Markel American Insurance Company v. Piggie Park Enterprises Inc et al

Filing 61

ORDER granting 45 Motion to Dismiss, dismissing the cross claim of Anthony Attaway against Jackson W. Padgett without prejudice; finding as moot 51 Motion to Compel Discovery Responses. Signed by Honorable Joseph F Anderson, Jr on 02/05/10.(bshr, )

IN THE UNITED STATES DISTRICT COURT F O R THE DISTRICT OF SOUTH CAROLINA C O L U M B IA DIVISION M a rk e l American Insurance Company, ) ) P l a in tif f , ) ) vs. ) ) P ig g ie Park Enterprises, Inc. dba Piggie ) P a rk Drive-In Restaurants, Maurice ) B e s s in g e r, Jackson W. Padgett, Tammy ) D . Bagley, Anthony E. Attaway, and ) E liza b e th Wyatt, ) ) D e f e n d a n ts . ) ________________________________ ) C / A No.: 3:09-1631-JFA

ORDER

T h is matter comes before the court on the following two motions: (1) defendant Ja c k so n W. Padgett's motion to dismiss or in the alternative to sever or for separate trials [ d k t. # 45], and (2) defendant Anthony E. Attaway's motion to compel discovery from P a d g e tt [dkt. # 51]. On February 4, 2010, the court heard oral argument and took the matter u n d e r advisement. This order serves to announce and memorialize the court's ruling on the p e n d in g motions. For the reasons stated herein, Padgett's motion to dismiss is granted, and A tta w a y's motion to compel is deemed moot. I. F a c tu a l and Procedural Background A c c o rd i n g to the complaint, on March 24, 2008, defendant Jackson Padgett was d riv in g a 1997 Ford Pickup Truck (the "Truck") when it was struck by a motorcycle driven b y defendant Anthony Attaway, causing debris to strike defendant Elizabeth Wyatt's vehicle. D e f e n d a n t Tammy D. Bagley was a passenger in Padgett's Truck at the time of the accident.

Plaintiff Markel American Insurance Company ("Markel") issued a policy covering several v e h icle s, including the Truck, used by Piggie Park and its employees in the conduct of Piggie P a rk 's business. The Truck was owned by defendant Maurice Bessinger, the

o f f ic e r/sh a re h o ld e r of Piggie Park. Padgett worked for Piggie Park and had allegedly entered into an agreement with B e ss in g e r to purchase the Truck for $3000 via biweekly payroll deductions through Piggie P a rk . On the day of the accident, Padgett's payroll was allegedly deducted for the final time, w h ic h Markel argues made Padgett the sole owner of the truck. Padgett had not transferred S C D M V title to or obtained insurance on the Truck when he was involved in the accident. M a rk e l filed this declaratory judgment action to determine whether its insurance p o lic y provided coverage for the Truck. Attaway subsequently answered the complaint, f ile d crossclaims against Piggie Park, Padgett, and Attaway, and filed a counterclaim against M a rk e l. Padgett now moves to dismiss Attaway's crossclaim, or in the alternative to sever f o r separate trials, arguing that because the crossclaims in this case do not arise out of the s a m e transaction or occurrence as the declaratory judgment action, the court lacks ju risd ictio n to hear the claims. For the reasons that follow, the court grants the motion to d i sm is s . II. D is c u ss io n U n d e r Fed. R. Civ. P. 13(g), a crossclaim is only permissible under the if the claim a ris e s out of the transaction or occurrence that is the subject matter of the original action or o f a counterclaim. Padgett argues that the issues of fact and law in the declaratory judgment

action and the tort crossclaim are not largely the same, and the evidence to support or refute th e complaint and crossclaim will not be substantially the same. Specifically, Padgett claims th a t the declaratory judgment action deals with a factual determination as to whether Padgett h a d completed the purchase of the Truck from Piggie Park at the time of this collision and w h e th e r he was informed that insurance on the truck maintained by Piggie Park would be ca n ce lled upon completion of the installment sales transaction. On the other hand the tort c ro s s c la im involves the determination as to which of the three drivers, if any, was negligent in causing the collision and a determination of damages for any injuries sustained. T h e court agrees with the analysis in Am. Fidelity Fire Ins. Co. v. Hood, 37 F.R.D. 1 7 (D.S.C. 1965): It is the rationale of the decisions of the United States Supreme Court that a f e d era l court in cases in which jurisdiction is based upon diversity of c itiz e n sh ip enforces state law and state policy. * * * *It is also the rationale of su c h decisions that provisions of the Federal Rules of Civil Procedure must in su c h cases give way to such law and policy. Further, it is the rule that if a party c o u ld not have maintained a certain action in the local state court he cannot m a in ta in such action in federal court in an action in which jurisdiction is based u p o n diversity of citizenship. * * * To permit the * * * injured persons in the p re se n t case to proceed as they have attempted to do, upon the ground that the F e d e ra l Rules of Civil Procedure permit them to do so, would be to permit s u c h parties by means of such Rules to contravene state policy and state law. It seems clear that the United States Supreme Court would not permit that to b e done. Id., citing Hoosier Cas. Co. of Indianapolis, Ind. v. Fox, 102 F.Supp. 214, 223 (N.D.Iowa 1 9 5 2 ). In this case, Markel seeks a determination as to whether it is liable on the policy for th e Truck, which judgment does not affect the various defendants' claims among themselves.

As the Hood court noted, an insurance company's initiation of a declaratory judgment action in federal court should not result in a waiver of the "no action" clause in its contract which p ro h ib its joining the company as a co-defendant in any action against the insured to d e te rm in e the insured's liability. Hood at 22, quoting Globe Indemnity Co. v. Teixeria, 230 F.Sup p . 444 (D.Hawaii 1963). "Undoubtedly the reason for such provisions in such insurance p o licie s is to keep the jury trying the accident case from knowing that the defendant is in s u re d , it being assumed, whether correctly or incorrectly, that larger amount of damages w o u ld be awarded if it were known that they were to be paid by an insurance company." T e ix e ria at 448. Likewise, the court concurs in the reasoning of Hood and Teixeria with respect to the c ro s s -c la im issue: T h e subject matter of the original action in this case is the liability or n o n -lia b ility of plaintiff on the insurance policy. The cross-claims are for d a m a g e s resulting from the accident alleged. Thus, the claims in the c ro s s -c la im s did not arise out of the transaction or occurrence that is the s u b je c t matter of the original action. The claims in the cross-claims did, h o w e v e r, arise out of the transaction or occurrence that is the subject matter of th e counterclaims filed herein. There being no claims or allegations of d iv e rsity of citizenship or other independent ground of jurisdiction of this C o u rt over the cross-claims, the only basis on which they may be maintained in this Court is that they arose out of the transaction or occurrence that is the s u b j e c t matter of the counterclaims. `T h e Court has held, supra, that the counterclaims cannot be brought. The c o u n te rc la im s no longer being in the case, the cross-claims, jurisdiction over w h ic h is based on their arising out of the transaction or occurrence that is the s u b je c t matter of the counterclaims, cannot be maintained, the Court no longer h a v in g jurisdiction over them. This Court is of the opinion that, although the g e n e ra l rule is that jurisdiction, once having attached, will not be divested by s u b s e q u e n t events, that rule should not apply in this case.

Hood at 22. H a v in g determined that the liability issue should be litigated independently of the in s u ra n c e coverage issue, the court finds no basis to allow the cross-claims to remain, as th e re is no diversity of citizenship. See Teixeira and Hoosier, supra. F o r the reasons given, Padgett's motion to dismiss [dkt. # 45] is granted. Having d ism issed the crossclaims among the defendants, Attaway's motion to compel discovery from P a d g e tt is rendered moot [dkt. # 51]. To the extent that Markel has named the defendants in the insurance coverage dispute, they remain as such. The underlying tort claims over liab ility, however, are dismissed, without prejudice to refile in state court. IT IS SO ORDERED.

F eb rua ry 5, 2010 C o lu m b ia , South Carolina

J o s e p h F. Anderson, Jr. U n ite d States District Judge