United States District Court, D. New Hampshire
Fletch's Sandblasting and Painting, Inc.
Colony Insurance Company Colony Insurance Company
Thick Tech Systems, Inc.
REPORT AND RECOMMENDATION
K. Johnstone United States Magistrate Judge.
Sandblasting and Painting Company, Inc., brought this
declaratory judgment action against Colony Insurance Company
in state court, seeking a determination that it was entitled
to coverage under a commercial general liability insurance
policy (the "policy") issued by Colony. Doc. no.
1-1. Colony removed the case to this court and filed a
third-party action against Thick Tech Systems, Inc., seeking
a declaration that the policy did not provide coverage for
claims brought by Thick Tech against Fletch's in another
jurisdiction. Doc. no. 5. The district judge granted summary
judgment in favor of Colony on Fletch's declaratory
judgment action, concluding that Fletch's was not
entitled to coverage under the policy. See 2017 DNH
097 (doc. no. 19). Colony now moves for an entry of default
against Thick Tech on its third-party action (doc. no. 22)
and for declaratory relief against both Thick Tech and
Fletch's on the coverage issue (doc. no. 23). These
motions have been referred to the undersigned magistrate
judge for report and recommendation. For the reasons that
follow, the court recommends that the district judge (1) deny
Colony's motion for declaratory judgment as to
Fletch's for want of standing or, alternatively, as moot;
(2) deny Colony's motion for declaratory judgment as to
Thick Tech as moot; (3) deny Colony's motion for default
as moot; and (4) dismiss Colony's third-party action.
filed its declaratory judgment action (the "first-party
action") against Colony in Rockingham County Superior
Court, seeking a defense and indemnification with respect to
a liability action Thick Tech filed against Fletch's
(among others) in the United States District Court for the
District of Maine (the "Maine action"). See
Thick Tech Systems, Inc. v. Methuen Construction Co.,
No. 2:15-cv-00076-DBH (D. Me.). Colony removed the
first-party action here, invoking this court's diversity
jurisdiction under 28 U.S.C. § 1332 (doc. no. 1), and
thereafter filed a "Third-Party Complaint for
Declaratory Judgment" against Thick Tech (the
"third-party action") (doc. no. 5). Though this
complaint prayed for declaratory relief against both Thick
Tech and Fletch's, it was filed solely against
Thick Tech and only named Thick Tech as a respondent.
Id. at 1, 4. The summons prepared by Colony with
respect to the third-party action similarly only named Thick
Tech as a third-party defendant. Doc. no. 6. Colony never
filed a separate counterclaim for declaratory relief against
moved for summary judgment on the first-party action,
contending that Thick Tech's claims against Fletch's
in the Maine action were not covered by the policy. Doc. no.
16. On June 6, 2017, the district judge granted that motion
over Fletch's objection, concluding that Thick Tech's
claims did not constitute "occurrences" under the
policy and were subject to the policy's "your
work" exclusion. See 2017 DNH 097.
time the summary judgment order issued, there was no docket
entry indicating that Colony had served Thick Tech with the
third-party action. The undersigned therefore issued an
endorsed order directing Colony to show cause why the
third-party action should not be dismissed for failure to
serve or, alternatively, as derivative of the first-party
action, which was resolved on the merits in the summary
judgment order. See June 13, 2017 Endorsed Order. In
response, Colony filed an affidavit of service indicating
that its third-party action had been served upon Thick Tech
as of January 8, 2016. Doc. no. 20. Four days later, Colony
filed a written response, conceding that the summary judgment
order "fully resolve[d] the issues in the case,
including the issues raised in Colony's third-party
action against Thick Tech, " but nonetheless arguing
that dismissal was not warranted and that the court should
instead issue a declaratory judgment against both
Fletch's and Thick Tech. Doc. no. 21 ¶ 15. Colony
subsequently filed a motion for default as to Thick Tech and
a motion for declaratory judgment as to Thick Tech and
Fletch's, which are currently before the undersigned for
report and recommendation. See doc. nos. 22, 23.
Motion for Declaratory Judgment
asks the court to enter a declaratory judgment in its favor
against both Thick Tech and Fletch's. Colony specifically
seeks a declaration that the policy provides no coverage for
the dispute between Thick Tech and Fletch's in the Maine
action and that, accordingly, Colony is under no obligation
to defend Fletch's in that lawsuit or indemnify
Fletch's in the event of a judgment or settlement in that
case. The court will first consider this motion as it
pertains to Fletch's.
request for a declaratory judgment against Fletch's
suffers from a fatal infirmity: Colony does not have
standing, at this point in the case, to seek such relief. The
Declaratory Judgment Act specifies that, "[i]n a case of
actual controversy within its jurisdiction, . . . any court
of the United States . . . may declare the rights and other
legal relations of any interested party seeking such
declaration . . . ." 28 U.S.C. § 2201(a) (emphasis
added). The "case of actual controversy"
requirement "refers to the type of 'Cases' and
'Controversies' that are justiciable under Article
III." Sevigny v. United States, No.
13-cv-401-PB, 2014 WL 3573566, at *4 (D.N.H. July 21, 2014)
(quoting Medlmmune, Inc. v. Genentech, Inc., 549
U.S. 118, 127 (2007)). To establish standing under the Act,
the dispute must be "definite and concrete, touching the
legal relations of parties having adverse legal interests;
and must be real and substantial and admit of specific relief
through a decree of conclusive character . . . ."
Id. (brackets and internal quotation marks omitted)
(quoting Medlmmune, 549 U.S. at 127). "The
question in each case is whether the facts alleged, under all
the circumstances, show that there is a substantial
controversy, between parties having adverse legal interests
of sufficient immediacy and reality to warrant the issuance
of a declaratory judgment." Id. (brackets
omitted) (quoting Medlmmune, 549 U.S. at 127).
Colony never formally sought declaratory relief against
Fletch's until after the district judge resolved the
underlying controversy between Fletch's and Colony in the
summary judgment order. As noted, Colony never filed a
counterclaim for declaratory relief against Fletch's.
Though Colony did seek a declaration with respect to
Fletch's in the prayer for relief in its third-party
complaint (doc. no. 5 at 4), that pleading was presented as a
"Third-Party Complaint for Declaratory Judgment
against Thick Tech Systems, Inc., "
id. at 1 (emphasis added) and named only
Thick Tech as a defendant to that claim, id. ¶
2. By the same token, the request for summons prepared by
Colony in conjunction with the third-party complaint named
only Thick Tech as a defendant (doc. no. 6), and the
affidavit of service ultimately submitted by Colony solely
referenced Thick Tech (doc. no. 20). And even if Colony had
named Fletch's as a defendant in the third-party
complaint, this likely would have run afoul of the Federal
Rules of Civil Procedure, which only contemplate third-party
practice against "a nonparty, " see
Fed.R.Civ.P. 14(a)(1), with a separate protocol for bringing
a claim against "an opposing party, " as
Fletch's was here, see Fed.R.Civ.P. 13.
also telling that Colony never sought any relief against
Fletch's in the course of litigating summary judgment
beyond the dismissal of Fletch's first-party action.
Though Colony did argue in the conclusion of its summary
judgment motion that it was "entitled to summary
judgment declaring that Fletch's is not entitled to a
defense or indemnity" under the policy, this argument
was plainly raised in reference to Fletch's claims
against Colony, and not as a request for relief under any
action brought against Fletch's by Colony. See
doc. no. 16-1. To this end, Colony notably did not ask the
district judge to clarify or reconsider his summary judgment
order on the basis that Colony was entitled to some
affirmative declaratory relief that the order did not
on these facts, the court concludes that Colony never
formally sought a declaratory judgment against Fletch's
until after the summary judgment order issued. At that time,
there was no longer any "actual controversy"
pending between Colony and ...