Giant Four Corners, Inc. v. Federated Mutal Ins. Co.
| Decision Date | 10 October 2013 |
| Docket Number | Case No. 13cv0301 WJ/LAM |
| Parties | GIANT FOUR CORNERS, INC., a wholly owned subsidiary of Giant Industries Inc., Plaintiff, v. FEDERATED MUTAL INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — District of New Mexico |
THIS MATTER comes before the Court upon Defendant's Motion to Dismiss Plaintiff's Complaint, filed April 5, 2013 (Doc. No. 9). Having considered the parties' briefs and the applicable law, the Court finds that Defendant's motion is well-taken and, therefore, is GRANTED.
This matter arises out of an incident where an intoxicated young man, Dana Pabst, caused a two vehicle collision resulting in numerous fatalities. Prior to the accident, an Ever Ready Oil ("ERO") employee served Mr. Pabst alcohol while Mr. Pabst was allegedly visibly intoxicated. Defendant, Federated Mutual Insurance Company ("Federated") insured ERO under Commercial General Liability ("CGL"), Umbrella, and Liquor Liability policies. Giant Four Corners, Inc. ("Giant") entered into a lease agreement with ERO and ERO added Giant as an additional insured under its CGL and Umbrella policies with Federated, but not the liquor liability policy.After the fatal accident, the family members of the decedents filed two separate lawsuits against ERO and Giant among other entities. Federated ultimately denied Giant coverage to defend the state court lawsuits, because it determined that the CGL and umbrella policies did not apply to Giant's claims.
Federated, although not a party to the lawsuits filed by the family members, filed a separate lawsuit in federal court, 09CV000857 WJ/RHS, ("the 2009 lawsuit") seeking a declaration that Giant was not covered under any Federated policy for the claims brought by the decedents' families. Federated asked for declaratory judgment based upon both the "dram-shop" and negligent leasing theories of liability. Giant, in turn, filed counterclaims against Federated alleging violations of the New Mexico Unfair Trade Practices Act ("UPA"), NMSA 1978 §§57-12-1, et seq and the New Mexico Unfair Insurances Practices Act ("UIPA"), NMSA 1978 §§59A-16-20. Giant also filed a Third Party Complaint against additional third party defendants, alleging a breach of contract for failure to procure insurance and violations of the UPA and UIPA. See (Doc. No. 47) 20091.
In the 2009 lawsuit, Federated moved for summary judgment on Giant's counterclaims as well as for summary judgment on its declaratory action. On March 29, 2012, Senior United States District Judge John Conway granted Federated's motion for summary judgment on Giant's counterclaims alleging violations of the UPA and UIPA. See (Doc. No. 192) 2009, Memorandum Opinion and Order. In the same Order, Judge Conway granted Federated's motion for summary judgment on its claim for declaratory relief with respect to the "dram-shop claims" but denied it with regard to the negligent leasing claim. Judge Conway found that while a fair reading of the coverage agreements precluded coverage under a dram shop theory ofliability, it was possible that Giant would be covered under a theory of negligent leasing. Subsequently, Senior Judge Conway entered an order of recusal and the 2009 lawsuit was randomly reassigned to the undersigned judge. Federated then moved to reconsider Judge Conway's ruling, but this Court denied Giant's Motion for Reconsideration. See (Doc. No. 198), 2009. This Court noted that there was not enough information presented by Federated to decide as a matter of law that no coverage existed under a negligent leasing theory. Further, this Court noted that whether a negligent leasing claim existed in the underlying state court matters was unclear and required further factual determination. On December 13, 2013, the Court entered an Order stating that it believed all claims in this matter had been addressed on the merits and asking the parties to object if they believed some claims had not been resolved. See (Doc. No. 199), 2009. After the time set for parties to object to the dismissal of the 2009 lawsuit passed without any objection from the parties, a Rule 58 judgment was entered dismissing the action on the merits in its entirety. See (Doc. No. 200), 2009.
On March 29, 2013, Giant filed the instant action in state court and Federated subsequently removed it to federal court. Giant alleges that Federated breached its coverage agreement and violated the UPA and UIPA by refusing coverage for the accident involving Mr. Pabst.2
Federated asks this Court to dismiss Giant's Complaint based res judicata, compulsory counterclaims, and the statute of limitations.
Fed. R. Civ. P. 12(b)(6) allows a defense for "failure to state a claim upon which reliefcan be granted." In asserting a claim, the claimant must plead "only enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp.v. Twombly, 550 U.S. 544, 570 (2007). A claim challenged by a 12(b)(6) motion to dismiss does not require detailed factual allegations, but must set forth "more than labels and conclusions, and a formulaic recitation of the element of a cause of action will not do". Id. at 555 "The court's function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the [claimant's] complaint alone is legally sufficient to state a claim for which relief may be granted." Sutton v. Utah State Sch. for the Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir. 1999). A 12(b)(6) motion should not be granted "unless it appears beyond doubt that the [claimant] can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957); see Ash Creek Mining Co. v. Lujan, 969 F.2d 868, 870 (10th Cir.1992). All well-pleaded factual allegations in the complaint are accepted as true, see Ash Creek Mining Co., 969 F.2d at 870, and viewed in the light most favorable to the nonmoving party, see Scheuer v. Rhodes, 416 U.S. 232, 236 (1974).
"Within the res judicata framework, this court applies federal law to determine the effect of a previous federal judgment, even if that judgment was issued in a case based on diversity jurisdiction." Hartsel Springs Ranch of Colorado, Inc. v. Bluegreen Corp., 296 F.3d 982, 986 (10th Cir. 2002). "Under the doctrine of res judicata, a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action." Clark v. Haas Grp., Inc., 953 F.2d 1235, 1238 (10th Cir. 1992) "The fundamental policies underlying the doctrine of res judicata [] are finality, judicial economy, preventing repetitive litigation and forum-shopping, and 'the interest in bringing litigation to an end.'"Plotner v. AT&T Corp., 224 F.3d 1161, 1168 (10th Cir. 2000) (citation omitted). "Res judicata requires the satisfaction of four elements: (1) the prior suit must have ended with a judgment on the merits; (2) the parties must be identical or in privity; (3) the suit must be based on the same cause of action; and (4) the plaintiff must have had a full and fair opportunity to litigate the claim in the prior suit." Nwosun v. Gen. Mills Restaurants, Inc., 124 F.3d 1255, 1257 (10th Cir. 1997).
Federated refers back to the 2009 lawsuit and states that Giant's claims are barred by res judicata. Giant argues that because the negligent leasing theory was not fully resolved by the previous lawsuit res judicata does not apply. Giant does not dispute that the Rule 58 Judgment was a judgment on the merits. Giant argues that because the Court held there may conceivably be a claim for coverage under a negligent leasing theory by denying Federated's motion for summary judgment as to that claim, that particular issue was not decided on the merits. The Court's Rule 58 judgment, which Giant had an opportunity to object to and chose not to, specifically stated it was a ruling on the merits on all of the claims pled in that action. Accordingly, the Court finds that the first factor for res judicata is met in this case. Additionally, Giant does not dispute factor number two (identical parties) or factor number four (full and fair opportunity to litigate previous lawsuit). Based upon lack of dispute and its own reading of the record and applicable case law, the Court finds that those two factors for res judicata are also met. Therefore, the only dispute centers around factor number three, whether the instant suit and the 2009 lawsuit are based upon the same cause of action.
The Tenth Circuit applies the transactional approach to determine what constitutes the same cause of action. See Plotner, 224 F.3d at 1168. Farmer Oil & Gas Properties,LLC v. S. Ute Indian Tribe, 899 F. Supp. 2d 1097, 1113 (D. Colo. 2012) (citation omitted). More specifically, "transaction" "connotes a natural grouping or common nucleus of operative facts." Id. It is well settled that parties cannot avoid the preclusive effects of res judicata by dressing up claims already litigated in new legal theories. See Plotner, 224 F.3d at 1170 (); see also Bill's Coal Company v. Board of Public Utilities, 887 F.2d 242 (10th Cir.1989) (...
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