United National Insurance Company v. WNC, Inc. et al

Filing 138

OPINION AND ORDER by Judge Claire V Eagan ; granting 84 Motion to Dismiss; finding as moot 87 Motion for Summary Judgment; finding as moot 90 Motion in Limine; finding as moot 92 Motion for Summary Judgment; finding as moot [94 ] Motion in Limine; finding as moot 95 Motion in Limine; finding as moot 96 Motion to Exclude; finding as moot 131 Motion to Strike; finding as moot 132 Motion to Supplement; finding as moot 132 Motion to Strike; granting 133 Motion for Miscellaneous Relief (djh, Dpty Clk)

UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF OKLAHOMA

UNITED NATIONAL INSURANCE
COMPANY,
Plaintiff,
v.
WNC, INC., et al.,
Defendants.

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Case No. 13-CV-0272-CVE-PJC

OPINION AND ORDER
Now before the Court is Plaintiff’s Motion for Voluntary Dismissal without Prejudice (Dkt.
# 84) and Plaintiff United National Insurance Company’s Motion for the Court to Take Judicial
Notice (Dkt. # 133).1 Plaintiff United National Insurance Company (UNIC) requests leave to
dismiss its claims against defendants WNC, Inc. (WNC), W.N. Couch Contractors, Inc. (Couch),
and Sherwood Construction Co., Inc. (Sherwood). Defendants object to plaintiff’s request to
voluntarily dismiss its claims without prejudice to refiling and they argue that plaintiff is seeking
dismissal primarily to avoid an unfavorable judgment in this case. Dkt. ## 102, 104.

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There are numerous pending motions filed by defendants, but it will be unnecessary for the
Court to consider the motions if the Court finds that plaintiff’s motion for voluntarily
dismissal should be granted. As to plaintiff’s motion to take judicial notice of state court
records, the Court may take judicial notice of public records under Fed. R. Evid. 201 and this
includes pleadings, docket sheets, and orders in this case and other related cases. Luis v.
Argent Mortg. Co., LLC, 2013 WL 4483503 (N.D. Okla. Aug. 19, 2013); Marlin Oil Corp.
v. Colorado Interstate Gas Co., 700 F. Supp. 1076, 1081 n.5 (W.D. Okla. 1988). Plaintiff’s
motion (Dkt. # 133) requesting that the Court take judicial notice of state court records is
granted.

I.
Trade Winds Motor Hotel East, Inc. (Trade Winds) filed this case alleging that Sherwood
was hired by the Oklahoma Department of Transportation (ODOT) to upgrade the existing water
pipes connecting to Trade Winds and to move Trade Winds’ water meter to a new location. Dkt.
# 2, at 10. Sherwood was the prime contractor, and Sherwood subcontracted with WNC to perform
part of the work. WNC subsequently assigned to Couch “all rights, title and interest held by
[WNC]” in the subcontract. Dkt. # 84-2, at 1. ODOT contracted for the work as part of a road
widening project of Interstate 44 (I-44) in Tulsa, Oklahoma. Trade Winds claims that defendants
installed a new water meter and water meter pit on May 28, 2010, and Trade Winds alleges that it
began to experience problems with its plumbing and that it noticed an increase in water usage after
that date. Dkt. # 2, at 10. On May 8, 2012, Trade Winds filed this case in Tulsa County District
Court alleging claims of negligence against WNC, Couch, and Sherwood as a result of the allegedly
defective workmanship during installation of the new pipes and water meter. Dkt. # 2, at 5-7. Trade
Winds filed an amended petition adding claims of trespass against each defendant. Id. at 8-18.
UNIC filed a motion to substitute itself as the plaintiff, because it had paid Trade Winds’ insurance
claim and UNIC claimed that it was the real party in interest. Id at 63-65. The state court granted
UNIC’s motion and UNIC was substituted for Trade Winds as the named plaintiff. Id. at 71.
Defendants removed the case to federal court based on diversity of citizenship upon the
substitution of UNIC as the named plaintiff. Id. at 1-3. The Court entered a scheduling order
setting, inter alia, a discovery cutoff of October 18, 2013. Dkt. # 32. After several extensions of
the deadlines in the scheduling order, the discovery cutoff was extended to February 18, 2014, the
dispositive motion deadline was set for March 4, 2014, and the jury trial was set for April 21, 2014.

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Dkt. # 63. On February 18, 2014, UNIC filed an opposed motion to extend all remaining deadlines
in the scheduling order, including the discovery cutoff, by at least 30 days, and UNIC claimed that
defendants had failed to produce discovery and had provided untimely supplemental expert reports.
Dkt. # 74. UNIC also claimed that it needed additional time to depose the corporate representatives
of WNC and Couch and other witnesses. Defendants opposed UNIC’s request to extend deadlines
and stated that UNIC had not diligently sought discovery from defendants. Dkt. # 76. UNIC had
taken only one deposition and it was refusing to take any more depositions until defendants
produced certain documents, but defendants explained that the documents plaintiff was seeking did
not exist. Id. at 5. Defendants also stated that plaintiff declined to depose defendants’ experts based
on their original expert reports, and the production of supplemental reports did not interfere with
plaintiff’s ability to depose defendants’ experts. Id. at 7. The Court found that UNIC had not
diligently conducted discovery and there was no support for plaintiff’s allegations that defendants
withheld discovery, and the Court denied UNIC’s motion to extend deadlines. Dkt. # 77.
On March 3, 2014, UNIC filed a motion for voluntary dismissal (Dkt. # 84) of its claims
against defendants because of an ongoing condemnation proceeding in state court.

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condemnation proceedings were initiated by ODOT on August 13, 2008, and ODOT was seeking
to acquire property to allow the widening of I-44. Trade Winds is located on the remainder of a
parcel of real property that was subject to eminent domain, and Trade Winds alleged that work
performed on behalf of ODOT damaged Trade Winds. Dkt. # 104-2. On December 2, 2013, the
state court entered an order joining UNIC as a defendant and WNC, Couch, and Sherwood as third
party defendants, and the state court order UNIC “to assert any claims it may possess against the
Plaintiff and/or proposed Third Party Defendants . . . .” Dkt. # 84-3, at 9. The state court issued a

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notice to WNC, Couch, and Sherwood on February 13, 2014 that UNIC intended to litigate third
party claims against them in the condemnation proceedings. Id. at 1. WNC, Couch, and Sherwood
have filed motions to dismiss the claims against them in the condemnation proceedings, and the state
court has not ruled on the motions. See Dkt. # 133-3; Dkt. # 133-4. UNIC states it is required to
litigate its claims against defendants in the condemnation proceedings and that it would be a waste
of the parties’ resources to litigate the same claims in separate courts. UNIC’s motion to dismiss
was filed one day before the dispositive motion deadline in this case. Defendants oppose plaintiff’s
motion to dismiss and they argue that they will be prejudiced if the case is dismissed at such a late
stage. Dkt. ## 102, 104.
II.
Plaintiff argues that this case should be dismissed under Younger v. Harris, 401 U.S. 37
(1971), because there is an ongoing state court proceeding and the condemnation proceedings
involve an important state interest. Defendants argue that there is no reason to dismiss or stay
plaintiff’s claims under Younger, because proceeding with this case will not interfere with the state
court condemnation proceedings.
“Younger abstention dictates that federal courts not interfere with state court proceedings
by granting equitable relief-such as injunctions of important state proceedings or declaratory
judgments regarding constitutional issues in those proceedings-when such relief could adequately
be sought before the state court.” Reinhardt v. Kelly, 164 F.3d 1296 (10th Cir. 1999). This doctrine
is founded on the principles that a court should not grant equitable relief when a party can obtain
adequate relief in another forum and such abstention promotes comity between state and federal
courts. Younger, 401 U.S. at 43-44. To abstain under Younger, a district court must consider three

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factors: “(1) the state proceedings are ongoing; (2) the state proceedings implicate important state
interests; and (3) the state proceedings afford an adequate opportunity to present the federal
constitutional challenges.” Phelps v. Hamilton, 122 F.3d 885 (10th Cir. 1997). Younger abstention
is not strictly considered to be a jurisdictional issue, but a district court is required dismiss or stay
a case if it properly finds that Younger abstention is applicable. D.A. Osguthorpe Family
Partnership v. ASC Utah, Inc., 705 F.3d 1223, 1230 n.8 (10th Cir. 2013). When only monetary
damages are sought by the federal court plaintiff, a stay of the proceedings, rather than dismissal,
is the appropriate remedy. Kirshner v. Klemons, 225 F.3d 227, 238 (2d Cir. 2000).
Plaintiff has not shown that proceeding with this case will interfere with the state court
condemnation proceedings and the Court finds no reason to dismiss or stay under Younger. Plaintiff
has alleged state law tort claims and it seeks monetary damages only, and the Court has not been
asked to grant injunctive or declaratory relief to plaintiff. In a diversity case, Younger abstention
is not required if the federal district court has not been asked to grant equitable relief that would
interfere with the state court proceedings. Reinhardt, 164 F.3d at 1302; Adobe Systems v. James,
2011 WL 573393 (D. Utah Feb. 15, 2011). Plaintiff cites Crown Point I, LLC v. Intermountain
Rural Elec. Ass’n, 319 F.3d 1211 (10th Cir. 2003), to support its argument that Younger abstention
is warranted. In Crown Point, the Tenth Circuit recognized that a condemnation case can be
considered an ongoing state proceeding for the purpose of Younger abstention, and defendants do
not dispute that plaintiff can establish the first part of the test for Younger abstention. However, the
claims at issue in Crown Point were federal constitutional claims and the plaintiff was seeking
injunctive and declaratory relief that would have prevented the filing of a state court condemnation
action. Id. at 1214. No party in this case has sought declaratory or injunctive relief that would

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interfere with the condemnation proceedings and, even if both cases proceed simultaneously, the
state court condemnation proceedings will not be affected or impeded. Under the second factor for
Younger abstention, a state interest is deemed “important” only “‘where ‘exercise of the federal
judicial power would disregard the comity between the States and the National Government.’”
Grieve v. Tamerin, 269 F.3d 149, 152 (2d Cir. 2001) (quoting Pennzoil Co. v. Texaco, Inc., 481 U.S.
1, 13 (1987)). There is no risk of infringing on an important state interest by hearing the tort claims
raised by plaintiff. A ruling on contested factual or legal issues could incidentally impact the
condemnation proceedings, but this alone does not support the application of Younger abstention.
The Court declines to dismiss or stay plaintiff’s claims under Younger.
III.
Plaintiff seeks to voluntarily dismiss its claims against defendants because it argues that it
would be a waste of judicial resources to litigate the same claims in this case and the state court
condemnation proceedings. Defendants argue that plaintiff is requesting a dismissal to avoid the
likelihood that it will receive an adverse judgment in this case, and the tort claims alleged by
plaintiff should be heard by this Court.
Under Rule 41(a)(2), “an action may be dismissed at the plaintiff’s request only by court
order, on terms that the Court considers proper.” Unless a defendant can show “legal” prejudice
from granting a plaintiff’s request for voluntary dismissal, such requests should ordinarily be
granted. Ohlander v. Larson, 114 F.3d 1531, 1537 (10th Cir. 1997). The Tenth Circuit has
identified four non-exclusive factors that should be considered when reviewing a request for
voluntary dismissal: “the opposing party’s effort and expense in preparing for trial; excessive delay
and lack of diligence on the part of the movant; insufficient explanation of the need for dismissal;

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and the present stage of the litigation.” County of Santa Fe, New Mexico v. Public Service Co. of
New Mexico, 311 F.3d 1031, 1048 (10th Cir. 2002). The Court must insure that “substantial justice
is accorded to both parties,” and this requires the district court to consider the “equities not only
facing the defendant, but also those facing the plaintiff.” Brown v. Baeke, 413 F.3d 1121, 1124
(10th Cir. 2005). When a plaintiff seeks to dismiss its claims without prejudice to refiling, a district
court should consider whether attorney fees should be awarded to the defendant to prevent the
duplication of litigation expenses. AeroTech, Inc. v. Estes, 110 F.3d 1523, 1528 (10th Cir. 1997).
Plaintiff’s primary argument is that the state court is requiring it to assert the claims alleged
in this case as part of the condemnation proceedings, and that it would be a waste of the parties’
resources to proceed with the same claims in separate courts. Dkt. # 84, at 5-6. Defendants argue
that plaintiff’s tort claims cannot be heard as part of the condemnation proceedings. Under
Oklahoma law, a condemnation proceeding is treated as a special statutory proceeding, rather than
an ordinary civil case, and condemnation proceedings do not involve tort claims. City of Tahlequah
v. Lake Region Elec., Cooperative, Inc., 47 P.3d 467, 471 (Okla. 2002). The purpose of
condemnation proceedings involving a governmental entity’s assertion of eminent domain is to
“ascertain[] the compensation to be paid for property to be appropriated.” State ex rel. Bd. of
Regents for Oklahoma Agr. and Mechanical Colleges v. McCloskey Bros., Inc., 227 P.3d 133, 142
(Okla. 2009). Although Oklahoma law is not settled, it does not appear that tort claims are permitted
as part of a condemnation proceedings unless the claims fall under the Surface Damage Act, OKLA.
STAT. tit. 52, § 318 et seq. Id. at 142 n.25. However, an aggrieved landowner subject to partial
condemnation of his property is entitled to recover consequential damages suffered as a result of a
partial condemnation. State ex rel. Dep’t of Highways v. Aker, 507 P.2d 1227, 1230 (Okla. 1973).

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It is not clear that plaintiff will be permitted to litigate its tort claims as part of the
condemnation proceedings and defendants argue that plaintiff has not alleged any cognizable claim
against them in state court. This Court declines to consider the possible merits (or lack thereof) of
plaintiff’s claims in the condemnation proceedings, and any arguments concerning plaintiff’s right
to recover from defendants in the condemnation proceedings should be raised in the state court. For
the purpose of this Opinion and Order, the Court will accept plaintiff’s statement that it wishes to
proceed with its claims only in state court, and the Court will also assume that plaintiff is prepared
to accept any limitations as to its remedy by making that choice. See Dkt. # 84, at 4-5. The record
shows that the state court directed plaintiff to file claims against WNC, Couch, and Sherwood as part
of the condemnation proceedings and that WNC, Couch, and Sherwood have been joined as third
party defendants in state court. Dkt. # 84-3. Thus, the parties will incur additional expense if this
Court proceeds to hear plaintiff’s claims against defendants, because the condemnation proceedings
will continue even if the Court were to deny plaintiff’s motion for voluntary dismissal. This is a
factor that weighs in favor of granting plaintiff’s motion.
Defendants argue that plaintiff delayed when filing its motion for voluntary dismissal and
that the circumstances show that plaintiff has filed its motion for voluntary dismissal in an attempt
to avoid an adverse judgment. Plaintiff learned as early as December 2, 2013 that it would be
required to assert certain claims against WNC, Couch, and Sherwood in the condemnation
proceedings, but the state court did not give notice to WNC, Couch, and Sherwood until February
18, 2014 that UNIC was asserting claims against them in the condemnation proceedings. Dkt. # 843. Plaintiff waited until March 3, 2014 to file its motion for voluntary dismissal. This was one day
before the dispositive motion deadline and about two weeks after plaintiff’s request for additional

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time to conduct discovery had been denied. In its motion to dismiss, plaintiff represented that no
dispositive motions were on file, but WNC states that it had already advised plaintiff that it would
be filing a motion for summary judgment. Dkt. # 104, at 4. Defendants have now filed motions for
summary judgment, motions to exclude expert testimony, and motions in limine, and the litigation
has reached an advanced stage where the parties are simply waiting on rulings to determine if they
need to prepare for trial. Plaintiff faults defendants for engaging in gamesmanship by withholding
documents in discovery, but the Court has already found that plaintiff did not diligently conduct
discovery in this case and that it was not likely that the documents plaintiff was seeking actually
existed. Dkt. # 77. The Court gives no weight to plaintiff’s argument that defendants engaged in
“stall tactics,” and any delay of the proceedings was caused by plaintiff’s failure to diligently
conduct discovery in support of its claims. The circumstances surrounding the filing of plaintiff’s
motion for voluntary dismissal do suggest that plaintiff delayed in seeking dismissal of its claims
in this case.
The Court also takes into account the defendants’ effort and expense in preparing for trial
and the current stage of the litigation. Defendants have expended substantial resources in defending
against plaintiff’s claims, and they have filed dispositive motions, motions to exclude expert
testimony, and motions in limine. Defendants have retained experts to respond to plaintiff’s
allegations of defective workmanship, and the parties have completed discovery. See Dkt. ##105,
109 (final witness lists of WNC and Sherwood identifying expert witnesses who will be called to
testify at trial). Plaintiff could have filed its motion for voluntary dismissal shortly after learning
that it would be required to participate in the condemnation proceedings and, at a minimum, plaintiff
could have at least alerted defendants and the Court that this was a possibility. This would have

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significantly reduced the expense incurred by defendants. Instead, plaintiff waited until defendant
had already incurred significant expense in preparing pretrial motions, and defendants will be
prejudiced if their efforts in preparing to defend against plaintiff’s claims goes to waste. This will
be considered as a factor weighing against granting plaintiff’s motion.
Even though there are some factors weighing against dismissal, the Court finds a significant
likelihood that proceeding with this case will result in additional expense to the parties and
potentially inconsistent rulings in regard to the same subject matter. The state court ordered plaintiff
to pursue certain claims against WNC, Couch, and Sherwood in the condemnation proceedings, and
those proceedings will continue even if this Court were to deny plaintiff’s motion for voluntary
dismissal. It is possible that granting plaintiff’s motion for voluntary dismissal could prevent some
duplication of effort by the parties, and the Court is cognizant that the general rule is that a
plaintiff’s motion for voluntary dismissal should be granted. Ohlander, 114 F.3d at 1537. The Court
finds that plaintiff’s motion for voluntary dismissal should be granted subject to conditions to
prevent defendants from suffering unfair prejudice from plaintiff’s decision to dismiss its claims at
this late stage in the case. In particular, the Court has previously found that plaintiff did not
diligently conduct discovery in this case, and plaintiff should not be permitted to restart discovery
in the condemnation proceedings to make up for its failure to conduct adequate discovery in this
case.

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IT IS THEREFORE ORDERED that Plaintiff’s Motion for Voluntary Dismissal without
Prejudice (Dkt. # 84) is granted, and plaintiff’s claims against defendants are dismissed without
prejudice. However, the Court will impose the following conditions on dismissal of plaintiff’s
claims:
1.

All discovery conducted in this case shall carry over to the condemnation
proceedings.

2.

Plaintiff shall conduct no additional discovery in the condemnation proceedings if
that discovery could have been conducted in this case unless it pays all attorney fees
and costs incurred by defendants in responding to such discovery requests. This
includes fees and costs associated with the taking of any depositions.

3.

To the extent that the same issues are litigated in the condemnation proceedings, the
parties shall be bound by their arguments in their pending motions and the responses
and replies to such motions filed in this case.

IT IS FURTHER ORDERED that Plaintiff United National Insurance Company’s Motion
for the Court to Take Judicial Notice (Dkt. # 133) is granted.
IT IS FURTHER ORDERED that all other pending motions (Dkt. ## 87, 90, 92, 94, 95,
96, 131, 132) are moot.
DATED this 12th day of May, 2014.

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