Cook et al v. Erie Insurance Company

Filing 41

ORDER granting in part and denying in part 11 Motion to Dismiss. Signed by Judge Algenon L. Marbley on 2/25/2019. (cw)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
LINDA COOK, et al.,
Plaintiffs,
v.
ERIE INSURANCE COMPANY,
Defendant.

:
:
:
:
:
:
:
:
:

Case No. 2:17-CV-282
JUDGE ALGENON L. MARBLEY
Magistrate Judge Deavers

OPINION & ORDER
This matter is before the Court on Plaintiffs’ Motion to Dismiss Defendant’s
Counterclaim. (ECF No. 11). For the reasons that follow, this Court GRANTS Plaintiffs’
Motion.
I.

BACKGROUND

On September 30, 2017, Steven Cook was working in a construction zone on Interstate
70 in Franklin County, Ohio when he was struck by a drunk driver. Mr. Cook died of his injuries.
(ECF No. 2 at 2; ECF No. 11 at 2). The Plaintiffs in this case are Mr. Cook’s family who have
made a claim for benefits under an insurance policy issued to him and his wife, Linda Cook.
(ECF No. 2 at 3-4). The insurance policy was issued by Defendant Erie Insurance Company.
Plaintiffs requested payment from Defendant under the policy in a letter dated November
8, 2017. (ECF No. 16 at 9). Defendant responded by a letter dated November 16, 2017 indicating
that it was “in a position” to offer the requested payment and would do so “immediately…upon
receiving the following documentation.” (ECF No. 16 at 10). Those four documents were “court
approved and filed probate documents, emergency room records for the date of the accident,
death certificate, [and] signed and dated release.” (Id.).

1

The Plaintiffs filed this complaint in March 2018 in the Belmont County Court of
Common Pleas whereupon Defendant subsequently removed the case to this Federal District
Court. The Plaintiffs argue that the Cooks were current on their payments to Defendant under the
policy and that the policy was in full force and effect on the date of the accident. (ECF No. 2 at
6). Plaintiffs allege Defendant has breached the terms of the contract by refusing to pay the
benefits outlined. (ECF No. 2 at 8). The Plaintiffs allege Defendant has behaved “capriciously
and/or maliciously” and has breached an implied “covenant which required Erie to act fairly and
in good faith.” (Id.). Plaintiffs request that the contract to be enforced, for fees and costs, and for
punitive damages. (ECF No. 2 at 8, 9).
Defendant filed an answer and a counterclaim. (ECF No. 6). In the counterclaim,
Defendant requests declarative judgment that they behaved reasonably when they requested
documents from the Plaintiffs, that their actions have complied with the terms of the contract,
that they are entitled to either reimbursement or a set-off as a result of an alleged over-payment,
and that the Plaintiffs acted unreasonably in failing to cooperate with Defendant’s investigation.
(ECF No. 6 at 4). Each of these elements of the counterclaim appear in the complaint except for
the allegation about the alleged prior over-payment.
II.

STANDARD OF REVIEW

The Court may dismiss a cause of action under Federal Rule of Civil Procedure 12(b)(6)
for “failure to state a claim upon which relief can be granted.” Such a motion “is a test of the
plaintiff’s cause of action as stated in the complaint, not a challenge to the plaintiff’s factual
allegations.” Golden v. City of Columbus, 404 F.3d 950, 958-59 (6th Cir. 2005). The Court must
construe the complaint in the light most favorable to the non-moving party. Total Benefits
Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 434 (6th Cir. 2008).
The Court is not required, however, to accept as true mere legal conclusions unsupported by
2

factual allegations. Ashcroft v. Iqbal, 556 U.S. 662 (2009). Although liberal, Rule 12(b)(6)
requires more than bare assertions of legal conclusions. Allard v. Weitzman, 991 F.2d 1236, 1240
(6th Cir. 1993) (citation omitted). Generally, a complaint must contain a “short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). In
short, a complaint’s factual allegations “must be enough to raise a right to relief above the
speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). It must contain
“enough facts to state a claim to relief that is plausible on its face.” Id. at 570.
The Declaratory Judgment Act, 28 U.S.C. 2201(a), permits a court to “declare the rights
and other legal relations of any interested party seeking such declaration,” Id. This statutory
authorization “confers a discretion on the courts rather than an absolute right upon the litigant.”
Pub. Serv. Comm’n of Utah v. Wycoff Co., 344 U.S. 237, 241 (1952). Whether declaratory relief
is proper in any case “will depend upon a circumspect sense of its fitness informed by the
teachings and experience concerning the functions and extent of federal judicial power.” Wycoff,
344 U.S. at 243. Even when a case otherwise falls within a court’s jurisdiction, district courts
“possess discretion in determining whether and when to entertain an action under the Declaratory
Judgment Act.” Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995).
The Sixth Circuit has adopted a five-factor test for district courts to decide whether to
grant a prayer for declaratory relief:
(1) whether the declaratory action would settle the controversy; (2) whether the
declaratory action would serve a useful purpose in clarifying the legal relations in
issue; (3) whether the declaratory remedy is being used merely for the purpose of
“procedural fencing” or “to provide an arena for a race for res judicata;” (4)
whether the use of a declaratory action would increase friction between our
federal and state courts and improperly encroach upon state jurisdiction; and (5)
whether there is an alternative remedy which is better or more effective.
Grand Trunk W. R. Co. v. Consol. Rail Corp., 746 F.2d 323, 326 (6th Cir. 1984).

3

Finally, where a party requests a declaratory judgment on a counterclaim, the court must
consider a further set of factors. When a counterclaim “is identical to the affirmative defense, a
district court is within sound discretion to dismiss the counterclaim.” Proctor & Gamble Co. v.
CAO Grp., Inc., 2013 WL 5353281 at *5 (S.D. Ohio 2013). The question is whether the
counterclaims “serve any useful purpose.” Id. (citing Pettrey v. Enter. Title Agency, Inc., 2006
WL 3342633) (N.D. Ohio 2006). See Am. Energy Corp. v. Am. Energy Partners, LP, 2015 WL
881519 at *3 (S.D. Ohio 2015). A district court should dismiss a counterclaim only when “it is
clear that there is a complete identity of factual and legal issues between the complaint and the
counterclaim.” Proctor & Gamble, at *5.
III. ANALYSIS
This Court’s analysis begins with the five Grand Trunk factors.
A. Settlement of the Controversy
The first factor to consider is whether the declaratory judgment would settle the
controversy. The Sixth Circuit has two lines of cases when confronted by an insurance company
requesting declaratory judgment to determine the scope of its liability. One line of cases “has
concluded that a declaratory relief action can settle the insurance coverage controversy not being
addressed in state court even though it will not help resolve the underlying state court action.”
Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 555 (6th Cir. 2008). The other line of cases has
concluded that “while such declaratory actions might clarify the legal relationship between the
insurer and the insured, they do not settle the ultimate controversy between the parties which is
ongoing in state court.” Id. In the instant cases, there is no pending state action, so the concerns
inhering in these lines of cases are not relevant.

4

The Plaintiffs argue that because the counterclaim merely repeats the substance of the
Complaint, all of the issues can be settled at once by addressing the Complaint; the counterclaim
adds no new questions for the Court’s consideration. Indeed, Defendant’s counterclaim does
largely mirror the Complaint. With respect to the contract, Defendant seeks a declaration that
their “communications and actions have complied” with the policy and that their “handling of
Plaintiff’s claim was reasonably justified and in good faith.” (ECF No. 6 at 4). This is the analog
to Plaintiff’s allegations in the Complaint that Defendant acted in bad faith and acted
unreasonably in the course of investigating Plaintiff’s claim under the policy. This Court could
dismiss these portions of Defendant’s counterclaim for serving no “useful purpose” because
“there is a complete identity of factual and legal issues” on these questions, which can be
addressed on the merits via the Plaintiff’s action. Proctor & Gamble, supra. Thus the first Grand
Trunk factor points toward dismissing the counterclaim.
B. Clarification of the Legal Relations at Issue
The second factor to consider is whether a declaratory judgment would clarify the legal relations
at issue. This factor is closely tied to the first factor: [i]ndeed it is almost always the case that if a
declaratory judgment will settle the controversy, then it will clarify the legal relations in issue.”
Scottsdale, 513 F.3d at 557. Once again, the Sixth Circuit caselaw is concerned with not
interfering with any underlying state action. Id. (citing cases). Accordingly, the question for this
court is whether the counterclaim is clarifying, or if it merely mirrors the questions presented in
the Complaint. As above, this Court finds that, to the extent the counterclaim concerns the
substance of the policy, it is repetitive of the Complaint. This second factor also points toward
dismissing the counterclaim.

5

C. Procedural Fencing
This Court next considers whether the prayer for declaratory relief is being used as
“procedural fencing” or “to provide an arena for a race for res judicata.” This factor “is meant to
preclude jurisdiction for declaratory plaintiffs who file their suits mere days or weeks before the
coercive suits filed by a ‘natural plaintiff’ and who seem to have done so for the purpose of
acquiring a favorable forum.” Scottsdale, 513 F.3d at 558 (quoting AmSouth Bank v. Dale, 386
F.3d 763, 788 (6th Cir. 2004)) (internal quotation omitted). To the extent this factor is concerned
with jurisdictional maneuvering, this is not relevant here, because Defendant merely removed
this case to Federal court rather than forum-shopped to a court of its choosing. But the concerns
about procedural fencing in a counterclaim are valid. Elements of Defendant’s counterclaim
could be pleaded as affirmative defenses, which would involve Defendant responding to the
Complaint. Allowing Defendant to allege what are essentially affirmative defenses in its
counterclaim – with a prayer for declaratory judgment – would be to allow a “race to res
judicata.” This third factor points toward dismissing the counterclaim.
D. Increased Friction between Federal and State Courts
In this case, there is no state court action with which to avoid conflicts. As a result, this
fourth factor is not applicable.
E. Availability of an Alternative Remedy
There does exist an alternative remedy besides the granting declaratory relief requested in
the counterclaim: allowing this case to proceed on the merits as outlined in the Complaint.
Because the counterclaim so closely mirrors the Complaint, each of Defendant’s allegations can
be addressed in turn as affirmative defenses. Rather than granting declaratory relief on a filing

6

that does resemble a “race for Res Judicata,” this Court can allow this case to proceed with the
“natural plaintiffs” and their properly filed Complaint.
III.

CONCLUSION

After applying each of the relevant Grand Trunk factors to the counterclaim, this Court
finds it would be inappropriate to grant the declaratory relief requested. To the extent that “there
is a complete identity of factual and legal issues between the complaint and the counterclaim,”
the counterclaim is dismissed. Specifically:
1. The claims in paragraph 12, parts (a), (b), (c), and (d) of the counterclaim are
dismissed, because these precisely mirror the contract questions presented in the
complaint.
2. The claim in paragraph 12(e) is not dismissed, because the question of the overpayment or set-off is not mirrored in the complaint and therefore properly presents a
new issue for this Court.

IT IS SO ORDERED.

s/Algenon L. Marbley
ALGENON L. MARBLEY
UNITED STATES DISTRICT JUDGE
Dated: February 25, 2019

7