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National Liability & Fire Ins. Co. v. LP Trucking, LLC

United States District Court, D. New Jersey

June 30, 2017

NATIONAL LIABILITY & FIRE INSURANCE CO., Plaintiff,
v.
LP TRUCKING, LLC, et al., Defendants.

          Diana M. Hendry, Esq., John T. Coyne, Esq., MCELROY, DEUTCH, MULVANEY & CARPENTER, LLP, Attorneys for Plaintiff.

          Richard M. Pescatore, Esq., Attorney for Defendants.

          OPINION

          HONORABLE JEROME B. SIMANDLE, District Judge:

         I. INTRODUCTION

         Presently before the Court are the motions for summary judgment by Plaintiff National Liability & Fire Insurance Co. (hereinafter, “Plaintiff” or “NLF”) [Docket Item 38], as well as Defendants' LP Trucking, LLC (hereinafter, “LP Trucking”) and Lionel Powell (hereinafter, “Defendant Powell”)(collectively, “Defendants”) motion to dismiss Plaintiff's Complaint [Docket Item 56.][1] Having considered the parties' submissions and oral argument, for the reasons set forth below, the Court will grant Defendants' motion to dismiss because it lacks declaratory judgment jurisdiction under the Declaratory Judgment Act, 28 U.S.C. § 2201. Plaintiff's motion for summary judgment will therefore be dismissed without prejudice.

         II. BACKGROUND[2]

         This insurance coverage dispute between NLF and Defendants arose out of a purported cancellation of a truckers insurance policy by Defendants' agent, Lasting Legacy.[3] NLF issued the policy to LP Trucking that incepted on May 23, 2014. (Compl. at ¶ 13.) The quoted premium for the policy was $14, 380, which was based on Defendant Powell's representation that he had zero motor vehicle points, but after the policy was issued, NLF determined that Powell actually had seven motor vehicle points, so NLF adjusted the premium to $28, 321. (Id. at ¶¶ 15-17.) Lasting Legacy and Defendant Powell requested that NLF reevaluate the magnitude of the premium increase, and NLF then revised the premium amount to $23, 194. (Id. at ¶ 19.) Defendants, apparently unwilling to pay the adjusted premium of $23, 194, opted to cancel the policy via a cancellation request on June 10, 2014. (Id. at ¶¶ 20, 22.) Lasting Legacy, Defendants' agent, emailed to the Tuscano Agency, NLF's agent, a cancellation request purported signed by Powell, and in response, NLF cancelled the policy effective at 12:01 a.m. on June 11, 2014. (Id. at ¶¶ 22-24.) Defendants claim that Lasting Legacy fraudulently signed the cancellation form. [Docket Item 56-1 at ¶ 3.]

         On June 11, 2014, at approximately 3:30 a.m., Defendant Powell was involved in a motor vehicle accident with Shawn Virgillo, and on July 3, 2014, Virgillo filed an action (hereinafter, “the Underlying Action”) against LP Trucking and Powell, among other parties. (Id. at ¶¶ 25, 27.) NLF offered to defend LP Trucking and Powell subject to a written reservation of rights letter dated December 15, 2014. (Id. at ¶ 30.)

         On July 10, 2015, Plaintiff filed a one-count Complaint in this Court requesting a declaratory judgment “that the cancellation of the NLF Policy at LP Trucking's request became effective on June 11, 2014 at 12:01 a.m. and that, accordingly, NLF has no obligation to defend or indemnify LP Trucking or Powell against the claims asserted in the Underlying Action or any other proceedings that may arise from the Accident.” (Compl. at ¶ 28.) NLF included LP Trucking, Defendant Powell, and Shawn Virgillo as Defendants in the federal action, but did not include Lasting Legacy.[4]

         Then, on November 24, 2015, Powell and LP Trucking filed a complaint in Cumberland County Superior Court against Lasting Legacy, alleging negligence and fraud. Powell and LP Trucking amended their complaint on April 19, 2016, adding Jenna Zeringo as a Defendant. Since neither LP Trucking nor Defendant Powell notified NLF of the underlying action involving Virgillo (Compl. at ¶ 28), LP Trucking's initial state court actions did not include NLF. However, On July 22, 2016, Powell and LP Trucking amended their complaint again and filed a properly styled declaratory judgment action against NLF, Jenna Zeringo, Virgillo, AAA Midlantic, GEICO, NJM ao Mary Dampf, Rochdale Ins. Co. and Western Union Ins. Co. (Ex. C. to Def. MTD Br.)

         As the federal court case progressed through discovery and through summary judgment motion practice, [5] ongoing discovery in the state court matter revealed a possibility of a conflict of interest. NLF's counsel had participated in the negotiations and mediation of the underlying action with Virgillo by negotiated the terms and conditions of a release agreement which included a payment of nearly $200, 000. [Docket Item 56-8 at 26] NLF then filed a counterclaim against Powell for reimbursement of the settlement money “which [NLF counsel] negotiated and . . . had authorized, ” despite no language in any of the reservation of rights letters (Ex. G to Def. MTD Br) regarding the reimbursement of indemnity monies. [Docket Item 64-6 at 43.] NLF also filed a motion for summary judgment “based on the theory of apparent authority.” [Docket Item 64-6 at 41.] The state court judge held a hearing on Powell's motion to disqualify counsel and NLF's motion for summary judgment on January 20, 2017, [Docket Item 64-6 at 39.]

         On February 17, 2017, in light of evidence that a lawyer from NLF's law firm had represented both Powell and NLF, the state court judge entered an order disqualifying the McElroy Deutch Mulvaney and Carpenter law firm from representing NLF in the state court matter because of this alleged conflict of interest. [Docket Item 54; Docket Item 64-5.][6] The state court judge explained that he “has concerns about how this went down and [he thinks] they need to get out.” [Docket Item 64-5.] NLF appealed this disqualification ruling, and that appeal is currently pending in the Appellate Division. The state court judge also denied NLF's motion for summary judgment “for several reasons, ” given the disqualification of the firm of NLF's counsel, and that “discovery is still outstanding and ongoing.” [Id.; Ex. B to Docket Item 63.][7] The judge further found that “the issues of apparent authority are fact sensitive and . . . involve issues of intent and credibility which are normally issues to be decided by the fact finder as opposed to on a motion for summary judgment.” [Ex. B to Docket Item 63.] Additionally, the judge found that there are issues “with regard to authenticity of a cancellation notice that no premium refund occurred after the purported cancellation, ” and there are issues “with regard to whether a cancellation notice was faxed to Powell . . . and back.” [Id.]

         On February 21, 2017, Defendants then requested that this Court hold summary judgment in abeyance given the denial of NLF's summary judgment in the state declaratory judgment action. [Docket Item 54.] Then, on March 21, 2017, Defendants filed a motion to dismiss Plaintiff's Complaint based on the Colorado River abstention doctrine. [Docket Item 56.]

         III. STANDARD OF REVIEW

         A. Rule 12(b)(1)

         As courts of limited jurisdiction, the federal courts may only exercise jurisdiction over cases which the Constitution and Congress expressly grant them power. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994); Zambelli Fireworks Mfg. Co., Inc. v. Wood, 592 F.3d 412, 418 (3d Cir. 2010). A motion to dismiss under Fed.R.Civ.P. 12(b)(1) must be granted if the court lacks subject matter jurisdiction to hear a claim. In re Schering Plough Corp. Intron/Temodar Consumer Class Action, 678 F.3d 235, 243 (3d Cir. 2012). When a defendant files a motion under Rule 12(b)(1), the plaintiff bears the burden of establishing subject matter jurisdiction for the sake of remaining in federal court. Gould Elec, Inc. v. United States, 220 F.3d 169, 178 (3d Cir. 2000).

         Under Rule 12(b)(1), the court's jurisdiction may be challenged either facially (based on the legal sufficiency of the claim) or factually (based on the sufficiency of a jurisdictional fact). Gould, 220 F.3d at 178; see also A.D. v. Haddon Heights Bd. of Educ, 90 F.Supp.3d 326, 334 (D.N.J. 2015) (stating same). In considering a factual attack, as here, the Court need not cabin its inquiry to allegations in the complaint. Rather, the Court may “consider affidavits, depositions, and testimony to resolve factual issues bearing on jurisdiction.” Gotha v. U.S., 115 F.3d 176, 179 (3d Cir. 1997); see also Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891-92 (3d Cir. 1977).

         B. Rule 56

         With respect to Plaintiff's motion for summary judgment, Federal Rule of Civil Procedure 56(a) generally provides that the “court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact” such that the movant is “entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A “genuine” dispute of “material” fact exists where a reasonable jury's review of the evidence could result in “a verdict for the non-moving party” or where such fact might otherwise affect the disposition of the litigation. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Disputes over irrelevant or unnecessary facts, however, fail to preclude the entry of summary judgment. Id. Conclusory, self-serving submissions cannot alone withstand a motion for summary judgment. Gonzalez v. Sec'y of Dept. of Homeland Sec., 678 F.3d 254, 263 (3d Cir. 2012) (internal citations omitted).

         In evaluating a motion for summary judgment, the Court must view the evidence in the light most favorable to the non-moving party, and must provide that party the benefit of all reasonable inferences. Scott v. Harris, 550 U.S. 372, 378 (2007); Halsey v. Pfeiffer, 750 F.3d 273, 287 (3d Cir. 2014). However, any such inferences “must flow directly from admissible evidence [, ]” because “‘an inference based upon [] speculation or conjecture does not create a material factual dispute sufficient to defeat summary ...


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