Muhler Company Inc, The v. Window World of N Charleston LLC

Filing 148

ORDER granting 135 Motion to Strike Signed by Honorable David C Norton on March 10, 2017.(span, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION
THE MUHLER COMPANY, INC.,

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Plaintiff,
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vs.
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WINDOW WORLD OF N.
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CHARLESTON LLC, and STATE FARM )
FIRE & CASUALTY CO.,
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Defendants.
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No. 2:11-cv-00851-DCN

ORDER

This matter is before the court on: (1) defendant State Farm Fire & Casualty Co.’s
(“State Farm”) motion to strike, or in the alternative, to dismiss the amended complaint
and third-party complaint filed by plaintiff The Muhler Company (“Muhler”) and thirdparty plaintiff Window World of North Charleston (“WWNC”); and (2) State Farm’s
motion to reconsider the court’s September 27, 2016 order (“September 2016 order”)
granting Muhler’s motion for assignment and to amend the complaint, ECF No. 130. For
the reasons set forth below, the court (1) grants the motion to strike; and (2) grants the
motion to reconsider.
I. BACKGROUND
Muhler and WWNC were direct competitors in the business of supplying and
installing replacement windows in Charleston County, South Carolina, and in
neighboring coastal counties. WWNC advertised through its website and other media
that it adhered to the “strictest industry standards” in the conduct of its replacement
window installation services. It advertised that it provided the “best for less” and that it
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was “lead certified.” These representations were aimed at and reached consumers in the
market. Similarly, Muhler advertised in the market that it “strives to exceed customer
expectations by offering the highest level of service and value,” that it “complies with
industry standards,” and that it is a “certified lead renovator.”
Muhler filed a complaint against WWNC in state court on March 11, 2011.
WWNC removed the case to federal court on April 11, 2011. Muhler filed an amended
complaint asserting three causes of action against WWNC: (1) false and misleading
advertising violation of the Lanham Act; (2) common law unfair competition; and
(3) violation of the South Carolina Unfair Trade Practices Act. On August 28, 2014, the
court granted Muhler’s motion for default judgment against WWNC in the amount of
$258,851.67 in actual damages, $2,866,358.50 in disgorgement of profits, $118,600 in
attorneys’ fees, and $7,506.09 in costs. ECF No. 118. On December 9, 2015, the court
ordered WWNC to appear for an examination to determine what assets WWNC had to
satisfy the default judgment. ECF No. 125. On August 1, 2016, Muhler moved to amend
the complaint to add WWNC’s commercial general liability insurer, State Farm Fire &
Casualty Co. (“State Farm”), as a party and assign WWNC’s claims against State Farm to
Muhler. ECF No. 127. On September 27, 2016, with no responsive pleadings filed
against Muhler’s motion to amend, the court granted Muhler’s motion for assignment and
to amend the complaint. ECF No. 130. As a result of this order, all claims that WWNC
had against State Farm were transferred to Muhler in partial satisfaction of the default
judgment against WWNC. ECF No. 130.
On November 4, 2016, Muhler and WWNC filed a third-party complaint against
State Farm, alleging claims for bad faith, breach of contract, and declaratory judgment.
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ECF No. 132. This third-party complaint was premised on State Farm’s initial
determination that there was coverage under WWNC’s commercial general liability
policy (the “policy”) and subsequent refusal to defend or indemnify WWNC. ECF No.
132 at 1. On December 27, 2016, State Farm filed a motion to strike or in the alternative
to dismiss the third-party complaint, and for the court to reconsider its September 2016
order granting Muhler’s motion for assignment and to amend. ECF No. 135. Muhler
filed a response on January 20, 2017, ECF No. 138, to which State Farm replied on
February 6, 2017, ECF No. 143. The motion has been fully briefed and is now ripe for
the court’s review.
II. STANDARDS
A.

Motion to Strike

Rule 12(f) of the Federal Rules of Civil Procedure provides that “[t]he court may
strike from a pleading an insufficient defense or any redundant, immaterial, impertinent,
or scandalous matter.” Fed. R. Civ. P. 12(f). “Rule 12(f) motions are generally viewed
with disfavor ‘because striking a portion of a pleading is a drastic remedy and because it
is often sought by the movant simply as a dilatory tactic.’” Waste Mgmt. Holdings, Inc.
v. Gilmore, 252 F.3d 316, 347 (4th Cir. 2001) (quoting 5A Charles Alan Wright & Arthur
R. Miller, Federal Practice & Procedure § 1380 (2d ed.1990)).
B.

Motion to Dismiss

A Rule 12(b)(6) motion for failure to state a claim upon which relief can be
granted “challenges the legal sufficiency of a complaint.” Francis v. Giacomelli, 588
F.3d 186, 192 (4th Cir. 2009) (citations omitted); see also Republican Party of N.C. v.
Martin, 980 F.2d 943, 952 (4th Cir.1992) (“A motion to dismiss under Rule 12(b)(6) . . .
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does not resolve contests surrounding the facts, the merits of a claim, or the applicability
of defenses.”). To be legally sufficient, a pleading 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). A Rule 12(b)(6) motion should not be granted unless it appears certain that the
plaintiff can prove no set of facts that would support his claim and would entitle him to
relief. Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). When
considering a Rule 12(b)(6) motion, the court should accept all well-pleaded allegations
as true and should view the complaint in a light most favorable to the plaintiff.
Ostrzenski v. Seigel, 177 F.3d 245, 251 (4th Cir. 1999); Mylan Labs., Inc., 7 F.3d at
1134.
C.

Motion to Reconsider

Rule 54(b) states, in relevant part:
[A]ny order or other decision, however designated, that adjudicates fewer
than all the claims or the rights and liabilities of fewer than all the parties
does not end the action as to any of the claims or parties and may be
revised at any time before the entry of a judgment adjudicating all the
claims and all the parties’ rights and liabilities.
A “judgment,” as used in Rule 54, “includes a decree and any order from which an appeal
lies.” Fed. R. Civ. P. 54(a). A motion brought under Rule 54(b) is judged by similar
standards as a motion brought under Rule 59(e), which may only be granted for the
following reasons: “(1) to accommodate an intervening change in controlling l aw; (2) to
account for new evidence not available at trial; or (3) to correct a clear error of law or
prevent manifest injustice.” Grayson Consulting, Inc. v. Cathcart, No. 2:07-cv-00593DCN, 2014 WL 587756, at *1 (D.S.C. Feb. 14, 2014) (quoting Pac. Ins. Co. v. Am. Nat’l

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Fire Ins. Co., 148 F.3d 396, 403 (4th Cir. 1998)); Slep-Tone Entm't Corp. v. Garner, 2011
WL 6370364, at *1 (W.D.N.C. Dec. 20, 2011).
III. DISCUSSION
A.

Motion to Strike

The third-party complaint against State Farm appears to stem from Muhler’s
desire to collect on the August 28, 2014 default judgment that the court issued against
WWNC in the amount of $258,851.67 in actual damages, $2,866,358.50 in disgorgement
of profits, $118,600 in attorneys’ fees, and $7,506.09 in costs. ECF No. 119. Having
determined in the December 9, 2015 court-ordered examination of WWNC, ECF No.
125, that WWNC did not have the assets to pay the default judgment, Muhler filed the
third-party complaint to determine if it could collect actual, consequential, and punitive
damages from State Farm, the issuer of WWNC’s Policy. ECF No. 132 at 2. For a
number of reasons, the filing of this third-party complaint was improper. WWNC, as a
party in default, does not have standing to file the third-party complaint, and even if it did
a post-judgment motion to amend cannot be granted “unless the judgment is vacated.”
Laber v. Harvey, 438 F.3d 404, 427 (4th Cir. 2006).
As an initial matter, WWNC is a party in default yet filed the third-party
complaint as a “third party plaintiff.” ECF No. 132 at 1. Without an order setting aside
the default judgment against WWNC—which the court has not even considered, let alone
granted—WWNC does not have standing to file the third-party complaint against State
Farm. See Hartford Fire Ins. Co. v. Sundeck Transp. Grp., Inc., No. 2:10-cv-191, 2011
WL 2938466, at *2 (E.D. Va. June 29, 2011) (“The general effect of the entry of default
under Rule 55(a) is that the defaulting party loses his standing in court, his right to
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receive notice of the proceedings, and his right to present evidence at the final hearing.”).
Muhler dismisses the standing argument as one that “makes much of little.” ECF No.
138. Not so. Standing is a justiciability doctrine that is deeply rooted in the Article III
“case or controversy” requirement for federal courts—it is the threshold question in every
federal case. Warth v. Seldin, 422 U.S. 490, 498 (1975). Without determining that each
party before it has standing to be there, the court may not proceed to the merits of the
dispute. Barrows v. Jackson, 346 U.S. 249, 255—256 (1953). Since WWNC does not
have standing, it cannot bring this third-party claim.
Next, a post-judgment Rule 15 motion cannot be granted “unless the judgment is
vacated” pursuant to Rule 59(e) or 60(b). Laber, 438 F.3d at 427. The default judgment
against WWNC has not been vacated. In DuBuit v. Harwell Enters., Inc., 540 F.2d 690,
692 (4th Cir. 1976), the Fourth Circuit denied a post-judgment motion to amend where
“the final order of the court disposed of all of the issues between these two plaintiffs and
the defendants, and . . . no appeals were taken the judgment became a finality and
terminated the case as to them.” This is precisely the scenario here—the default
judgment against WWNC terminated the case as to Muhler and WWNC. Under these
circumstances, the case could only be reopened or the order revised under the provisions
of Rule 59 or 60, for which Muhler has not yet moved.1 In Calvary Christian Ctr. v. City
of Fredricksburg, Va., 710 F.3d 536, 540 (4th Cir. 2013), the Fourth Circuit held that
where the judgment was not yet vacated the plaintiff could not prevail on a motion to
amend. Instead, the Calvary Christian court ruled that the plaintiff could only proceed
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Given that the default judgment against WWNC is the basis of the third-party
action against State Farm, Muhler would have no practicable reason to set aside the final
judgment that the court issued.
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post-judgment with a different complaint that commenced a new action. Id. While
Muhler has technically prevailed in its motion to amend, the court’s September’s 2016
order granting the motion is a short text order that granted Muhler’s motion to amend
based in part on the fact that no responses were filed. Of course, WWNC, as a party in
default, could not file a response and State Farm was not yet a party to the proceeding, so
it could not file a response either. Since the Fourth Circuit has clearly held that a party
may only amend its pleading post-judgment after the judgment has been set aside, and the
default judgment against WWNC has yet to be set aside, Muhler may not amend its
pleading and the third-party complaint must be struck.
Finally, State Farm argues that under Federal Rule of Civil Procedure 14(b),
Muhler cannot bring a third-party action against State Farm because it had no causes of
action asserted against it. ECF No. 135 at 2. Rule 14(b) allows a plaintiff to bring in a
third party when “a claim is asserted against [the] plaintiff.” Fed. R. Civ. P. 14. Muhler
has no claim asserted against it in this action, and so has no ability to bring a third-party
action under Rule 14.
The August 28, 2014 order granting Muhler default judgment against WWNC
terminated the case—a case that was filed in 2011. Should Muhler wish to bring an
insurance coverage claim against State Farm, it must file a separate action. An improper
supplemental pleading is not a vehicle to bring that insurance coverage claim.
Accordingly, the court strikes the third-party complaint as improper.2

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Muhler devotes a considerable portion of its briefing on this matter to the court’s
“inherent power,” urging it to control the disposition of the case keeping judicial
efficiency in mind. ECF No. 138 at 4. While the court may have discretion in docket
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B.

Motion to Reconsider

A review of the court’s September 2016 order granting Muhler’s motion for
assignment and to amend complaint to sue State Farm demonstrates that no responses
were filed in opposition. ECF No. 130. Now that the arguments regarding the propriety
of the third-party complaint have been fully fleshed out—and given that the court has
already ruled to strike the third-party complaint as improper—the court grants State
Farm’s motion to reconsider.
IV. CONCLUSION
For the reasons set forth above, the court GRANTS State Farm’s motion to strike
the third-party complaint and GRANTS State Farm’s motion to reconsider the September
2016 order.
AND IT IS SO ORDERED.

DAVID C. NORTON
UNITED STATES DISTRICT JUDGE
March 10, 2017
Charleston, South Carolina

control, the rules of civil procedure and doctrines of justiciability are not discretionary—
that is why they are called “rules” and not “guidelines” or “suggestions.”
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