Chartis Property Casualty Company v. Bordas et al
Filing
24
MEMORANDUM OPINION AND ORDER DENYING DEFENDANTS 15 MOTION TO DISMISS AND GRANTING PLAINTIFFS 20 MOTION FOR LEAVE TO FILE AMENDED COMPLAINT. Cerk is DIRECTED to file the pla's first amended complaint. Pla is DIRECTED to serve its first amended complaint. Signed by Senior Judge Frederick P. Stamp, Jr on 8/6/12. (mji)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
CHARTIS PROPERTY CASUALTY
COMPANY,
Plaintiff,
v.
Civil Action No. 5:11CV110
(STAMP)
JAMES G. BORDAS, JR. and
LINDA M. BORDAS,
Defendants.
MEMORANDUM OPINION AND ORDER
DENYING DEFENDANTS’ MOTION TO DISMISS
AND GRANTING PLAINTIFF’S MOTION FOR
LEAVE TO FILE AMENDED COMPLAINT
I.
Background
The above-styled declaratory judgment action arises out of a
claim for coverage by the defendants, James and Linda Bordas (“the
Bordases”), which was made to Chartis Property Casualty Company
(“CPCC”) under the Bordases’ Homeowners Insurance Policy1 and
Excess Liability Policy2 (“the Bordas policies”).
The Bordas
policies were issued by American International Insurance Company
(“American International”) in August of 2008. Haynie Aff. ¶ 6. On
July 1, 2009, American International was sold to the Farmers Group,
Inc. (“Farmers”).
Id. at ¶ 7.
However, the Bordas policies were
not included in this sale.
Id.
Farmers,
arising
certain
claims
1
Policy No. PCG 0005391825.
2
Policy No. PCG 0002017514.
Pursuant to an agreement with
under
certain
American
International policies, such as the Bordas policies, were to be
handled by National Union Fire Insurance Company of Pittsburgh, Pa.
(“National Union”), acting as the administrative agent for American
International.
Id. at ¶ 8.
National Union and CPCC are both
direct subsidiaries of Chartis, U.S., Inc.
Id. at ¶ 9.
In August 2010, CPCC became the insurer for the renewed Bordas
policies, which continue in effect today.
Id. at ¶ 10.
In May
2011, the Bordases, through their broker, made a claim for coverage
to
CPCC,
including
counterclaims
asserted
defense
and
against
them
indemnification
in
a
Financial
Regulatory Authority (“FINRA”) arbitration action.3
for
the
Industry
Id. at ¶ 11.
At this time, it is unclear when exactly the alleged conduct that
gave rise to the counterclaims against the Bordases and their
request for coverage under their policies of insurance occurred.
Thus, it is currently unknown whether the claims at issue for which
the Bordases seek coverage arise out of conduct which occurred
during the American International policy period, or the CPCC policy
period.
Id. at ¶ 12.
3
In this ongoing arbitration proceeding, the Bordases allege
that Wells Fargo Advisors, LLC (“Wells Fargo”) and its agent,
Ernest Coffindaffer, mishandled their personal investment portfolio
from 2003 until 2007.
FINRA Dispute Resolution Action, No.
11-00484.
In
their
answer,
affirmative
defenses,
and
counterclaims, Coffindaffer and Wells Fargo expressly dispute the
Bordases’ allegations, and also assert that the Bordases attempted
to tarnish the reputation of both Wells Fargo and Coffindaffer.
2
The Bordases filed a motion to dismiss, in which they argue
that it is clear from the complaint that they did not purchase the
policies at issue from CPCC.
Rather, according to the defendants,
both policies were issued by American International.4
Because the
Bordases did not purchase their policies from CPCC, they argue that
the complaint fails to state a claim against them upon which relief
can be granted and should be dismissed.
CPCC then filed a response in opposition to the motion to
dismiss and motion for leave to file an amended complaint.5
In
this response, CPCC first argues that it is a proper plaintiff
because it provided coverage to the Bordases during the time in
which the conduct giving rise to the counterclaims might have
occurred.
Second, CPCC argues that this Court should deny the
motion to dismiss as moot and grant the plaintiff leave to amend
its complaint in order to add National Union -- the administrative
agent of American International -- as a plaintiff.
Subsequently, the Bordases filed a reply in support of their
motion to dismiss and in opposition to the motion for leave to file
an amended complaint.
In their reply, the defendants assert that
4
The defendants point to the declarations page of both
policies, which identify American International as the “issuing
company.” Compl. Ex. 2 at BOR 2; Ex. 3 at BOR 74.
5
In accordance with Local Rule of Civil Procedure 15.01, the
plaintiff attached its proposed first amended complaint for
declaratory relief to the motion for leave to file an amended
complaint.
3
CPCC has admitted that the Bordas policies were issued by American
International. Further, the defendants argue that because National
Union is merely an administrative agent of American International,
the joinder of National Union as a plaintiff in this action would
be meaningless.
Lastly, the plaintiff filed a reply in support of its motion
for leave to file an amended complaint, with a second proposed
amended complaint attached.
In this reply, CPCC concedes that
American International, n/k/a 21st Century North America Insurance
Company (“AIIC”), is also a proper plaintiff as it issued the
policies in question. Also, in light of the defendants’ objections
in their response, CPCC requests leave to amend its complaint to
add AIIC, acting by and through its administrative agent, National
Union, as a plaintiff in this case.
The motion to dismiss and the
motion for leave to file an amended complaint are currently pending
before this Court.
For the reasons set forth below, this Court
finds that the motion to dismiss must be denied and the plaintiff’s
motion for leave to file an amended complaint must be granted.
II.
A.
Applicable Law
Motion to Dismiss
In assessing a motion to dismiss for failure to state a claim
under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a
court must accept all well-pled facts contained in the complaint as
true.
Nemet Chevrolet, Ltd v. Consumeraffairs.com, Inc, 591 F.3d
4
250, 255 (4th Cir. 2009). However, “legal conclusions, elements of
a cause of action, and bare assertions devoid of further factual
enhancement fail to constitute well-pled facts for Rule 12(b)(6)
purposes.”
(2009)).
Id. (citing Ashcroft v. Iqbal, 556 U.S. 677, 678
This
Court
also
declines
to
consider
“unwarranted
inferences, unreasonable conclusions, or arguments.”
Wahi v.
Charleston Area Med. Ctr., Inc., 562 F.3d 599, 615 n.26 (4th Cir.
2009).
It has often been said that the purpose of a motion under Rule
12(b)(6) is to test the formal sufficiency of the statement of the
claim for relief; it is not a procedure for resolving a contest
about the facts or the merits of the case.
5B Charles Alan Wright
& Arthur R. Miller, Federal Practice and Procedure § 1356 (3d ed.
2004).
The Rule 12(b)(6) motion also must be distinguished from a
motion for summary judgment under Federal Rule of Civil Procedure
56, which goes to the merits of the claim and is designed to test
whether there is a genuine issue of material fact.
Id.
For
purposes of the motion to dismiss, the complaint is construed in
the
light
essentially
most
the
favorable
court’s
to
the
inquiry
party
is
making
directed
the
to
claim
and
whether
the
allegations constitute a statement of a claim under Federal Rule of
Civil Procedure 8(a).
Id. § 1357.
A complaint should be dismissed “if it does not allege ‘enough
facts to state a claim to relief that is plausible on is face.’”
5
Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
“Facial
plausibility is established once the factual content of a complaint
‘allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.’” Nemet Chevrolet,
591 F.3d at 256 (quoting Iqbal, 556 U.S. at 678). Detailed factual
allegations are not required, but the facts alleged must be
sufficient “to raise a right to relief above the speculative
level.”
B.
Twombly, 550 U.S. at 555.
Motion to Amend Complaint
Rule 15(a) of the Federal Rules of Civil Procedure grants this
Court broad discretion concerning motions for leave to amend
pleadings.
See Keller v. Prince George’s Cnty., 923 F.2d 30, 33
(4th Cir. 1991) (“Motions to amend are committed to the discretion
of the trial court.”); Fed. R. Civ. P. 15(a).
Rule 15 states, in
pertinent part, that “[a] party may amend its pleading once as a
matter of course within . . . 21 days after serving it, or . . . 21
days after service of . . . a motion under Rule 12(b).”
Civ. P. 15(a)(1).
Fed. R.
If a party seeks to amend its pleadings in all
other cases, it may only do so “with the opposing party’s written
consent or the court’s leave.”
Fed. R. Civ. P. 15(a)(2).
court should freely give leave when justice so requires.”
“The
Id.
Further, leave to amend should be granted absent some reason
“such as undue delay, bad faith or dilatory motive on the part of
6
the movant, repeated failure to cure deficiencies by amendments
previously allowed, undue prejudice to the opposing party by virtue
of allowance of the amendment, [or] futility of the amendment.”
Foman v. Davis, 371 U.S. 178, 182 (1962); see also Ward Elec. Serv.
v. First Commercial Bank, 819 F.2d 496, 497 (4th Cir. 1987);
Gladhill v. Gen. Motors Corp., 743 F.2d 1049, 1052 (4th Cir. 1984).
III.
A.
Discussion
Motion to Dismiss
In their motion to dismiss, the Bordases argue that both of
their policies were issued by American International and that the
policies were not purchased from CPCC.
This Court notes that the
defendants’ memorandum in support of the motion to dismiss cites no
case law or statutes, and only briefly references the language of
Rule 12(b)(6) of the Federal Rules of Civil Procedure.
As the
plaintiff states, it is unclear from the motion to dismiss whether
the defendants’ argument is based upon a claim that CPCC is not a
real party in interest, or that CPCC lacks standing to seek a
declaratory judgment.
Rule 17 of the Federal Rules of Civil Procedure states, in
pertinent part:
The court may not dismiss an action for failure to
prosecute in the name of the real party in interest
until, after an objection, a reasonable time has been
allowed for the real party in interest to ratify, join,
or be substituted into the action. After ratification,
joinder, or substitution, the action proceeds as if it
had been originally commenced by the real party in
interest.
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Fed. R. Civ. P. 17(a)(3).
Assuming that the defendants’ motion to
dismiss is founded upon the argument that CPCC is not a real party
in interest, this Court finds that under Rule 17, it must allow the
plaintiff reasonable time to ratify, join, or substitute the real
party in interest into this action.
Therefore, this Court cannot
simply dismiss the case as the defendants request.
Alternatively, if the defendants’ motion to dismiss is based
upon
the
argument
that
CPCC
lacks
standing
to
bring
this
declaratory judgment action, it does not change the result that the
motion to dismiss must be denied.
The Bordases made their claim
for coverage to CPCC, their current insurer.
Haynie Aff. at ¶ 11.
Believing coverage does not exist under the terms of the Bordas
policies, and not knowing whether the “occurrences” which serve as
the basis for the counterclaims against the Bordases and their
claim for coverage took place within the CPCC policy period, CPCC
properly brought this declaratory judgment action.
The complaint
alleges enough facts to suggest that CPCC could be responsible for
coverage, should this Court find that coverage exists. Until these
issues are resolved through discovery, CPCC is a proper plaintiff
in this action, and the motion to dismiss must be denied.
B.
Motion to Amend Complaint
In its motion for leave to file an amended complaint, CPCC
argues that this Court should allow it to amend its complaint to
add National Union as a plaintiff. CPCC claims that National Union
8
is a proper plaintiff because it has authority to act as the
administrative agent for American International, the insurer for
the
2008
and
2009
Bordas
policies.
According
to
CPCC,
the
defendants will suffer no prejudice if this Court allows it to
amend its complaint. Instead, with the addition of National Union,
CPCC argues that this Court will be able to decide this case upon
the merits.
Significantly, CPCC admits that it appears that at
least some conduct which is the basis for the counterclaims against
the Bordases took place during the time period when American
International was the insurer.
In response to the motion for leave to file an amended
complaint, the defendants assert that the addition of National
Union as a plaintiff is insufficient because National Union is not
a party to the policies in question, it is simply an agent of the
insurer.
In its reply, CPCC concedes that AIIC is a proper
plaintiff because it issued the Bordas policies, which may or may
not provide coverage for the defendants’ claims.
While the Bordas
policies were issued by AIIC, the plaintiff contends that it is
National Union who will bear the ultimate responsibility for
providing coverage and administering the defendants’ claims, should
this Court find that such coverage exists.
Thus, the amended
complaint attached to its reply (the second proposed amended
complaint), adds “American International Insurance Company n/k/a
21st Century North America Insurance Company, acting by and through
9
its Administrative Agent, National Union Fire Insurance Company” as
a plaintiff.
This Court finds no undue delay, bad faith, or dilatory motive
on the part of the plaintiff in filing its motion for leave to
amend.
This action was only recently initiated, and in fact, a
scheduling order has not yet been entered in this case.
The
defendants have not alleged that they will suffer any actual
prejudice as a result of an amendment to the complaint.
As the
plaintiff has represented to this Court, either CPCC or National
Union will be responsible for providing coverage to the defendants
if this Court finds that such coverage exists.
The key inquiry is
during which policy period the claims arose, as the answer to this
question will determine the responsible entity.
The addition of
AIIC and its administrative agent, National Union, will enable this
Court to make a judicial determination of coverage based on the
merits of the case.
See also Fed. R. Civ. P. 21 (“On motion or on
its own, the court may at any time, on just terms, add or drop a
party.”).
Therefore, this Court grants the plaintiff’s motion for
leave to file an amended complaint.
IV.
Conclusion
For the reasons stated above, the defendants’ motion to
dismiss (ECF No. 15) is DENIED and the plaintiff’s motion for leave
to file an amended complaint (ECF No. 20) is GRANTED.
The Clerk is
DIRECTED to file the plaintiffs’ first amended complaint for
10
declaratory relief.
(ECF No. 23-1.)6
The plaintiff is further
DIRECTED to serve its first amended complaint for declaratory
relief pursuant to Rule 4 of the Federal Rules of Civil Procedure.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
DATED:
August 6, 2012
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
6
The plaintiff has submitted two proposed first amended
complaints to this Court. However, only the second one is to be
filed as the first amended complaint.
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