MAXIM CRANE WORKS, LP v. SMITH TRANSPORTATION SERVICES, INC et al
Filing
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MEMORANDUM OPINION re: 56 Joint Motion to Dismiss with Prejudice. Signed by Chief Judge Joy Flowers Conti on 7/22/2016. (ten)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
MAXIM CRANE WORKS, LP,
Plaintiff,
v.
SMITH TRANSPORTATION
SERVICES, INC. also known as
SMITH-CARGO TRANSPORTATION,
LLC; SENTRY SELECT
INSURANCE CO.; AGCS MARINE
INSURANCE CO.
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Civil Action No. 15-597
Defendant.
OPINION
The case arises out of a motor vehicle accident involving a truck operated by
Smith Transportations Services, Inc. (“Smith”) on behalf of Maxim Crane Works, L.P.
(“Maxim Crane”), and a car driven by a third party, who was injured in the accident. (ECF No.
1.) Maxim Crane filed declaratory judgment claims against Smith and two of Smith’s insurers,
Sentry Select Insurance Company (“Sentry”) and AGCS Marine Insurance Company
(“AGCS”), seeking to enforce defense and indemnity obligations purportedly owed to it for
claims arising out of this accident. (Id.) Maxim Crane also asserted two breach of contract
claims against Smith based upon Smith’s alleged failure to meet its indemnity obligations, or,
alternatively, to secure adequate insurance pursuant to the terms of a written contract between
those two parties. (Id.)
Maxim Crane settled its claims against Smith and Sentry, and these three parties
filed a joint motion for dismissal of all claims, with prejudice, pursuant to Federal Rule of
Civil Procedure 41(a)(2). (ECF No. 56.) AGCS refuses to consent to voluntary dismissal and
“seeks its costs and attorneys [sic] fees incurred in defending against Maxim [Crane’s]
frivolous action.” (ECF No. 61 at 3.) For the reasons set forth below, the joint motion to
dismiss will be granted and this matter will be dismissed with prejudice and without any
conditions, including an award of attorneys’ fees and costs to AGCS.
I. Procedural Background
Maxim Crane filed its complaint in this action on May 7, 2015. (ECF No. 1.)
Defendants Sentry and AGCS separately answered the complaint. (ECF Nos. 10, 20.) In its
answer, Sentry asserted a four-count counterclaim against Maxim Crane. (ECF No. 10 at 1118.) AGCS listed various affirmative defenses in its answer, but asserted no counterclaims
against Maxim Crane. (ECF No. 20.) Defendant Smith filed a motion to dismiss (ECF No. 8),
which was denied by the court in an opinion dated February 26, 2016. (1/20/2016 Minute
Entry; ECF Nos. 37-38.) Smith answered the complaint and this case proceeded to fact
discovery and mediation. (ECF Nos. 31-32, 34, 39.)
With the exception of a substitution and then addition of counsel appearing on
behalf of AGCS, and filings relating to the scheduling of mediation, there was no activity on
the docket until AGCS filed a motion for summary judgment on May 9, 2016, two weeks
before the fact-discovery period was scheduled to end. (ECF Nos. 31, 47.) The record reflects
that AGCS was aware that Maxim Crane, Smith, and Sentry had agreed to settle their claims
before AGCS filed its motion for summary judgment. (ECF No. 61-2 at 100.) On May 10,
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2016, the court-appointed neutral filed a notice with the court indicating that this matter had
been resolved as a result of the mediation session held in April, and several follow-up
telephone conferences. (ECF Nos. 39, 51.) The court immediately informed the parties that the
scope of the reported settlement and the future scheduling of this case would be discussed at
the post-discovery status conference, which had been previously scheduled for May 23, 2016.
(5/10/2016 Remark.)
In advance of that conference, AGCS wrote a letter to the court, which it
docketed as a status report. (ECF No. 53.) In that letter, counsel for AGCS informed the court
that it “was not made aware of the arrangements for the initial mediation” and suggested that a
second mediation session be scheduled to resolve the outstanding issues raised in its motion for
summary judgment, particularly AGCS’s “continued request for its attorneys [sic] fees.” (ECF
No. 53 at 1.) In response, counsel for Maxim Crane sent a responsive letter to the court by
facsimile, a practice that is disfavored by this court. (5/23/2016 (10:45 a.m.) facsimile
transmission; Chamber’s Rules, Preliminary General Matters ¶ 1.) In its letter, which does not
appear on the docket of this case, Maxim Crane stated that AGCS’s request for attorneys’ fees
was “fatally flawed from a procedural, legal and factual standpoint” and insisted that further
mediation was not warranted. At the post-discovery status conference, the court ordered
further briefing with respect to whether the matters raised in AGCS’s motion for summary
judgment were moot given that Maxim Crane was no longer pursuing the declaratory judgment
claim it asserted against AGCS in the complaint. (ECF No. 60 at 3-4, 10-12.) Two days later,
Maxim Crane, Smith, and Sentry filed a joint motion for voluntary dismissal pursuant to Rule
41(a)(2) (the “Joint Motion”). (ECF No. 56.) AGCS thereafter withdrew its motion for
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summary judgment, conceding that the motion was rendered moot when the other parties
settled this case. (ECF No. 58 at 1.) In doing so, however, AGCS stated its intent to formally
oppose the Joint Motion on the ground that any dismissal of this case must be conditioned
upon reimbursement of AGCS’s attorneys’ fees and costs. (Id. at 2.)
In response to the Joint Motion, AGCS argues that it is entitled to reimbursement
of the costs and fees incurred in defending against this action because Maxim Crane “acted in
bad faith by bringing frivolous litigation and by refusing for months (necessitating the filing of
an answer and otherwise defending against Maxim [Crane’s] meritless claims) to dismiss
AGCS with prejudice.” (ECF No. 61 at 8.) According to AGCS, Maxim Crane abused the
judicial process by naming AGCS, which issued an inland marine cargo policy to Smith that
provided coverage only for property damage to Smith’s vehicles and cargo, in a coverage
action stemming from personal injury claims made by a third party who was injured in a motor
vehicle accident. (Id. at 8-10.) AGCS characterizes Maxim Crane’s explanation that it could
not agree to dismiss AGCS with prejudice until it confirmed that Smith had not requested a
different kind of insurance coverage from AGCS as a “sudden irrational rationale” that cannot
justify Maxim Crane’s conduct because the complaint did not include allegations that AGCS
committed an underwriting error. (Id. at 9-10.)
II. Legal Authority
Federal Rule of Civil Procedure 41 provides for the voluntary dismissal of an
action without court order if the plaintiff files the notice of dismissal before the opposing party
serves either an answer or a motion for summary judgment, or if all parties who have appeared
sign the stipulation of dismissal. FED. R. CIV. P. 41(a)(1)(A). In all other circumstances, “an
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action may be dismissed at the plaintiff’s request only by court order, on terms that the court
considers proper.” FED. R. CIV. P. 41(a)(2). If a counterclaim was pled, that counterclaim must
remain pending for independent adjudication if the defendant asserting it objects to dismissal.
Id.
Whether to grant or deny a motion for voluntary dismissal under Rule 41(a)(2)
falls within the sound discretion of the district court. Protocomm Corp. v. Novell, Inc., 171 F.
Supp. 2d 459, 470-71 (E.D. Pa. 2001) (citing Sinclair v. Soniform, Inc., 935 F.2d 599, 603 (3d
Cir. 1991), and Ferguson v. Eakle, 492 F.2d 26, 28 (3d Cir. 1974)). “The purpose of the grant
of discretion under Rule 41(a)(2) ... is primarily to prevent voluntary dismissals which unfairly
affect the other side, and to permit the imposition of curative conditions.” Charles A. Wright &
Arthur R. Miller, 9 FED. PRAC. & PROC. CIV. § 2364 nn.18-19 (3d ed. 2016) (collecting some
of the “many, many cases” so holding). When considering dismissal under Rule 41(a)(2), “it
becomes necessary to decide the presence or extent of any prejudice to the defendant.”
Ferguson, 492 F.2d at 29. The analysis is different depending upon whether the plaintiff seeks
dismissal with or without prejudice.
Where the dismissal will be without prejudice, a district court must consider
various factors such as: (1) the excessive and duplicative expense of a second litigation; (2) the
effort and expense incurred by the defendant in preparing for trial; (3) the extent to which the
current suit has progressed; (4) the plaintiff’s diligence in bringing the motion to dismiss and
explanation thereof; and (5) the pendency of a dispositive motion by the nonmoving party in
deciding the motion. Bezarez v. Pierce, 107 F. Supp. 3d 408, 415 (D. Del. 2015) (citing
Schandelmeier v. Otis Div. of Baker–Material Handling Corp., 143 F.R.D. 102, 103 (W.D. Pa.
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1992)); Dodge-Regupol, Inc. v. RB Rubber Products, Inc., 585 F.Supp.2d 645, 652 (M.D. Pa.
2008); Young v. Johnson & Johnson Corp., No. 05-2393, 2005 WL 2886218, at *2-3 (E.D. Pa.
Nov. 2, 2005) (listing same factors, and adding whether the dismissal is designed to evade
federal jurisdiction); Maleski v. DP Realty Trust, 162 F.R.D. 496, 498 (E.D. Pa. 1995) (same).
A court may, and often will, condition a voluntary dismissal without prejudice upon payment
of defendant’s attorneys’ fees and costs. Pittsburgh Jaycees v. United States Jaycees, 89 F.R.D.
454, 455 (W.D. Pa. 1981); 9 Charles Alan Wright & Arthur R. Miller, Federal Practice and
Procedure § 2366 nn.13-14 (3d ed.).
In contrast, where the dismissal will be with prejudice, courts typically attach no
conditions to the dismissal, including an award of attorneys’ fees and costs. Colombrito v. The
Holy Spirit Ass’n, 764 F.2d 122, 133-35 (2d Cir. 1985); Arlington Indus., Inc. v. Bridgeport
Fittings, Inc., No. 06-cv-1105, 2015 WL 1470710, at *4 (M.D. Pa. Mar. 31, 2015);
Protocomm, 171 F.Supp.2d at 471 (citing decisions); John Evans Sons, Inc. v. Majik-Ironers,
Inc., 95 F.R.D. 186, 191 (E.D. Pa. 1982); Selas Corp. of Am. v. Wilshire Oil Comp. of Tex.,
57 F.R.D. 3, 7 (E.D. Pa. 1972) (“[t]here is some doubt whether it is ever proper to assess costs
and attorney’s fees in a dismissal with prejudice under Rule 41(a)(2)”). In fact, some courts
find that if the dismissal will be with prejudice, the court lacks the power to order the payment
of attorneys’ fees and costs, barring exceptional circumstances. John Evans, 95 F.R.D. at 191
(citing decisions); In re Asbestos Products Liab. Litig. (No. VI), No. 09-mc-103, 2010 WL
2034636, at *9 (E.D. Pa. May 14, 2010); Wright & Miller, 9 FED. PRAC. & PROC. CIV. § 2366
nn. 16-20. Exceptional circumstances include an abuse of the judicial process or bad faith
conduct. Asbestos Products, 2010 WL 2034636, at *9.
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As the Court of Appeals for the Second Circuit explained:
The reason for denying a fee award upon dismissal of claims with prejudice is
simply that the defendant, unlike a defendant against whom a claim has been
dismissed without prejudice, has been freed of the risk of relitigation of the
issues just as if the case had been adjudicated in his favor after a trial, in
which event (absent statutory authorization) the American Rule would
preclude such an award.
Colombrito, 764 F.2d at 134. An award of fees compensates a defendant for having incurred
the expense of trial preparation without the benefit of a final determination of the controversy;
that consideration, however, is not present where the dismissal is with prejudice. John Evans,
95 F.R.D. at 191.
III.
Discussion
The Joint Motion seeks dismissal with prejudice of all claims pending in this
case, including specifically the declaratory judgment claim asserted by Maxim Crane against
AGCS. (ECF No. ¶ 6.) AGCS opposes the Joint Motion on the ground that Maxim Crane
should be ordered to pay its attorneys’ fees and costs as a condition of dismissal because that
declaratory judgment claim was meritless. According to the legal authority set forth above,
this court must find that exceptional circumstances exist in order to award fees and costs to
AGCS under the circumstances of this case. John Evans, 95 F.R.D. at 191 (citing decisions);
Asbestos Products, 2010 WL 2034636, at *9.
AGCS claims that exceptional circumstances exist because Maxim Crane knew
before it filed suit that AGCS’s insurance policy, an inland marine cargo policy, could not
possibly provide coverage for a third party’s personal injury claims, and refused to dismiss
AGCS with prejudice after receiving a copy of the AGCS policy, which confirmed this fact.
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(ECF No. 61 at 9.) In response, Maxim Crane argues that it offered to dismiss AGCS from this
case, without prejudice, while Maxim Crane conducted discovery and evaluated whether
AGCS could have liability to it, either under the policy or for failing to provide Smith with all
coverages requested, but AGCS refused. (ECF No. 64.)
This case is not one in which exceptional circumstances warrant an award of
attorneys’ fees and costs to AGCS. AGCS’s assertion that Maxim Crane acted in bad faith by
filing a declaratory judgment claim against it is unconvincing. There is no dispute that AGCS
was named as one of Smith’s insurers on documents available to Maxim Crane before this
lawsuit was filed. (ECF No. 61-2 at 77-78.) Although AGCS claims that Maxim Crane should
have known, from the face of that document, that AGCS’s policy would not provide coverage
for claims arising out of the motor vehicle accident, it was not abusive, vexatious, or
oppressive for Maxim Crane to seek coverage declarations for all insurers listed as having
written automobile liability policies to Smith during the pertinent time period. Only after all
pertinent policies were located, reviewed, and, if necessary, interpreted by the court, could
Maxim Crane know definitively whether any AGCS policy provided coverage.
AGCS’s contention that Maxim Crane acted in bad faith and abused the judicial
process by continuing to pursue a coverage claim against it after receiving a copy of the AGCS
policy is equally unpersuasive. As an initial matter, AGCS did not provide a copy of the
policy at issue to Maxim Crane until four months after the complaint was served, three weeks
after the policy was specifically requested by Maxim Crane’s counsel, and ten days before the
already-extended deadline for AGCS to respond to the complaint was set to pass. (ECF Nos.
64-1; 64-4 at 2; 64-5.) The documents attached to the parties’ briefing on the Joint Motion
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reflect that Maxim Crane, shortly after receiving a copy of the AGCS policy, suggested that
proceedings between the two parties be stayed for 30 days to allow for settlement discussions
between Smith and Maxim Crane to develop. (ECF Nos. 64-4 at 1-3; 64-5 at 1; 64-6 at 2-3; 612 at 82.) At this point in the litigation, AGCS’s attorneys’ fees and costs consisted of
communicating with Maxim Crane’s counsel, via telephone and email, several times over the
course of six weeks, and preparing an answer, which included affirmative defenses but no
counterclaims. (ECF No. 64-6 at 1-4.)
It is unclear whether AGCS agreed to that 30-day stay, but, in any event, the case
appears to have remained dormant, at least between Maxim Crane and AGCS, until the court
conducted the initial scheduling conference on January 20, 2016. (ECF No. 54; 1/20/2016
Minute Entry.) AGCS participated in that conference by telephone, but did not participate in
the Rule 26(f) planning meeting held on January 4, 2016. (ECF No. 27.) Maxim Crane
informed the court at the initial status conference that it had engaged in discussions with
AGCS and was willing to dismiss AGCS, without prejudice to Maxim Crane’s right to reassert
claims against AGCS if any grounds to do so were revealed during fact discovery. (ECF No.
54 at 3-4.) Counsel for AGCS represented that he did not have authority to accept that offer,
noted that AGCS had “incurred expenses” up to this point, and stated that he would work with
Maxim Crane’s counsel to arrive at a resolution of the matter. (Id. at 4.) The parties did not
thereafter file any papers related to AGCS’s dismissal.
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This case proceeded to fact discovery and court-mandated mediation. During
February and March 2016, counsel for AGCS and Maxim Crane exchanged various written
communications in which AGCS made it clear that, by whatever means necessary, AGCS
would seek and obtain reimbursement of the attorneys’ fees and costs associated with its
defense of this case. (ECF Nos. 64-7; 64-8 to -9; 61-2 at 85-87, 90, 93-94.) A mediation
session was held on April 5, 2016, but AGCS did not participate, claiming in a letter to the
court that it “was not made aware of” the scheduled mediation session; a claim that is
explicitly contradicted by the docket. (ECF Nos. 39, 53.) AGCS, having remained a party to
this litigation, was entitled to appear at the mediation and assert its purported right to recover
the fees and costs incurred in defending this case. It elected not to do so. Instead, several days
after being informed that Maxim Crane, Smith, and Sentry had settled their claims during the
court-mandated mediation, AGCS filed an unsolicited motion for summary judgment. (ECF
Nos. 47, 64-10; 61-2 at 100.) AGCS withdrew the motion for summary judgment, admitting
that the matters raised therein were rendered moot by Maxim Crane’s settlement and voluntary
dismissal of this case. (ECF No. 58.)
There is no basis for the court to find that Maxim Crane acted in bad faith or
abused the judicial process by refusing to dismiss AGCS, with prejudice, earlier in this case.
The materials submitted to the court, and the docket of this case, indicate that there was
nothing unusual, improper, or oppressive about Maxim Crane’s pursuit of its claims against
AGCS. It is not unusual for insurers to insist, from the outset, that coverage could not possibly
be available under their policy, and for insureds (or in this case, third-party insureds) to
advance arguments and theories, sometimes novel ones, in an effort to expand coverage to the
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broadest extent possible. In this respect, the instant case was a routine declaratory judgment
insurance coverage action.
At the same time, there is evidence that AGCS engaged in a course of conduct
that increased its costs and expenses. The record reflects that Maxim Crane offered several
options to AGCS to curtail its expenses while this case proceeded through settlement
discussions and discovery, including a stay and dismissal without prejudice. (ECF No. 64-6 at
1-2; ECF No. 64-7.) AGCS refused any resolution except dismissal with prejudice, with a
condition that AGCS be reimbursed for its attorneys’ fees and costs. Although opportunities to
assert its purported right to reimbursement were available to AGCS during the pendency of
this litigation, such as filing a counterclaim or attending the Rule 26(f) planning meeting and
the court-mandated mediation session, counsel for AGCS chose not to participate in this case.
AGCS instead sent emails and letters to Maxim Crane’s counsel threatening any manner of
consequences if Maxim Crane refused to reimburse its fees and costs. (ECF No. 61-2 at 85-88,
90-91, 96-98, 103-04; ECF No. 64-6.) When those threats failed to produce results, AGCS
filed a motion for summary judgment, which AGCS was required to withdraw because it was
moot. (ECF Nos. 47-50; ECF No. 58.) When that motion failed to produce results, AGCS
objected to the Joint Motion. (ECF No. 61.)
It would be illogical and counterproductive for this court to refuse to allow
Maxim Crane, Sentry, and Smith, who settled their disputes during court-mandated mediation,
to voluntarily dismiss this case unless AGCS, who elected not to participate in mediation, is
paid its fees and costs. To the extent AGCS believed that this case could not be settled without
payment of its fees and costs, AGCS could have availed itself of the opportunities presented
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during this litigation to assert its right to these sums. AGCS did not do so. This course of
events does not present exceptional circumstances in which Maxim Crane should be held
responsible for the fees and costs incurred by AGCS in defending this action. An award of
fees and costs to AGCS is not warranted as a condition of voluntary dismissal.
IV. Conclusion
For the foregoing reasons, the Joint Motion is granted. This case will be
dismissed, with prejudice. There being no exceptional circumstances demonstrated, the court
will not condition dismissal upon the payment of AGCS’s attorneys’ fees and costs.
An appropriate order will be entered contemporaneously with this opinion.
Dated: July 22, 2016
BY THE COURT,
/s/ Joy Flowers Conti
Joy Flowers Conti
Chief U.S. District Judge
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