XL Specialty Insurance Company et al v. Truland et al
Filing
90
MEMORANDUM OPINION in re 43 Motion to Dismiss, or in the Alternative, to Strike Mary W. Trulands Amended Counterclaim. Signed by District Judge James C. Cacheris on 12/23/2014. (jlan)
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division
XL SPECIALTY INSURANCE
COMPANY, et al.,
Plaintiffs,
v.
ROBERT W. TRULAND, et al.,
Defendants.
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M E M O R A N D U M
1:14cv1058(JCC/JFA)
O P I N I O N
This matter is before the Court on Plaintiffs XL
Specialty Insurance Co., XL Reinsurance America Inc., and
Greenwich Insurance Co.’s (“Plaintiffs” or “XL”) Motion to
Dismiss, or in the Alternative, to Strike Mary W. Truland’s
Amended Counterclaim.
[Dkt. 43.]
For the following reasons,
the Court will grant XL’s motion and dismiss the amended
counterclaim.
I. Background
Though this litigation has only been pending since
August of 2014, the Court is well-versed with the facts.
As
relevant here, XL, a surety for construction contractors, issued
numerous payment and performance bonds on behalf of the Truland
Entities in reliance upon the terms of an Indemnity Agreement.
(Pls.’ Mem. in Supp. [Dkt. 43-1] at 1-2.)
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The indemnitors
included various corporate entities as well as Robert and Mary
Truland.
(Id.)
According to XL, the indemnitors, including
Mary Truland, promised to deposit collateral security to
exonerate and hold XL harmless from any losses or liability that
XL may incur by issuing the bonds.
(Id. at 2.)
The Indemnity
Agreement also contained an indemnification clause, requiring
the indemnitors to reimburse XL for any losses, claims,
liabilities, damages, and fees.
(Id.)
The Truland Entities incurred substantial debts to
their subcontractors and suppliers for the bonded projects.
(Compl. [Dkt. 1] ¶ 32.)
As a result, subcontractors and
suppliers were not paid by Truland Entities, and those
subcontractors and suppliers have submitted claims for payment
from XL under the bonds.
(Id. ¶ 33.)
XL brought this suit to
enforce the collateral security and indemnification provisions
of the Indemnity Agreement, naming the sole non-bankrupt Truland
Entity, A&E Technologies, Inc., and Robert and Mary Truland as
defendants.
Mary Truland answered the complaint, asserting sixteen
affirmative defenses.
(See Answer [Dkt. 27].)
As her first
affirmative defense, Mrs. Truland asserts that the complaint
fails to state a claim upon which relief may be granted.
at 1.)
(Id.
In support, Mrs. Truland points to Section XXIII of the
Indemnity Agreement, which reads in part:
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[T]he liability and obligaton’s [sic] of
Mary Truland hereunder shall only extend to
and be enforceable against those assets
jointly held by the Individual Indemnitors
[Robert and Mary], and to any and all
property she has received or may hereafter
receive from Robert Truland and shall not
extend and be enforceable against her sole
and separate estate.
(Id. at 2.)
The agreement was amended twice after it was
initially signed, but those amendments are not at issue here.
Mrs. Truland filed a counterclaim and shortly
thereafter amended it.
[Dkts. 28, 33.]
In this declaratory
judgment action, she asks the Court to find that her membership
interests in three assets – Truland Holdings, Truland Partners,
and Belgarde – are part of her sole and separate estate, were
not received from Dr. Truland, and therefore are not part of her
obligations under the Indemnity Agreement.
33] ¶ 88.)
(Am. Countcl. [Dkt.
XL has filed the instant motion, seeking to dismiss
the counterclaim on grounds that it merely restates an
affirmative defense already at issue in the litigation.
Mem. at 3.)
(Pls.’
XL requested a hearing on this motion [Dkt. 59],
but both parties later agreed to have the Court take it on the
papers.
7(J).
See Fed. R. Civ. P. 78(b); E.D. Va. Local Civil Rule
Therefore, the Court dispenses with oral argument and
issues this ruling without a hearing.
Having been fully
briefed, then, XL’s motion is ripe for disposition.
II. Legal Standard
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Whether a court will entertain a counterclaim for
declaratory judgment rests within the sound discretion of that
court.
New Wellington Fin. Corp. v. Flagship Resort Dev. Corp.,
416 F.3d 290, 296–97 (4th Cir. 2005).
Some courts have
exercised their discretion to dismiss declaratory judgment
counterclaims pursuant to Federal Rule of Civil Procedure 12(f)
when the declaratory relief sought is redundant in light of the
claims raised in the complaint.
As one court explained:
[I]f a district court, in the sound exercise
of
its
judgment,
determines
after
a
complaint
is
filed
that
a
declaratory
judgment will serve no useful purpose, it
cannot be incumbent upon that court to
proceed
to
the
merits
before
.
.
.
dismissing
the
action.
Although
federal
courts normally should adjudicate all claims
within their discretion, in the declaratory
judgment context this principle yields to
considerations
of
practicality
and
wise
judicial administration.
District courts
have
dismissed
counterclaims
under
the
Declaratory Judgment Act where they have
found them to be repetitious of issues
already before the court via the complaint
or affirmative defenses.
Monster Daddy LLC v. Monster Cable Prods., Inc., C.A. No. 6:10–
1170–HMH, 2010 WL 4853661, *6 (D. S.C. Nov. 23, 2010) (quoting
Ortho–Tain, Inc. v. Rocky Mountain Orthodontics, Inc., No. 05 C
6656, 2006 WL 3782916, at *3 (N.D. Ill. Dec. 20, 2006)
(citations and internal quotation marks omitted)).
Conversely,
the court should adjudicate declaratory judgment actions “when
it finds that the declaratory relief sought (i) will serve a
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useful purpose in clarifying and settling the legal relations in
issue, and (ii) will terminate and afford relief from the
uncertainty, insecurity, and controversy giving rise to the
proceeding.”
Cont'l Cas. Co. v. Fuscardo, 35 F.3d 963, 965 (4th
Cir. 1994) (internal quotation marks omitted).
III. Analysis
Mrs. Truland attempts to distinguish her first
affirmative defense by arguing that the limitation of individual
indemnity in Section XXIII of the Indemnity Agreement “precludes
XL from being able to claim that Mary breached [the collateral
security provision] of the contract.”
[Dkt. 53] at 5.)
(Mary Truland’s Opp.
In contrast, the counterclaim “seeks a
declaration that the Indemnity Agreement does not extend to and
is not enforceable against specific assets.”
(Id.)
Mrs.
Truland claims that while these issues overlap, they are not
identical.
(Id.)
The Court disagrees with Mrs. Truland’s parsing of
words because the first affirmative defense and the counterclaim
are repetitious.
Both ultimately seek to answer the same
question: identifying what, if any, obligations Mrs. Truland has
under the Indemnity Agreement.
This Court began the December
17, 2014 evidentiary hearing on XL’s motion for preliminary
injunction by stating that both Mary and Robert Truland are
contractually obligated to post collateral.
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While this ruling
does not answer the question of what specific assets Mrs.
Truland must pledge, the next step – determining what assets can
be used to satisfy that obligation - necessarily excludes assets
that she owns separately.
Therefore, the question of whether
Mrs. Truland’s membership interests in Belgarde, Truland
Holdings, and Truland Partners are part of her sole and separate
estate will already be resolved during the litigation.
A
declaratory judgment action would not add anything to the
proceedings, as it would not settle the legal relations at issue
nor will it remove uncertainty.
IV. Conclusion
For the reasons set forth above, the Court will grant
XL’s motion and dismiss the amended counterclaim.
An
appropriate order will follow.
December 23, 2014
Alexandria, Virginia
/s/
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE
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