Evergreen Indemnity v. Dalomba, et al.

2016 DNH 148

• Court: District Court, D. New Hampshire
• Decided: August 23, 2016
• Docket: 15-cv-485-JD
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Evergreen Indemnity, Ltd.

v. Civil No. 1:15-cv-485-JD Opinion No. 2016 DNH 148 Maria Dalomba, Edwin Simonsen, Catherine Kierstead, and Hidden Valley RV Park, LLC

O R D E R

Evergreen Indemnity, Ltd. (“Evergreen”) brings an action

for declaratory relief against its insureds, Hidden Valley RV

Park, LLC (“Hidden Valley”), Edwin Simonsen, and Catherine

Kierstead (together, the “Hidden Valley Defendants”), and Maria

Dalomba, seeking a declaratory judgment that Evergreen has no

duty to defend or indemnify the Hidden Valley Defendants in a

civil rights action brought by Dalomba. The Hidden Valley

Defendants have moved to add third-party claims against their

insurance broker and her agency. Evergreen objects.

Background

In July of 2015, Dalomba brought suit against the Hidden

Valley Defendants, alleging claims for racial discrimination

under federal civil rights laws. Dalomba’s complaint alleges

that her family, all of whom are “Black persons of African

heritage,” experienced a series of racially motivated and harassing events while vacationing at Hidden Valley. Although

most of the harassment in the complaint is attributed to other

residents of the campground, Dalomba’s complaint alleges that

Hidden Valley, along with Simonsen as a member of Hidden Valley,

and Kierstead as a Hidden Valley employee, are liable for racial

discrimination under 42 U.S.C. § 1981, which prohibits

discrimination while making and enforcing contracts.

In response to Dalomba’s complaint, the Hidden Valley

Defendants requested a defense and indemnification from

Evergreen under a commercial liability policy (“the policy”)

covering Hidden Valley, Simonsen, and Hidden Valley employees

acting in the scope of their employment. Evergreen denied

coverage because it determined that Dalomba’s complaint alleged

intentional acts of racial discrimination, which, it asserted,

were not covered under the policy. Evergreen also denied

coverage on the ground that Hidden Valley and Simonsen failed to

promptly provide notice of Dalomba’s discrimination allegations,

as required by the policy.

Evergreen then filed this action against the Hidden Valley

Defendants and Dalomba, seeking a declaratory judgment that the

policy does not require it to defend, indemnify, or provide

coverage to the Hidden Valley Defendants for the claims arising

out of Dalomba’s complaint. Evergreen brought this action under

diversity jurisdiction. See 28 U.S.C. § 1332. Evergreen is a 2 Barbados corporation with its principal place of business in

Barbados. 1 Hidden Valley is a limited liability company whose

sole member, Simonsen, is a New Hampshire citizen. Dalomba is a

citizen of Massachusetts, and Kierstead is a citizen of New

Hampshire or Florida. 2

On May 16, 2016, the Hidden Valley Defendants moved to add

third-party claims against Lisa Joe Huff, their insurance

broker, and her agency, Brown & Brown Insurance of N.H., which

is a New Hampshire corporation. 3 The proposed third-party

complaint alleges a claim of professional negligence against

Huff and Brown & Brown based on the allegation that they should

have obtained “coverage for Hidden Valley that was adequate to

1 Evergreen’s complaint did not properly allege the citizenship of itself or Hidden Valley. Because of this, the court ordered Evergreen and Hidden Valley to file affidavits establishing their respective citizenships. Doc. no. 26. In response to the court’s order, Evergreen and Hidden Valley filed affidavits containing jurisdictional facts. See docs. no. 28, 29-1. The facts in this motion pertaining to the citizenships of Evergreen, Simonsen, and Hidden Valley are derived from those affidavits.

2 Although Evergreen alleges only that Kierstead lives in New Hampshire, the defendants’ answer clarifies that Kierstead is likely domiciled in either Florida or New Hampshire. Doc. 14 at ¶ 4. Aponte-Davila v. Municipality of Caguas, --F.3d--, 2016 WL 3648474, at *4 (1st Cir. July 8, 2016) (“For purposes of diversity, a person is a citizen of the state in which he is domiciled.”). Because Evergreen is not a citizen of Florida or New Hampshire, it is not necessary to resolve this ambiguity for diversity purposes. See 28 U.S.C. 1332(a)(2).

3 The proposed third-party complaint does not allege the citizenship of Huff. 3 cover the claims made by Ms. Dalomba.” Doc no. 21-1 at 6.

Evergreen objects.

Discussion

Evergreen contends that the court should deny the Hidden

Valley Defendants’ motion to add the proposed third-party claims

for four reasons. Evergreen argues that the court cannot

exercise subject-matter jurisdiction over the claims, and that

even if the court could exercise jurisdiction over the proposed

third-party claims, it should decline to do so. Evergreen also

asserts that the court should deny the Hidden Valley Defendants’

motion because the proposed third-party claims are futile.

Finally, Evergreen requests that the proposed third-party claims

be deferred because they could be rendered moot by summary

judgment in this action.

A. Supplemental Jurisdiction

In their proposed third-party complaint, the Hidden Valley

Defendants allege that the court has supplemental jurisdiction

over their third-party claims. Under 28 U.S.C. § 1367(a),

except as provided elsewhere, a court with original jurisdiction

over an action has supplemental jurisdiction over “all other

claims that are so related to claims in the action within such

original jurisdiction that they form part of the same case or 4 controversy under Article III of the United States

Constitution.”

Evergreen does not dispute that the Hidden Valley

Defendants’ third-party claims arise from the same case or

controversy as Evergreen’s claim for declaratory relief.

Rather, Evergreen contends that supplemental jurisdiction over

the proposed third-party claims is prohibited under § 1367(b)

because those claims—at least one of which is against a New

Hampshire citizen—would destroy diversity. Subsection 1367(b)

provides that federal courts in diversity cases do not have

supplemental jurisdiction “over claims by plaintiffs against

persons made parties under Rule 14, 19, 20, or 24, of the

Federal Rules of Civil Procedure” if exercising such

jurisdiction “would be inconsistent with the jurisdictional

requirements of [diversity jurisdiction].”

In Allstate Interiors & Exteriors, Inc. v. Stonestreet

Const., LLC, the First Circuit held that § 1367(b) did not

prohibit a district court from exercising supplemental

jurisdiction over non-diverse third-party claims asserted by the

defendant in a diversity action. 730 F.3d 67, 73 (1st Cir.

2013). In doing so, the court interpreted the term “plaintiff”

in § 1367(b) as referring only to the “original plaintiff in the

action, and not to a defendant that also is a third-party

plaintiff.” Id. The First Circuit reasoned that this 5 interpretation was “consistent with Congress's intent that

section 1367(b) should prevent original plaintiffs—but not

defendants or third parties—from circumventing the requirements

of diversity.” Id. (internal quotation marks omitted).

Here, the Hidden Valley Defendants seek to bring claims

against Huff and Brown & Brown for the loss associated with

their potential insurance coverage deficiency. Federal Rule of

Civil Procedure 14, which governs third-party practice, provides

that a defendant makes such a claim as a “third-party plaintiff”

and not as an original plaintiff. Fed. R. Civ. P. 14(a)(1).

Therefore, § 1367(b) does not strip the court of jurisdiction

over the Hidden Valley Defendants’ third-party claims.

Stonestreet Constr., 730 F.3d at 73. 4

B. Discretion to Decline Jurisdiction

Evergreen also contends that the court should decline

jurisdiction under § 1367(c) because the proposed third-party

claims will predominate over its claim for declaratory relief.

In support, Evergreen argues that the proposed third-party

4 Evergreen relies on Nat’l Fire & Marine Ins. Co. v. ECH Builders, LLC, 2008 U.S. Dist. LEXIS 39768, at *2 (D.N.H. 2008). In ECH Builders, the court held that § 1367(b) stripped it of supplemental jurisdiction over third-party claims brought by a defendant against its non-diverse insurance agent. ECH Builders, however, was decided before Stonestreet Constr., which is controlling precedent.

6 claims require “time-consuming and costly discovery” and the

development of an evidentiary record, whereas its claim for

declaratory relief can be resolved based solely on the policy

and the complaint in the underlying action. The Hidden Valley

Defendants do not respond to Evergreen’s predominance argument.

Under § 1367(c), a district court may decline to exercise

supplemental jurisdiction if “the claim substantially

predominates over the claim or claims over which the district

court has original jurisdiction.” 28 U.S.C. § 1367(c)(2). When

assessing predominance under § 1367(c), a court should look at

the proof necessary to prove each claim, the scope of the issues

raised, and the remedies sought. Stonestreet Constr., 730 F.3d

at 73. “The inquiry . . . turns on whether the supplemental

claims are more complex or require more judicial resources or

are more salient in the case as a whole than the claims over

which the court has original jurisdiction.” William A. Gross

Constr. Assocs., Inc. v. Am. Mfrs. Mut. Ins. Co., 2009 WL

427280, at *15 (S.D.N.Y. Feb. 23, 2009) (internal quotations

omitted). Further, in all supplemental jurisdiction decisions,

courts must assess the totality of the circumstances, which

includes giving consideration to issues such as “comity,

judicial economy, convenience, fairness and the like.” Che v.

Mass. Bay Transp. Auth., 342 F.3d 31, 37 (1st Cir. 2003)

(internal quotations omitted)). 7 Here, Evergreen seeks a declaratory judgment that it is not

obligated to indemnify or defend the Hidden Valley Defendants in

the Dalomba action under the terms of the policy. The

interpretation of an insurance policy is a question of law.

Todd v. Vt. Mut. Ins. Co., ---N.H.---, 2016 WL 1381486, at *2

(N.H. Apr. 7, 2016). In general, courts can resolve such

questions based solely on the terms of the policy and the

pleading in the underlying action. See Tech-Built 153, Inc. v.

Virginia Sur. Co., Inc., 153 N.H. 371, 375 (2006) (“We

acknowledge that, in general, we do not look beyond the four

corners of the insurance contract to discern the intent of the

contracting parties regarding the scope and extent of insurance

coverage.”); State Farm Ins. Co. v. Bruns, 156 N.H. 708, 713

(2008) (“In deciding the scope of a liability policy's coverage,

a court must compare the policy language with the facts pled in

the underlying suit to see if the claim falls within the express

terms of the policy . . . .”) (internal quotation marks

omitted).

In contrast, the Hidden Valley Defendant’s tort claims

would raise a number of issues that require an evidentiary

record to resolve, including whether Huff and Brown & Brown owed

a duty to the Hidden Valley Defendants and, if so, whether Huff

8 and Brown & Brown’s conduct violated that duty. 5 As Evergreen

points out, the necessity of such evidence will require the

court and the parties to participate in a lengthy discovery

process that would likely be unnecessary if this action were

confined to Evergreen’s claim for declaratory relief. Moreover,

the proposed third-party claims seek damages, which is a remedy

that may raise factual issues not present in an action for

declaratory relief. Therefore, the proposed third-party claims

would predominate over Evergreen’s claim for declaratory relief.

In addition, exercising supplemental jurisdiction over the

third-party claims would not further the goals of judicial

economy and convenience. The parties have filed summary

judgment motions concerning the interpretation of the policy,

and discovery closed on August 19, 2016. Adding the third-party

claims likely would disrupt that schedule. Further, there would

be limited overlap of facts between Evergreen’s claim for

declaratory relief and the third-party claims, all of which

focus on what a third party should have advised the Hidden

Valley Defendants. Therefore, the court declines to exercise

supplemental jurisdiction over the Hidden Valley Defendants’

5 See Sintros v. Hamon, 148 N.H. 478, 480 (2002)(“[A]n insurance agent owes clients a duty of reasonable care and diligence, but absent a special relationship, that duty does not include an affirmative, continuing obligation to inform or advise an insured regarding the availability or sufficiency of insurance coverage.”). 9 third-party claims.

C. Futility and Mootness

Because the court has declined supplemental jurisdiction

over the proposed third-party claims, it need not assess whether

those claims are futile or whether deferring those claims is

appropriate.

Conclusion

For the foregoing reasons, the Hidden Valley Defendants’

motion to add claims against Huff Brown & Brown as third-party

defendants (doc. no. 21) is denied.

SO ORDERED.

/s/ Joseph A. DiClerico, Jr. Joseph A. DiClerico, Jr. United States District Judge

August 23, 2016

cc: Katherine A. Nickerson, Esq. Kevin H. O’Neill, Esq. Nancy Richards-Stower, Esq. Jeremy David Eggleton, Esq.