Penn-America Insurance Company v. Heaviland et al

Filing 15

ORDER DENYING 6 MOTION to Dismiss 1 Complaint. The plaintiff is ORDERED to either AMEND its complaint or SHOW CAUSE why this claim should not be dismissed for lack of justiciability.(Signed by Judge Gray H. Miller) Parties notified.(rkonieczny)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
PENN -AMERICA INSURANCE COMPANY ,
Plaintiff,
v.
PAMPERED NAILS & SKIN CARE , LLC
d/b/a ELEGANT NAIL AND SKIN CARE , et al.,
Defendants.

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CIVIL ACTION H-12-1564

O RDER
Pending before the court is defendants’ motion to dismiss pursuant to Rule 12(b)(7) for
failure to join a necessary party. Dkt. 6. Upon consideration of the motion, response, reply, surreply, and the applicable law, the motion is DENIED. However, as further explained below, the
plaintiff is ORDERED to either AMEND its complaint or SHOW CAUSE why this claim should
not be dismissed for lack of justiciability.
I.

MOTION TO DISMISS
BACKGROUND
According to the compliant, defendants Tim Heaviland (“Heaviland”), Hang Heaviland, and

Pampered Nails & Skin Care, LLC (“Pampered”) applied for a property and general liability policy
from plaintiff Penn-America Insurance Company (“Penn-America”).

Dkt. 1.

Based on

representations by defendants that Pampered had been in the nail salon business for 1 month, PennAmerica issued the policy. Id. Approximately 3-1/2 months after the effective date of the policy,
Penn-America learned that Pampered was not in operation as a nail salon, had never been in
operation as a nail salon, and, in fact, did not even have the equipment necessary to operate a nail

salon. Id. Penn-America then rescinded the policy and returned the premiums paid by defendants.
Penn-America filed a declaratory judgment action for a declaration that it properly rescinded the
policy and owes no duties to defendants for any claims that occurred during the effective period of
the policy.1 Defendants have not answered but have filed a motion to dismiss pursuant to Rule
12(b)(7) for failure to join an indispensable party. Dkt. 6.
LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(7) allows dismissal for “failure to join a party under
Rule 19.” FED . R. CIV . P. 12(b)(7). “Rule 19 provides for the joinder of all parties whose presence
in a lawsuit is required for the fair and complete resolution of the dispute at issue.” HS Res., Inc. v.
Wingate, 327 F.3d 432, 438 (5th Cir. 2003). “It further provides for the dismissal of litigation that
should not proceed in the absence of parties that cannot be joined.” Id. “[T]he burden is on the party
moving under Rule 12(b)(7) to show the nature of the unprotected interests of the absent individuals
or organizations and the possibility of injury to them or that the parties before the court will be
disadvantaged by their absence.” 5C CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL
PRACTICE AND PROCEDURE § 1359 (3rd ed. 2004).
Rule 19 provides a two-step inquiry to determine if dismissal is warranted for failure to join
an absent party. “First, Rule 19(a) provides a framework for deciding whether a given person should
be joined. Second, if joinder is called for, then Rule 19(b) guides the court in deciding whether the
suit should be dismissed if that person cannot be joined.” Pulitzer-Polster v. Pulitzer, 784 F.2d 1305,
1309 (5th Cir. 1986). The court shall require joinder if any of the substantive requirements are met
under 19(a)(1)(A), 19(a)(1)(B)(i), or 19(a)(1)(B)(ii):

1

Penn-America is a Pennsylvania corporation and predicates jurisdiction on diversity pursuant to 28 U.S.C. §

1332(a).

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A person who is subject to service of process and whose joinder will
not deprive the court of subject-matter jurisdiction must be joined as
a party if: (A) in that person's absence, the court cannot accord
complete relief among existing parties; or (B) that person claims an
interest relating to the subject of the action and is so situated that
disposing of the action in the person's absence may: (i) as a practical
matter impair or impede the person's ability to protect the interest; or
(ii) leave an existing party subject to a substantial risk of incurring
double, multiple, or otherwise inconsistent obligations because of the
interest.
FED . R. CIV . P. 19(a).
ANALYSIS
Defendants argue that the suit must be dismissed because Mark L. Brock and Brock
Insurance Group (collectively “Brock”) are required parties. Dkt. 6.

Brock is an independent

insurance broker who, according to defendants, recommended and sold them the Penn-American
policy at issue. Defendants contend that Brock is required because if the court finds that defendants’
claim2 is not covered under the policy, Brock could face liability for misrepresentation and/or
negligence. Id. Penn-America counters that Brock was the defendants’ agent and had no contractual
relationship with Penn-America, who sold the policy through a wholesaler. Thus, Brock’s alleged
misrepresentations have no bearing on the relationship between Penn-America and defendants.
Defendants do not explain, nor does the court find, any reason why relief could not be
properly accorded among the parties in the absence of Brock. Additionally, should the court find
in favor of Penn-America, that would not subject Brock to liability against which it is unable to
protect itself or an inconsistent obligation. Whether defendants made material misrepresentations

2

The court notes that although a claim under the policy is implied by the complaint and both parties allude to
a claim in their respective filings on this motion to dismiss, nowhere has anyone actually plead the existence of a claim.
As explained later in this order, the failure to plead an active claim may suggest that the case is non-justiciable.

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on their application is a completely separate cause of action from a suit for misrepresentation or
negligence—if any—on the part of the broker. Accordingly, Brock is not a necessary party.
In their reply, for the first time, defendants also allege that Tapco Underwriters, Inc. is a
necessary party, as the surplus lines agent for the policy. The court need not consider arguments
raised for the first time in a reply brief. Texas Democratic Party v. Benkiser, 459 F.3d 582, 594 (5th
Cir. 2006). However, even if the court did consider the argument, it would fail for the same reasons
as defendants’ argument that Brock is a necessary party fails. Therefore, the motion to dismiss is
DENIED.
II.

JUSTICIABILITY
“[R]ipeness is a constitutional, jurisdictional prerequisite to both declaratory and injunctive

relief.” Int’l Tape Mfrs. Ass’n v. Gerstein, 494 F.2d 25, 27 (5th Cir. 1974). In the instant case, PennAmerica asks the court to declare that it would not be liable for any claims under the voided policy
brought by defendants for incidents occurring during the period the policy was in force. Dkt. 1
However, Penn-America has not alleged a claim exists. In the absence of an actual claim, whether
Penn-America properly cancelled the policy and could be liable for claims during the period at issue
would be purely advisory. Therefore, it is ORDERED that Penn-America either AMEND its
complaint to state a controversy or SHOW CAUSE why this case should not be dismissed as not yet
ripe within 20 days of the date of this order.
It is so ORDERED.
Signed at Houston, Texas on November 1, 2012.

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Gray H. Miller
United States District Judge
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