Vanliner Insurance Company v. DerMargosian et al
Filing
55
MEMORANDUM OPINION AND ORDER denying 44 Motion to Dismiss and denying 46 Motion to Dismiss. (Ordered by Chief Judge Sidney A Fitzwater on 1/13/2014) (Chief Judge Sidney A Fitzwater)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
VANLINER INSURANCE COMPANY, §
§
Plaintiff,
§
§ Civil Action No. 3:12-CV-5074-D
VS.
§
§
GREG DERMARGOSIAN, et al.,
§
§
Defendants. §
MEMORANDUM OPINION
AND ORDER
In this declaratory judgment action, an insurer seeks a declaration that it does not owe
its insured a duty to defend or indemnify, naming as defendants its insured and the two
plaintiffs who have sued its insured in the underlying state court action. The two state court
plaintiffs each move to dismiss under Fed. R. Civ. P. 12(b)(1) and (6). For the following
reasons, the court denies the motions.
I
Plaintiff Vanliner Insurance Company (“Vanliner”) insures defendant Arpin America
Moving Systems, LLC (“Arpin”) under a commercial general liability insurance policy.
Defendants Greg DerMargosian (“Greg”) and Martina DerMargosian (“Martina”)
(collectively, “the DerMargosians”) hired Arpin to pack their household items in preparation
for a move from Texas to Dubai, U.A.E. The DerMargosians allegedly instructed Arpin
regarding which items were to be packed and which were to remain at their residence, to
which the DerMargosians intended to return in three years. According to the DerMargosians,
Arpin erroneously packed a pistol, which was shipped by sea to Dubai with their other
household goods; shortly after their move, Greg was called to Customs in U.A.E., was
arrested, and his passport was seized; and Greg was charged with a crime, incarcerated, and
forced to stand trial in U.A.E. The DerMargosians allege that Greg’s arrest resulted from the
discovery of the pistol.
The DerMargosians filed a lawsuit against Arpin (“the DerMargosian lawsuit”) in
Texas state court1 alleging claims for negligence, gross negligence, and violation of the
Texas Deceptive Trade Practices-Consumer Protection Act and seeking compensatory and
punitive damages. Vanliner then filed the instant declaratory judgment action against Arpin
and the DerMargosians seeking a declaration that it has no duty to defend or indemnify Arpin
in the DerMargosian lawsuit because the DerMargosians’ claims do not meet the terms of
the policy’s insuring agreements. The DerMargosians have filed nearly identical motions
to dismiss the claims against them.2 They argue that, because they have neither sued nor
entered into a contract with Vanliner, they are not otherwise in privity with Vanliner, and
they do not possess a judgment or settlement that can be enforced against Vanliner, they are
not proper parties to this lawsuit. The DerMargosians seek dismissal of Vanliner’s claims
1
Arpin removed the DerMargosian lawsuit to this court, but the case was remanded
because the removal was untimely. See DerMargosian v. Arpin Am. Moving Sys., LLC, 2013
WL 787091, at *2 (N.D. Tex. Mar. 4, 2013) (Fitzwater, C.J.).
2
Greg and Martina have filed separate motions to dismiss, supported by separate
appendixes, and separate reply briefs. Because the contents of these documents are nearly
identical, the court will refer to and cite their briefs as if they were single documents.
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under Rule 12(b)(6), contending that Vanliner has failed to state a claim on which relief can
be granted, and under Rule 12(b)(1), asserting that the court lacks subject matter jurisdiction.
Vanliner opposes the motions.
II
The DerMargosians argue that the claims against them should be dismissed under both
Rule 12(b)(6) and 12(b)(1) because there is no actual controversy between the parties.
“When a Rule 12(b)(1) motion is filed in conjunction with other Rule 12 motions, the court
should consider the Rule 12(b)(1) jurisdictional attack before addressing any attack on the
merits.” Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001) (per curiam).
A
“Federal courts are courts of limited jurisdiction, and absent jurisdiction conferred by
statute, lack the power to adjudicate claims.” Stockman v. Fed. Election Comm’n, 138 F.3d
144, 151 (5th Cir. 1998). The court “must presume that a suit lies outside this limited
jurisdiction, and the burden of establishing federal jurisdiction rests on the party seeking the
federal forum.” Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001). “It is
incumbent on all federal courts to dismiss an action whenever it appears that subject matter
jurisdiction is lacking.” Stockman, 138 F.3d at 151.
Because the DerMargosians’ motions to dismiss ask the court to consider the contents
of their affidavits, the challenge is factual rather than facial. See Paterson v. Weinberger,
644 F.2d 521, 523 (5th Cir. May 1981) (“If a defendant makes a ‘factual attack’ upon the
court’s subject matter jurisdiction over the lawsuit, the defendant submits affidavits,
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testimony, or other evidentiary materials.”). In a factual challenge, the “court is free to weigh
the evidence and satisfy itself as to the existence of its power to hear the case.” Williamson
v. Tucker, 645 F.2d 404, 413 (5th Cir. May 1981). Further, “no presumptive truthfulness
attaches to plaintiff’s allegations, and the existence of disputed material facts will not
preclude the trial court from evaluating for itself the merits of jurisdictional claims.” Id. As
the party seeking to invoke jurisdiction, plaintiff has the burden of establishing jurisdiction.
It is “required to submit facts through some evidentiary method and ha[ve] the burden of
proving by a preponderance of the evidence that the trial court does have subject matter
jurisdiction.” Paterson, 644 F.2d at 523; see also New Orleans & Gulf Coast Ry. Co. v.
Barrois, 533 F.3d 321, 327 (5th Cir. 2008).
B
Vanliner brings this action under the federal Declaratory Judgment Act (“DJA”), 28
U.S.C. §§ 2201, 2202. Under the DJA, a federal court may “declare the rights and other legal
relations” of parties in “a case of actual controversy.” 28 U.S.C. § 2201. The controversy
must be “of a justiciable nature, thus excluding an advisory decree upon a hypothetical state
of facts.” Ashwander v. Tenn. Valley Auth., 297 U.S. 288, 325 (1936). “Th[e Fifth C]ircuit
interprets the § 2201 ‘case of actual controversy’ requirement to be conterminous with
Article III’s ‘case or controversy’ requirement.” Hosein v. Gonzales, 452 F.3d 401, 403 (5th
Cir. 2006) (per curiam); see also Bauer v. Texas, 341 F.3d 352, 358 (5th Cir. 2003) (“The
‘actual controversy’ required under 28 U.S.C. § 2201(a) ‘is identical to the meaning of “case
or controversy” for the purposes of Article III.’” (quoting Lawson v. Callahan, 111 F.3d 403,
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405 (5th Cir. 1997))).
In Klein v. O’Neal, Inc., 2009 WL 3573849, at *3 (N.D. Tex. Oct. 30, 2009)
(Fitzwater, C.J.), this court held that “[a] declaratory judgment action among an insurer, an
insured, and a plaintiff in a pending lawsuit against the insured constitutes a ‘controversy’
within the meaning of the DJA and Article III of the Constitution.” Id. (quoting Md. Cas.
Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 272-74 (1941)). “Merely satisfying the minimum
standards of Article III, however, does not entitle a party to a declaratory judgment.” Id. “In
a diversity case, where the claims are based on state law, the relief sought must be available
under state law.” Id.; see also Westport Ins. Corp. v. Atchley, Russell, Waldrop & Hlavinka,
L.L.P., 267 F.Supp.2d 601, 630 (E.D. Tex. 2003) (“[S]ince a federal court adjudicating a
state-created right solely because of the diversity of citizenship of the parties is for that
purpose, in effect, only another court of the State, it cannot afford recovery if the right to
recover is made unavailable by the State.”). Accordingly, the court must determine whether,
under Texas law, an insurer is permitted to maintain a prejudgment declaratory action against
its insured and the parties suing the insured to determine the insurer’s duty to defend and
indemnify the insured. See Standard Fire Ins. Co. v. Sassin, 894 F. Supp. 1023, 1026 (N.D.
Tex. 1995) (Sanders, J.) (holding that “courts faced with declaratory judgment actions
involving insurers and tort plaintiffs have acknowledged that state law, by defining the
substantive rights of the parties, plays a large role in determining whether a case or
controversy exists.”).
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III
A
The DerMargosians argue that Vanliner does not plead that it was ever in privity of
contract with them or that it sold any insurance policy to them or that it claims to have any
debt or obligation to them. They attach the Arpin policy and argue that there is no indication
that the DerMargosians were ever a party to it. The DerMargosians further posit that there
is nothing in the state court petition that indicates that they are asserting or bringing any
claim against Vanliner, and that Vanliner is not a party to the DerMargosian lawsuit. They
argue that a review of Vanliner’s complaint in this declaratory judgment action reveals that,
although Vanliner is seeking declaratory relief against Arpin, Vanliner does not appear to be
seeking relief against them. The DerMargosians also rely on their affidavits, arguing that
they show that they never did business with Vanliner, Vanliner never issued any insurance
policy to them, they never sought to buy insurance from Vanliner, and they have never sued
or tried to sue Vanliner. They maintain that Vanliner should not have sued them.
Vanliner contends that the pleadings demonstrate that the DerMargosians have sued
Arpin (Vanliner’s insured), that they intend to seek a judgment against Arpin, and that Arpin
maintains that it is entitled to a defense and indemnity in the DerMargosian lawsuit with
respect to any judgment or settlement. Accordingly, Vanliner argues that it is entitled to a
ruling regarding whether it is liable under the terms of Arpin’s policy for the claims that the
DerMargosians assert against Arpin, and, as such, an actual controversy exists among all of
the parties to this lawsuit. Vanliner thus seeks a ruling that will be binding on both Arpin
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and the DerMargosians regarding whether it owes a duty to defend and indemnify under the
policy.
B
Under Texas law, it is well established that “a party injured by the insured is a third
party beneficiary of a liability insurance policy. However, he cannot enforce the policy
directly against the insurer until it has been established, by judgment or agreement, that the
insured has a legal obligation to pay damages to the injured party.” Klein, 2009 WL
3573849, at * 3 (quoting State Farm Cnty. Mut. Ins. Co. v. Ollis, 768 S.W.2d 722, 723 (Tex.
1989)) (internal quotation marks omitted). An insurer, however, can obtain a prejudgment
declaration that it owes no duty to defend its insured in a pending lawsuit and can also obtain
a declaration regarding the duty to indemnify “when the insurer has no duty to defend and
the same reasons that negate the duty to defend likewise negate any possibility the insurer
will ever have a duty to indemnify.” Farmers Tex. Cnty. Mut. Ins. Co. v. Griffin, 955 S.W.2d
81, 83-84 (Tex. 1997) (emphasis omitted); see also Nat’l Am. Ins. Co. v. Breaux, 368
F.Supp.2d 604, 620 (E.D. Tex. 2005) (“[I]t is now settled in Texas that a justiciable
controversy exists such that an insurer’s duty to indemnify an insured may be determined
before a judgment is obtained in the underlying lawsuit.”).3 In addition, “under Texas law,
a declaratory judgment action brought by an insurer is binding upon a third-party beneficiary
3
In Klein this court explained the Griffin holding as follows: “[s]tated in common
parlance, the Griffin exception allows only a one-directional determination: the action must
be brought by the insurer seeking a declaratory judgment that it has no duty to indemnify.”
Klein, 2009 WL 3573849, at *4.
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to a liability insurance policy if properly joined as a party to such action.” Breaux, 368
F.Supp.2d at 620 (citing State Farm Fire & Cas. Co. v. Fullerton, 118 F.3d 374, 385 n.6 (5th
Cir. 1997); Balog v. State Farm Lloyds, 2001 WL 997412, at *3 (Tex. App. 2001, no pet.)
(not designated for publication)); see also Balog, 2001 WL 997412, at *3 (holding, without
regard to privity, that trial court’s determination that insurer had no duty to indemnify insured
was binding upon injured party who had been joined as party to insurer’s declaratory
judgment action); Century Sur. Co. v. Hardscape Constr. Specialties, Inc., 2006 WL
1948063, at *5 (N.D. Tex. July 13, 2006) (Means, J.) (“This court’s determination that [the
insurer] does not have a duty to indemnify [its insureds] is binding on [the injured party], as
well, due to the derivative nature of its right to recovery.”).
Accordingly, the DerMargosians have failed to demonstrate that Vanliner’s
declaratory action against them should be dismissed. See, e.g., Breaux, 368 F.Supp.2d at
619-21 (holding that injured parties were proper parties to lawsuit “because [they] derive
their right, if any, to collect insurance proceeds directly from the rights of [the insured]” and
thus “they are deemed to be in privity by virtue of their shared legal interest.”).
C
The DerMargosians rely on Klein to contend that Texas law does not permit a suit by
an insurer against a state-court plaintiff where the plaintiff is not in privity with the insurer
and does not have a state court judgment or settlement that is enforceable against the insurer.
But Klein is distinguishable factually. In Klein the plaintiffs sought a declaratory judgment
that the defendants’ insurers had a duty to indemnify in the underlying class action. Klein,
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2009 WL 3573849, at *1. Making an Erie guess, this court held that, because Texas law
would not authorize the plaintiffs to seek a declaratory judgment affirmatively establishing
that the insurer had a duty to indemnify, the court could not grant the requested relief. Id.
at *8. Here, the insurer seeks a declaratory judgment regarding both its duty to defend and
duty to indemnify, and Texas law expressly permits such an action. See, e.g., Griffin, 955
S.W.2d at 83-84.
The DerMargosians’ reliance on Sassin is similarly misplaced. Unlike here, in Sassin
although the insurer initially sought a declaratory judgment against both the insured and the
injured party, the insurer dropped its claims against the insured, leaving the injured party as
the sole defendant. Sassin, 894 F. Supp. at 1025. Here, Arpin (the insured) is a party to
Vanliner’s declaratory judgment action.
The DerMargosians’ motions to dismiss under Rule 12(b))(1) are denied.
IV
In the alternative, the DerMargosians seek dismissal under Rule 12(b)(6) for failure
to state a claim. They rely, however, on the same argument as they do for dismissal under
Rule 12(b)(1): that there is no “case or controversy.” Accordingly, for the reasons explained
above, the court also denies the DerMargosians’ motions to dismiss under Rule 12(b)(6).
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*
*
*
For the reasons explained, the DerMargosians’ motions to dismiss under Rules
12(b)(1) and 12(b)(6) are denied.
SO ORDERED.
January 13, 2014.
_________________________________
SIDNEY A. FITZWATER
CHIEF JUDGE
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