United Specialty Insurance Company v. Jonak et al

Filing 35

ORDER - The Court ADOPTS Magistrate Judge John V. Acosta's Findingsand Recommendation 30 . Accordingly, the Court GRANTS Defendant's (Intervenor State of Oregon) Motion 14 to Intervene; concludes the State has waived its sovereign immunity; and, pursuant to Federal Rule of Civil Procedure 54(b), DENIES as premature Plaintiff's pending Motion 12 for Default Judgment as to Defendants Jonak and Ison until any claims asserted by the State of Oregon are also resolved. The Court returns this matter to the Magistrate Judge forfurther handling. IT IS SO ORDERED. DATED this 17th day of October, 2017, by United States Senior District Judge Anna J. Brown. (peg)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

UNITED SPECIALTY INSURANCE
COMPANY, a Delaware corporation,

3:17-cv-00330-AC
ORDER

Plaintiff,

v.
CLAY JONAK, an Oregon resident,
ROGER ISON, an Oregon resident,
Defendants,
THE STATE OF OREGON, acting by
and through its Department of
Lands,
Applicant for
Intervention.

BROWN, Judge.
Magistrate Judge John V. Acosta issued Findings and
Recommendation (#30) on August 28, 2017, in which he recommends
the Court grant the State of Oregon's Motion (#14) to Intervene.
The Magistrate Judge found the State is a necessary party and is
entitled to intervene as a matter of right.

The Magistrate

Judge, however, also found the State waived its Eleventh

1 - ORDER

Amendment sovereig n immunity .
The parties did not file _objectio ns as to the Findings and
Recomme ndation that this Court grant the State's request to
interven e.

The State, however, filed timely Objectio ns to the

Findings and Recomme ndation that this Court find the State waived
its sovereig n immunity .
pursuant to 28 U.S.C.

§

That issue is now before this Court
636(b) (1) and Federal Rule of Civil

Procedur e 72(b).
Because the parties did not file objectio ns to the
Magistra te Judge's· Findings and Recomme ndation as to the State's
request to interven e, this Court is relieved of its obligati on to
review the record de novo regardin g this issue.

Marshall , 561 F.3d 930, 932 (9th Cir. 2009).

See Dawson v.

See also United

States v. Reyna-Ta pia, 328 F,3d 1114, 1121 (9th Cir. 2003) (en
bane) .

Having reviewed the legal principl es de novo, the Court

does not find any error in the Findings and Recomme ndation as to
the State's request to interven e.
As noted, however, the State filed an Objectio n to the
Findings and Recomme ndation that this Court find the State waived
its sovereig n immunity .

When any party objects to any portion of

the Magistra te Judge's Findings and Recomme ndation, the district
court must make a de novo determin ation of that portion of the
Magistra te Judge's report.

28 U.S.C.

§

636(b) (1).

See also

Dawson v. Marshall , 561 F.3d 930, 932 (9th Cir. 2009); United
2 - ORDER

States v. Reyna-Ta pia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en
bane).

Accordin gly, the only issue before this Court is whether

the State waived its sovereig n immunity .

BACKGROUND
I .

Factual Backgrou nd

Beginnin g on April 6, 2012, Defendan ts leased property on
.. the Columbia River from the State o.f Oregon.

The Lease required

Defendan ts to obtain and to maintain pollutio n ·liabilit y
insuranc e for bodily injury, property ·damage, and environm ental
damage on the leased property .
On January 5, 2016, Defendan ts obtained an environm ental
.policy from Plaintif f covering the leased premises with effectiv e
dates from January 5, 2016, to January 5, 2017.

Plaintif f

alleges Defendan ts made misrepre sentation s to Plaintif f in their
applicat ion for insuranc e that there were not any prior or
pending claims related to the property .

The property , however,

had actually been subject to multiple complain ts and/or claims by
various agencies regardin g pollutio n on the leased property since
July 1, 2015.
On November 1, 2016, the State sent a Notice of Claim to
Defendan ts seeking reimburs ement for property damage and clean-up
costs on the property .
On November 14, 2016, the State sent a notice to Defendan ts
3 - ORDER

terminat ing the lease.
On December 15, 2016, Plaintif f received a copy of the
Notice of Claim.
On January 19, 2017, Plaintif f sent a letter to Defendan ts
regardin g coverage issues for the claim made by the State.
On March 20, 2017, the State and Defenda.n ts entered into a
Settleme nt Agreemen t regardin g the lease.

A Final Order

terminat ed the lease. as of May 1, 2017, and directed Defendan ts
to vacate by June 1, 2017.
II.

Procedur al Backgrou nd

On February 28, '2017, Plaintif f filed a Complain t in this
Court to have the insuranc e policy declared void based on the
alleged misrepre sentation s by Defendan ts in their applicat ion.
On May 5, 2017, Plaintif f filed a Motion for Default based
on Defendan ts' failure to appear after being personal ly served
with Summons and Complain t.
On May 15, 2017,· an Order of Default was entered against
Defendan ts.
On May 17, 2017, Plaintif f filed an Unoppose d Motion for
Default Judgment Regardin g Declarat ory Judgment and Equitabl e
Relief.

Plaintif f sought entry of judgment against Defendan ts

declarin g the policy void.
The Court advised Plaintif f's counsel by email that although
the facts asserted in Plaintif f's Motion are sufficie nt to
4 - ORDER

support entry of judgment , Plaintif f needed to suppleme nt its
Motion with a declarat ion by someone with personal knowledg e of
the facts alleged.
On June 16, 2017, while Plaintif f's Motion for Default
Judgment was pending, the State filed a Motion to Interven e.

The

Court held Plaintif f's Motion for Default Judgment in abeyance
pending the Magistra te.

Judge'~

resolutio n of thff State's Motion

to Interven e.
On July 26, · 2017 ,. the Magistra te Judge heard .oral argument
on ·the State's Motion· to Interven e.

At: bhe·.'con olusion of the

hearing the Magistra te Judge allowed the parties to submit
suppLem ental briefs.a s to whether the State was a necessar y and
proper party.
On August 10, 2017, Plaintif f and the State submitte d
simultan eous suppl·em ental briefs.

After .volunta rily seeking to

be a party in this matter, the State rai.sed the issue of
sovereig n immunity in its suppleme ntal brief for the first time
and asserted even though it is a necessar y party in this case
because it has "a clear interest " to be protecte d, it cannot be
properly joined in this particul ar action because it has
sovereig n immunity .

The State, therefor e, contends this Court

should dismiss this action on the grounds that "the Eleventh
Amendment prevents the joinder of the State and because a
proceedi ng in Oregon state court could provide complete relief."

5 - ORDER

.;

'

STANDARD

The Eleventh Amendment of the United States Constitu tion
"The Judicial power of the United States shall not be

provides :

construe d to extend to any suit in law or equity, commence d or
prosecut ed against one of the United States by Citizens of
another State, or Citizens or Subjects .of any Foreign State."
The Supreme Court ".has drawn upon principl es of sovereig n
immunity to construe the. [Eleventh ) Amendment ·to ·establis h that
an unconsen ti.ng State. is immune from suits brought· in federal
courts by her own citizens as well as by citi·zens o'f another
state."

Port Auth. Trans.-Hu dson Corp. v. Feeney, 495 U.S. 299,

304 (1990) (quotatio ns omitted) .
"The Eleventh Amendment bar to suit is not·abso lute.

States

may consent to suit in federal court and, in certain cases,
Congress may abrogate the States' sovereig n immunity ."
(quotatio ns omitted) .

Id.

A state may also choose to waive its

immunity , thus consenti ng to being a party to a lawsuit, "if the
state makes a clear declarat ion that it intends to submit itself
to federal jurisdic tion."

Demshki v. Monteith , 255 F.3d 986, 989

(9th Cir. 2001).
The Supreme Court summariz ed the issue of waiver of immunity
in College Savings Bank v. Florida Prepaid Postseco ndary

Educatio n Expense Board as follows:
6 - ORDER

We have long recogniz ed that a State's sovereig n
immunity is a personal privileg e which it may waive at
its pleasure . The decision to waive that immunity ,
however, is altogeth er voluntar y on the part of the
sovereig nty. Accordin gly, our test for determin ing
whether a State has waived its immunity from
federal- court jurisdic tion is a stringen t one.
Generall y, we will find a waiver either if the State
voluntar ily invokes our jurisdic tion or else if the
State makes a clear declarat ion that it intends to
submit itself to our jurisdic tion. Thus, a state does
not consent to suit in federal court merely by
consenti ng to suit in the courts o:f its own creation .
Nor does' it consent to suit in federal court merely by
stating. its intentio n to sue a.nd be .sued or even by
authoriz ing suits against it in any court of competen t
jurisdic tion.
527 U.S. 627, 675-76 (1999) (quotatio ns omitted) .·
Demshki,· 255 F.3d at 989

fi.ee also

("A state does· not waive Eleventh

Amendment immunity merely by defendin g in ·federal court.
Instead, waiver turns on the state's failure to raise immunity
during the litigatio n.") ; Hill v, Blind Indus. and Svcs. of
Maryland , 179 F.3d 754, 758

(9th Cir. 1999·) ("[A] state may waive

its Eleventh Amendment immunity by conduct that is incompa tible
with an intent to preserve that immunity ."').

DISCUSSION

The State contends it has not waived its Eleventh Amendment
immunity .

Although the State concedes it did not raise the issue

of immunity in its Motion to Interven e or at the time of oral

7 - ORDER

argumen t on that Motion ,' it contend s the filing of its Motion to
Interve ne does not invoke federal jurisdi ction especi ally since
the State has not asserte d any affirma tive claims suffici ent to
do so.
Plaint iff, howeve r, notes the State specifi cally asserte d in
its Motion that its "rights and interes ts may be impaire d if it
is not allowed to pursue its claim in the present case, as any
ruling in this case could prevent the State of Oregon seeking
insuran ce coverag e to which it is entitle d."

The Court notes the

State also asserte d in its Reply in suppor. t of its Motion to
Interve ne:

"The Court should allow the State of Oregon to

interve ne in this case because the State of Oregon has a clear
interes t in the outcome of this litigat ion" and "(t]he State of
Oregon seeks to interve ne in this lawsuit in order to protec t its
interes ts in the state owned submerg ed and submer sible land and
to assert claims for coverag e under the insuran ce policy ."
Moreov er, at the time of oral argume nt the State again
contend ed it should be allowed to interve ne "becaus e the State of
Oregon has a clear interes t in the outcome of the case" and it
sought to interve ne "in order to protect its interes ts in State
owned submerg ed and submer sible land to assert claims for
coverag e under the insuran ce policy. "

The State further asserte d

As noted, the State raised the issue of soverei gn
immunit y for the first time in its supplem ental brief filed after
oral argumen t on its Motion to Interve ne.
1

8 - ORDER

it was a necessa ry party, and "[a] judgmen t can't enter withou t a
necessa ry party."

The State also argued extensi vely regardi ng

the merits of its claim against Plaint iff and why the insuran ce
policy should not be voided.
Moreov er, Plaint iff points out that it did not bring
the State into this case and that the State volunt arily sought
to interve ne.

Plaint iff contend s the State had ample opportu nity

to raise all issues related to soverei gn immunit y and failed
to do so until after the hearing on its Motion to Interve ne.
Plainti ff, therefo re, asserts the State waived soverei gn immuni ty
"by conduct that is incomp atible with an intent to preserv e that
immuni ty."
The Court in Lapides v. Board of Regents of Univer sity
System of Georgia held when "a State volunt arily becomes a party
to a cause and submits its rights for judicia l determ ination , it
will be bound thereby and cannot escape the result of its own
volunta ry act by invokin g the prohib itions of the Eleven th
Amendm ent."

535 U.S. 613, 620 (2002).

Here the record does not reflect the State expres sly or
implied ly preserv ed its soverei gn immuni ty in its Motion or at
oral argumen t on its Motion.

To the contrar y, the Court notes

the State demons trated its clear intent to invoke federal
jurisdi ction and to partici pate in the federal court case on the
merits in order to protec t its asserte d claims and interes ts.

9 -.ORDER

On this record the Court concludes the State voluntarily
invoked the judicial powers of this Court when it filed its
Motion to Intervene without reservation, and, therefore, the
State waived its sovereign immunity.

CONCLUSION

The Court ADOPTS Magistrate Judge John V. Acosta's Findings
and Recommendation (#30).

Accordingly, the Court GRANTS

Defendant's Motion (#14) to Intervene; concludes the State has
waived its sovereign immunity; and, pursuant to Federal Rule of
Civil Procedure 54(b), DENIES as premature Plaintiff's pending
Motion (#12) for Default Judgment as to Defendants Jonak and Ison
until any claims asserted by the State of Oregon are also
resolved.
The Court returns this matter to the Magistrate Judge for
further handling.
IT IS SO ORDERED.
DATED this 17th day of October, 2017.

10 - ORDER