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Scottsdale Insurance Company v. James L. Gardner Trust

United States District Court, D. Kansas
May 16, 2001
Case No. 98-1343-MLB (D. Kan. May. 16, 2001)

Opinion

Case No. 98-1343-MLB.

May 16, 2001.


MEMORANDUM AND ORDER


This matter is before the court on defendants' motion to compel production of documents (Doc. 58) and Scottsdale's motion to strike one of defendants' affirmative defenses (Doc. 66). For the reasons stated below, the motions shall be DENIED.

Background

This lawsuit involves an insurance coverage dispute with a complex history. A brief overview should provide a context for analysis of the pending motions. Highly summarized, Falley's operated a retail grocery store at the southwest corner of 21st and Amidon in Wichita, Kansas. At the northeast corner of 21st and Amidon, Falley's leased property from defendants who owned the vacant commercial building at that location. Falley's maintained its long-term lease with defendants in order to prevent the opening of a competing supermarket at the northeast corner.

In 1996, defendants and Falley's agreed to terminate Falley's lease. Through a series of real estate transactions, Albertson's eventually purchased defendants' real estate and built a grocery store on the northeast corner to compete with Falley's. Believing that defendants' agent had made misrepresentations to induce Falley's surrender of its leasehold rights, Falley's filed a fraud action in state court against defendants.

Defendants demanded a defense to the lawsuit from the insurers with whom they had policies. Scottsdale, one of the insurers, denied coverage and filed this federal action seeking a declaration of its coverage obligations. Defendants countered by adding Scottsdale and other insurers as third party defendants to the state court action and moved to stay the federal lawsuit. By agreement of the parties, the case was stayed while the state court action proceeded.

The stay was granted based on the parties' expectation that all disputes related to the 21st and Amidon property would be resolved in the state court lawsuit. In fact, with the single exception of Scottsdale's coverage dispute, all disputes were resolved in the state court action.

Falley's state claims against defendants were ultimately settled with an agreement by the insurers to pay $125,000 to Falley's. The settlement agreement preserved defendants' right to pursue claims against their insurers and also provided that the insurers' contribution to the settlement fund was "not to be construed as an admission of liability by the insurers."

The third party complaint by defendants against Scottsdale in the state court was dismissed without prejudice.

Having resolved Falley's state court litigation, defendants returned to federal court asserting a counterclaim against Scottsdale for breach of its insurance obligations. As explained in greater detail below, the motions to strike defendants' affirmative defense and motion to compel both arise out of the state court settlement agreement which disposed of Falley's claims.

I. Defendants' Motion to Compel

Defendants move to compel production of documents related to the agreement between Scottsdale and the other insurers (State Farm, EMCASCO, and Travelers) to make individual contributions to the Falley's settlement fund. Specifically, defendants seek documents which might reveal the amount of money contributed by Scottsdale to the settlement. They contend this information is relevant to show that Scottsdale improperly interfered with and/or delayed the settlement of Falley's lawsuit. Scottsdale opposes production because defendants, in executing the settlement, expressly agreed that the amount of each insurer's contribution would remain confidential. For the reasons set forth below, the motion to compel shall be denied.

Analysis

The settlement agreement entered into by the insurance companies, Falley's and defendants contains the following operative language:

COVENANT NOT TO SUE AND AGREEMENT

This agreement is made on the ___ day of June, 1999, between Falley's, Inc. (hereinafter Plaintiff), the James L. Gardner Testamentary Trust, the Estate of James L. Gardner, deceased, and Forrest W. Weirick and their court appointed representatives (hereinafter Defendants), and Scottsdale Insurance Company, the Travelers Indemnity Company, EMCASCO Insurance Company and State Farm Fire Casualty Insurance Company (hereinafter collectively Insurers and individually Insurer):

* * *

The parties are desirous of effecting a compromise settlement of Plaintiff's claims against Defendants. Therefore, the parties mutually agree as follows:
1. Insurers shall pay Plaintiff the sum of One Hundred, Twenty-Five Dollars ($125,000). Each Insurer shall contribute money to settle Plaintiff's claim; however, the specific amount of each Insurer's contribution to the sum being paid is confidential and shall not be disclosed or disseminated in any manner by any party or its agents, employees, or representatives.

(Emphasis added). Defendants concede that they signed the agreement. They argue, however, that Scottsdale has no standing to enforce the settlement terms because Scottsdale was not a party to the agreement. This argument is unpersuasive. The first sentence of the agreement unequivocally identifies Scottsdale as a party to the settlement. It is also undisputed that Scottsdale contributed money to the settlement fund in order to complete the settlement.

Without benefit of case citation or other legal authority, Defendants argue that Scottsdale cannot enforce the terms of the contract because Scottsdale did not sign the agreement. However, this argument is contrary to a long line of Kansas cases. See, e.g., Sentney v. Hutchinson Interurban Ry. Co., 90 Kan. 610 (1913) (a written contract, signed by one party only, but fully recognized and acted upon by both is binding); Hallard v. Kinney, 135 Kan. 323 (1932) (a party who accepts the benefits of a written contract waives defense that the contract was unsigned by the performing party); Sewell v. Dolby, 171 Kan. 640 (1951) (that party suing to enforce contract did not sign is not a defense). Moreover, "[a] party who fails to press a point by supporting it with pertinent authority, or by showing why it is sound despite a lack of supporting authority or in the face of contrary authority, forfeits the point." Phillips v. Hillcrest Medical Center, 244 F.3d 790, 800, fn. 10 (10th Cir. 2001). Because defendants provide no legal authority to counter established Kansas law, they forfeit their argument that Scottsdale has no standing to enforce the confidentiality provisions of the settlement agreement.

Under the terms of the settlement agreement, defendants agreed that the amount each insurer contributed would remain confidential and not disclosed or disseminated in any manner by any party. Now, after accepting the benefits of the settlement agreement, defendants seek to discover the amount contributed by each insurance company. The court will not permit defendants to eviscerate their own agreement; thus, the motion to compel shall be denied.

It appears that other disputed factual issues exist regarding Scottsdale's conduct during the settlement negotiations. Defendants complain that, after the parties reached an agreement in principle to settle Falley's state claims, Scottsdale hindered completion of the settlement by objecting to language in the document circulated for final approval. Scottsdale disagrees with defendants' recitation of events, raising disputed factual issues. This ruling on defendant's motion to compel should be narrowly construed because it addresses only the question of discovery of the amount contributed by Scottsdale and the other insurers.

II. Scottsdale's Motion to Strike

Scottsdale moves to strike defendants' affirmative defense that "[b]y paying money to settle Falley's claims against defendants, Scottsdale is barred from asserting any defense to coverage." (Defendant's Answer, Doc. 57, par. 131). In support of its motion, Scottsdale argues that the defense should be stricken under Fed.R.Civ.P. 12(f) because the settlement agreement contains language that payments by the insurers to settle the state court lawsuit would not be construed as an admission of liability. Defendants oppose the motion and reassert the same argument that Scottsdale was not a party to the settlement agreement. They also argue that substantial questions of law and fact exist concerning Scottsdale's conduct in connection with the settlement process.

Analysis

Fed.R.Civ.P. 12(f) provides that the court may order stricken from any pleading "any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter. However, motions to strike under Rule 12(f) are generally disfavored. Nwakpuda v. Falley's, Inc., 14 F. Supp.2d 1213 (Kan. 1998). "A motion to strike will usually be denied unless the allegations have no possible relation to the controversy and may prejudice one of the parties. If the record reveals any doubt as to whether under any contingency a certain matter may raise an issue, the court should deny the motion." Miller v. Pfizer, Inc., No. Civ.A. 99-2326-KHV, 199 WL 1063046 at *3 (Kan. Nov. 10, 1999) (citations omitted).

The court has reviewed the challenged allegations with these standards in mind. Although Scottsdale presents a compelling argument that the language of the settlement agreement precludes this affirmative defense, the court is unable to state as a matter of law that the allegation has no relationship to the controversy. Further, no prejudice to Scottsdale has been shown by allowing the allegation to remain, at least at the pleading stage of this litigation. Thus, the motion to strike shall be denied.

IT IS THEREFORE ORDERED that defendants' motion to compel (Doc. 58) is DENIED. Scottsdale's motion to strike (Doc. 66) is also DENIED.


Summaries of

Scottsdale Insurance Company v. James L. Gardner Trust

United States District Court, D. Kansas
May 16, 2001
Case No. 98-1343-MLB (D. Kan. May. 16, 2001)
Case details for

Scottsdale Insurance Company v. James L. Gardner Trust

Case Details

Full title:SCOTTSDALE INSURANCE COMPANY, Plaintiff, v. JAMES L. GARDNER TRUST, et…

Court:United States District Court, D. Kansas

Date published: May 16, 2001

Citations

Case No. 98-1343-MLB (D. Kan. May. 16, 2001)