State Farm Mutual Automobile Insurance Company v. Allman et al
Filing
17
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS' MOTION TO DISMISS: Granting 9 Motion to Dismiss; Clerk directed to enter Judgment pursuant to FRCP 58 Signed by Senior Judge Frederick P. Stamp, Jr on 7/8/16. (soa)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY,
Plaintiff,
v.
Civil Action No. 5:16CV25
(STAMP)
SHAWN D. ALLMAN and
BETHANY R. ALLMAN,
his wife,
Defendants.
MEMORANDUM OPINION AND ORDER
GRANTING DEFENDANTS’ MOTION TO DISMISS
I.
Background
This is an action for a declaratory judgment.
the
complaint,
the
plaintiff,
State
Farm
According to
Mutual
Automobile
Insurance Company (“State Farm”), issued an automobile insurance
policy to the defendants, Shawn D. Allman and Bethany R. Allman
(collectively, “the Allmans”).
Allegedly, the policy did not
contain underinsured motorist (“UIM”) coverage, and the Allmans
rejected offers for such coverage.
an automobile accident.
Later, Shawn D. Allman was in
The Allmans then sought claims for UIM
coverage for injuries arising from that accident.
State Farm
denied such claims, arguing that the Allmans repeatedly rejected
offers for UIM coverage. As to the action before this Court, State
Farm seeks a declaratory judgment, finding that the Allmans’
policies do not provide UIM coverage, and that no such coverage is
available to the Allmans concerning the automobile accident.
As will be discussed below, the Allmans previously filed suit
in the Circuit Court of Marshall County, West Virginia on December
4, 2013.
That underlying state court action currently remains
pending. The overall procedural history of this case, however, is
somewhat complex.
To better explain the series of events, this
Court will provide the following bulleted-style timeline:
•
Counsel for the Allmans sent a letter to
April 18, 2013:
State Farm, wherein they sought UIM coverage benefits.
•
May 10, 2013: State Farm indicated by letter that it “may not
have a duty to pay,” and then reserved its rights under the
policy.
•
May 21, 2013: After receiving a letter from counsel for State
Farm, counsel for the Allmans asked for more information,
including a certified copy of the insurance policy.
•
May 28, 2013: State Farm indicated to counsel for the Allmans
that it was sending copies of the forms reflecting that State
Farm rejected the UIM claim.
•
December 4, 2013: The Allmans then filed suit in the Circuit
Court of Marshall County, West Virginia, and shortly
thereafter forwarded a courtesy copy of the complaint to State
Farm and its claim adjuster.
•
January 4, 2014:
State Farm acknowledged receipt of the
courtesy copy of the complaint.
•
January 27, 2014: Counsel for the Allmans sent a letter to
State Farm, wherein they requested additional documentation.
State Farm never responded to that letter.
•
October 27, 2014: Almost a year after being served the state
court complaint, State Farm filed a motion to intervene and a
counterclaim. West Virginia Code § 33-6-31(d) states that an
insurance company has the “right to file pleadings and to take
other action allowable by law in the name of the owner, or
operator, or both, of the uninsured or underinsured motor
vehicle or in its own name.” During that span of time,
however, State Farm did not file an answer or any other
2
filing, except for the motion to intervene and counterclaim
mentioned above.
•
The Allmans responded to State Farm’s
December 3, 2014:
motion to intervene.
•
February 3, 2015: The presiding state court judge, Judge Mark
A. Karl, conducted a hearing as to the motion to intervene.
At the conclusion of that hearing, he directed the parties to
submit proposed findings of fact and conclusions of law.
Shortly thereafter, Judge Karl retired, and Judge Jeffrey
Cramer was appointed.
•
November 6, 2015: Judge Cramer conducted a hearing on the
motion to intervene, reviewed findings of fact, and denied the
motion to intervene on December 9, 2015.
•
March 3, 2016: State Farm filed a declaratory judgment action
in this Court, which is approximately two years and three
months after the state court action began.
•
March 23, 2016:
Judge Cramer vacated his prior order of
November 6, 2015, in which he denied State Farm’s motion to
intervene.
•
April 1, 2016: Judge Cramer held a hearing, where he advised
the parties that Attorney Johnathan Turak, who was listed on
the pleadings as one of the Allmans’ counsel, currently served
as Judge Cramer’s judicial campaign treasurer.
For that
reason, he vacated his prior ruling in which he denied the
motion to intervene. After Judge Cramer vacated the prior
ruling, State Farm withdrew its motion to intervene and filed
a motion for reassignment to Judge David W. Hummel, Jr.
•
May 5, 2016: The Allmans filed a motion to dismiss in this
Court, which will be more thoroughly addressed below.
•
May 19, 2016: The state court docket (ECF No. 14) indicated
that the state court action has since been reassigned to Judge
David W. Hummel, Jr.
At issue now is the Allmans’ motion to dismiss, which they
filed under Rule 12(b)(3) for improper venue.
ECF No. 9.
In that
motion, the Allmans argue that State Farm filed the instant action
3
only after receiving an unfavorable ruling in the state court
action. Here, the Allmans are referring to the initial denial of
the motion to intervene.
The Allmans point to the factors under
Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371 (4th Cir.
1994), to argue that the current action should be dismissed while
the state court action remains pending.
response in opposition.
ECF No. 10.
State Farm then filed a
In that response, State Farm
argues that the factors under Nautilus actually weigh in its favor.
More specifically, State Farm contends the following: (1) it is not
a party to the state court action; (2) neither novel nor complex
issues of state law are at play; (3) the issues between the state
court action and this action face no significant entanglement; and
(4) it has not engaged in procedural fencing.
Following State
Farm’s response, the Allmans filed a reply, wherein they reassert
their prior arguments.
ECF No. 12.
After reviewing the parties’
filings, this Court conducted oral argument as to the Allmans’
motion to dismiss, at which counsel for both parties presented
their arguments. ECF No. 15.
For the reasons discussed below, the Allmans’ motion to
dismiss (ECF No. 9) is GRANTED.
II.
Applicable Law
Rule 12(b)(3) of the Federal Rules of Civil Procedure permits
a defendant to raise “improper venue” in a pre-answer motion. When
such defense is raised, a court is allowed to “freely consider
4
evidence outside the pleadings.”
Coastal Mechanics Co., Inc. v.
Defense Acquisition Program Admin., 79 F. Supp. 3d 606, 609 (E.D.
Va. 2015) (citing Silo Point II LLC v. Suffolk Const. Co., Inc.,
578 F. Supp. 2d 807, 809 (D. Md. 2008)).
Under Rule 12(b)(3),
“‘the pleadings are not accepted as true, as would be required
under a Rule 12(b)(6) analysis.’” Sucampo Pharmaceuticals, Inc. v.
Astellas Pharma, Inc., 471 F.3d 544, 549 (4th Cir. 2006) (quoting
Argueta v. Banco Mexicano, 87 F.3d 320, 324 (9th Cir. 1996)).
establish
plaintiff.
that
venue
is
correct,
the
burden
rests
upon
To
the
See Kirk v. State Dept. of Educ., 2008 WL 819632, at *2
(W.D.N.Y. Mar. 25, 2008).
“To survive a motion to dismiss for
improper venue when no evidentiary hearing is held, the plaintiff
need only make a prima facie showing of venue.”
377 F.3d 402, 405 (4th Cir. 2004).
or
omissions
are
sufficiently
Mitrano v. Hawes,
“In determining whether events
substantial
to
support
venue,”
however, “a court should not focus only on those matters that are
in dispute or that directly led to the filing of the action,” but
“should review the entire sequence of events underlying the claim.”
Id. (internal citations omitted). Moreover, without an evidentiary
hearing, “‘the trial court must “draw all reasonable inferences in
favor of the non-moving party and resolve all factual conflicts in
favor
of
the
non-moving
party.”’”
The
Hipage
Co.,
Inc.
v.
Access2Go, Inc., 589 F. Supp. 2d 602, 611 (E.D. Va. 2008) (quoting
Essex Ins. Co. v. MDRB Corp., 2006 WL 1892411, at *2 (D. Md. 2006)
5
(quoting Murphy v. Schneider Nat’l, Inc., 362 F.3d 1133, 1138-39
(9th Cir. 2004)).
III.
As
indicated
above,
Discussion
the
primary
dispute
of
the
parties
concerns whether this Court should exercise jurisdiction in this
case.
On the one hand, the Allmans argue that the factors set
forth under Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d
371 (4th Cir. 1994), weigh in their favor.
On the other hand,
State Farm contends that the factors under Nautilus favor its
position, and contrary to the Allmans’ assertions, it is not
engaging in procedural fencing.
The parties do not dispute, however, that district courts
generally have discretion to hear declaratory judgment actions.
See 28 U.S.C. § 2201(a); Brillhart v. Excess Ins. Co. of Am., 316
U.S. 491, 494 (1942).
The United States Court of Appeals for the
Fourth Circuit has determined that a declaratory judgment action is
appropriate “when the judgment will serve a useful purpose in
clarifying and settling the legal relations in issue, and . . .
when it will terminate and afford relief from the uncertainty,
insecurity, and controversy giving rise to the proceeding.”
Aetna
Cas. & Sur. Co. v. Quarles, 92 F.2d 321, 325 (4th Cir. 1937);
accord Centennial Life Ins. Co. v. Poston, 88 F.3d 255, 256 (4th
Cir. 1996).
Parties should not use such an action, however, “to
try a controversy by piecemeal, or to try particular issues without
6
settling the entire controversy, or to interfere with an action
which has already been instituted.” Quarles, 92 F.2d at 325. “The
Supreme Court of the United States explained that, when a related
state proceeding is underway, a court considering a declaratory
judgment
action
should
specifically
consider
whether
the
controversy ‘can better be settled in the proceeding pending in the
state court.’” Poston, 88 F.3d at 257 (quoting Brillhart, 316 U.S.
at 495).
Thus, although district courts generally have discretion
to hear declaratory judgment actions, such exercise of jurisdiction
may not always be warranted.
When an insurer files a declaratory judgment action “on
coverage issues while the underlying” state court action “against
its insured” is pending, the Fourth Circuit provides specific
factors for district courts to consider in deciding whether to
exercise jurisdiction.
Nautilus Ins. Co., 15 F.3d at 376.
In
Nautilus, the Fourth Circuit set forth the four following factors
for district courts to consider: (1) “the strength of the state’s
interest in having the issues raised in the federal declaratory
action decided in the state courts”; (2) “whether the issues raised
in the federal action can more efficiently be resolved in the court
in which the state action is pending”; (3) “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”; and (4)
7
“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 achiev[e] a federal hearing in a
case otherwise not removable.”
Nautilus Ins. Co., 15 F.3d at 377
(internal citations and quotations omitted).
In light of the case law and Nautilus factors discussed above,
the Allmans’ motion to dismiss is GRANTED.
First, the State of
West Virginia has an interest in deciding the issues raised in this
declaratory judgment action.
In particular, the parties’ dispute
involves, among other issues, prior offers for UIM coverage under
West Virginia Code § 33-6-31(d).
Further, intricate issues that
appear to be specific to West Virginia exist in this case.
For
example, counsel for the Allmans admitted at oral argument that
West Virginia law is unclear as to whether notice-defendants, such
as State Farm, have an obligation to file a counterclaim, or at
least within what time period such parties must do so under the
West Virginia Rules of Civil Procedure.
Second, this declaratory
judgment action can be more efficiently resolved in the pending
state court proceeding. Here, the record shows that the underlying
state court action has involved significant amounts of hearings,
briefings, and conclusions of law made by the state court. This
case already has an intricate and developed procedural history that
needs no additional procedural delays. Third, the issues in both
the
state
court
action
and
this
8
declaratory
judgment
action
significantly overlap. Proceeding forward with the federal action
raises a risk of unnecessary entanglement between this Court and
the state court.
Finally, this Court must conclude that given the procedural
developments in the state court, the current declaratory judgment
action in this Court is being used by State Farm to engage in
“procedural fencing.”
The Fourth Circuit defined “procedural
fencing” as seeking entry to “the forum in a race for res judicata
or
to
achiev[e]
removable.”
a
federal
hearing
in
a
case
otherwise
not
Nautilus, 15 F.3d at 371; see Ameritas Variable Life
Ins. Co. v. Roach, 411 F.3d 1128,
1331 (11th Cir. 2005); see also
State Farm Fire & Cas. Co. v. Kirby, 919 F. Supp. 939, 945 (N.D. W.
Va. 1996) (“Nautilus seems to suggest that ‘procedural fencing’ is
only evident in situations where ‘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,’
or in situations in which the declaratory action is filed in order
to obtain a federal forum in a case that could not otherwise be
removed.”) (internal citations omitted).
The record does seem to
demonstrate
engaging
that
State
Farm
has
been
in
procedural
fencing. State Farm’s decisions as to how it has proceeded in this
case thus far strongly supports a finding that it engaged in
procedural fencing.
When collectively viewed, the factors under
9
Nautilus weigh in favor of dismissal. Therefore, the Allmans’
motion to dismiss is GRANTED.
IV.
Conclusion
For the reasons set forth above, the motion to dismiss (ECF
No. 9) of defendants Shawn D. Allman and Bethany R. Allman is
hereby GRANTED.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein. Pursuant to Federal
Rule of Civil Procedure 58, the Clerk is DIRECTED to enter judgment
on this matter.
DATED:
July 8, 2016
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
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