Michael Kitnurse v. Marshall and Sterling; and Certain Underwriters at Lloyds of London Subscribing to Policy Number CPS200601660

• Court: Superior Court of The Virgin Islands
• Decided: May 26, 2020
• Docket: SX-14-CV-361
• Status: Published

Opinion

SUPERIOR COURT OF THE VIRGIN ISLANDS DIVISION OF ST CROIX

MICHAEL KITNURSE, PLAINTIFF,

v.

MARSHALL AND STERLING, AND CERTAIN SX 14 CV 361 UNDERWRITERS AT LLOYDS OF LONDON Cite as 2020 V I Super 060 SUBSCRIBING T0 POLICY NUMBER CP8200601660

DEFENDANTS

FOR P UBLICA TION

Appearances

Lee J RohII, Esq Christiansted USVI For Plamtzfi"

James L Hymes, III, Esq St Thomas USVl For Defendant Marshall & Sterling

Garry Garten, Esq St Thomas USVl For Defendant Underwriters ofLloyds

MEMORANDUM OPINION and ORDER

WILLOCKS, Presiding Judge

111 THIS MATTER is before the Court on the Motion to Quash Service and Dismiss Complaint

Against Certain Underwriters at Lloyds of London (hereinafter Motion”), filed September 4, 2015

The Plaintiff‘s Opposition was filed on September 25, 2015, and a Reply was submitted on October 6,

2015 Kltnurse 1 Ma: shall & Sterling 2020 V I Super 060 SX 2014 CV 361 MEMORANDUM OPlNION & ORDER Page 2 of 1 1 BACKGROUND

112 In 2012 the Plaintiff (hereinafier “Kitnurse”) filed suit in District Court (hereinafter ‘Kltnurse

v Nazis Tzme”) against John Phuoc le d/b/a Nails Time (hereinafter Nails Time’) after receiving

injuries during a pedicure Certain Underwriters at Lloyds ofLondon v Le, 2014 U S Dist LEXIS

95988 *1 2 (D V 1 July 15 2014) Nails Time had an insurance policy through Marshall and Sterling

which was underwritten by Lloyds of London (hereinafter ‘Lloyds’) Id Kitnurse ultimately settled

with Nails Time in a Consent Judgment for the amount of $1,000,000 (Compl SI 9 ) On May 7 2014

Nails Time assigned Kitnurse all potential claims against Marshall and Sterling and Lloyds arising

from Kitnurse’s injuries in exchange for Kitnurse’s agreement not to execute the Consent Judgment

(Id See Exhibit 1 to Compl )

1i3 However, during the pendency of Kztnurse v NLRB Ttme Lloyds filed a declaratory action in

District Court (hereinafter “Lloyds v Nazls Time’ ) seeking a determination that the policy did not cover

Kitnurse s injuries and that Lloyds was not obligated to defend and indemnify Nails Time The District

Court granted summary judgment in favor of Lloyds Le 2014 U S Dist LEXIS 95988 at *10 12

Nails Time subsequently appealed to the Third Circuit Court of Appeals, but the appeal was denied as

moot because the Consent Judgment between Kitnurse and Nails Time terminated any liability and

responsibility Lloyds may have had to [Nails Time] in the Kztnurse case ’ Certain Underwriters of

Lloyds ofLondon Subscribing to PolIcy No CP5'200601660 v Le 629 Fed App 358 361 (3d Cir

Oct 19 2015)

{[4 The present case was filed in Superior Court before the Third Circuit issued its ruling Proof of

service for Marshall and Sterling was filed by Kitnurse on October 23, 2014 but service was not made

on Lloyds On March 24 2015 the Court issued an order sua sponte seeking proofof service Kimurse

then filed a motion for leave to serve out of time, which the Court granted on June 23, 2015 Despite Kitnurse v Marshall & Sterling 2020 V I Super 060 SX 2014 CV 36] MEMORANDUM OPINION & ORDER Page 3 of l l

finding that Kitnurse had not demonstrated good cause for the delay the Court exercised its discretion

to grant an extension of time due to the preference that cases be heard on the merits

15 According Lloyds service should be quashed pursuant to Rule 4(m) of the Rules of Civil

Procedure1 because [Kitnurse] waited nearly a year to serve the Complaint on Lloyds far in excess

of the 120 day requirement, even though it served the Complaint on [Marshall and Sterling] at least

nine months [prior] and began discovery, knowing that Lloyds was not participating in the case and

knowing that most of the same issues in this case were already being litigated with Lloyds in another

case ” (Mot l )

116 Lloyds asserts that the delay in service was a deliberate act to gain a litigation advantage to

the prejudice of Lloyds in both this case and in [the Lloyds v Nails Tzme] Third Circuit appeal of the

same issues (Id) Though the Court granted Kitnurse an extension of time to serve Lloyds, it did so

without knowing about the other case (Id at 2 ) The extension of time was also granted despite a

finding that Kitnurse had not demonstrated good cause (1d ) Further since Lloyds was not served with

the motion for an extension of time, it did not have the opportunity to file an opposition (Id) Lloyds

requests that the Court reconsider and vacate its order granting an extension of time pursuant to Rule

60(b)(2) or 60(b)(6) of the Rules of Civil Procedure because Kitnurse’s failure to disclose all

circumstances may be viewed as misrepresentation to the Court (1d)

{[7 Lloyds also argues that there is good cause to quash service because Kitnurse did not serve

Lloyds within the 120 day timeframe articulated in Rule 4(m) and the issues, at the time this motion

was filed were already being litigated in District Court and on appeal (Id at 3 ) At oral argument

before the Third Circuit Kitnurse s counsel was unable to articulate a reason why proceeding with the

present matter would not moot the District Court case other than that she did not want the District

Court’s holdings to stand because it would undermine this case (1d ) In Lloyds View Kitnurse ‘ was

‘ Though this motion was filed prior to the adoption of the Virgin Islands Rules of Civil Procedure in March 2017, Rule 4(m) of the Federal Rules of Civil Procedure was subsequentl) adopted by the Virgin Islands and the rules are identical Kitnurse v Marshall & Sterling 2020 V 1 Super 060 SX 2014 CV 361 MEMORANDUM OPINION & ORDER Page 4 of 11

clearly hedging his bets to see what happens in the District Court/Appeal before involving Lloyds

here (Id at 4 )

118 Lloyds goes on to allege prejudice in the form of costs and delays from having to litigate the

same issues in the District Court and Third Circuit as well as in the Superior Court (Id) Additionally,

Kitnurse is not prejudiced because he ‘ freely chose to pursue the appeal and many if not all of the

issues in the instant case wili be decided by that appeal or made moot ” (Id) ‘Lloyds did not initiate

the appeal and had no reason to respond to this case as it was not timely served ” (Id)

{[9 In Opposition, Kitnurse asserts that service was sufficient because he was granted leave to

serve out of time (Opp’n 2 ) Though Rule 12(b)(5) of the Rules of Civil Procedure allow a defendant

to challenge service, Kitnurse states that Lloyds challenge must fail because it cannot meet its burden

of proof given because Kitnurse obtained the Court’s permission to file out of time and the motion for

an extension of time was supported by an affidavit indicating that the failure to serve Lloyds was a

mistake on the part of new office employee (Id at 3 ) Further, Kitnurse states that Lloyds had actual

notice that the present suit had been filed because it was informed by an opening brief submitted to the

Third Circuit and by the Complaint which was attached to the Joint Appendix filed before the Third

Circuit (Id at 4 )

1110 Kitnurse also argues that the Court should not reconsider its grant of an extension of time

because Lloyds challenge is not based on one of the usual grounds of reconsideration l) intervening

change in controlling law, 2) availability of new evidence; or 3) need to correct a clear error of law or

fact or to prevent manifest injustice (Id at 4, citing Max s Seafood Cafe by Lou Ann Inc v Qumteros

176 F 3d 669 (3d Cir 1999)) Specifically Kitnurse states that Lloyds had actual notice of this

litigation and therefore cannot claim prejudice (Opp’n at 5 )

fill Moreover, Kitnurse alleges that a comparison between this case and the District Court case

demonstrates that no issues here were ever actually litigated in the District Court matter ” (Id) The Kltnurse v Mai shall & Stet/mg 2020 V I Super 060 SX 2014 CV 361 MEMORANDUM OPINION & ORDER Page 5 of 11

District Court case was a declaratory action regarding whether Policy Number CP8200601660 covered

claims filed by Kitnurse against Nails Time (Id) Here, however, Kitnurse filed suit alleging breach

of fiduciary duty for failure to underwrite the policy properly failure to correct the policy so that it

provided adequate coverage, and for fraudulent misrepresentation in selling an inadequate policy

(Id at 5 6 ) According to Kitnurse ‘[t]o the extent Lloyds believes that any issues were previously

litigated and were the subject of an {sic} final dispositive order then it should be required to file the

proper dispositive motion (1d at 6 )

1112 In the Reply Lloyds asserts that Kitnurse missed the point of its argument regarding a

reconsideration of the order granting an extension of time to serve Lloyds (See Reply 1 ) Kitnurse’s

motion was untimely lacked good cause, and did not fully inform the Court of the circumstances of

Lloyds v Nazls sze (Id ) Additionally, Lloyds does not accept the explanation that the failure to serve

was clerical error because ‘it should have been obvious to everyone that Lloyds was not participating

in the case including discovery which was ongoing with the other co defendant ” (Id)

1113 Moreover, Lloyds argues that the copy of the Complaint that it was provided ‘clearly shows

that the same coverage issues pled in this action are addressed in the District Court and the very

coverage issues presented in that case are a precondition to even having the claims presented here ’

(Id at 2)

STANDARD OF LAW

1) Reconsideration of extension of time pursuant to 60(b)(2) or (6)

1114 A motion for reconsideration must be made within fourteen days after the entry of a ruling

except as stated in Rules 59 and 60 of the Rules of Civil Procedure In this case, Lloyds has invoked

Rule 60(b)(2) and (b)(6) Under Rule 60(b)(2) the Court may relieve Lloyds of the order granting an

extension oftime ifthere is newly discovered evidence that could not, with reasonable diligence, have

been discovered in time to move for a new trial under Rule 59(b) ” V l R Civ P 60(b)(2) The KIInurse 1 Marshall & Sterling 2020 V 1 Super 060 SX 2014 CV 361 MEMORANDUM OPINION & ORDER Page 6 of 11

evidence must have been discovered alter trial and the failure to learn must not have been caused by a

lack of diligence Strtdlron v Strzdlron 698 F 2d 204 207 (3d Cir 1983) Additionally 1t]he

evidence must be material to the issues involved, yet not merely cumulative or impeaching and must

be of such a nature that it would probably change the outcome’ Id, citing Unzted States v Meyers,

484 F 2d 113 116 (3d Cir 1973) In this case the parties have not yet gone to trial in this matter

which makes consideration of Rule 60(b)(2) inappropriate Accordingly, the Court will consider only

Rule 60(b)(6)

1115 Under that rule [t]he movant must Show extraordinary and special circumstances justifying

relief Lucan Corp v RobertL Merwm & C0 2008 V 1 Supreme LEXIS l9 *7 (Sup Ct 2008)

Moreover ‘the preceding five categories [of Rule 60(b)] are considered mutually exclusive, and if the

reason for which relief is sought fits within one of the five specific categories even if the facts fail to

meet the prerequisites for that relief, Rule 60(b)(6) is inapplicable ’ Griffith v Carpenter 2012 V I

LEXIS 84 *5 (V 1 Super June 7 2012)

1116 Another basis for relief is ‘fraud misrepresentation, or misconduct by an opposing party as

per V l R Civ P 60(b)(3) but Lloyds notably does not argue, cite or otherwise invoke this principle

despite alleging bad faith Since the Court is only empowered to consider relief from an order ‘on

motion and just terms ” V I R Civ P 60, the Court will not give 60(b)(3) its fiill consideration

2) Quashing service

1117 If a defendant is not served within 120 days after the complaint is filed, the court on motion

or on its own after notice to the plaintiff must dismiss the action without prejudice against that

defendant or order that service be made within a specified time V I R Civ P 4(m) A motion to

quash service is proper when service of process is improper or inadequate “Generally, where service

of process is insufficient courts allow a plaintiff the opportunity to re serve the defendant, provided

that service is not futile Daley Jeffers v Graham 69 VI 931 (Sup Ct 2018) [(11an v Marsha/18: Sterling 2020 V 1 Super 060 SX 2014 CV 36] MEMORANDUM OPINION & ORDER Page 7 of ll

DISCUSSION

1) Lloyds is not entitled to relief under Rule 60(b)(6) because there are no extraordinary circumstances warranting relief and Lloyds’ motion should have been made pursuant to Rule 60(b)(3)

{[18 The Court may relieve Lloyds of the order granting Kitnurse an extension of time to serve if

Lloyds has demonstrated extraordinary circumstances that warrant the order be vacated under Rule

60(b)(6) Lloyds alleges bad faith based on the fact that it was not timely served and that Lloyds v

Nazls Tme was being litigated in District Court

1i19 With regard to the untimely service, the Court addressed the issue sua sponte and gave Kitnurse

fourteen days to either submit proof of service or to Show good cause why it should give an extension

oftime Kitnurse subsequently filed a motion for an extension of time explaining that a legal secretary

had inadvertently forgotten to prepare the Summons and Complaint intended for Lloyds and that

Kitnurse had not acted in bad faith The Court found that excuse inadequate but still decided to exercise

its discretion and grant an extension of time in order to hear this case on its merits The Court is

therefore in agreement with Lloyds that Kitnurse should have realized much sooner that Lloyds had

not been properly served, but the fact that the Court exercised discretion in granting an extension does

not indicate an extraordinary circumstance for vacating an order

1120 As for bad faith, the Complaint discloses the fact that Kitnurse filed suit against Nails Time in

2012 and that the parties entered into a Consent Judgment It does not disclose the fact that Lloyds

filed its declaratory action Lloyds v Nazis Tune, during the pendency Kitnurse v Nails Twe to

determine whether the insurance policy covered Kitnurse’s claims That information should have been

disclosed along with the outcome of the case or its current status However, there is no hard evidence

of misconduct in this matter It is not necessarily bad faith for a party to ‘hedge their bets ’ by filing a

subsequent suit and assuming the affidavit regarding the inadvertent failure to serve is true than there

is no cause to believe that Kitnurse intended to exclude Lloyds for a litigation advantage A lack of Kltnurse v Ma; shall & Sm [mg 2020 V I Super 060 SX 2014 CV 36] MEMORANDUM OPINION & ORDER Page 8 of 1]

response could simply indicate a default Whether a duplicate case is pending or whether res Judzcata

applies to claims already litigated are questions that can be resolved by an appropriate motion

1121 Regardless relief cannot be granted under Rule 60(b)(6) ifthe reason for which relief is sought

fits within another category of Rule 60(b) In this case, the Court beiieves the proper claim for relief

is for Rule 60(b)(3), which allows for relief from an order due to fraud, misrepresentation, or

misconduct by an opposing party V I R Civ P 60(b)(3) The Plaintiffs alleged bad faith as

articulated by Lloyds, would be misconduct and a misrepresentation to the Court Since Lloyds

requested relief only pursuant to Rules 60(b)(2) and (b)(6), neither of which is applicable in this case,

the Court will deny Lloyds’ request to reconsider the extension of time granted to the Plaintiff

2) Service of process will not be quashed because the service was not futile, but the Plaintiffs contract claims against Lloyds are barred by resjudtcam

€122 There is no dispute that Lloyds was not served within the 120 day period required by Rule

4(m) However the Court exercised its discretion in granting Kitnurse the opportunity to serve Lloyds

out oftime which is allowable under the rule as an alternative to dismissal The question then becomes

whether that service is futile Beyond the Rule 60(b) argument discussed above, Lloyds asserts that

the issues in this case have been litigated elsewhere Though Lloyds does not expressly say it, this is

an argument that res Judicata applies If so, then not only would service have been futile at the time

the Court granted an extension of time, but the claims against Lloyds may be dismissed now

{[23 ResJudicata prevents re litigation of a claim when (I) the priorjudgment was valid, final, and

on the merits, (2) the parties in the subsequent action are identical to or in privity with the parties in

the prior action and (3) the claims in the subsequent action arise out of the same transaction or

occurrence as the prior claims Stewart v Virgin Islands Bd ofLand Use Appeals, 66 V I 522, 532

(Sup Ct 2017) (adopting res Judicata by Banks analysis) (citations omitted) The Virgin Islands has

adopted the ‘transactional test for determining when a claim arises out of the same transaction or Kltnurse v Mats/tall & Sterling 2020 V I Super 060 SX 2014 CV 36] MEMORANDUM OPINION 8; ORDER Page 9 of l I

occurrence as prior claims Stewart 66 V I at 541 This means that subsequent claims will be barred

when they rely on the same ‘group of operative facts giving rise to the assertion ofrelief as the earlier

claim or claims Id citing River Park Inc v Czty ofHighland Park 703 N E 2d 883 891 (Ill 1998)

(internal brackets omitted) ‘Requiring a plaintiff to pursue all rights he or she may have against a

defendant that arise out of a single transaction or series of connected transactions promotes both

judicial economy and the public perception of the stability and finality of court decisions ” Stewart, 66

VI at 542 citing Beegan v Schmidt 54] A 2d 642 646 (Me 1982)

1124 [T]he measure of a cause of action is the aggregate of connected operative facts that can be handled together conveniently for purposes oftrial A prior judgment bars a later suit arising out of the same aggregate of operative facts even though the second suit relies on a legal theory not advanced in the first case, seeks different relief than that sought in the first place, and involves evidence different from the evidence relevant to the first case

Stewart 66 V l at 543 citing Connecticut Nat [Bank v Kendall 617 A 2d 544 547 (Me 1992) In

applying this test the court must pragmatically consider whether the connected operative facts are

related in time space origin or motivation whether they form a convenient trial unit and whether

their treatment as a unit conforms to the parties’ expectations or business understandings or usage

Stewart 66 V I at 543 citing River Park 703 N E 2d at 312

1125 In this case, the District Court granted summary judgment in favor of Lloyds that it was not

obligated to indemnify Nails Time, which is a valid and final judgment on the merits The parties in

this action (the subsequent action) are also identical to or in privity with the parties in the declaratory

action because Nails Time assigned any claims it had against Lloyds to Kitnurse Finally, the claims

against Lloyds in this action arise out of the same transaction or occurrence as the claims Lloyds v

Nails Twe The purpose of the declaratory action was to determine whether Nails Time had insurance

coverage for Kitnurse s injury claims and whether Lloyds was obligated to defend and indemnify Nails

Time The underlying transaction/occurrence is the issuance of the insurance policy and the aggregate Kztnwse 1 Marshall & Sterling 2020 V I Super 060 SX 2014 CV 361 MEMORANDUM OPINION & ORDER Page 10 of 1 1 of operative facts includes those related to its issuance, such as whether Lloyds breached duties to

Nails Time

1126 As such, the Plaintiff’s claims against Lloyds in this case are barred by res Judicata because

they should have been brought as counterclaims in the declaratory judgment action Pragmatically the

claims and issues outlined in the Complaint are related by origin to the question of whether Nails

Time’s insurance policy covered Kitnurse s injury They also constitute a convenient trial unit and

could have easily been resolved by the District Court

1127 Despite the fact that Kitnurse’s contract claims against Lloyds are barred, the Court will not

quash service because Kitnurse may still pursue its requested declaratory relief, meaning that service

is not entirely futile and there may still be a reason for Lloyds to be involved in this litigation If Lloyds

feels that it is not a proper party to those claims or that they can be resolved by summary judgment

Lloyds may file the appropriate motion

CONCLUSION

1128 In sum the Court will not reconsider its decision to grant Kitnurse an extension oftime to serve

Lloyds pursuant to Rule 60(b)(2) and (b)(6) of the Rules of Civil Procedure because Lloyds has not

articulated a sufficiently extraordinary circumstance warranting relief from the order and because

Lloyds argument that Kitnurse acted in bad faith must be assigned to Rule 60(b)(3) instead of60(b)(6)

The two are mutually exclusive but Lloyds did not argue the applicability of Rule 60(b)(3)

{[29 Additionally, the Court will not quash service for untimeliness because the Court exercised its

discretion to grant an extension of time and therefore the service was not untimely or deficient With

regard to the Lloyds v Nazis Tme, the Court finds that Nails Time neglected to bring countersuits for Kitnurse v Mat shall & Sterling 2020 V I Super 060 SX 2014 CV :6] MEMORANDUM OPINION & ORDER Page 11 of 11

breach of contract, breach of contractual duties, and misrepresentation and those claims as assigned

to Kitnurse are now barred by resjudzcata Accordingly, it is hereby

ORDERED that the Motion to Quash Service and Dismiss Complaint Against Certain

Underwriters at Lloyds of London is GRANTED IN PART DENIED IN PART Count 1] Count

IV, Count VI, and Count VII of the Complaint are DISMISSED as against Certain Underwriters of

Lloyds Subscribing to Policy Number CP8200601660

DONE and so ORDERED this ,9@ day of May 2020 // // /2 )/ ATTEST W Tamara Charles HAROLD W L WILLOCKS Clerk of the Court Presiding Judge of the Superior Court

By: :"‘%?M: Court Clerk Supervisor E

Dated ‘52fféflfi