1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 * * *
7 EVANSTON INSURANCE COMPANY, Case No. 2:20:cv-01783-KJD-EJY
8 Plaintiff, ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS 9 v.
10 VENTURE POINT, LLC; KEVIN SCHARRINGHAUSEN; and DOES 1 to 100, 11 Defendants. 12 Before the Court are Defendant Venture Point, LLC’s Motion to Dismiss Plaintiff’s 13 Complaint (ECF #10) and Defendant Kevin Scharringhausen’s Motion to Dismiss (ECF #12). 14 Plaintiff responded in opposition to both motions (ECF #18), Defendant Venture Point, LLC 15 replied (ECF #20), and Defendant Scharringhausen joined Venture Point’s reply (ECF #21) and 16 filed its own reply (ECF #22). Defendant Scharringhausen also filed a Motion for Leave to File 17 Supplemental Brief (ECF #35). Plaintiff responded in opposition (ECF #39) and Defendant 18 replied (ECF #43). 19 I. Factual and Procedural Background 20 On or around July 7, 2016, Defendant Kevin Scharringhausen (“Scharringhausen”) fell 21 down the stairs at work and was injured. (ECF #10, at 2). Scharringhausen’s employer, 22 Petroleum Logistics (“Petroleum”), leased the building where Scharringhausen was injured from 23 Venture Point, LLC (“Venture Point”). Id. Scharringhausen’s underlying state court action 24 against Venture Point is ongoing. Id. According to the lease agreement between Venture Point 25 and Petroleum, Petroleum was required to secure commercial general liability insurance and add 26 Venture Point as an additional insured. Id. at 3. Petroleum complied and purchased an insurance 27 policy through Kinsale Insurance Company (“Kinsale”). Id. Petroleum then purchased an 28 1 additional insurance policy for excess coverage from Plaintiff Evanston Insurance Company 2 (“Evanston”). Id. That additional insurance policy is the subject of Evanston’s declaratory 3 judgment action in this Court. Evanston seeks a declaration that Venture Point is not an 4 additional insured, and that Evanston does not owe any coverage regardless of the factual 5 findings in the state court action. (ECF #18, at 5). Evanston argues that the contract entered by 6 Evanston and Petroleum prevents Venture Point from indemnification or coverage by Evanston. 7 Id. at 9–10. 8 II. Legal Standard 9 The Declaratory Judgment Act states that in a “case of actual controversy within its 10 jurisdiction . . . any court of the United States . . . may declare the rights and other legal relations 11 of any interested party seeking such declaration.” 28 U.S.C. § 2201(a). Courts must “first inquire 12 whether there is an actual case or controversy within its jurisdiction.” Principal Life Ins. Co. v. 13 Robinson, 394 F.3d 665, 669 (9th Cir. 2005). Then, “if the court finds that an actual case or 14 controversy exists, the court must decide whether to exercise its jurisdiction by analyzing the 15 [Brillhart] factors.” Id. The Brillhart factors “remain the philosophic touchstone for the district 16 court.” Gov’t. Emp. Ins. Co. v. Dizol, 133 F.1220, 1225 (9th Cir. 1998). The factors mandate 17 that the district court “should avoid needless determination of state law issues; it should 18 discourage litigants from filing declaratory actions as a means of forum shopping; and it should 19 avoid duplicative litigation.” Id. When a party “requests declaratory relief in federal court and a 20 suit is pending in state court presenting the same state law issues, there exists a presumption that 21 the entire suit should be heard in state court.” Chamberlain v. Allstate Ins. Co., 931 F.2d 1361, 22 1366–67 (9th Cir. 1991). Nevertheless, “there is no presumption in favor of abstention in 23 declaratory actions generally, nor in insurance cases specifically.” Dizol, 133 F.3d at 1225. The 24 district court is in the “best position to assess how judicial economy, comity and federalism are 25 affected in a given case.” Id. at 1226. 26 III. Analysis 27 Defendants argue that Evanston’s action should be dismissed for three reasons. First, 28 Defendants argue that Evanston failed to join necessary and indispensable parties to the litigation. 1 Second, Defendants argue that Evanston does not have standing because it failed to comply with 2 Nevada Revised Statute 80.010 and did not file as a foreign corporation with the Secretary of State. 3 Third, Defendants argue that even if Evanston’s claim survives those arguments, the Court should 4 refuse jurisdiction because the Brillhart factors weigh in favor of dismissal. 5 A. Necessary and Indispensable Parties 6 “Application of Federal Rule of Civil Procedure 19 determines whether a party is 7 indispensable. The inquiry is a practical, fact-specific one, designed to avoid the harsh results of 8 rigid application.” Dawavendewa v. Salt River Project Agr. Imp. and Power Dist., 276 F.3d 9 1150, 1155 (9th Cir. 2002). Courts must determine “(1) whether an absent party is necessary to 10 the action; and then, (2) if the party is necessary, but cannot be joined, whether the party is 11 indispensable such that in ‘equity and good conscience’ the suit should be dismissed.” Id. 12 (quoting Confederated Tribes of Chehalis Indian Reservation v. Lujan, 928 F.2d 1496, 1498 (9th 13 Cir. 1991)). Rule 19(a) “provides a two-pronged inquiry for determining whether a party is 14 ‘necessary.’” White v. Univ. of Cal., 765 F.3d 1010, 1026 (9th Cir. 2014) (quoting Confederated 15 Tribes, 928 F.2d at 1498. “First, the court must determine whether complete relief can be 16 afforded if the action is limited to the existing parties.” Id. “Second, the court must determine 17 whether the absent party has a ‘legally protected interest’ in the subject of the action and, if so, 18 whether the party’s absence will ‘impair or impede’ the party’s ability to protect that interest or 19 will leave an existing party subject to multiple, inconsistent legal obligations with respect to that 20 interest.” Id. (quoting Confederated Tribes, 928 F.2d at 1498). 21 Evanston named two defendants in this action: Venture Point and Scharringhausen. Both 22 of those defendants argue that the action must be dismissed because Evanston failed to join 23 necessary and indispensable parties. They argue that Petroleum should have been added because 24 Petroleum is Evanston’s insured and the accident occurred because of Petroleum’s failure to 25 maintain the building it rented. Defendants argue that Kinsale and Truck Insurance Exchange, a 26 member of the Farmers insurance company affiliates (“Farmers”) must also be added because, as 27 Venture Point’s primary insurer, they may decide to sue Evanston for any rights of subrogation if 28 they settle the underlying action within their policy limits. Defendants argue that the Court may 1 prevent the future suits by adding Kinsale and Farmers as parties to this action. While the Court 2 may prevent a future suit, the Court does not find that these parties are necessary. While they 3 may be interested in the outcome of this action, they must have a specific interest that they 4 “would be unable to protect if the action proceeded without [them].” IDS Property Cas. Ins. Co. 5 v. Mullins, 726 Fed.Appx. 597, 598 (9th Cir. 2018) (memorandum opinion). Defendants have 6 not shown that Kinsale and Farmers have a specific interest that they would be unable to protect 7 if the Court proceeds in this action without them. The requested relief can be completely granted 8 in their absence and their absence will not impair or impede their ability to protect their legal 9 interests.
Free access — add to your briefcase to read the full text and ask questions with AI
1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 * * *
7 EVANSTON INSURANCE COMPANY, Case No. 2:20:cv-01783-KJD-EJY
8 Plaintiff, ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS 9 v.
10 VENTURE POINT, LLC; KEVIN SCHARRINGHAUSEN; and DOES 1 to 100, 11 Defendants. 12 Before the Court are Defendant Venture Point, LLC’s Motion to Dismiss Plaintiff’s 13 Complaint (ECF #10) and Defendant Kevin Scharringhausen’s Motion to Dismiss (ECF #12). 14 Plaintiff responded in opposition to both motions (ECF #18), Defendant Venture Point, LLC 15 replied (ECF #20), and Defendant Scharringhausen joined Venture Point’s reply (ECF #21) and 16 filed its own reply (ECF #22). Defendant Scharringhausen also filed a Motion for Leave to File 17 Supplemental Brief (ECF #35). Plaintiff responded in opposition (ECF #39) and Defendant 18 replied (ECF #43). 19 I. Factual and Procedural Background 20 On or around July 7, 2016, Defendant Kevin Scharringhausen (“Scharringhausen”) fell 21 down the stairs at work and was injured. (ECF #10, at 2). Scharringhausen’s employer, 22 Petroleum Logistics (“Petroleum”), leased the building where Scharringhausen was injured from 23 Venture Point, LLC (“Venture Point”). Id. Scharringhausen’s underlying state court action 24 against Venture Point is ongoing. Id. According to the lease agreement between Venture Point 25 and Petroleum, Petroleum was required to secure commercial general liability insurance and add 26 Venture Point as an additional insured. Id. at 3. Petroleum complied and purchased an insurance 27 policy through Kinsale Insurance Company (“Kinsale”). Id. Petroleum then purchased an 28 1 additional insurance policy for excess coverage from Plaintiff Evanston Insurance Company 2 (“Evanston”). Id. That additional insurance policy is the subject of Evanston’s declaratory 3 judgment action in this Court. Evanston seeks a declaration that Venture Point is not an 4 additional insured, and that Evanston does not owe any coverage regardless of the factual 5 findings in the state court action. (ECF #18, at 5). Evanston argues that the contract entered by 6 Evanston and Petroleum prevents Venture Point from indemnification or coverage by Evanston. 7 Id. at 9–10. 8 II. Legal Standard 9 The Declaratory Judgment Act states that in a “case of actual controversy within its 10 jurisdiction . . . any court of the United States . . . may declare the rights and other legal relations 11 of any interested party seeking such declaration.” 28 U.S.C. § 2201(a). Courts must “first inquire 12 whether there is an actual case or controversy within its jurisdiction.” Principal Life Ins. Co. v. 13 Robinson, 394 F.3d 665, 669 (9th Cir. 2005). Then, “if the court finds that an actual case or 14 controversy exists, the court must decide whether to exercise its jurisdiction by analyzing the 15 [Brillhart] factors.” Id. The Brillhart factors “remain the philosophic touchstone for the district 16 court.” Gov’t. Emp. Ins. Co. v. Dizol, 133 F.1220, 1225 (9th Cir. 1998). The factors mandate 17 that the district court “should avoid needless determination of state law issues; it should 18 discourage litigants from filing declaratory actions as a means of forum shopping; and it should 19 avoid duplicative litigation.” Id. When a party “requests declaratory relief in federal court and a 20 suit is pending in state court presenting the same state law issues, there exists a presumption that 21 the entire suit should be heard in state court.” Chamberlain v. Allstate Ins. Co., 931 F.2d 1361, 22 1366–67 (9th Cir. 1991). Nevertheless, “there is no presumption in favor of abstention in 23 declaratory actions generally, nor in insurance cases specifically.” Dizol, 133 F.3d at 1225. The 24 district court is in the “best position to assess how judicial economy, comity and federalism are 25 affected in a given case.” Id. at 1226. 26 III. Analysis 27 Defendants argue that Evanston’s action should be dismissed for three reasons. First, 28 Defendants argue that Evanston failed to join necessary and indispensable parties to the litigation. 1 Second, Defendants argue that Evanston does not have standing because it failed to comply with 2 Nevada Revised Statute 80.010 and did not file as a foreign corporation with the Secretary of State. 3 Third, Defendants argue that even if Evanston’s claim survives those arguments, the Court should 4 refuse jurisdiction because the Brillhart factors weigh in favor of dismissal. 5 A. Necessary and Indispensable Parties 6 “Application of Federal Rule of Civil Procedure 19 determines whether a party is 7 indispensable. The inquiry is a practical, fact-specific one, designed to avoid the harsh results of 8 rigid application.” Dawavendewa v. Salt River Project Agr. Imp. and Power Dist., 276 F.3d 9 1150, 1155 (9th Cir. 2002). Courts must determine “(1) whether an absent party is necessary to 10 the action; and then, (2) if the party is necessary, but cannot be joined, whether the party is 11 indispensable such that in ‘equity and good conscience’ the suit should be dismissed.” Id. 12 (quoting Confederated Tribes of Chehalis Indian Reservation v. Lujan, 928 F.2d 1496, 1498 (9th 13 Cir. 1991)). Rule 19(a) “provides a two-pronged inquiry for determining whether a party is 14 ‘necessary.’” White v. Univ. of Cal., 765 F.3d 1010, 1026 (9th Cir. 2014) (quoting Confederated 15 Tribes, 928 F.2d at 1498. “First, the court must determine whether complete relief can be 16 afforded if the action is limited to the existing parties.” Id. “Second, the court must determine 17 whether the absent party has a ‘legally protected interest’ in the subject of the action and, if so, 18 whether the party’s absence will ‘impair or impede’ the party’s ability to protect that interest or 19 will leave an existing party subject to multiple, inconsistent legal obligations with respect to that 20 interest.” Id. (quoting Confederated Tribes, 928 F.2d at 1498). 21 Evanston named two defendants in this action: Venture Point and Scharringhausen. Both 22 of those defendants argue that the action must be dismissed because Evanston failed to join 23 necessary and indispensable parties. They argue that Petroleum should have been added because 24 Petroleum is Evanston’s insured and the accident occurred because of Petroleum’s failure to 25 maintain the building it rented. Defendants argue that Kinsale and Truck Insurance Exchange, a 26 member of the Farmers insurance company affiliates (“Farmers”) must also be added because, as 27 Venture Point’s primary insurer, they may decide to sue Evanston for any rights of subrogation if 28 they settle the underlying action within their policy limits. Defendants argue that the Court may 1 prevent the future suits by adding Kinsale and Farmers as parties to this action. While the Court 2 may prevent a future suit, the Court does not find that these parties are necessary. While they 3 may be interested in the outcome of this action, they must have a specific interest that they 4 “would be unable to protect if the action proceeded without [them].” IDS Property Cas. Ins. Co. 5 v. Mullins, 726 Fed.Appx. 597, 598 (9th Cir. 2018) (memorandum opinion). Defendants have 6 not shown that Kinsale and Farmers have a specific interest that they would be unable to protect 7 if the Court proceeds in this action without them. The requested relief can be completely granted 8 in their absence and their absence will not impair or impede their ability to protect their legal 9 interests. As such, the Court finds that the parties Evanston did not join in the action are not 10 necessary for the determination of whether Venture Point is an additional insured under the 11 insurance contracts and dismissal is improper. 12 B. Nevada Revised Statute 80.010 13 Statute requires that “[b]efore commencing or doing any business in this State, each 14 corporation organized pursuant to the laws of another state . . . that enters this State to do 15 business must [f]ile in the Office of the Secretary of State.” NEV. REV. STAT. § 80.010(a). It also 16 mandates that “every corporation which fails or neglects to comply with the provisions of NRS 17 80.010 to 80.040, inclusive, may not commence or maintain any action or proceeding in any 18 court of this Statue.” Id. at § 80.055. Defendants argue that they searched the Secretary of State 19 website and did not find Evanston’s registered corporation listed along with the foreign 20 corporations that had complied with NRS 80.010. Evanston argues that it is exempt from that 21 statute because it holds a license as an insurer under NRS 680B.020. Section 680B.020 states 22 that [n]otwithstanding the provisions of any general or special law, the possession of a 23 license or certificate of authority issued under this Code shall be authorization to 24 transact such business as indicated in such license or certificate of authority, and shall be in lieu of all licenses, whether for regulation or revenue, required to 25 transact insurance business within the State of Nevada. 26 NEV. REV. STAT. § 680B.020(1). This section appears to provide Evanston the power to conduct 27 business in Nevada without filing with the Secretary of State, as required in § 80.010. The plain 28 language of the statute permits an insurance company to authorize or transact insurance business 1 in the state despite any other statute, including § 80.010. Because Evanston is permitted to 2 transact business in the state, it may also commence a civil action. 3 If the plain language § 680B.020(1) did not grant Evanston the ability to conduct 4 business in Nevada without registering as a foreign corporation and filing with the Secretary of 5 State, dismissal would still be improper. The Nevada Supreme Court has held that when a party 6 that is not qualified to do business in Nevada commences an action, “the district court should 7 stay [the] unqualified foreign corporation’s action until the foreign corporation qualifies.” 8 Executive Management, Ltd. v. Ticor Title Ins. Co., 38 P.3d 872, 876 (Nev. 2002). A party’s 9 failure to “promptly qualify, however, could result in dismissal.” Id. While the current statute 10 was drafted after the Ticor decision was issued, the Court agrees with its holding. As such, 11 Defendants’ argument that Evanston does not have standing to commence a civil action in 12 Nevada is denied. 13 C. The Brillhart Factors 14 When determining whether to exercise jurisdiction over a claim for declaratory judgment, 15 courts consider the Brillhart factors. A district court should “avoid needless determination of 16 state law; it should discourage litigants from filing declaratory actions as a means of forum 17 shopping; and it should avoid duplicative litigation.” Dizol, 133 F.3d at 1225. 18 This action does not involve the needless determination of state law. A “needless 19 determination of state law may involve: (1) an ongoing parallel state court proceeding regarding 20 the precise state law issue, (2) an area of law Congress expressly left to the states, or (3) a 21 lawsuit with no compelling federal interest.” Rimini Street, Inc. v. Hartford Fire Ins. Co., No. 22 2:15-cv-2292-JCM-CWH, 2016 WL 3192709, at *5 (D. Nev. June 6, 2016). The parties to this 23 action are currently engaged in an underlying state court case involving a similar issue, but it is 24 not the precise issue presented to this Court. The question presented of whether Venture Point is 25 an additional insured under the policy is not an area of law Congress has expressly left to the 26 states. While an insurance contract interpretation action does not have any compelling federal 27 interest, the action would not require any needless determinations of state law. Therefore, it does 28 not weigh toward dismissal. 1 The action was not filed as an attempt to forum shop. Forum shopping involves “the 2 vexatious or reactive nature” of the litigation. Moses H. Cone Memorial Hosp. v. Mercury 3 Constr. Corp., 460 U.S. 1, 17 n.20 (1983). Evanston had the right to file this action in federal 4 court as diversity jurisdiction exists. Additionally, there does not appear to be any vexatious or 5 reactive nature to the filing. Evanston simply argues that it does not owe a duty to Venture Point 6 under the plain language of the insurance contracts and it has the right to file a claim for such a 7 declaratory action. Therefore, this factor does not weigh toward dismissal. 8 Furthermore, this action is not likely to produce duplicative litigation. Evanston argues 9 that the only questions in this action involve contract interpretation, have nothing to do with the 10 facts of the underlying action, and as such, do not constitute duplicative litigation. Defendants 11 argue that factual issues exist that cannot be resolved without the underlying action, such as 12 workers compensation issues, interpretation of contracts from Kinsale, a party that is not named 13 in this action, and the specific nature of the incident that led to Scharringhausen’s injury. The 14 ongoing state court proceedings will litigate the substantive issues of negligence and the proper 15 amount of damages. This action only involves contract interpretation. The Court can interpret 16 contract language without determining the extent of Scharringhausen’s damages or the liability 17 of the parties. While Evanston incorporates portions of the Kinsale contract in its complaint, the 18 Court’s interpretation of the contract language will not be duplicative of or dependent upon the 19 underlying state court action. This factor does not weigh toward dismissal. Because the Brillhart 20 factors all weigh against dismissal, the Court finds that exercising jurisdiction for this declaratory 21 judgment action is proper. 22 Because the parties that Evanston did not name are not necessary, Evanston has standing 23 to bring the declaratory judgment action, and the Brillhart factors weigh in favor of the Court 24 exercising jurisdiction, the Court denies Defendants’ motions to dismiss. 25 // 26 // 27 // 28 // 1 TV. Conclusion 2 Accordingly, IT IS HEREBY ORDERED that Defendants’ Motions to Dismiss (ECF #10/12) are DENIED. 4 IT IS FURTHER ORDERED that Defendant’s Motion for Leave to File Supplemental 5 | Brief (ECF #35) is DENIED. 6 | Dated this 24th day of May, 2021. 7 | | \ ) 8 Kent J. Dawson 9 United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
-7-