Slusarek v. John Riley Company, LLC et al
Filing
25
MEMORANDUM OPINION AND ORDER GRANTING 5 MOTION TO REALIGN, DENYING 9 MOTION TO REMAND AND DENYING 14 MOTION TO REDESIGNATE COUNTERCLAIM AS CROSS-CLAIM. Defendant Jordan Parker is hereby REALIGNED as a party plaintiff. Signed by Senior Judge Frederick P. Stamp, Jr. on 8/4/2014. (copy to counsel of record via CM/ECF) (nmm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
MICHAEL B. SLUSAREK,
Plaintiff,
v.
Civil Action No. 5:13CV148
(STAMP)
JOHN RILEY COMPANY, LLC,
d/b/a KWIK KING FOOD STORES,
JOHN RILEY, JORDAN PARKER
and STATE AUTO PROPERTY AND
CASUALTY INSURANCE COMPANY,
Defendants.
MEMORANDUM OPINION AND ORDER
GRANTING MOTION TO REALIGN,
DENYING MOTION TO REMAND AND
DENYING MOTION TO REDESIGNATE
COUNTERCLAIM AS CROSS-CLAIM
I.
Background
The plaintiff originally brought this action in the Circuit
Court of Brooke County, West Virginia.
The plaintiff’s action
arises out of an altercation at a convenience store where it is
alleged that defendant Jordan Parker (“Parker”) hit the plaintiff
while acting as an employee.
The plaintiff seeks a declaratory
judgment, declaring that Parker is a covered insured under an
insurance policy issued by defendant State Auto Property and
Casualty Insurance Company (“State Auto”) to defendants John Riley
Company, LLC d/b/a Kwik King Food Stores (“Kwik King”).
The
underlying tort action for the alleged altercation is currently
still pending in the Circuit Court of Brooke County.
On October 24, 2013, defendant State Auto removed the abovestyled civil action to this Court alleging diversity jurisdiction.1
In the notice of removal, State Auto asserts that the plaintiff is
a citizen of Pennsylvania, State Auto is a citizen of Iowa, Parker
is a citizen of West Virginia, and John Riley (“Riley”) and Kwik
King are citizens of Ohio.
As to Parker’s citizenship, State Auto
states that while Parker is a named defendant, his interests are
more aligned with the plaintiff’s interests in this action and,
therefore, for diversity purposes, he should be considered a
plaintiff.
State
Auto
further
alleges
that
the
amount
in
controversy exceeds the jurisdictional amount.
After State Auto removed this action, it filed a motion to
realign the parties in which it seeks to realign defendant Parker
with the plaintiff based on Parker’s interests in this matter.
State Auto asserts that such an action would make diversity
jurisdiction proper, and Parker would no longer invalidate removal
pursuant to 28 U.S.C. § 1441(b)(2) as a defendant of the state in
which the original action was brought.
The plaintiff did not file
a response to this motion.
The plaintiff then filed a motion to remand, arguing that the
factors set out by the United States Court of Appeals for the
Fourth Circuit in Nautilus Ins. Co. v. Winchester Homes, 15 F.3d
1
Defendants John Riley and Kwik King consented in the removal.
See ECF No. 1 Ex. 3 *2.
2
371 (4th Cir. 1994), weigh in favor of abstaining from exercising
jurisdiction over this declaratory judgment action.
Further, the
plaintiff asserts that this case should be remanded because there
is no valid basis to realign the parties.
State Auto filed a
response, first arguing that abstention is not appropriate under
the
Nautilus
factors.
Second,
State
Auto
asserts
that
the
plaintiff’s attempt at responding to State Auto’s motion to realign
is untimely and should be disregarded, but even so realignment is
proper.
The plaintiff did not file a reply.
The plaintiff then filed a motion to redesignate State Auto’s
counterclaim against Parker as a cross-claim.
The plaintiff
asserts that State Auto’s counterclaim seeking a declaration that
the
subject
insurance
policy
does
not
provide
a
defense
or
indemnity to Parker for the claims asserted against him by the
plaintiff should be redesignated as a cross-claim because Parker is
a defendant and should remain a defendant. State Auto did not file
a response.
For the reasons stated below, this Court grants State Auto’s
motion to realign, denies the plaintiff’s motion for remand, and
denies
the
plaintiff’s
motion
counterclaim.
3
to
redesignate
State
Auto’s
II.
A.
Discussion
Motion to Realign
Title 28, United States Code, Section 1332 confers original
jurisdiction over suits in which the amount in controversy exceeds
$75,000.00 and the action is between citizens of different states.
Moreover, 28 U.S.C. § 1441(b) states, in pertinent part, that
actions “shall be removable only if none of the parties in interest
properly joined and served as defendants is a citizen of the State
in which such action is brought.”
In this action, Parker, a named
defendant, is a citizen of West Virginia, the state in which the
plaintiff brought this action.
State Auto argues that Parker
should be realigned as a plaintiff in this action, so as to cure
any defect pursuant to § 1441(b).
In determining whether a court has jurisdiction over a certain
action, the court is not bound by the alignment of the parties in
the pleadings. Instead, the court has the duty to “look beyond the
pleadings and arrange the parties according to their sides in the
dispute.”
Dawson v. Columbia Avenue Saving Fund, Safe Deposit,
Title & Trust Co., 197 U.S. 178, 180 (1905).
The Fourth Circuit
has adopted the principal purpose test for realignment of parties,
under which the court determines the primary issue in controversy
and then aligns the parties with respect to their positions on that
issue.
United States Fid. & Guar. Co. v. A & S Mfg. Co., 48 F.3d
131, 133 (4th Cir. 1995).
4
There seems to be no dispute that the primary issue in this
matter is whether or not the State Auto insurance policy covers the
allegations made in the plaintiff’s complaint for declaratory
judgment, and therefore, whether or not State Auto has a duty to
defend and indemnify Parker.
The parties’ dispute concerns the
position of the various parties on this issue.
State Auto asserts that both Parker and the plaintiff have the
same position on this issue, as they both have an interest in a
finding that State Auto has a duty to defend and indemnify Parker.
The plaintiff, in his motion to remand, asserts that Parker’s
position is not aligned with the plaintiff’s because in the
underlying action Parker has attempted to establish that he was not
acting as an employee of Kwik King, and therefore, would not be
covered under the State Auto insurance policy.
Accordingly, the
plaintiff asserts that Parker’s position is more align with State
Auto’s and the other defendants’ position in this action.
While Parker may be attempting to establish in the underlying
tort action that he was not acting as an employee of Kwik King at
the time of the altercation, such an attempt does not alter his
interest in being indemnified if he is found to have been acting as
such.
A different finding would be contrary to Parker’s financial
interests.
The plaintiff also has the interest in ensuring that
State Auto has a duty to defend and indemnify Parker because such
a finding increases the likelihood of recovery against Parker, who
5
may not have the funds to satisfy the possible judgment.
See Lott
v. Scottsdale Ins. Co., 811 F. Supp. 2d 1220, 1224 (E.D. Va. 2011)
(finding that the position of a potential insured was more align
with the plaintiffs’ position in establishing that the insurer had
a duty to indemnify the potential insured in the event of a
judgment against it).
Here only defendants John Riley, Kwik King,
and State Auto have an interest in a finding that Parker was not an
employee and, thus, not covered under the insurance policy, as such
a finding would be to their financial benefit.
Accordingly, for
purposes of this Court’s diversity jurisdiction and to cure any
defect created by § 1441(b), this Court realigns Parker as a
plaintiff in this action.
As such, this Court must deny the
plaintiff’s motion for redesignation of State Auto’s counterclaim
against Parker as a cross-claim, as Parker is now a plaintiff,
against whom State Auto, as a defendant, may assert a counterclaim.
B.
Motion to Remand
In his motion to remand, the plaintiff asserts that even if
removal is proper, this Court should abstain from exercising
jurisdiction over this declaratory judgment action pursuant to the
factors outlined in Nautilus Ins. Co. v. Winchester Homes, 15 F.3d
371 (4th Cir. 1994). Under the Declaratory Judgment Act, 28 U.S.C.
§ 2201, federal courts are not required to hear declaratory
judgment actions.
See Nautilus, 15 F.3d at 375.
6
Rather, a
district court’s decision to hear such a case is discretionary.
Id.
Initially, the Fourth Circuit in Mitcheson v. Harris, 955 F.2d
235, 237-40 (4th Cir. 1992), indicated that when determining
whether to entertain a declaratory judgment action, a district
court should consider:
(i) the strength of the state’s interest in having the
issues raised in the federal declaratory judgment action
decided in the state courts; (ii) whether the issues
raised in the federal action can more efficiently be
resolved in the court in which the state action is
pending; and (iii) whether permitting the federal action
to go forward would result in unnecessary “entanglement”
between the federal and state court systems, because of
the presence of overlapping issues of fact or law.
Id. (as cited in Nautilus Ins. Co. v. Winchester Homes, Inc., 15
F.3d 371, 377 (4th Cir. 1994)).
Later, in Nautilus, the Fourth
Circuit added that courts should further consider “whether the
declaratory judgment action is being used merely as a device for
‘procedural fencing’–that is, ‘to provide another forum in a race
for res judicata’ or ‘to achieve a federal hearing in a case
otherwise not removable.’” 15 F.3d at 377 (quoting 6A J. Moore, B.
Ward & J. Lucas, Moore’s Federal Practice, ¶ 57.08[5] (2d ed.
1993)).
Initially, the plaintiff argues that West Virginia has a
strong interest in having the issues raised in this declaratory
judgment action raised in the state court because the insurance
policy and the parties have ties to West Virginia.
7
This argument,
however, is not persuasive.
The Fourth Circuit stated in Nautilus
that when exercising its “discretionary power to abstain from
deciding
state-law
questions
otherwise
properly
within
its
jurisdiction, that discretion may be exercised only when the
questions
of
unsettled.”
state
law
15 F.3d 378.
involved
are
difficult,
complex,
or
The fact that the issues of insurance
coverage are governed by state law “alone provides no reason for
declining to exercise federal jurisdiction.” Id. The questions of
state law in this matter do not seem to be difficult, complex, or
unsettled. This is a dispute over liability insurance coverage, as
was the issue in Nautilus.
The plaintiff has not indicated that
the dispute requires this Court to apply any difficult, complex, or
unsettled law.
Instead, this case involves a standard dispute
concerning the terms of an insurance policy that requires the
interpretation of the policy based on the facts at issue. Further,
it
is
unclear,
at
this
time,
whether
West
Virginia
or
Ohio
substantive law applies in this matter, as State Auto has indicated
that the contract is an Ohio contract.
If Ohio law applies, it
cannot be said that West Virginia has a strong interest in how the
insurance policy is construed.
Accordingly, this Court finds that
the first factor does not weigh in favor of abstention.
As to the second factor, which is whether the state court can
more efficiently resolve the issues presented in this action, the
plaintiff argues that because the state court has become familiar
8
with the underlying facts in the tort action, it would be more
efficient for the state court to hear this case.
The plaintiff
asserts that the issue of whether Parker was acting as a volunteer
employee is an issue in the underlying tort and it is an issue in
this action as well.
Accordingly, the plaintiff believes that the
state court is in a better position to more efficiently handle this
action.
While this one issue of whether Parker was acting as an
employee may be addressed in the state court proceeding, State Auto
indicates that the issue of whether the policy covers Parker’s
actions even if he was acting as an employee would still be at
issue, as the insurance policy may not cover such intentional
actions.
court.
This is not something that is being decided by the state
There is no indication that the state court has become
familiar with the terms of the insurance policy at issue, or that
the state court has been asked to interpret the policy in any way.
Therefore,
this
Court
cannot
say
that
it
would
be
any
more
efficient for the state court to resolve this insurance dispute
than for this Court to continue exercising jurisdiction over the
action.
The third factor that this Court must examine is whether there
will be excessive entanglement between the federal and state cases
due to overlapping issues of law and fact.
As to this factor, the
plaintiff only states that due to overlapping factual issues,
unnecessary entanglement will result.
9
This Court assumes the
plaintiff is referring to the factual issues surrounding the
alleged altercation, and whether such facts are sufficient to
establish that Parker was acting as an employee at the time of the
altercation. This overlap, however, is not sufficient to establish
the type of entanglement required for this Court to abstain from
hearing this action.
interpreting
the
As stated above, the state court is not
insurance
policy
in
any
way;
whereas,
the
interpretation and application of the terms of the policy are the
only matters involved in this action.
While a jury may determine
whether Parker was or was not acting as an employee at the time of
the altercation, this is only one issue that may overlap between
the two actions, and this Court finds that this is not significant
enough to justify abstention.
Lastly, the plaintiff argues that the fourth factor concerning
procedural fencing is applicable in this matter.
The plaintiff
asserts that because the state court has a substantial interest in
deciding the issues in this declaratory judgment action and will do
so more efficiently, State Auto’s removal is likely only an attempt
to have this action resolved in what it perceives as a more
favorable forum.
attempt
to
The plaintiff also contends that State Auto’s
realign
Parker
as
a
plaintiff
without
evidence to do so, also lends to this conclusion.
sufficient
This Court,
however, finds that these allegations are without merit. As stated
above, this Court does not believe that the state of West Virginia
10
has a substantial interest in deciding the issues in this case, or
that it would be more efficient for the state court to do so.
Further, as decided above, State Auto was justified in seeking the
realignment of Parker as a plaintiff.
The procedural history of this case is the same as that of the
Nautilus action, but for the realignment issue.
As the Fourth
Circuit stated in that case, “[t]his is not a case in which a party
has raced to federal court in an effort to get certain issues that
are already pending before the state courts resolved first in a
more favorable forum.”
Nautilus, 15 F.3d at 380.
Instead, the
issues presented in this action are not the same as those in the
state court action.
Further, there is no “indication that this
declaratory action was filed in an effort to obtain a federal forum
in a case not otherwise removable.”
Id.
The plaintiff chose not
to amend his earlier complaint in the tort action and is the party
who initially filed this declaratory judgment action, not State
Auto.
State Auto merely exercised its rights to remove this case
pursuant to 28 U.S.C. § 1332, which it was entitled to do.
Accordingly, because this Court has found that none of the factors
weigh in favor of abstention, it cannot remand this action to state
court.
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III.
Conclusion
For the reasons stated above, State Auto Property and Casualty
Insurance
Company’s
motion
for
realignment
is
GRANTED,2
the
plaintiff’s motion for remand is DENIED, and the plaintiff’s motion
for redesignation of State Auto’s counterclaim as a cross-claim is
DENIED.
Further, defendant Jordan Parker is hereby REALIGNED as a
party plaintiff.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
2
In subsequent filings, the style of this case shall be as
follows:
MICHAEL B. SLUSAREK,
Plaintiff,
and
JORDAN PARKER,
Realigned as Plaintiff per
Order of August 4, 2014,
v.
Civil Action No. 5:13CV148
(STAMP)
JOHN RILEY COMPANY, LLC,
d/b/a KWIK KING FOOD STORES,
JOHN RILEY and STATE AUTO PROPERTY
AND CASUALTY INSURANCE COMPANY,
Defendants.
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DATED:
August 4, 2014
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
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