Smith et al v. Scottsdale Insurance Company et al

Filing 67

MEMORANDUM OPINION AND ORDER GRANTING 8 DEFENDANT'S PARTIAL MOTION TO DISMISS. Accordingly, Count II of the plaintiffs' complaint is hereby DISMISSED. Signed by Senior Judge Frederick P. Stamp, Jr. on 1/22/2014. (copy to counsel of record via CM/ECF) (nmm)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
LEVERT SMITH and NELSON D. RADFORD,
Co-Administrators of the Estate of
JOSEPH JEREMAINE PORTER,
Plaintiffs,
v.

Civil Action No. 5:12CV86
(STAMP)

SCOTTSDALE INSURANCE COMPANY,
SCOTTSDALE INDEMNITY COMPANY,
and NATIONWIDE INSURANCE COMPANY,
Defendants.
MEMORANDUM OPINION AND ORDER
GRANTING DEFENDANT’S PARTIAL MOTION TO DISMISS
I.

Background

The plaintiffs originally filed this action in the Circuit
Court of Ohio County, West Virginia.

Thereafter, the original

defendants removed the action to this Court based on diversity
jurisdiction.

The plaintiffs are the Co-Administrators of the

Estate of Joseph Jeremaine Porter.

Mr. Porter was fatally injured

in a shooting involving a police officer who was an employee of the
City of Huntington’s Police Department.

The remaining defendant,

Scottsdale Insurance Company (“Scottsdale”),1 was the City of
Huntington’s insurer at that time of the shooting.

The plaintiffs

sued the City of Huntington and the police officer as a result of

1

This Court previously dismissed defendants Scottsdale
Indemnity Company and Nationwide Insurance Company pursuant to the
parties’ stipulation of dismissal (ECF No. 24) as to these
defendants.

the shooting.2

The defendant, Scottsdale, provided the City’s and

the officer’s defense.

Mediation and settlement negotiations

between the parties were unsuccessful.

Eventually all claims were

resolved in the City of Huntington’s and the police officer’s
favor, either through summary judgment, judgment as a matter of
law, or through a jury verdict.
This

suit

arises

from

the

unsuccessful

mediation

and

subsequent settlement negotiations between the defendant and the
plaintiffs, which took place during the above-described litigation.
The plaintiffs assert two counts in their complaint.

Count I of

the complaint asserts that the defendant violated the West Virginia
Human Rights Act, W. Va. Code § 5-11-1 et seq., when it did not
settle the plaintiffs’ claims against the City and the officer.
Count II of the complaint, filed pursuant to the West Virginia
Uniform Declaratory Judgments Act, W. Va. Code § 55-13-1 et seq.,
requests that this Court determine the rights of the parties as to
a consent clause in the insurance policy between the City and the
defendant.

Specifically, the plaintiffs request that this Court

find that the defendant may not rely on the consent clause to
defend against its actions, when it knew or should have known that
the City’s refusal to give consent to settle was motivated by
racial considerations.

2

Plaintiffs’ claims in the underlying action were for
negligence, wrongful death, and for a deprivation of constitutional
rights under 42 U.S.C. § 1983.
2

This action was previously stayed as a result of an appeal of
the underlying action by the plaintiffs against the City and the
officer.

Prior to this stay, however, the defendant had filed a

partial motion to dismiss.

The defendant argues that this Court

should dismiss Count II of the plaintiffs’ complaint because the
plaintiffs have no legal standing to assert such claim.

The

plaintiffs filed a motion in opposition and the defendant replied.
After the stay in this matter was lifted, this Court ordered
further briefing on the partial motion to dismiss.

The motion is

now fully briefed and ripe for disposition. For the reasons stated
below, this Court grants the defendant’s partial motion to dismiss.
II.

Applicable Law

Rule 12(b)(6) of the Federal Rules of Civil Procedure allows
a defendant to raise the defense of “failure to state a claim upon
which

relief

can

be

granted”

as

a

motion

in

response

to

a

plaintiff’s complaint before filing a responsive pleading.
In assessing a motion to dismiss for failure to state a claim
under Rule 12(b)(6), a court must accept the factual allegations
contained in the complaint as true.

Advanced Health-Care Servs.,

Inc. v. Radford Cmty. Hosp., 910 F.2d 139, 143 (4th Cir. 1990).
Dismissal is appropriate only if “‘it appears to be a certainty
that the plaintiff would be entitled to no relief under any state
of facts which could be proven in support of its claim.’”

Id. at

143-44 (quoting Johnson v. Mueller, 415 F.2d 354, 355 (4th Cir.

3

1969)); see also Rogers v. Jefferson-Pilot Life Ins. Co., 883 F.2d
324, 325 (4th Cir. 1989).
A motion to dismiss for failure to state a claim under Rule
12(b)(6) should be granted only in very limited circumstances, as
the pleading requirements of Federal Rule of Civil Procedure
8(a)(2) only mandate “a short and plain statement of a claim
showing that the pleader is entitled to relief.” Conley v. Gibson,
355 U.S. 41, 47 (1957).

Still, to survive a motion to dismiss, the

complaint must demonstrate the grounds to entitlement to relief
with “more than labels and conclusions . . . factual allegations
must be enough to raise a right to relief above the speculative
level.”

Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007).
III.

Discussion

As stated above, Count II of the complaint is the plaintiffs’
claim

for

located

in

defendant.

declaratory
the

judgment

insurance

concerning

contract

between

the
the

consent
City

clause

and

the

The consent clause gave the City the right to consent

to settle any claim pending against the City.

The defendant

asserts that such a clause is standard in the insurance industry
when the insured could face adverse implications from a settlement,
even if liability is denied.

Count II requests that this Court

find

not

that

the

defendant

may

rely

on

the

consent

clause

contained in the insurance contract between the defendant and the
City to defend against its actions during the mediation and

4

settlement negotiations when it knew or should have known that the
City’s refusal to give consent to settle was motivated by racial
considerations.
The defendant asserts that the plaintiffs lack standing to
assert such claim as neither the plaintiffs nor their decedent were
party to the contract between the defendant and the City.
plaintiffs

in

opposition

to

this

argument

cite

The

Michael

v.

Appalachian Heating, LLC, 701 S.E.2d 116 (W. Va. 2010), as support
for their position.
standing

to

bring

The plaintiffs state that because they have
an

action

for

discrimination

against

the

defendant as an insurer of the City under the West Virginia Human
Rights

Act,

pursuant

to

specifically
Michael,

West

they

Virginia

also

have

Code

§

standing

5-11-9(7)(A),
to

pursue

a

declaratory judgment claim related to the same facts. Further, the
plaintiffs argue that based on the elements required to assert
standing, they also have standing to assert their claim in Count
II.
After reviewing the briefs and cases cited by the parties,
this Court finds that the plaintiffs lack standing to assert their
claim in Count II of the complaint.

First, Michael does not

provide the plaintiffs with standing to assert their declaratory
judgment claim.

The West Virginia Supreme Court in Michael found

that West Virginia Code § 5–11–9(7)(A) of the West Virginia Human
Rights Act “prohibits unlawful discrimination by a tortfeasor’s

5

insurer in the settlement of a property damage claim when the
discrimination

is

based

upon

race,

religion,

color,

national

origin, ancestry, sex, age, blindness, disability or familial
status.” 701 S.E.2d at 124-25. Further, the West Virginia Supreme
Court found that a third-party may bring a cause of action against
the insurer for such a claim despite the prohibition of third-party
lawsuits against an insurer under West Virginia Code § 33-11-4a.
Id.

While that case does provide the plaintiffs with the ability

to bring the discrimination claims alleged in Count I against the
defendant despite the ban on third-party lawsuits against an
insurer, it does not provide the plaintiffs with standing to bring
the declaratory judgment claim in Count II.

The claim asserted in

Count II is not seeking to assert violations of the West Virginia
Human Rights Act, but instead it is seeking to have a portion of
the insurance contract, which is between the defendant and the
City, declared an invalid defense.
While not discussed by either party, this Court notes that
although

the

plaintiffs

purport

to

invoke

the

West

Virginia

Declaratory Judgment Act in Count II of their complaint, this Court
must apply the federal declaratory judgment act after removal, as
it is a procedural matter.

Jones v. Sears Roebuck and Co., 301 F.

App’x 276, 281 n.12 (4th Cir. 2008). A district court may exercise
jurisdiction over a declaratory judgment claim when “the complaint
alleges an actual controversy between the parties of sufficient

6

immediacy
judgment.”

and

reality

to

warrant

issuance

of

a

declaratory

Volvo Constr. Equip. N. Am., Inc. v. CLM Equip. Co.,

386 F.3d 581, 592 (4th Cir. 2004) (internal quotation marks
omitted).

To satisfy this jurisdictional requirement, the party

asserting the declaratory judgment claim must have standing, which
the defendant in this matter asserts the plaintiffs lack.

To

assert standing “(1) the plaintiff must allege that he or she
suffered an actual or threatened injury that is not conjectural or
hypothetical, (2) the injury must be fairly traceable to the
challenged conduct, and (3) a favorable decision must be likely to
redress the injury.”

Miller v. Brown, 462 F.3d 312, 316 (4th Cir.

2006) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61
(1992)).
While the parties attempt to liken the current set of facts
and the claim for declaratory relief to other various cases, this
Court does not believe any of the cited cases are exactly on point.
Thus, this Court will endeavor to analyze the facts and claim in
relation to the above three elements required for finding standing.
As to these elements, the plaintiffs first assert that the decedent
and now his estate have the right to be free from discrimination.
Thus, this Court assumes the plaintiffs are asserting that they
have

been

injured

by

the

defendant’s

alleged

discriminatory

practices because the defendant refused to enter into a reasonable
settlement of the underlying action. Second, the plaintiffs assert

7

there is a causal connection between the injury and the conduct
forming the basis of the lawsuit because the defendant’s conduct in
conjunction with the conduct of the City caused the defendant’s
failure

to

make

a

reasonable

settlement

offer.

Third,

the

plaintiffs assert that the injury would be redressed through a
favorable decision of this claim because the possible damages that
may be awarded for the defendant’s failure to properly evaluate and
attempt to settle the underlying action would correspond with what
the jury would believe is a reasonable pretrial settlement of the
underlying action.
Even assuming that the plaintiffs have asserted a valid injury
and it can be traced to the defendant’s use of the consent clause,
this Court does not find that such injury will be redressed through
the plaintiffs’ claim for declaratory judgment.

By only declaring

that the consent clause contained within the insurance contract
between the defendant and the City is invalid and cannot serve as
a defense to the defendant’s actions, this Court would not be
providing

redress

for

the

defendant’s

actions.

Instead, this Court would merely be declaring the

defendant’s possible defense invalid.

alleged

discriminatory

As the United States Court

of Appeals for the Fourth Circuit has stated in regards to whether
an injury is redressable, “[b]y itself, a declaratory judgment
cannot be the redress that satisfies the third standing prong.
Rather, plaintiffs must identify some further concrete relief that

8

will likely result from the declaratory judgment.”

Trabajadores

Agricolas (CATA) v. U.S. Dep’t of Labor, 995 F.2d 510, 513 (4th
Cir. 1993).

This Court cannot say that by merely eliminating one

of the defendant’s possible defenses that it is likely that it will
be

awarded

relief

for

the

alleged

discriminatory

actions.

Accordingly, this Court finds that the plaintiffs do in fact lack
standing to assert the claim raised in Count II of their complaint.
IV.

Conclusion

For the reasons stated above, the defendant’s partial motion
to dismiss (ECF No. 8) is hereby GRANTED. Accordingly, Count II of
the plaintiffs’ complaint is hereby DISMISSED.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
DATED:

January 22, 2014

/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE

9