ERIE INSURANCE EXCHANGE et al v. STOVER et al

Filing 85

OPINION & ORDER indicating, as more fully set forth in the Opinion, that 43 Erie Indemnity Company's motion to intervene is GRANTED. The Clerk of Court is hereby DIRECTED to make Erie Indemnity Company a party Defendant in this matter. IT IS FURTHER ORDERED that Erie Indemnity Company is permitted to join in Defendants' motions. Defendants' 66 Motion to Dismiss is DENIED in part, and GRANTED in part. Defendants' motion to dismiss is GRANTED on the basis of primary juris diction, and is denied without prejudice in all other respects. IT IS FURTHER ORDERED that the issues in this case are hereby referred to the PENNSYLVANIA INSURANCE DEPARTMENT to decide any and all issues within its jurisdiction. Defendants' 68 & 75 Motions for judicial notice are DENIED without prejudice. IT IS FURTHER ORDERED that this case is DISMISSED WITHOUT PREJUDICE. Signed by Judge Maurice B. Cohill on 2/10/2014. (rtw)

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

ERIE INSURANCE EXCHANGE,
an unincorporated association, by
members PATRICIA R. BELTZ,
JOSEPH S. SULLIVAN, and ANITA
SULLIVAN, and PATRICIA R. BELTZ,
on behalf of herself and others similarly
situate,

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Plaintiffs
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v.
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RICHARD L. STOVER, J. RALPH
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BORNEMAN, JR., TERRENCE W.
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CAVANAUGH, JONATHAN HIRT
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HAGEN, SUSAN HIRT HAGEN,
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THOMAS B. HAGEN, C. SCOTT
HARTZ, CLAUDE C. LILLY, III,
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LUCIAN L. MORRISON, THOMAS W. )
PALMER, MARTIN P. SHEFFIELD,
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ELIZABETH H. VORSHECK, and
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ROBERT C. WILBURN,
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Civil No. 13-37 Erie

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Defendants.

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Opinion

This is an insurance case based on diversity jurisdiction that also purports to be a class
action. Plaintiffs are Erie Insurance Exchange, a Pennsylvania unincorporated association that
issues insurance policies, and four named Plaintiffs who are Policyholders of Erie Insurance
Exchange. Plaintiffs explain in their Second Amended Complaint that Erie Insurance Exchange
has no employees, officers, board, bylaws, or organizing documents and is run by Erie Indemnity
Company pursuant to a Subscriber Agreement. Erie Indemnity Company is the attorney-in-fact
for the Subscribers of Erie Insurance Exchange, and Erie Indemnity Company operates and
manages Erie Insurance Exchange.

The Defendants are individually named defendants, each of whom is a trustee of Erie
Insurance Exchange. Plaintiffs bring this action based on breach of fiduciary duty by
Defendants, and seek to recover "service charges" and "added service charges" collected by
Defendants from 1998 through 2011. Plaintiffs also set forth an alternative count seeking to sue
as a derivative action.
Presently before the Court are Defendants' motion to dismiss (and related motions for
judicial notice) and the Erie Indemnity Company's motion to intervene as of right. A status
conference regarding these motions was held on February 3, 2014. For the reasons stated herein
we will grant Defendants' motion to refer the issues in this case to the Pennsylvania Insurance
Department under the doctrine of Primary Jurisdiction. In addition, we will grant Erie Indemnity
Company's motion to intervene.
I.

Motion to Intervene

Erie Indemnity Company moves to intervene in this action as of right pursuant to Federal
Rule of Civil Procedure 24(a)(2), or alternatively, seeks permissive intervention pursuant to Rule
24(b).
Rule 24(a)(2) provides that a court "must permit anyone to intervene who: ... (2) claims
an interest relating to the property or transaction that is the subject of the action and is so situated
that disposing of the action may as a practical matter impair or impede the movant's ability to
protect its interest, unless existing parties adequately represent that interest." F.R.Civ.P.
24(a)(2). "A movant seeking to intervene under Rule 24(a)(2) must satisfy the following
requirements: "'(1) the application for intervention is timely; (2) the applicant has a sufficient
interest in the litigation; (3) the interest may be affected or impaired, as a practical matter, by the
disposition of the action; and (4) the interest is not adequately represented by an existing party in

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the litigation."'" Benjamin ex reI. Yock v. Department of Public Welfare of Pennsylvania, 701
F.3d 938,948 (3 rd Cir 2012) quoting In re Cmty. Bank ofN. Va., 418 F.3d 277,314 (3d
Cir.2005)(quoting Harris v. Pernsley, 820 F.2d 592, 596 (3d Cir.1987)).
Rule 24(b) provides in relevant part that a court "may permit anyone to intervene who: ..
. (B) has a claim or defense that shares with the main action a common question oflaw or fact."
F.R.Civ.P.24(b)(1)(B)
Our review of the Second Amended Complaint and Erie Indemnity Company's
arguments in support of its position overwhelmingly show that Erie Indemnity Company meets
the standard for intervention as of right. Accordingly, we will grant the motion to intervene and
order that Erie Indemnity Company be made a party Defendant in this action and that it join in
the Defendants' motion to dismiss. Had we not granted the motion to intervene as of right, we
would have granted Erie Indemnity Company's motion for permissive intervention under Rule
24(b),
II.

Primary Jurisdiction

The United States Supreme Court has explained the doctrine of Primary Jurisdiction as
follows:
The doctrine of primary jurisdiction, like the rule requiring exhaustion of
administrative remedies, is concerned with promoting proper relationships
between the courts and administrative agencies charged with particular regulatory
duties. 'Exhaustion' applies where a claim is cognizable in the first instance by an
administrative agency alone; judicial interference is withheld until the
administrative process has run its course. 'Primary jurisdiction,' on the other
hand, applies where a claim is originally cognizable in the courts, and comes into
play whenever enforcement of the claim requires the resolution of issues which,
under a regulatory scheme, have been placed within the special competence of an
administrative body; in such a case the judicial process is suspended pending
referral of such issues to the administrative body for its views. General American
Tank Car Corp. v. EI Dorado Terminal Co., 308 U.S. 422, 433, 60 S.Ct. 325, 331,
84 L.Ed. 36l.

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United States v. Western Pac. R. Co., 352 U.S. 59, 63-64 ( 1956) (see also Consolidated Rail
Corp. v. Certainteed Corp., 835 F.2d 474,477 (3 rd Cir. 1987). "In determining whether the
doctrine applies, courts have consistently looked to the twin purposes articulated by the Supreme
Court in Western Pacific: (1) 'the desirable uniformity which would obtain if initially a
specialized agency passed on certain types of administrative questions'; and (2) 'the expert and
specialized knowledge of the agencies involved.'" AT & T Communications, Inc. v.
Consolidated Rail Corp., 285 F.Supp.2d 649, 661 (E.D. Pa. 2003) quoting Western Pac. R. Co.,
352 U.S. at 64. Similarly, "[s]ome courts have found the following four factors helpful in
determining whether to apply the doctrine: '(1) Whether the question at issue is within the
conventional experience ofjudges or whether it involves technical or policy considerations
within the agency's particular field of expertise; (2) Whether the question at issue is particularly
within the agency's discretion; (3) Whether there exists a substantial danger of inconsistent
rulings; (4) Whether a prior application to the agency has been made.'"

Phone-Tel

Communications, Inc. v. AT & T Corp., 100 F.Supp.2d 313,316 n3. (E.D. Pa. 2000) (citation
omitted).
In addressing this issue in the case filed in the Court of Common Pleas of Fayette
County, Judge Gerald R. Solomon found that the Pennsylvania legislature has committed issues
raised by plaintiff s claims in that case to the specialized knowledge of the Pennsylvania
Insurance Department. Judge Solomon noted the Insurance Department's "special competence
to address the subject matter of plaintiff s claims" explaining the statutory basis as follows:
"The General Assembly, in recognition of the specialized complexities involved
in insurance generally, and in the regulation ofthis industry in particular, assigned
the task of overseeing the management of that industry, in this Commonwealth, to
the Insurance Department, the agency having expertise in that field. 40 P.S. § 41,
et seq." Foster v. Mutual Fire, Marine and Inland Ins. Co., 614 A.2d 1086,1091
(Pa. 1992). The Insurance Commissioner, an appointed position pursuant to 40
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P.S. § 42 is, therefore, afforded broad supervisory powers to regulate the
insurance business in this Commonwealth, including the power to protect 'the
interests of insureds, creditors, and the public generally .... '40 P.S. § 22Ll(c)."
Id.
Erie Ins. Exch. V. Erie Indemnity Company, Civil No. 1712 of2012, at 4-5 (Court of Common
Pleas Dec. 19,2013).
The instant case is nearly identical to the case filed in the Court of Common Pleas of
Fayette County and raises the same issues. Accordingly, we will grant Defendants' motion to
dismiss on the basis of primary jurisdiction, we will refer this case to the Pennsylvania Insurance
Department to decide any and all issues within its jurisdiction, and we will dismiss this action
without prejudice.

III.

Conclusion
For the reasons stated herein, we will enter an order granting Erie Indemnity Company's

motion to intervene and permit it to join in Defendants' motions. We will also grant in part and
deny in part Defendants' motion to dismiss. We will grant Defendants' motion to the extent they
seek referral of the issues raised in this case to the Pennsylvania Insurance Department. We
otherwise deny the motion without prejudice as to its remaining arguments. We will also deny
as moot Defendants' motions for judicial notice.

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Maur B. Cohill, J r . . . . " .
Senior United States District Court Judge

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ORDER
AND NOW, to-wit, this

If) ~ay of February, 2014 for the reasons stated in the

accompanying Opinion, it is hereby ORDERED, ADJUDGED and DECREED as follows:

1. Erie Indemnity Company's Motion to Intervene (ECF No. 43) is GRANTED. The Clerk
of Court is hereby DIRECTED to make Erie Indemnity Company a party Defendant in
this matter. IT IS FURTHER ORDERED that Erie Indemnity Company is permitted to
joined in Defendants' motions.
2. Defendants' Motion to Dismiss (ECF No. 66) is DENIED in part, and GRANTED in
part.
a. Defendant's motion to dismiss is GRANTED on the basis of primary jurisdiction.
b. IT IS FURTHER ORDERED that the issues in this case are hereby referred to the
PENNSYLVANIA INSURANCE DEPARTMENT to decide any and all issues
within its jurisdiction.
c. Defendant's Motion to Dismiss is DENIED without prejudice in all other respects
as moot.
3. Defendants' Motions for Judicial Notice (ECF Nos. 68 & 75) are DENIED without
prej udice as moot.
IT IS FURTHER ORDERED that this case is DISMISSED WITHOUT PREJUDICE.

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Maurice B. Cohill, Jr.

Senior United States District Judge

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