Century Indemnity Company v. The Marine Group, LLC et al, No. 3:2008cv01375 - Document 145 (D. Or. 2009)

Court Description: OPINION AND ORDER - LMI's motion 119 to dismiss is GRANTED without prejudice with leave for third-party plaintiffs to replead. Signed on 9/29/09 by Magistrate Judge John V. Acosta. (peg)

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON Civ. No.08-1375-AC CENTURY INDEMNITY COMPANY, a Pennsylvania Corporation, OPINION AND ORDER Plaintiff, v. THE MARINE GROUP, LLC, a California limited liability company, as affiliated with NOlihwest Marine, Inc.; NORTHWEST MARINE, INC., an inactive Oregon corporation, as affiliated with NOlihwest Marine Iron Works; NORTHWEST MARINE IRON WORKS, an inactive Oregon corporation, Defendants. THE MARINE GROUP, LLC, a California limited liability company, as affiliated with Northwest Marine, Inc.; NORTHWEST MARINE, INC., an inactive Oregon OPINION AND ORDER 1 {KPR} corporation, as affiliated with Northwest Marin e Iron Works; NORT HWES T MARI NE IRON WORK S, an inactive Oregon cOlporation; and BAE SAN DIEGO SHIP REPAIR, INC., a California corporation, Third- Party Plaintiffs, v. AGRI CULT URAL INSUR ANCE COMP ANY, an Ohio corporation; AMER ICAN CENT ENNI AL INSUR ANCE COMP ANY, a Delaw are corporation; CHICAGO INSUR ANCE COMP ANY, an Illinois cOlporation; CONT INEN TAL INSUR ANCE COMP ANY, a Pel1l1sylvania corporation; EMPL OYER S MUTU AL CASU ALTY COMP ANY, an Iowa corporation; FEDE RAL INSUR ANCE COMP ANY, an Indiana corporation; GRAN ITE STAT E INSUR ANCE COMP ANY, a Penns ylvani a corporation; HART FORD INSUR ANCE COMP ANY, a Connecticut corporation; INSUR ANCE COMP ANY OF THE STAT E OF PENN SYLV ANIA , a New Jersey corporation; INSUR ANCE COMP ANY OF NORT H AMER ICA, a Pel1l1sylvania corporation; CERT AIN UNDE RWRI TERS AT LLOY D'S, LOND ON, and CERT AIN LOND ON MARK ET INSUR ANCE COMP ANIES , each a foreign corporation; NATI ONAL UNIO N FIRE INSUR ANCE COMP ANY OF PITTS BURG H, a Pe11l1sylvania corporation; NEW ENGL AND REINS URAN CE COMP ANY, a Connecticut corporation; OLD REPUBLIC INSUR ANCE COMP ANY, an Illinois corporation; PACIF IC MUTU AL MARI NE OFFIC E INC., a New York corporation; RELIA NCE INSUR ANCE COMPANY, a OPINI ON AND ORDE R 2 {KPR} Peillisylvania corporation; ROYA L INDEMNITY COMPANY, a Delaware corporation; ST. PAUL FIRE & MARI NE INSUR ANCE COMPANY, a Minnesota corporation; TWIN CITY FIRE INSUR ANCE COMPANY, an Indiana corporation; WATE R QUALITY INSUR ANCE SYNDICATE, a syndicate of foreign corporations; WEST COAS T MARI NE MANA GERS , INC., a New York corporation; and JOHN DOE INSURANCE COMPANIES, Third-Pmiy Defendants. ACOSTA, Magistrate Jndge: Intraduction NOlihwest Marine Third-party plaintiffs the Marin e Group, LLC, Northwest Marine, Inc., "third- party h'on Works, and BAE Systems San Diego Ship Repair, Inc. (collectively defendants in the present action, and asseli a third-pmiy complaint agains plaintiffs") are t various entities including and Certain Londo n Marke t the third-paliy defendants Celiain Underwriters at Lloyd 's Londo n plaintiffs seek declaratory Insurance Companies (collectively "LMI"). Specifically, third-party judgm ent regarding the rights and liabilities ofthe parties with respec t to insurance policies. Third- arty defendants, LM!. party plaintiffs also assert a breach of contract claim against the third-p LMI a claim for relief, pursuant to moves for dismissal ofthe breach of contract claim for failure to state Federal Rule of Civil Procedure ("Rule") 12(b)(6).1 II t for attorney fees They also move for dismissal of the third-party plaintiffs' reques third-party plaintiffs agreed associated with its claims for declaratory judgment. In their response, and, thus, the court strikes the that they are not entitled to attomey fees associated with those claims request for said attorney fees from the complaint. I OPINION AND ORDE R 3 {KPR} Factual Background party plaintiffs, as The facts are taken, as true, from the pleading in question. Thirddefendants to the underlying action, have and will incur substantial litigati on expenses arising from incur substantial liabilities defense of the underlying action. Third-patty plaintiffs may also liabilities upwards of$50 0 associated with the Portland Harbo r Superfund Site. They anticipate total allocated among a group of million associated with the Superfund Site. This amount will be arty plaintiffs. LMI is potentially responsible patties, inchiding those who comprise third-p ffs have defense and/or comprised of some of several insurers with whom third-party plainti indemnity policies in comlection with the underlying policies. The breach of contract claim includes the following specific allegations. First, it is alleged defending the underlying that the third-party plaintiffs have and will continue to incur costs for es in connection with such actions and future actions, and anticipates incuni ng liability for damag d-patty defendants have actions. (McCarthy Dec!., Ex. A at ~64.) Second, it is alleged that "[t]hir ants will continue to breach, breached, and third-party plaintiffs anticipate that third-patty defend e coverage for costs of their respective obligations for claims ... in wrongfully refusing to provid of third-party defendants' defense or indemnity." [d. at '\65. Third, it is alleged that "[a]s a result actual and prospective or anticipated breaches of their contractual obliga tions under the insurance ...." [d. at ~ 66. policies, third-party defendants are liable, and will be liable in the future Legal Standard e Court addressed the In Bell Atlantic CO/po v. Twombly, 550 U.S. 544 (2007), the Suprem pleading standard to adequately state a claim under the Federal Rules of Civil Procedure. Rule 8(a) showing that the pleader governs pleadings and calls for "a short and plain statement of the claim OPINION AND ORDE R 4 {KPR} explicitly departed fium is entitled to relief ...." FED. R. CIY. P. 8(a) (2009). In 2007, the Court . The Conley standard held the often cited standard set forth in Conley v. Gibson, 355 U.S. 41 (1957) that "a complaint should not be dismissed for failure to state a claim unless that the plainti ff can prove no set of facts in SUppOlt ofhis claim which it appears beyon d doubt would entitle him to relief." ng standard, and indicated ld. at 45-46. The Twombly court rejected this as an inappropriate pleadi that it had been taken out ofits original context and should be "forgotten as an incomplete, negative adequately, it may be gloss on an accepted pleading standard: once a claim has been stated in the complaint." 550 U.S. suppo rted by showing any set of facts consistent with the allegations at 563. Not only did Twombly depart fi'om the previous standard, it emphasized the need to include basis: "Whil e a complaint sufficient facts in the pleading to give proper notice ofthe claim and its attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaint iffs es more than labels and obliga tion to provide the 'groun ds' of his 'entitle ment to relief requir conclusions, and a formulaic recitation of the elements of a cause of action will not do." !d. at 555 aint may procee d (brackets omitted). Even so, the court noted that "a well-pleaded compl even if it and 'that a recovelY is velY strikes a savvy judge that actual proof of those facts is improbable, 232,2 36 (1974)). remote and unlikely.'" !d. at 556 (quoting Scheuer v. Rhodes, 416 U.S. rd announced therein Since Twombly, the Supreme Court made clem' that the pleading standa is generally applicable to cases governed by the Federal Rules of Civil Procedure, and not just those cases involving antitrust allegations. nces does not As the Court held in Twombly, the pleading standard Rule 8 amlOu rned, therequire "detailed factual allegations," but it demands more than an unado "labels and defendant-unlawfully-harmed-me accusation. A pleading that offers OPINION AND ORDE R 5 {KPR} conclusions" or "a formulaic recitation of the elements of a cause of action will not do." ng Twombly, 550 U.S. Ashcroft v. Iqbal, _U.S . _,12 9 S.Ct. 1937, 1949 (May 18, 2009) (quoti & Co., No. C 09-00261 at 555) (internal citations omitted); see also Villegas v. J.P Morgan Chase 9) ("The Twom bly standard, SBA, 2009 U.S. Dist. LEXIS 19265, at *7-8 (N.D. Cal. Mar. 6,200 moreover, is of general application and is as easily applied to wage and hour litigation as antitrust."). The Court went on to identify two principles informing the decision in Twombly. The first was that, it need not accept as true any although the court must assume true all facts asserted in a pleading, s that the complaint set forth legal conclusions set f01ih in a pleading. The second principle require The Comi advised that a plausible claim for relief and not merely a possible claim for relief. "[d]etermining wheth er a compl aint states a plausible claim for relief will ... be a context-specific ence and comm on sense." task that requires the reviewing comi to draw on its judicia l experi 7-158 (2nd Cir. 2007)). In Ashcroft, 129 S. Ct. at 1949-50 (citing Iqbal v. Hasty, 490 F.3d 143,15 fi'amework of a complaint, conclusion, the Comt wrote: "Whil e legal conclusions can provid e the leaded factual allegations, a they must be supported by factual allegations. When there are well-p plausi bly give rise to an court should assume their veracity and then detelmine wheth er they entitlement to relief " Id. at 1950. Discussion This motion and the resulting briefing present two questions for determ ination by the court: (1) whether the third-party complaint, the motion to dismiss, or both, were prematurely pleaded and filed, respectively, and (2) ifthe breach ofcontract claim was appropriately pleade d in the third-party complaint. OPlNI ON AND ORDE R 6 {KPR} .L Timeliness of the Third-party Complaint and Motion to Dismiss Each party maintains that the other's procedural action is premature. LMI argues that the third-party complaint, to the extent that it alleges a claim of breach of contract, is premature. This because, according to LMI, until the underlying liabilities are determined, i.e., the nature and content of the insurance policies at issue, the court cannot evaluate whether or not a breach has plausibly occurred. Furthermore, by failing to give LMI notice ofthe alleged breach, third-party plaintiffs did not allow LMI to perform an investigation into what coverage and what duties were owed to thirdparty plaintiffs. Third-party plaintiffs claim that LMI's motion is premature under the terms of the courtorderedjoint case management order and based on an exchange ofincomplete information that thirdparty plaintiffs did not understand would f0I111 the basis of a motion to dismiss. The joint case management order, filed on July 7,2009, provided that the first phase of discovery would be completed December 15,2010, unless otherwise ordered, and is for the purpose of identifying and resolving the existence of insurance policies, if any, and their terms, ... , and any additional insurance policies which might cover claims in this action by defendants and third-party plaintiffs, and the legal entitlement, if any, of defendants and third-party plaintiffs to claim benefits thereunder. (Joint Case Management Order, Docket No. 127 at 3-4.) Thus, according to third-party plaintiffs, LMI's motion to dismiss is contrary to this schedule and, thus, premature. LMI points out that its motion to dismiss was filed three weeks prior to the order. Procedurally, as a legal matter, LMI's motion to dismiss is not premature and the fact that the parties agreed subsequently to conduct discovery in a particular matmer does not necessarily render it premature. Rather, LMI, upon being served with a complaint alleging claims against it was entitled to respond to those claims as it saw fit. Similarly, third-party plaintiffs' breach of contract OPINION AND ORDER 7 {KPR} claim against LMI is not premature either, as a matter of law. Provided that third-party plaintiffs' claims are properly pleaded, they may allege any claims they have against third-patiy defendants. 2. Sufficiency of Pleading The parties agree that the full extent ofthe underlying coverage has not yet been determined. Even so, third-party plaintiffs submitted evidence suggesting that the parties entered into policies that provided for both primaty and excess coverage. This evidence is extrinsic and, thus, irrelevant to the court's analysis. Furthermore, regardless of what the underlying rights and duties of the respective parties are, no facts were pleaded detailing the alleged claim or the refusal to perform by LMI resulting in LMI's alleged breach. Thus, it is undisputed at this stage that third-party plaintiffs did not act in such a way as to trigger performance of LMI's duties, whatever they may be. For purposes ofthis motion, no breach has been effectively pleaded. The relevant case law supports LMI's position, regardless of the type ofpolicy in question. First, ifthe patiies entered into an excess insurance policy, i.e., the insurers' duty to pay is triggered only after the primary policies have been exhausted, the breach ofcontract claim may be pleaded as one of anticipatOlY breach. In order to adequately plead such a claim, it must be alleged that the breaching party has "refuse[d] by acts or deeds [to] perform [its] obligations under the contract positively, unconditionally, unequivocally, distinctly and absolutely." Swickv. Mueller, 193 Or. 668, 676 (1951). Second, in order for the breach to "become an effective breach, the other party must accept and act on the same." Id. at 677. In instances where the underlying policies have not been exhausted, but the excess insurer has repudiated its duty "prior to the time for performance ... a declaratory judgment on the coverage obligations of celiain defendant-insurers may be appropriate, [although] a breach of contract action is premature." Mmyland Casualty Co. v. W.R. Grace & Co., OPINION AND ORDER 8 {KPR} 1996 U.S. Dist. LEXIS 7795, at *5 (S.D.N.Y. June 7, 2006). Thus, absent an allegation of a claim and repudiation, no claim of anticipatOlY breach has been pleaded. Third-party plaintiffs respond that LMI's duty to defend has been triggered as it has been shown that third-paliy plaintiffs had a primmy policy with LMI that included a duty to defend clause. 2 Therefore, third-party plaintiffs contend, LMI is currently in breach, its claim does not implicate anticipatory breach and, thus, Mmyland Casualty does not apply. Again, evidence as to the nature of the policies in question is extrinsic and will not be considered by the court. Furthermore, third-party plaintiffs did not specifically plead that LMlhad a duty to defend, that thirdparty plaintiffs gave LMI notice of their claim, or that LMI unequivocally refused to defend that claim on behalf of the third-party plaintiffs. Third-pmiy plaintiffs' pleading contains only the broadest ofgeneralities, at best advancing the conclusion that the third-pmiy defendant insurers have or will breach their duties to third-party plaintiffs, who have or will incur liability arising from the underlying actions and, thus, third-party defendants are or will be liable for breach ofcontract. This, alone, is insufficient to meet the standard miiculated in Twombly and Ashcroft. Therefore, because third-party plaintiffs' pleading is insufficient as a matter of law, thirdparty defendants' motion is granted. The motion is granted with leave to third-party plaintiffs to replead in a legally sufficient mall11er. The claim for declaratOly judgment is unaffected by this ruling. II II 2 Marine Group states in its response that, to the extent LMI agrees to embrace its contractual obligations under its insurance policies with Marine Group, it will drop the third-party claims arising from breach of contract. OPINION AND ORDER 9 {KPR} Conclusion For the reasons above stated, LMI's motion is GRANTED without prejudice and with leave to replead. DATED this 29th day of September, 2009. (JOHN V. ACOSTA United'States Magistrate Judge OPINION AND ORDER 10 {KPR}

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