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Ace Property and Casualty Insurance Co. v. Specialty Logging, LLC

United States District Court, D. South Carolina, Aiken Division

March 27, 2015

Ace Property and Casualty Insurance Company, Plaintiff,
Specialty Logging, LLC, and Harold Moors, Defendants.


J. MICHELLE CHILDS, District Judge.

This matter is before the court pursuant to a motion filed by Defendants Specialty Logging, LLC, and Harold Moors ("Defendants"), pursuant to Rule 13(a) and Rule 12(b)(1) of the Federal Rules of Civil Procedure, requesting that the court dismiss this case ("Motion to Dismiss"). (ECF No. 11.) On April 18, 2014, Plaintiff Ace Property and Casualty Insurance Company ("Plaintiff") filed a Response in Opposition to the Motion to Dismiss. (ECF No. 14.) For the reasons stated below, the court DENIES Defendants' Motion to Dismiss and GRANTS Plaintiff's request to stay this case pending resolution of the motions in another lawsuit currently before the court. (ECF No. 14 at 15.)


On January 15, 2014, Defendants Michael Perry Bowers and George and Veronica Skipper ("the Skippers") filed a lawsuit against Plaintiff in the Allendale County Court of Common Pleas ("Claims Handling Lawsuit"). (ECF No. 14 at 3; see also Skipper v. Ace Property and Casualty Insurance Company., Civil Action No. 1:14cv-00444-JMC.) In that action, Defendants Bowers and the Skippers allege that Plaintiff breached its insurance contract with Defendants and committed wrongful conduct in handling the claims arising from an automobile accident that took place on September 22, 2010. (ECF No. 11-1 at 3.) Plaintiff removed the Claims Handling Lawsuit to this court on February 20, 2014. (ECF No. 14 at 3; see Claims Handling Lawsuit at ECF No. 1.) Subsequently, Defendants Bowers and the Skippers filed a Motion to Remand the Claims Handling Lawsuit (ECF No. 11-1 at 3-4; see Claims Handling Lawsuit at ECF No. 19), and Plaintiff filed a Motion to Dismiss the action. (ECF No. 14 at 3-4; see Claims Handling Lawsuit at ECF No. 12.) The court denied both Motions with leave to refile pending the adjudication by the Supreme Court of South Carolina of a certified question regarding the assignability of legal malpractice claims. See Claims Handling Lawsuit at ECF Nos. 35, 45.

On March 17, 2014, Plaintiff filed a Complaint for Declaratory Judgment against Defendants pursuant to 28 U.S.C. § 2201 and Fed.R.Civ.P. 57, asserting that Defendants materially breached express duties owed to Plaintiff under an automobile liability policy by entering into a settlement agreement and executing a confession of judgment with regard to the September 22 automobile accident between Defendants and the Skippers. (ECF No. 1 at 1-3.) Because of this breach, Plaintiff argues that it has no duty to provide insurance coverage to Defendants in connection with the claims and lawsuits arising from the accident. (Id. at 1.)

On April 1, 2014, Defendants filed this Motion to Dismiss Plaintiff's Complaint pursuant to Rule 13(a) and Rule 12(b)(1) of the Federal Rules of Civil Procedure on the following grounds: (1) Plaintiff's Complaint raises issues that are compulsory counterclaims that must be asserted in the Claims Handling Lawsuit; (2) the court should exercise its discretion in declining jurisdiction under Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371 (4th Cir. 1994); and (3) Plaintiff's Complaint is barred by the first-to-file rule. (ECF No. 11.) Plaintiff filed Response in Opposition to Defendants' Motion to Dismiss on April 18, 2014, contending that the coverage questions raised by Plaintiff's Complaint must be resolved before the lawsuits concerning the automobile accident can proceed to trial. (ECF No. 14 at 2.)


A. Motions to Dismiss Pursuant to Fed.R.Civ.P. 13(a)

Under Fed.R.Civ.P. 13(a), "[a] pleading must state as a counterclaim any claim that-at the time of its service-the pleader has against an opposing party if the claim: (A) arises out of the transaction or occurrence that is the subject matter of the opposing party's claim; and (B) does not require adding another party over whom the court cannot acquire jurisdiction." Fed.R.Civ.P. 13(a). If a counterclaim falls within the scope of Rule 13(a), it is compulsory, and "[a] counterclaim which is compulsory but is not brought is thereafter barred." Baker v. Gold Seal Liquors, Inc., 417 U.S. 467, 477 n. 1 (1974). Therefore, if a party fails to assert a compulsory counterclaim in an action, that party will be precluded from asserting that claim in a subsequent action. See Q Int'l Courier Inc. v. Smoak, 441 F.3d 214, 219 (4th Cir. 2006). Moreover, the preclusive effect of Rule 13(a) applies where a party files a declaratory judgment action that should have been raised as a compulsory counterclaim in a prior action. Dow Chem. Co. v. Metlon Corp., 281 F.2d 292, 297 (4th Cir. 1960). However, the Fourth Circuit has held that because a motion to dismiss under Rule 12 is not a pleading, "Rule 13(a) does not come into play when a defendant files only a motion to dismiss, instead of a pleading." Mellon Bank, N.A. v. Ternisky, 999 F.2d 791, 795 (4th Cir. 1993).

B. Motions to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(1)

A Rule 12(b)(1) motion for lack of subject matter jurisdiction raises the fundamental question of whether a court has jurisdiction to adjudicate the matter before it. Fed.R.Civ.P. 12(b)(1). "Federal courts are courts of limited subject matter jurisdiction, and as such there is no presumption that the court has jurisdiction." Pinkley, Inc. v. City of Frederick, Md., 191 F.3d 394, 399 (4th Cir. 1999). Unless a matter involves an area of a federal court's exclusive jurisdiction, a plaintiff may bring suit in federal court only if the matter involves a federal question arising "under the Constitution, laws or treaties of the United States, " 28 U.S.C. § 1331, or if "the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between citizens of different states, " 28 U.S.C. § 1332(a)(1). In determining whether jurisdiction exists, the court is to "regard the pleadings' allegations as mere evidence on the issue, and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment." Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991) (citing Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982)). "The moving party should prevail only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law." Id. (citation omitted).

C. The First-to-File Rule

The first-to-file rule provides that between two parallel suits, the first suit filed has priority "absent the showing of balance of convenience in favor of the second action." Ellicott Mach. Corp. v. Modern Welding Co., 502 F.2d 178, 180 n. 2 (4th Cir. 1974) (quoting Remington Products Corp. v. American Aerovap, Inc., 192 F.2d 872, 873 (2d Cir. 1951)). The Fourth Circuit has recognized and historically applied the first-to-file rule "in cases where two distinct federal courts have concurrent jurisdiction over actions embracing the same issue, in order to determine the proper venue in which to litigate the dispute." SAS Inst., Inc. v. Practicingsmarter, Inc., 353 F.Supp.2d 614, 617 (M.D. N.C. 2005). The two actions "need not be identical if there is substantial overlap with respect to the issues and parties, " but the fact that the claims are similar "is not sufficient to invoke the first-to-file rule." Byerson v. Equifax Info. Servs., LLC, 467 F.Supp.2d 627, 635-36 (E.D. Va. 2006). Furthermore, "[t]he fact that one suit is for a declaratory judgment does not change the general rule that the first-filed case should go forward." SAS Inst., Inc., 353 F.Supp.2d at 617. For the purpose of the first-to-file rule, a district court has the discretion to "dismiss, stay, or transfer a later-filed lawsuit in deference to the first ...

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