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Evergreen Indemnity, Ltd. v. Dalomba

United States District Court, D. New Hampshire

August 23, 2016

Evergreen Indemnity, Ltd.
v.
Maria Dalomba, Edwin Simonsen, Catherine Kierstead, and Hidden Valley RV Park, LLC Opinion No. 2016 DNH 148

          ORDER

          Joseph A. DiClerico, Jr. United States District Judge

         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 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 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 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 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 ...


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