Opinion
Civil Action CV-17-097
10-04-2017
CITIZENS INSURANCE COMPANY OF AMERICA, Plaintiff v. PHOENIX BAY STATE CONSTRUCTION CO., INC., WILLIAM A. BERRY & SON, INC., SUFFOLK CONSTRUCTION COMPANY, INC., MAINE MEDICAL CENTER, INC., and NORTH RIVER INSURANCE COMPANY, Defendants
Michael Johnson, Esq. Aaron White, Esq., Erin Murphy, Esq., William Druary, Esq., John Whitman, Esq., Joseph Cahoon, Esq., Martha Gaythwaite, Esq., Brett Leland, Esq., Sean Magenis, Esq., Juliana O'Brien, Esq., Michelle Byers, Esq.
COUNSEL
Michael Johnson, Esq. Aaron White, Esq., Erin Murphy, Esq., William Druary, Esq., John Whitman, Esq., Joseph Cahoon, Esq., Martha Gaythwaite, Esq., Brett Leland, Esq., Sean Magenis, Esq., Juliana O'Brien, Esq., Michelle Byers, Esq.
ORDER ON DEFENDANT EMPLOYERS FIRE INSURANCE COMPANY'S MOTION TO DISMISS DEFENDANT MAINE MEDICAL CENTER'S COUNTERCLAIM
Nancy Mills Justice
Before the court is counterclaim defendant Employers Fire Insurance Company's motion to dismiss defendant Maine Medical Center's (MMC) counterclaim. For the following reasons, the motion to dismiss is denied.
FACTS
The present action stems from an underlying lawsuit brought by MMC against defendants William A. Berry & Son, Inc. (Berry) and Suffolk Construction Company, Inc. (Suffolk) in the United States District Court for the District of Maine. (Compl. ¶¶ 8-9; MMC's Ans. ¶¶ 8-9.) Phoenix Bay State Construction Co., Inc. (Phoenix) is a third-party defendant in the underlying lawsuit. (Compl. ¶ 10; MMC's Ans. ¶ 10.) In that action, MMC is seeking to recover damages against Berry and Suffolk for alleged property damage to substantial additions made to the hospital located at 22 Bramhall Street in the City of Portland, Maine. (Compl. ¶ 11; MMC's Ans. ¶ 11.) MMC hired Berry to manage and lead the construction of additions to the hospital. (MMC's Countercl. ¶ 5.) Berry then hired Phoenix as a subcontractor to perform certain work for the additions. (Id.) The construction began in 2006. (Compl. ¶ 11; MMC's Ans. ¶ 11.)
In 2009, Suffolk acquired Berry's assets, including its contract with MMC. (Compl. 5 13; MMC's Ans. 5 13.)
MMC's contract with Berry mandated all subcontractors procure and maintain insurance coverage for their work on the addition and name MMC as an additional insured on the insurance policies. (MMC's Countercl. ¶¶ 19, 23.) In accordance with that requirement, Berry's subcontract with Phoenix provided as follows: "[Phoenix], at its own expense shall procure, carry and maintain on all its operations hereunder policies of insurance with coverage at a minimum in the amounts and limits as provided in Rider B . . . ." (Id.) Moreover, the subcontract obligates Phoenix to "indemnify, defend and hold . . . [MMC] harmless to the fullest extent allowed by law from any and all loss, damage, cost or expense .... resulting from or arising from the negligence of [Phoenix] . . . ." (Id. ¶ 24.) MMC asserts Phoenix procured insurance policies through EFIC, Citizens Insurance Company of America (Citizens), and North River Insurance Company to fulfill the subcontract insurance requirements. (Id. ¶¶ 25, 85.) MMC also alleges it may be an additional insured under the policies. (Id. ¶¶ 27, 87.)
Citizens initiated this action on February 10, 2017 when it filed a complaint against defendants Phoenix, Berry, Suffolk, and MMC. In the complaint, plaintiff seeks a declaratory judgment that with regard to the underlying suit, it does not have a duty (1) to indemnify Phoenix for the alleged damages; (2) to defend or indemnify Berry or Suffolk; or (3) to indemnify MMC; or, in the alternative, (4) if it does have a duty to indemnify any of the defendants, their recovery is limited the policy limit for one occurrence, $1,000,000 MMC filed its answer, counterclaims, and cross-claims on April 10, 2017 In its counterclaim, MMC alleges four counts against EFIC. MMC seeks a declaratory judgment that with regard to the underlying suit (1) EFIC has a duty to indemnify MMC; and alleges EFIC (2) breached an implied duty of good faith and fair dealing owed to MMC; (3) violated Mass. Gen. Laws ch. 93A, §§ 2, 9; and (4) violated Mass. Gen. Laws ch.93A, §§2, ll.
Citizens brought an additional claim against North River, but the court granted Citizens' motion to dismiss the claim without prejudice on July 19, 2017.
The court granted MMC's motion to extend the deadline to file its response to April 10, 2017.
EFIC filed its motion to dismiss on May 3, 2017. MMC opposed the motion on May 31, 2017. EFIC filed a reply on June 8, 2017.
DISCUSSION
1. Standard of Review
"A motion to dismiss pursuant to M.R. Civ. P. 12(b)(6) tests the legal sufficiency of the [counterclaim!." Seacoast Hangar Condo. II Ass'n v. Martel. 2001 ME 112, ¶ 16, 775 A.2d 1166 (quoting New Orleans Tanker Corp. v. Dep't of Transp.. 1999 ME 67, ¶ 3, 728 A.2d 673). When the court reviews a motion to dismiss, "the [counterclaim] is examined 'in the light most favorable to the [counterclaim] plaintiff to determine whether it sets forth elements of a cause of action or alleges facts that would entitle the [counterclaim] plaintiff to relief pursuant to some legal theory.'" Lalonde v. Cent. Me. Med. Or., 2017 ME 22, 5 11, 155 A.3d 426. Allegations in the counterclaim are deemed true for the purposes of deciding a motion to dismiss. Id. "A dismissal should only occur when it appears beyond doubt that a [counterclaim] plaintiff is entitled to no relief under any set of facts that he might prove in support of his claim." Moody v. State Liquor & Lottery Comm'n, 2004 ME 20, ¶ 7, 843 A.2d 43 (quoting McAfee v. Cole, 637 A.2d 463, 465 (Me. 1994)) (internal quotations omitted).
2. Joinder of EFIC
EFIC's primary argument for dismissal is that the claims against it "are not the proper subject of impleader under M.R. Civ. P. 14." (EFIC's Mot. Dismiss 2.) MMC counters that it properly joined EFIC as a counterclaim defendant pursuant to M.R. Civ. P. 13(h) and 20(a).(MMC's Opp'n to Mot. Dismiss 4.)
MMC argues in the alternative that joinder of EFIC is also proper under M.R. Civ. P. 14. Because joinder is appropriate in these circumstances under M.R. Civ. P. 13(h), the court does not consider MMC's Rule 14 argument.
M.R. Civ. P. 13(h) states, "Persons other than those made parties to the original action may be made parties to a counterclaim or cross-claim in accordance with the provisions of Rules 19 or 20." When counterclaims against a non-party arise "out of many of the same transactions or occurrences as those alleged in [counterclaims against the plaintiff] and there [are] questions of law and fact common to both sets of claims, it [is] proper for [the non-party] to be permissively joined as a party." Faith Temple v. DiPietro. 2015 ME 166, ¶ 35, 130 A.3d 368 (citing M.R. Civ. P. 20). MMC's counterclaims against Citizens and EFIC are in large part based on the same occurrences, namely, the insured's alleged negligent construction and the insurers' refusal to indemnify the insured. Questions of law and fact will necessarily overlap because MMC brings the same four counts against Citizens and EFIC. Thus, MMC properly joined EFIC as a counterclaim defendant pursuant to M.R. Civ. P. 13(h) and 20(a).
EFIC further argues that a party seeking to join a non-party pursuant to M.R. Civ. P. 13(h) and 20 must file a motion to join with the court. EFIC points to the Law Court's holding in Cushing v. Cohen to support this argument. 420 A.2d 919 (Me. 1980). In Cushing, the primary issue before the Law Court was whether the State of Maine was the real party-in-interest such that sovereign immunity barred the plaintiffs' claims. Id. at 922. The court reviewed the parties' extensive pleadings in an attempt to decipher whether the State had been joined as a counterclaimant. Id. at 924. The defendants continually named the State as such in their pleadings, while the plaintiffs consistently omitted the State as a party. Id., at 924-25. In the context of that case, the court declared, "Although a formal court order may not always be necessary to allow one who has not been named by plaintiffs as a party defendant to become a party as a 'counter-claimant', we think such formal action is necessary in the circumstances of this case." LI at 927 (internal citations omitted). The court distinguished its holding in Cushing from Casco Bank & Tr. Co. v. Cloutier in which it held "pursuant to Rules 13(h) and 20(a) in combination, the counterclaim included in the answer of [the named defendant] effectively joined [a non-party] as a counterclaiming party, despite the absence of an order of court . . . ." 398 A.2d 1224, 1227 (Me. 1979). The court in Cushing and Casco addressed the joinder of a party as a counterclaimant, not as a counterclaim defendant. This case is more analogous to Faith Temple because in both cases defendants joined a non-party as a counterclaim defendant. Faith Temple, 2015 ME 166, ¶ 35, 130 A.3d 368; see also Law Offices of Peter Thompson & Assocs. P.A. v. Gerber. No. CV-11-418, 2014 Me. Super. LEXIS 17, *1 n.1 (Feb. 11, 2014) (noting parties who were improperly joined as third-party defendants most likely did not object to their joinder because pursuant to M.R. Civ. P. 13(h) they qualified as additional parties who could be joined on the counterclaims.) The defendant in Faith Temple did not seek or receive permission from the court to join the counterclaim defendant. Faith Temple, 2015 ME 166, ¶¶ 5 n.1, 35, 130 A.3d 368. MMC properly joined EFIC as a counterclaim defendant pursuant to Rules 13(h) and 20(a).
3. Third-Party Beneficiary
EFIC argues MMC lacks standing to bring the counterclaims alleged because MMC was not a party to the insurance policy contracts. MMC counters it can enforce the contracts because it is a third-party beneficiary of the insurance policies EFIC issued to Phoenix.
"Litigants normally may not assert the rights of third parties but must demonstrate that they have received some particularized injury in order to have standing to raise their claim." Stull v. First Am .Title Ins .Co., 2000 ME 21, 5 11, 745 A.2d 975. "Third parties to contracts are strictly limited in their ability to maintain an action under contract law." Id. ¶ 17. "A third party harmed by a breach may only sue for breach of contract if the contracting parties intended that the third party have an enforceable right." Id.
Maine has adopted the Restatement (Second) of Contracts definition of third-party beneficiaries. F. O. Bailey Co. v. Ledgewood. Inc.. 603 A.2d 466, 468 (Me. 1992). Section 302 of the Restatement provides:
EFIC does not argue which state law should apply to the counterclaims, but rather points out both Maine and Massachusetts follow the Restatement (Second) of Contracts definition of third-party beneficiaries. (EFIC M.T.D. at 7-8.) EFIC is correct that both states apply the same test. See Spinner v. Nutt, 417 Mass. 549, 555, 631 N.E.2d 542, 546 (1994) (holding "A party is an intended beneficiary where 'the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.'" (quoting Restatement (Second) of Contracts § 302 (1) (b) (1981)); Miller v. Mooney, 431 Mass. 57, 62, 725 N.E.2d 545, 550 (2000) ("It must appear from 'the language and circumstances of the contract' that the parties to the contract 'clearly and definitely' intended the beneficiaries to benefit from the promised performance.") (quoting Anderson v. Fox Hill Village Homeowners Corp., 424 Mass. 365, 366-367, 676 N.E.2d 821 (1997).
(1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either
(a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or
(b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.
(2)An incidental beneficiary is a beneficiary who is not an intended beneficiary. Restatement (Second) of Contracts § 302; see also F.O. Bailey, 603 A.2d at 486 (adopting section 302). "In order to prevail on their third-party beneficiary contract claim, [MMC has] to demonstrate that the promisee, . . . intended to give [MMC] the benefit of the performance." Id. The court looks to the contract language and the circumstances surroundings its execution to determine the promisee's intention. Id. "In the absence of contract language, there must be circumstances that indicate with clarity and definiteness that [the promisee] intended to give [a third party] an enforceable benefit under the contract." Devine v. Roche Biomedical Labs., 659 A.2d 868, 870 (Me. 1995).
The parties have not provided the court with copies of the complete insurance policy contracts. MMC alleges it may be an additional insured of the policies, but does not otherwise allege the policies establish that Phoenix's intended for it to have an enforceable benefit under the policies. (MMC's Countercl. ¶ 27.) Rather, MMC's third-party beneficiary claim rests almost entirely upon the circumstances surrounding the execution of the policies. It points to the following allegations in support of its claim:
(1) Phoenix was contractually required to obtain and maintain insurance coverage for its work on the MMC project[;]
(2) Phoenix promised to indemnify MMC from any and all loss, damage, cost, or expense sustained by MMC resulting from or arising from Phoenix's work[;]
(3) Phoenix procured the EFIC policies to satisfy its contractual requirement to obtain and maintain insurance coverage for its work on the MMC project and to indemnify MMC, and [EFIC, Citizens, and North River] knew of those contractual requirements[; and]
(4) MMC is also a named insured on the EFIC policies.(MMC Opp'n Mot. Dismiss 12.) The Law Court has cautioned courts considering the circumstances surrounding the execution of contracts:
In assessing the relevant circumstances, courts must be careful to distinguish between the consequences to a third party of a contract breach and the intent of a promisee to give a third party who might be affected by that contract breach the right to enforce performance under the contract. If consequences become the focus of the analysis, the distinction between an incidental beneficiary and an intended beneficiary becomes obscured. Instead, the focus must be on the nature of the contract itself to determine if the contract necessarily implies an intent on the part of the promisee to give an enforceable benefit to a third party.Devine, 659 A.2d at 870. The contracts are not before the court. If following discovery MMC can establish is was a named insured or can present other facts that establish the contracting parties' clear and definite intent that MMC receive enforceable benefits under the policies, it could proceed as a third-party beneficiary. In viewing the counterclaim in the light most favorable to MMC, it states a cognizable third-party beneficiary claim. See Moody, 2004 ME 20, ¶ 7, 843 A.2d 43.
4. Mass. Gen. Laws ch. 93A. §§ 2, 9
EFIC argues MMC's claim under Mass. Gen. Laws ch. 93A, §§ 2, 9 fails as a matter of law because MMC did not allege it sent a statutorily required demand letter. MMC counters that a demand letter is not necessary in these circumstances because its claim was brought as a counterclaim and because EFIC's principal place of business is in Philadelphia.
Section 9 states, "At least thirty days prior to the filing of any [action under this section], a written demand for relief, identifying the claimant and reasonably describing the unfair or deceptive act or practice relied upon and the injury suffered, shall be mailed or delivered to any prospective respondent." Mass. Gen. Laws ch. 93A, § 9(3). "[T]he thirty-day requirement, as part of the requirement of a written demand for relief, is a prerequisite to suit, to be alleged and proved." York v. Sullivan, 369 Mass. 157, 163, 338 N.E.2d 341, 346 (1975). MMC does not argue that it sent a letter to EFIC prior to filing the counterclaim. There are two exceptions to the demand requirement, however: "[It] shall not apply if the claim is asserted by way of counterclaim or cross-claim, or if the prospective respondent does not maintain a place of business or does not keep assets within the commonwealth . . . ." Mass. Gen. Laws ch. 93A, § 9(3).
As discussed above, MMC has brought counterclaims against EFIC pursuant to M.R. Civ. P. 13(h) and 20. Under the plain language of the statute, MMC was not required to send a written demand thirty days prior to filing its counterclaim or plead that such a letter was sent. As a result, the court does not address MMC's second argument regarding EFIC's place of business.
If EFIC was not already litigating its duty to indemnify in Massachusetts, an argument that the counterclaim exception for sending a demand letter should not apply might be more persuasive. EFIC was joined pursuant to M.R. Civ. P. 13(h).
5. Mass. Gen.Laws ch. 93A. §§2.11
EFIC argues MMC failed as a matter of law to allege a cognizable claim for violation of Mass. Gen. Laws ch. 93A, §§ 2, 11 because the alleged actions did not occur "primarily and substantially" within Massachusetts. MMC counters that the burden of proof is on EFIC to establish the alleged actions did not occur "primarily and substantially" within Massachusetts and it is a question of fact not properly decided upon a motion for summary judgment.
MMC also argues EFIC waived any argument that the loss did not occur in Massachusetts because it failed to assert the argument in its motion to dismiss.
A party may only bring a claim under Mass. Gen. Laws ch. 93A, § 11 when the "actions and transactions constituting the alleged unfair method of competition or the unfair or deceptive act or practice occurred primarily and substantially within the commonwealth." Mass. Gen. Laws ch. 93A, § 11. "[T]he burden of proof shall be upon the person claiming that such transactions and actions did not occur primarily and substantially within the commonwealth." Id. There is no definitive list of factors to determine whether or not the actions occurred primarily and substantially within Massachusetts. Kuwaiti Danish Comput. Co. v. Dig. Equip. Corp., 438 Mass. 459, 473, 781 N.E.2d 787, 799 (2003). "Any determination necessarily will be fact intensive and unique to each case." Ia\ at 472-73. "Section 11 suggests an approach in which a judge should, after making findings of fact, and after considering those findings in the context of the entire section 11 claim, determine whether the center of gravity of the circumstances that give rise to the claim is primarily and substantially within [Massachusetts]." Id. Because the determination is fact intensive, an assessment of where the actions "primarily and substantially" occurred is not appropriate on the "basis of the allegations of the complaint alone." Resolute Mgmt. Inc. v. Transatlantic Reinsurance Co.. 87 Mass.App.Ct. 296, 300, 29 N.E.3d 197, 201 (2015); see also Fleet Nat'l Bank v. Certain Underwriters at Lloyd's, London, 16 Mass. L. Rep. 212 (2003) (concluding the court must deny without prejudice the defendant's motion to dismiss because "[t]he Court finds itself between the mandate of the [Massachusetts] S.J.C. to decide the 'primarily and substantially' issue 'after making findings of fact' and the very liberal requirements for notice pleadings at the motion to dismiss stage."). Thus, dismissal of MMC's section 11 claim at this juncture would be premature.
6. Pending Action in Massachusetts Superior Court
EFIC asks this court to dismiss the counterclaims because it previously filed an action in Massachusetts Superior Court against Phoenix, Berry, and Suffolk seeking a declaration that it has no duty to indemnify the parties in the underlying action. MMC maintains this court should not dismiss the counterclaims, or give the Massachusetts action priority, because MMC is not a party to that case.
"Jurisdictional claims respecting subject matter present overriding issues which courts may examine at any stage of the proceedings, whether at the trial level or on appeal and whether called to the attention of the court or noted by the court on its own motion." Jones v. York, 444 A.2d 382, 384 (Me. 1982). The question of comity arises when pending in separate courts are different "actions involving the same subject matter, parties and issues." Id.; see also E. Fine Paper, Inc. v. Garri ga Trading Co., 457 A .2d 1111, 1114 (Me. 1983) (vacating declaratory judgment for plaintiff because the trial court should have afforded comity to another court in which an action involving same subject matter, parties, and issues had already commenced). While the action EFIC initiated in Massachusetts involves the same subject matter and some of the same issues, it does not involve MMC or many other issues raised in the counterclaim.
CONCLUSION
EFIC was properly joined as a counterclaim defendant pursuant to M.R. Civ. P. 13(h) and 20(a). On this record, the court cannot determine whether MMC was an intended third-party beneficiary of the EFIC insurance policies. MMC was not required to send a written demand letter to EFIC pursuant to Mass. Gen. Laws ch. 93A, § 9(3) because its section 9 claim was asserted as a counterclaim. On this record, the court cannot determine whether EFIC's actions that allegedly constituted unfair or deceptive practices occurred primarily and substantially within the Commonwealth of Massachusetts. Questions of comity do not apply to this case because MMC is not a party to the Massachusetts litigation.
The entry is
Employers' Fire Insurance Company's Motion to Dismiss is DENIED.