Summary
finding motion to intervene timely when filed slightly over three months after the complaint before significant discovery had taken place
Summary of this case from T.E. v. Wyndham Hotels & Resorts, Inc.Opinion
Case No. C-3-99-351.
January 7, 2000.
Christopher M. Bechhold, Attorney for Plaintiff.
Michael L. Cargill, Dennis A. Becker, Barry David Jacobson Levy, Attorney for Plaintiff.
DECISION AND ENTRY SUSTAINING MOTION TO INTERVENE (DOC. #7) OF MARY PATRICK, RALPH PATRICK, JUDY MARSHALL AND PETER MARSHALL; DIRECTIONS TO COUNSEL
In September, 1998, Mary Patrick, Ralph Patrick, Judy Marshall and Peter Marshall (collectively "State Court Plaintiffs" or "Proposed Intervenors") filed suit against Defendant Midwest Maintenance, Inc. ("Midwest"), alleging that its negligence had caused them to suffer injuries. Plaintiff Indiana Insurance Company ("Indiana") is Midwest's insurer. On July 30, 1999, Indiana initiated this litigation, requesting that the Court declare that it is not obligated to defend or to indemnify Midwest in the State Court Plaintiffs' action. This case is now before the Court on the motion of the State Court Plaintiffs to intervene in this litigation. See Doc. #7. While the State Court Plaintiffs do not expressly so state, it appears that they seek to intervene in this litigation as Defendants.
The State Court Plaintiffs' claims arise out of injuries which Mary Patrick and Judy Marshall suffered when they were exposed to chemicals that Midwest was using to waterproof portions of a building. In this litigation, Indiana claims that the claims of the State Court Plaintiffs are excepted from its insurance policy with Midwest, by virtue of the total pollution exclusion contained in that policy. Parenthetically, the Sixth Circuit recently rejected a similar argument made by another insurer.See Meridian Mutual Ins. Co. v. Kellman, ___ F.3d ___, 1999 WL 1081635 (6th Cir. Dec. 2, 1999)
Although the State Court Plaintiffs move pursuant to Rule 24(a)(2) of the Federal Rules of Civil Procedure, they have not addressed the requirements of that Rule. Rather, the Proposed Intervenors rely exclusively upon two decisions by the Ohio Supreme Court, to wit: Krejci v. Prudential Property Casualty Ins. Co., 66 Ohio St.3d 15, 607 N.E.2d 446 (1993), and Broz v. Winland, 68 Ohio St.3d 521, 629 N.E.2d 395 (1994). In both of those decisions, the Ohio Supreme Court indicated that a party, injured by the alleged negligence of a tortfeasor, could maintain an action against the tortfeasor's insurer, requesting a declaratory judgment that the insurer has a duty to indemnify the tortfeasor (i.e., its insured), even though the injured party had not obtained a final judgment against the tortfeasor. In response to that argument, Indiana points out that the Ohio General Assembly has legislatively overruled to holdings ofKrejci and Broz to that effect, by enacting Ohio Revised Code § 2721.02(B). Indiana also argues that the motion of the Proposed Intervenors is barred, as a matter of law, by that statute. This Court agrees with Indiana that the cases relied upon by the Proposed Intervenors have been legislatively overruled. Section 2721.02(B) was adopted by the Ohio General Assembly as part of Sub. House Bill 58, effective September 24, 1999. Section 4 of that Bill expressly states that the intent of the General Assembly in enacting § 2721.02(B) was to overrule Krejci and Broz. This Court cannot, however, agree with Indiana that § 2721.02(B) bars the State Court Plaintiffs from seeking to intervene in this litigation. That statute provides:
As is explained below, in Broz, the Ohio Supreme Court also addressed the issue of the res judicata and collateral estoppel effect of the decree entered in a declaratory judgment action between an insurer and its insured.
(B) A plaintiff who is not an insured under a particular policy of liability insurance may not commence against the insurer that issued the policy an action or proceeding under this chapter that seeks a declaratory judgment or decree as to whether the policy's coverage provisions extend to an injury, death, or loss to person or property that a particular insured under the policy allegedly tortiously caused the plaintiff to sustain or caused another person for whom the plaintiff is a legal representative to sustain, until a court of record enters in a distinct civil action for damages between the plaintiff and that insured as a tortfeasor a final judgment awarding the plaintiff damages for the injury, death, or loss to person or property involved.
(Emphasis added). Assuming for sake of argument that § 2721.02(B) is applicable in this litigation, this Court does not read that statute as barring the State Court Plaintiffs from intervening in this litigation. Section 2721.02(B) prohibits someone who is not an insured from commencing an action. The verb commence means to begin or to initiate. See Webster's Third New International Dictionary at 456. See also, Ohio R. Civ. P. 3(A) ("A civil action is commenced by filing a complaint with the court. . . .");Cover v. Hildebran, 103 Ohio App. 413, 415, 145 N.E.2d 850, 852 (1957) (commence is synonymous with bring). The State Court Plaintiffs did not commence this litigation; rather, Indiana initiated this lawsuit, requesting declaratory relief under 28 U.S.C. § 2201. The language of § 2721.02(B) does not remotely suggest that parties, such as the State Court Plaintiffs, are precluded from seeking leave to intervene in a declaratory judgment action brought by an insurer against its insured. Accordingly, the Court rejects Indiana's argument that § 2721.02(B) is a bar to the State Court Plaintiffs' request to intervene.
That conclusion, however, does not mean that the State Court Plaintiffs are entitled to intervene. Rather, before this Court can make such a determination, it must consider the requirements of Rule 24(a)(2), which provide:
(a) Intervention of Right. Upon timely application anyone shall be permitted to intervene in an action: . . . (2) when the applicant claims an interest relating to the property or transaction which is the subject of the action and the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant's ability to protect that interest, unless the applicant's interest is adequately represented by existing parties.
In Michigan State AFL-CIO v. Miller, 103 F.3d 1240, 1245 (6th Cir. 1997), the Sixth Circuit restated the four-part test which must be applied when intervention under Rule 24(a) is sought:
This court has interpreted Rule 24(a) as establishing four elements, each of which must be satisfied before intervention as of right will be granted: (1) timeliness of the application to intervene, (2) the applicant's substantial legal interest in the case, (3) impairment of the applicant's ability to protect that interest in the absence of intervention, and (4) inadequate representation of that interest by parties already before the court. Cuyahoga Valley Ry. Co. v. Tracy, 6 F.3d 389, 395 (6th Cir. 1993).
This Court need not devote significant analysis to the first element set forth above. It cannot be questioned that the Proposed Intervenors have moved in a timely fashion, since they filed their motion on November 2, 1999, slightly more than three months after Indiana had filed this litigation on July 30, 1999. There is no indication that a significant amount of discovery had been conducted, before the Proposed Intervenors filed their motion.
With respect to the second element, this Court concludes that the Proposed Intervenors have a substantial legal interest in this litigation. The Sixth Circuit recently commented that it subscribes to a "rather expansive notion of the interest sufficient to invoke intervention of right." Grutter v. Bollinger, 188 F.3d 394, 398 (6th Cir. 1999) (citation and internal quotation marks omitted). Herein, Indiana has requested that the Court declare, inter alia, that it is not obligated to indemnify Midwest, under the terms of the insurance policy between the parties. The Proposed Intervenors have a significant interest in that policy, since it could be the source from which they obtain satisfaction of any judgment, which they are able to obtain in their lawsuit against Midwest. Courts have frequently held that an injured party, who has filed suit against an alleged tortfeasor, has a substantial legal interest in a declaratory judgment action initiated by an insurer, seeking a declaration that it is not obligated to indemnify its insured (i.e., the alleged tortfeasor). See e.g., Security Ins. Co. of Hartford v. Schipporeit, 69 F.3d 1377, 1380-81 (7th Cir. 1995); Teague v. Bakker, 931 F.2d 259, 261 (4th Cir. 1991); St. Paul Fire Marine Ins. Co. v. Summit-Warren Industries Co., 143 F.R.D. 129, 133 (N.D.Ohio. 1992). This Court finds the results reached and the rationale employed by those courts to be persuasive. Accordingly, this Court concludes that the State Court Plaintiffs have a substantial legal interest in this litigation.
The third element, recognized by the Sixth Circuit inMichigan State AFL-CIO, is the impairment of the interest of the party seeking leave to intervene in the absence of intervention. The Sixth Circuit has indicated that the impairment of the intervenor's substantial legal interest need only be possible and that this burden is minimal. Grutter, 188 F.3d at 399. If another aspect of the Ohio Supreme Court's decision in Broz,supra, remains the law of Ohio, it would be doubtful that the Proposed Intervenors could meet even that minimal burden. Therein, the plaintiffs brought a negligence claim against the defendant. Before the negligence action could be resolved, the defendant's insurer, American States, filed suit against its insured, seeking a declaratory judgment that it was not under a duty to defend or to indemnify the defendant. After American States had prevailed in the declaratory judgment action, the plaintiffs obtained a judgment against the defendant in the negligence action. When the plaintiffs were unable to satisfy that judgment, they initiated a supplemental proceeding against American States. The trial and intermediate appellate courts concluded that principles of res judicata and collateral estoppel prevented the plaintiffs from relitigating the question of whether American States had a duty to indemnify. Upon further appeal, the Ohio Supreme Court reversed, concluding that the plaintiffs were free to litigate that issue, rather that being bound by the judgment entered in the declaratory judgment action between American States and its insured. The Ohio Supreme Court based that conclusion on the fact that the plaintiffs had not been parties to the declaratory judgment action. Thus, under Broz, the Proposed Intervenors' interest could not be impaired by a judgment in this litigation, since, if not permitted to intervene, they will not be parties to this litigation and thus bound by any decision rendered herein. In other words, assuming this aspect ofBroz remains the law of Ohio, a judgment in this action would not affect the State Court Plaintiffs' ability to attempt to collect, from Indiana, any judgment which they are able obtain against Midwest. However, as is indicated above, the Ohio General Assembly changed the legal landscape when it enacted Sub. House Bill 58, which enacted §§ 2721.02(C), 2721,12(B) and 3929.06 of the Ohio Revised Code, in addition to § 2721.02(B). While this Court cannot be certain that the Ohio Supreme Court will interpret those statutory enactments to overrule the aspect of its decision in Broz, concerning the res judicata and collateral estoppel effect of a declaratory judgment action between an insurer and its insured, § 5 of Sub. House Bill 58 expressly states that the legislation is intended "to supersede the effect of the holding of the Ohio Supreme Court in [Broz] and its progeny relative to the lack of binding legal effect of a judgment or decree upon certain persons who were not parties to a declaratory judgment action or proceeding between the holder of a policy of liability insurance and the insurer that issues the policy." Given that the minimal burden on the State Court Plaintiffs' is to demonstrate the possibility that their legal interest will be impaired, if they are not permitted to intervene (Grutter, supra), this Court concludes that the uncertainty concerning the state of the law in Ohio, in the wake of the passage of Sub. House Bill 58, is sufficient to meet that burden.
The fourth element of the Sixth Circuit's four-part test requires this Court to ascertain whether the State Court Plaintiffs will be adequately represented by the existing parties in this litigation. The Sixth Circuit has stressed that there need not be a showing that representation by the existing parties will, in fact, be inadequate; rather, there need only be the potential for inadequate representation. Grutter, 188 F.3d at 400. Herein, it is apparent that Indiana's interests diverge from those of the Proposed Intervenors (the former wishes a declaration of non-coverage, the latter four wish for the opposite conclusion); therefore, it could not be an adequate representative of them. The question of whether Midwest will provide adequate representation is closer. The State Court Plaintiffs and Midwest seem to share the common interest in having this Court declare that the Proposed Intervenors' claims come within the insurance policy issued by Indiana. Nevertheless, the possibility that Midwest will inadequately represent the Proposed Intervenors exists. The Sixth Circuit has repeatedly stressed that the jurisdiction to grant a declaratory judgment, in an action wherein an insurer alleges that it is not obligated to defend or to indemnify its insured, is discretionary. See Aetna Casualty Surety Co. v. Sunshine Corporation, 74 F.3d 685, 687 (6th Cir. 1996) (and cases cited therein). Indeed, the Sixth Circuit has indicated that "such declaratory judgment actions `should normally be filed, if at all, in the court that has jurisdiction over the litigation which gives rise to the indemnity problem.'" Id. at 688 (quoting Manley, Bennett, McDonald Co. v. St. Paul Fire Marine Ins. Co., 791 F.2d 460, 463 (6th Cir, 1986)). Herein, it is by no means certain that the Proposed Intervenors and Midwest will both argue that this Court should decline to exercise that discretionary jurisdiction in this litigation. In Grutter, the Sixth Circuit indicated that the potential for inadequate representation exists, when it is possible that the party seeking intervention and the existing party, allegedly providing adequate representation, could present different defenses. Accordingly, this Court concludes that the fourth element of the test has been met.
Accordingly, based upon the foregoing, the Court sustains the State Court Plaintiffs' Motion to Intervene (Doc. #7). Those parties will be permitted to intervene in this litigation as Defendants. They are directed to file an answer to Indiana's Complaint, within 20 days from date.
Given the pendency of the within motion, this Court's Order of October 25, 1999 (Doc. #6 attached) has not been executed. As of this date, said Order is, once again, in effect. Not later that 14 days from date, counsel will have conferred and will file with this Court a joint discovery plan, setting forth the nature of the discovery desired and the anticipated length of time for obtaining same. Not later than 20 days following the completion of the discovery ordered by this Court as a result of the joint discovery plan, counsel will file cross motions for summary judgment on the merits of this litigation. Reply memoranda will be due not later than 14 days following the filing of said cross motions.