American Mining Insurance Company, Inc. v. Rock "N" Roll Coal Company, Inc. et al

Filing 32

MEMORANDUM OPINION AND ORDER denying plaintiff's 12 MOTION for Default Judgment Against Myrtle D. Corporation; granting defendants Rock "N" Roll Coal Company, Inc., and David Cline's 18 MOTION to Defer Entry of Judgment Against Myrtle D. Corporation; denying as moot plaintiff's 30 MOTION for Oral Argument. Signed by Judge John T. Copenhaver, Jr. on 3/24/2017. (cc: counsel of record; any unrepresented parties) (taq)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
AMERICAN MINING INSURANCE COMPANY, INC.,
Plaintiff,
v.

Civil No. 16-3626

ROCK “N” ROLL COAL COMPANY, INC.,
DAVID CLINE, and
MYRTLE D. CORPORATION,
a West Virginia corporation,
Defendants.

MEMORANDUM OPINION AND ORDER

Pending are plaintiff’s Motion for Default Judgment
Against Defendant Myrtle D. Corporation, filed July 19, 2016
(ECF No. 12), defendants Rock “N” Roll Coal Company, Inc., and
David Cline’s Motion to Defer Entry of Judgment Against Myrtle
D. Corporation, filed August 10, 2016 (ECF No. 18), and
plaintiff’s Motion for Oral Argument, filed February 20, 2017
(ECF No. 30).

This case is a declaratory judgment action brought by
plaintiff American Mining Insurance Company, Inc.

The complaint

asks the court to find that none of the six policies issued by
plaintiff to defendant Rock “N” Roll Coal Company, Inc., (“Rock
‘N’ Roll”) cover the claims or counterclaims alleged in a state

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suit initiated by defendant Myrtle D. Corporation (“Myrtle D.”)
against Rock “N” Roll and David Cline.

Myrtle D. filed its state court complaint against Rock
“N” Roll and David Cline, President of Rock “N” Roll, on October
13, 2015, alleging that Rock “N” Roll failed to make certain
royalty payments.

Shortly thereafter, Rock “N” Roll and Cline

filed a counterclaim against Myrtle D. alleging conspiracy,
slander of title, public disclosure of private facts,
negligence, and breach of a lease agreement.

Myrtle D.

responded with its own counterclaim alleging that Cline and Rock
“N” Roll were contractually obligated to name Myrtle D. as an
additional insured in their policies and to indemnify and defend
Myrtle D. for claims arising out of Rock “N” Roll’s coal mining
operations.

The state court dismissed Myrtle D.’s complaint on

June 6, 2016, on Myrtle D.’s motion, leaving only the Rock “N”
Roll and David Cline counterclaim and the Myrtle D. counterclaim
in that case.

Myrtle D. is named as an additional insured on

five of plaintiff’s six insurance policies with Rock “N” Roll,
generating plaintiff’s coverage obligations to Myrtle D., Rock
“N” Roll, and David Cline.

Plaintiff’s motion contends that entry of judgment
against defendant Myrtle D. is appropriate under Rule 55(b)(2)

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of the Federal Rules of Civil Procedure because Myrtle D. has
failed to otherwise plead or defend in this action.

Myrtle D.

was served in this action with the summons and the complaint on
May 17, 2016, as shown by the proof of service filed by the West
Virginia Secretary of State on May 23, 2016, but it never
answered the complaint or filed a notice of appearance in this
case.

Plaintiff also argues that the declaratory relief it

seeks is proper on the merits.

The motion by Rock “N” Roll and

Cline does not directly respond to plaintiff’s motion but
instead moves to defer entry of default judgment against Myrtle
D. under Rule 54(b), which allows the court to enter final
judgment against one party in a multiparty suit “only if the
court expressly determines that there is no just reason for
delay.”

Fed. R. Civ. P. 54(b).1

Rule 54(b) applies in the Fourth Circuit to situations
in which a plaintiff alleges either joint or several liability
of co-defendants, especially when there are overlapping issues.
See United States for Use of Hudson v. Peerless Ins. Co., 374

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The Rule goes on to provide that “[o]therwise, any order or
other decision, however designated, that adjudicates fewer than
all the claims or the rights and liabilities of fewer than all
the parties does not end the action as to any of the claims or
parties and may be revised at any time before the entry of a
judgment adjudicating all the claims and all the parties’ rights
and liabilities.” Fed. R. Civ. P. 54(b).

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F.2d 942, 944 (4th Cir. 1967).

Our Court of Appeals has

suggested that delay is particularly justified when, inter alia,
a co-defendant may be prejudiced by dismissal, a co-defendant
objects to dismissal, there are overlapping claims or issues to
be resolved, or there are outstanding motions.

Equip. Fin.

Grp., Inc. v. Traverse Computer Brokers, 973 F.2d 345, 348 (4th
Cir. 1992).

In a situation closely analogous to this one, one

district court in this circuit expressly found that “[t]he
avoidance of logically inconsistent judgments in the same action
and factually meritless default judgments provide ‘just
reason.’”

Phoenix Renovation Corp. v. Gulf Coast Software,

Inc., 197 F.R.D. 580, 582 (E.D. Va. 2000) (default judgment
against one co-defendant inappropriate when other co-defendant
objected and theories against each co-defendant were similar).
A district court is allowed to “exercise its discretion in
certifying partial judgments in consideration of ‘judicial
administrative interest’ — including ‘the historic federal
policy against piecemeal appeals’ — and ‘the equities
involved.’”

Lloyd Noland Found., Inc. v. Tenet Health Care

Corp., 483 F.3d 773, 777–78 (11th Cir. 2007) (some quotation
marks omitted) (quoting Curtiss-Wright Corp. v. Gen. Elec. Co.,
446 U.S. 1, 8 (1980)).

In this case, plaintiff lays out what it contends is

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the correct interpretation of its insurance policies – policies
that are dispositive of the case against each co-defendant,
including the two non-defaulting co-defendants.

Because

plaintiff’s claims against different co-defendants each involve
the same insurance policies, litigation against the nondefaulting co-defendants will inevitably require interpreting
those policies and the issues to which they give rise.

As such,

entry of final judgment now against Myrtle D. would preempt full
discovery on issues relevant to coverage and may lead to
inconsistent judgments among the defendants.

Furthermore, the

conditions noted by the Fourth Circuit in Equipment Finance
Group, including prejudice to a co-defendant, objections by a
co-defendant, overlapping issues, and pending motions, recommend
against entering default judgment against Myrtle D. at this
juncture.

973 F.2d at 348.2

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Plaintiff identifies cases in which default judgments have been
entered against unresponsive parties in declaratory judgment
actions. See Pl.’s Resp. to Defs.’ Mot. to Defer J. Against
Myrtle D. Corp. 3. Simply put, none of those cases involved
objecting co-defendants or overlapping issues that might have
resulted in the issuance of inconsistent judgments. See, e.g.,
Crum v. Canopius US Ins. Inc., No. 2:14-CV-24861, 2015 WL
4772466, at *1 (S.D.W. Va. Aug. 12, 2015); State Auto Prop. &
Cas. Ins. Co. v. Fas Chek Enters., Inc., No. 2:15-CV-00809, 2015
WL 1894011, at *1 (S.D.W. Va. Apr. 27, 2015). Indeed, Fas Chek
actually bolsters defendants’ argument that when co-defendants
object because of overlapping issues there is just reason to
delay entry of default judgment. 2015 WL 1894011, at *2
(“Generally, I decline to enter default judgment in such cases

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Plaintiff emphasizes that “out of an abundance of
caution, [plaintiff] agreed to provide Myrtle D. with a defense
[in the state court action], under a reservation of rights,”
beginning on April 12, 2016.

Pl.’s Resp. to Defs.’ Mot. to

Defer J. Against Myrtle D. Corp. 2.

Indeed, in an ordinary case

involving only two parties, the costs of a related defense would
counsel in favor of a default judgment against a non-responsive
party declaring there is no duty to defend that party.

Here,

however, this factor must be balanced against the risk of
inconsistent or factually underdeveloped default judgments as
well as the pecuniary interests of co-defendants David Cline and
Rock “N” Roll in establishing coverage.

Other courts have found that withholding entry of
default judgment is proper even when an insurer-plaintiff is
involved in ongoing representation of a co-defendant in another
action.

For example, in Security Insurance Co. of Hartford v.

Schipporeit, Inc., the plaintiff insurer, Security, represented
Schipporeit, Inc., under a reservation of rights in a state
court action brought by LaSalle Street Church.
1380 (7th Cir. 1995).

69 F.3d 1377,

Plaintiff moved for entry of a default

judgment declaring non-coverage against Schipporeit, Inc., for

when the nonmoving party has demonstrated opposition to it in
some manner.”).

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failure to appear in federal court.

Id.

The district court

denied the motion for default judgment despite the costs
incurred by plaintiff’s ongoing representation of Schipporeit
because a similarly situated non-party, LaSalle, moved to
intervene.

Id.

The Seventh Circuit upheld the denial, noting

that

Security opposed LaSalle's petition to intervene
because it wanted a quick, unopposed adjudication that
it had no obligation to defend or indemnify
Schipporeit. And Security, it seems, was on the verge
of obtaining that result. It wanted to play the
Washington Generals and get out of town with a quick
win. The district court wisely allowed a more worthy
opponent to get into and onto the court.
Id. at 1381.3

Although Schipporeit involved an intervenor rather

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The Seventh Circuit went on to note the policy ramifications of
entering a default judgment in such a situation:
If the district court had denied intervention,
Security would probably have won, by default, a
judgment that it had no duty to defend or indemnify
Schipporeit for LaSalle’s claims. From the record, it
seems probable that Schipporeit would not have
defended against LaSalle in the state court action.
LaSalle could then have sought, and probably obtained,
a default judgment in its state court action. With
that judgment in hand, LaSalle could have sought to
intervene in federal court and have Security’s default
judgment set aside. If LaSalle won a declaration of
coverage, Security would then have had grounds to seek
to set aside the state court default judgment against
Schipporeit. Judge Zagel skillfully avoided this sort
of endless, circular, and unnecessary litigation.
Intervention enabled the court to address important
issues in this case once, with fairness and finality.
Schipporeit, 69 F.3d at 1381.

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than a co-defendant, the principles and policy rationales
enunciated by the Seventh Circuit are applicable here.

In another case, Global Aerospace, Inc. v. Platinum
Jet Management, LLC, et al., an insurance company plaintiff
moved for default judgment against a non-responsive corporate
defendant in a suit arising out of a plane crash.

No. 09-60756-

CIV, 2009 WL 3400519, at *5 (S.D. Fla. Oct. 20, 2009).
Plaintiff was defending the other individual co-defendants in
various criminal proceedings arising out of the crash.

The

court noted that plaintiff had not shown that entering
declaratory relief would “no longer run the risk of being
inconsistent with rulings in favor of some of the Individual
Defendants,” although it did observe that it would consider “at
any point” information showing that the co-defendants’ claims
were sufficiently distinct for default judgment to be entered.
Id. at *6.

Similarly, plaintiff here has not shown that there

is no risk of inconsistent rulings among the co-defendants, and
the fact that it has agreed to provide a defense for Myrtle D.
does not negate that risk.

These cases together suggest that the incurrence of
defense costs by an insurer in a related case does not by itself
justify the entry of default judgment against a non-responsive

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THOMAS PARKER,
Plaintiff,
v.
Civil Action No. 15-14025
co-defendant where there is a risk of inconsistent judgments and
THE DOW CHEMICAL COMPANY LONG TERM DISABILITY PROGRAM,
an Employee Welfare Benefits Plan,
underdeveloped factual premises. Consequently, and in light of
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON,
a Massachusetts Corporation, and
the pending motion for summary judgment in this case, there is
DOES 1 THROUGH 10, inclusive,
just reason to delay entry of default judgment against Myrtle D.
Defendants.
under Rule 54(b). Accordingly, the court will not enter default
ORDER AND NOTICE
judgment under Rule 55(b) at this time. The court will,
Pursuant to L.R. Civ. P. 16.1, it is ORDERED that the
following dates are hereby fixed as the time by or on which
however, consider information demonstrating that no “overlapping
certain events must occur:
claims or issues” remain at any point it becomes together with
01/28/2016
Motions under F.R. Civ. P. 12(b), available.
supporting briefs, memoranda, affidavits, or other
such matter in support thereof. (All motions
It is therefore ORDERED that plaintiff’s Motion for
unsupported by memoranda will be denied without
prejudice pursuant to L.R. Civ. P. 7.1 (a)).
Default Judgment Against Myrtle D. Corporation be, and it hereby
02/08/2016
Last day for Rule 26(f) meeting.
is, denied. In addition, it is ORDERED that defendants Rock “N”
02/15/2016
Last day to file Report of Parties= Planning
Meeting. See L.R. Civ. P. 16.1.
Roll Coal Company, Inc., and David Cline’s Motion to Defer Entry
02/22/2016
Scheduling conference at 4:30 p.m. it hereby is,
of Judgment Against Myrtle D. Corporation be, and at the Robert C.
Byrd United States Courthouse in Charleston, before
the undersigned, unless canceled.
granted. Plaintiff’s Motion for Oral Argument is Lead counsel
denied as
directed to appear.
moot.
02/29/2016
Entry of scheduling order.
03/08/2016
Last day to serve F.R. Civ. P 26(a)(1) disclosures.
The Clerk is requested to transmit this order to all
The Clerk is requested to transmit this Order and
counsel of record and any unrepresented parties.
Notice to all counsel of record and to any unrepresented
parties.
ENTER: March 24, 2017
DATED: January 5, 2016
John T. Copenhaver, Jr.
United States District Judge

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