Kuzava v. United Fire & Cas. Co.
| Decision Date | 05 March 2018 |
| Docket Number | Civil Action No. 17-cv-02673-CMA-NYW |
| Parties | TIMOTHY KUZAVA, and KATHY JO KUZAVA, as assignees of Lyon Trucking, Inc. and Eric Kubby, Plaintiffs, v. UNITED FIRE & CASUALTY COMPANY, Defendant. |
| Court | U.S. District Court — District of Colorado |
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
This matter comes before the court on Defendant United Fire & Casualty's ("Defendant" or "United") Rule 12(b)(1) Motion to Dismiss or, in the Alternative, Motion to Stay Proceedings ("Motion to Dismiss" or "Motion"), filed November 15, 2017. [#12]. The undersigned Magistrate Judge considers the Motion to Dismiss pursuant to 28 U.S.C. § 636(b), the Order Referring Case dated November 9, 2017 [#11], and the Memorandum dated November 16, 2017 [#13]. Having carefully reviewed the Motion and associated briefing, the applicable case law, the entire case file, and the comments offered during the February 9, 2018 Motion Hearing, this court respectfully RECOMMENDS that the Motion to Dismiss be GRANTED. ALTERNATIVELY, to the extent that the presiding judge, the Honorable Christine M. Arguello, finds that this court has subject matter jurisdiction over some (but not all) of the claims in this matter, this court respectfully RECOMENDS that this matter be ADMINISTRATIVELY CLOSED pending the disposition of United's appeal to the Colorado Court of Appeals.
Timothy Kuzava and Kathy Jo Kuzava (collectively, "Plaintiffs") initiated this action in the District Court for the City and County of Denver on September 6, 2017. [#6]. The following day, Plaintiffs filed an Amended Complaint [#8], the operative complaint in this matter. On November 8, 2017, United removed this action to federal court pursuant to 28 U.S.C. § 1332(a). [#1].
The facts giving rise to this matter involve an automobile accident between Mr. Kuzava and Eric Kubby [#7 at ¶ 5], which occurred near Avon, Colorado on or about June 7, 2013, [#12 at 2]. "At the time of the accident, Mr. Kubby was acting within the course and scope of his employment with Lyon Trucking, Inc., and was operating a truck owned by Lyon Trucking, Inc." [#7 at ¶ 6]. Plaintiffs subsequently filed suit against Mr. Kubby and Lyon Trucking, Inc. ("Lyon Trucking"), seeking damages for their injuries in Eagle County District Court, Case No. 2014CV30452 (the "Underlying Action"). [Id. at ¶ 10].
At the time of the accident, United insured Lyon Trucking and Mr. Kubby as an employee of Lyon Trucking. [Id. at ¶¶ 7-8]. United's insurance policy provided a $1,000,000 liability limit per accident; United also agreed to defend Lyon Trucking and Mr. Kubby in the Underlying Action. See [id. at ¶ 9; #12 at 2]. Plaintiffs made several unsuccessful settlement demands for the policy limit during the Underlying Action. [#7 at ¶¶ 13-18]. Though set for a two-week jury trial beginning June 20, 2016, Plaintiffs, Mr. Kubby, and Lyon Trucking agreed to arbitration in Denver to resolve the Underlying Action. See [id. at ¶ 20; #12 at 2-3]. Defendant then sought to intervene as a matter of right in the Underlying Action to bar the arbitration proceedings and to receive a declaration that it owed no further defense or indemnity obligations to Lyon Trucking and Mr. Kubby. [#12 at 3]. The Eagle County District Courtdenied United's Motion to Intervene. [Id. at 4]. United therefore defended Lyon Trucking and Mr. Kubby at arbitration, but United itself elected not to participate in the arbitration proceedings. [#7 at ¶¶ 21-25].
The arbitration proceedings lasted "over 8 days," and resulted in an award of more than $3,000,000 to Plaintiffs—an award Lyon Trucking and Mr. Kubby were jointly and severally liable for. [Id. at ¶¶ 26-27]. The Eagle County District Court confirmed the arbitration award and entered judgment against Lyon Trucking and Mr. Kubby for the full amount of the arbitration award plus post-judgment interest. [Id. at ¶ 28]. Subsequently, Lyon Trucking and Mr. Kubby assigned to Plaintiffs the rights and interests in any and all present and future claims Lyon Trucking and Mr. Kubby may have had against United under its insurance policy, including the full judgment amount of the Underlying Action as well as state law claims for breach of contract and bad faith breach of an insurance contract (the "Agreement").1 See [id. at ¶ 32]; see also [#12 at 3; #12-5 (assigning all claims to Plaintiffs in exchange for Plaintiffs' agreement not to execute or enforce the arbitration judgment against Lyon Trucking and Mr. Kubby)]. United has yet to pay any portion of the judgment entered against Lyon Trucking and Mr. Kubby. [#7 at ¶ 29].
Accordingly, Plaintiffs initiated the present action alleging claims against Defendant for breach of contract and bad faith breach of an insurance contract. [#7]. At oral argument, the Parties disagreed as to whether Plaintiffs had asserted a breach of contract claim based on the failure of the duty to defend as well as a failure of the duty to indemnify. [#35]. When asked by the court to clarify, Plaintiffs contended the Amended Complaint contained a separate cause ofaction for breach of contract arising from a failure to defend, but Defendant contended that such a separate breach could not lie because United, in fact, provided a defense to Lyon Trucking and Mr. Kubby in the Underlying Action. This court's review of the Amended Complaint indicates that, while the supporting paragraphs in the breach of contract claim refer to Defendant's obligation to defend and "provide competent counsel to advocate for Mr. Kubby and Lyon Trucking, Inc.'s best interests," [#7 at ¶¶ 35-36], the breach asserted arises not from a failure to defend but "failing and refusing to indemnify Mr. Kubby and Lyon Trucking, Inc. for any portion of the judgment entered against them in the Underlying Lawsuit." [Id. at ¶ 39]. Plaintiffs also allege that Defendant acted in bad faith throughout the Underlying Action because of its refusal to reasonably settle the claims when it had an opportunity to do so within the policy limits; wrongfully refusing to indemnify Mr. Kubby and Lyon Trucking; failing to reasonably investigate and evaluate the claims brought by Plaintiffs in the Underlying Action; moving to bifurcate the non-covered claims from the Underlying Action; and failing to reasonably communicate with Lyon Trucking and Mr. Kubby in the Underlying Action. [Id. at ¶ 44]. Plaintiffs contend that these actions were unreasonable, reckless, and negligent, causing damages and losses to Lyon Trucking and Mr. Kubby. See [id. at ¶¶ 43-47].
Relevant here, Defendant appealed the Eagle County District Court's denial of its Motion to Intervene, among other issues, on June 16 and August 16, 2017, respectively. [#12 at 4]. In its instant Motion, Defendant avers that Plaintiffs' breach of contract and bad faith breach of an insurance contract claims are not ripe for judicial review by this court given its appeal of the Underlying Action. [Id. at 6]. This is because, should United win its appeal, "thereby obtaining a decision that its intervention should have been granted before the [] arbitration commenced, that arbitration proceeding and the result thereof will be void as to United Fire, and allproceedings in this Court (which are based upon the Award) will be nullified." [Id.]. As an alternative, United requests that this court stay the instant matter until the Underlying Action "becomes final and non-appealable." [Id.]. Plaintiffs oppose the requested relief, and argue that United's appeal of the Underlying Action has no effect on whether their claims in this action are ripe and that an indefinite stay of this action is unwarranted. [#22]. This court considers the Parties' arguments below.
Federal courts are courts of limited jurisdiction and, as such, "are duty bound to examine facts and law in every lawsuit before them to ensure that they possess subject matter jurisdiction." The Wilderness Soc. v. Kane Cty., Utah, 632 F.3d 1162, 1179 n.3 (10th Cir. 2011) (Gorsuch, J., concurring). Indeed, courts have an independent obligation to determine whether subject matter jurisdiction exists, even in the absence of a challenge from any party. Image Software, Inc. v. Reynolds & Reynolds, Co., 459 F.3d 1044, 1048 (10th Cir. 2006) (citing Arbaugh v. Y & H Corp., 546 U.S. 500 (2006)).
Pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure, a party may bring either a facial or factual attack on subject matter jurisdiction, and a court must dismiss a complaint if it lacks subject matter jurisdiction. See generally Pueblo of Jemez v. United States, 790 F.3d 1143, 1147 n.4 (10th Cir. 2015). For a facial attack, the court takes the allegations in the Complaint as true, but when reviewing a factual attack the court may not presume the truthfulness of the Complaint's factual allegations and may consider affidavits or other documents to resolve jurisdictional facts. Holt v. United States, 46 F.3d 1000, 1002-03 (10th Cir. 1995). The burden of establishing jurisdiction rests with the party asserting jurisdiction. Basso v. Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir. 1974).
Federal subject matter jurisdiction may exist in one of two ways. First, to invoke federal question jurisdiction under 28 U.S.C. § 1331, a plaintiff's well-pleaded complaint must either establish "that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law." Nicodemus v. Union Pac. Corp., 440 F.3d 1227, 1232 (10th Cir. 2006) (internal quotations and citation omitted). Second, under 28 U.S.C. § 1332(a)(1), federal courts In removing this action to this District, Defendant invoked the court's diversity...
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