Harford Mut. Ins. Co. v. New Ledroit Park Bldg. Co.

• Decision Date: 27 April 2018
• Docket Number: Civil Action No. 17–1489 (TJK)
• Citation: 313 F.Supp.3d 40
• Court: U.S. District Court — District of Columbia
• Parties: HARFORD MUTUAL INSURANCE COMPANY, Plaintiff, v. The NEW LEDROIT PARK BUILDING COMPANY, LLC et al., Defendants.

313 F.Supp.3d 40

HARFORD MUTUAL INSURANCE COMPANY, Plaintiff,

v.The NEW LEDROIT PARK BUILDING COMPANY, LLC et al., Defendants.

Civil Action No. 17–1489 (TJK)

United States District Court, District of Columbia.

Signed April 27, 2018

Edward M. Buxbaum, Albert J. Mezzanotte, Whiteford, Taylor & Preston, LLP, Baltimore, MD, for Plaintiff.

Eric James Menhart, Lexero Law Firm, Washington, DC, for Defendant.

MEMORANDUM OPINION AND ORDER

TIMOTHY J. KELLY, United States District Judge

In this declaratory-judgment action, a liability insurer (Plaintiff Harford Mutual Insurance Company, or "Harford") brings suit against its insured, a construction company and its owners (the Defendants). This Opinion addresses three outstanding issues. First, the Court has raised sua sponte the issue of whether it has jurisdiction over this action under Article III of the U.S. Constitution and the Declaratory Judgment Act, 28 U.S.C. §§ 2201 – 2202. Second, Harford has moved to strike Defendants' Second Amended Answer and Counterclaim. See ECF No. 28. Third, Harford has moved to dismiss Defendants' first amended counterclaim, which seeks attorney's fees, for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). See ECF No. 25.

For the reasons set forth below, the Court will dismiss Harford's Amended Complaint for lack of subject matter jurisdiction. Harford may seek to remedy the deficiencies identified in this Opinion by filing a second amended complaint on or before May 28, 2018. The pending motions for summary judgment (ECF Nos. 15 and 17) will be denied as moot, although the parties may file renewed motions if Harford files a second amended complaint over which this Court has jurisdiction. The Court will also grant both Harford's motion to strike and its motion to dismiss.

I. Factual and Procedural Background

A. Harford's Claim for Declaratory Judgment

This case is a dispute over attorney's fees. Defendants face two lawsuits filed in the Superior Court of the District of Columbia by customers who allege that Defendants improperly performed certain construction work. See ECF No. 4 ("Am. Compl.") ¶¶ 6–8, 18. Harford concedes that, as Defendants' liability insurer, it has a duty to defend them in the Superior Court lawsuits, even though it is doing so under a reservation of rights. Id. ¶¶ 10–11. It disagrees with Defendants, however, on how much it should have to pay. Defendants assert that their chosen counsel in the Superior Court lawsuits has reasonably charged fees as high as $625 per hour. Id. ¶ 15. Harford claims that those fees are unreasonably high, and has agreed to pay only a "blended rate" of $275 per hour. Id. ¶ 13.

In this declaratory-judgment action, Harford asks the Court to determine what a reasonable attorney's fee would be to defend against the two Superior Court lawsuits. Id. ¶ 21. Specifically, in its prayer for relief, Harford asks that the Court:

1. Enter a judgment declaring the reasonable and fair market rate, on an hourly basis, that will apply to the work undertaken by counsel of the Defendants' choosing in connection with the defense of the two cases now pending in the Superior Court for the District of Columbia against the Defendants; and

2. For such other and further relief as this Court deems necessary and just.

Id. at 6. Harford asserts that this Court has jurisdiction based on the Declaratory Judgment Act and diversity of citizenship. Id. ¶¶ 2, 20–21. The parties agree that Harford's claim is governed by District of Columbia law. See ECF No. 15 at 8–9; ECF No. 17–1 at 10. The parties have filed motions for summary judgment on the merits of Harford's claim. ECF Nos. 15, 17.

On December 7, 2017, the Court held a status conference during which it questioned whether it could properly exercise jurisdiction over this action. The parties subsequently submitted supplemental briefing on that issue. See ECF Nos. 29, 30. Both parties agree that Harford has a duty to defend Defendants in the underlying Superior Court actions, and argue jurisdiction exists because there is an actual case or controversy regarding the amount of attorney's fees that Harford should pay. See ECF No. 29 at 5; ECF No. 30 at 9–10.

B. Defendants' Counterclaim for Attorney's Fees

On October 13, 2017, Defendants answered Harford's Amended Complaint and filed a counterclaim for attorney's fees under District of Columbia law. ECF No. 14. Harford moved to dismiss the counterclaim on November 3. ECF No. 16. On November 17, Defendants filed an Amended Answer and Counterclaim, ECF No. 20 ("Am. Ans."), mooting Harford's initial motion to dismiss. The amended counterclaim generally asserts that Harford's conduct in the insurance dispute has been vexatious, oppressive, and in bad faith. Id. ¶¶ 75–76. The amended counterclaim further specifies that Harford has unreasonably refused to pay Defendants' legitimate attorney's fees, has unreasonably delayed making payments, and has made misstatements of fact and law that benefited Harford at Defendants' expense. See id. ¶¶ 77–87. Based on these allegations, Defendants request various forms of relief, including "litigation expenses and attorney's fees" incurred in this action. See id. at 11–12.

Harford filed a renewed motion to dismiss the first amended counterclaim on December 1. ECF No. 25. Defendants then filed a Second Amended Answer and Counterclaim, ECF No. 26, and a "notice" asserting that Harford's renewed motion was now moot, ECF No. 27. Harford moved to strike the Second Amended Answer and Counterclaim, asserting that it was improperly filed under Federal Rule of Civil Procedure 15 and did not moot Harford's renewed motion to dismiss. ECF No. 28. Defendants opposed the motion to strike, and in doing so also set forth arguments opposing Harford's renewed motion to dismiss. ECF No. 31 ("Defs.' Opp'n"); see also ECF No. 32 (Harford's reply in support of its motion to strike).

II. Legal Standard

A. Subject Matter Jurisdiction

Courts "have an independent obligation to determine whether subject-matter jurisdiction exists, even in the absence of a challenge from any party." Arbaugh v. Y & H Corp. , 546 U.S. 500, 514, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006). Accordingly, district courts must dismiss any claim over which they lack subject matter jurisdiction, Fed. R. Civ. P. 12(h)(3), and may do so sua sponte, see, e.g., In re Marin , 956 F.2d 339, 340 (D.C. Cir. 1992) (per curiam).

"[I]n order for a court to issue declaratory relief, it must first determine that there is a ‘case or controversy’ within the meaning of Article III of the United States Constitution and the Declaratory Judgment Act." Gibson v. Liberty Mut. Grp., Inc. , 778 F.Supp.2d 75, 78 (D.D.C. 2011) (citing 28 U.S.C. § 2201(a) ). The controversy must be "definite and concrete, touching the legal relations of parties having adverse legal interests" and admitting of "specific relief through a decree of a conclusive character." MedImmune, Inc. v. Genentech, Inc. , 549 U.S. 118, 127, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007) (quoting Aetna Life Ins. Co. v. Haworth , 300 U.S. 227, 240–41, 57 S.Ct. 461, 81 L.Ed. 617 (1937) ). The jurisdictional inquiry "should concentrate on ‘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.’ " Gibson , 778 F.Supp.2d at 78 (quoting Md. Cas. Co. v. Pac. Coal & Oil Co. , 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941) ).

"Even if the Court finds a case or controversy exists, it must still consider whether it is appropriate to exercise its discretion to grant declaratory relief in the instant case." Id. (citing 28 U.S.C. § 2201(a) ). "Where declaratory relief would ‘cause [the] case to be tried piecemeal, or ... only particular issues will be resolved without settling the entire controversy,’ a court should not exercise its discretion in favor of granting it." Id. (quoting Newton v. State Farm Fire & Cas. Co. , 138 F.R.D. 76, 79 (E.D. Va. 1991) ). "There is no absolute right to a declaratory judgment in federal courts, and the factors relevant to a court's determination of the propriety of declaratory relief are numerous." Glenn v. Fay , 222 F.Supp.3d 31, 35 (D.D.C. 2016). "In the D.C. Circuit, two criteria are ordinarily relied upon: 1) whether the judgment will serve a useful purpose in clarifying the legal relations at issue, or 2) whether the judgment will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding." Id. at 36. "Ultimately, the purpose of the Declaratory Judgment Act is to ‘allow[ ] the uncertain party to gain relief from the insecurity caused by a potential suit waiting in the wings.’ " Id. (alteration in original) (quoting Hipage Co., Inc. v. Access2Go, Inc. , 589 F.Supp.2d 602, 615 (E.D. Va. 2008) ).

B. Filing of Amended Pleadings

Under Rule 15(a), a "party may amend its pleading once as a matter of course" within certain specified time limits. Fed. R. Civ. P. 15(a)(1). Further amendments must be made with the opposing party's consent or leave of the court, and courts "should freely give leave when justice so requires." Fed. R. Civ. P. 15(a)(2). Under this standard, "leave should be denied in cases involving ‘undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [and] futility of amendment.’ " Beach TV Properties, Inc. v. Solomon , 254 F.Supp.3d 118, 124 (D.D.C. 2017) (alteration in original) (quoting Foman v. Davis , 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962) ). "However, to receive the benefit of this standard in this Circuit, one must file a motion for leave to amend a [pleading] accompanied by a copy of the proposed amended [pleading]." Ofisi v. BNP Paribas, S.A. , No. 15-cv-2010 (JDB), ...