Navelski v. Int'l Paper Co.

• Decision Date: 28 January 2018
• Docket Number: CASE NO. 3:14cv445-MCR/CJK
• Parties: JOHN NAVELSKI, et al., Plaintiffs, v. INTERNATIONAL PAPER COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Florida

JOHN NAVELSKI, et al., Plaintiffs, v. INTERNATIONAL PAPER COMPANY, Defendant.

CASE NO. 3:14cv445-MCR/CJK

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF FLORIDA PENSACOLA DIVISION

January 28, 2018

ORDER

Plaintiffs filed this putative class action tort suit against Defendant International Paper Company ("IP"), alleging property damage from a dam breach, and the Court later certified a class on liability only. Trial is scheduled to begin on February 20, 2018. Pending is a Motion to Intervene filed by United Services Automobile Association (a Reciprocal Inter-Insurance Exchange) ("USAA") and USAA General Indemnity Company ("USAA GIC" or collectively, "Intervenors"), seeking to assert subrogation rights based on their payment of several putative members' property insurance claims. ECF No. 131. Having fully considered the matter, the Court finds that the motion should be granted, as limited in this Order.

Background

Plaintiffs filed a putative class action suit in state court, claiming that IP failed to properly maintain the Kingsfield Road Dam, which it owned and which collapsed during a storm in April 2014, allegedly causing damage to Plaintiffs' homes. The suit was removed to federal court. The Amended Complaint, ECF No. 38, asserts claims of negligence, trespass, nuisance, and strict liability. On March 25, 2017, the Court certified a class solely for the purpose of determining liability. Class Notice was approved on September 19, 2017, and class members were given 45 days from the date of mailing the notice to opt out.¹

On November 9, 2017, USAA and USAA GIC moved to intervene to assert a subrogation right to recover insurance payments they made on claims arising out of the same occurrence that is the subject of this suit. USAA and USAA GIC were insurers of seven class members.² The Complaint in Intervention alleges that each insured complied with all terms of the policies and filed proofs of loss specifying the amount of damages caused by this occurrence and that the Intervenors paid the totalsums claimed as loss. It is alleged that USAA paid its insureds the total sum of $411,756.45 and USAA GIC paid its insureds a total of $679,305.04. The Intervenors seek to join as plaintiffs in the counts asserted in the First Amended Complaint based on these insurance payments.

Plaintiffs oppose the Motion to Intervene as premature, arguing that the Complaint in Intervention fails to state a ripe subrogation claim. In reply, the Intervenors argue that the claim is ripe, that Plaintiffs have misstated Florida's made-whole doctrine, and that the requirements for intervention are satisfied. The Intervenors also clarify and limit the scope of the proposed intervention, confirming that they are not requesting to participate in the upcoming liability trial. Specifically, the Intervenors reference "the conditions listed in [paragraph] Number 3" of an email between counsel dated November 21, 2017. See ECF No. 145-2, at ¶ 3. Although not attached to the original motion, this email states in Paragraph Number 3 that "USAA and USAA GIC will not participate in the trial on liability unless issues of their rights to subrogation are implicated or the class settles its claims beforehand."³ Id.

Defendant IP initially did not oppose the motion to intervene but reserved the right to "oppose the imposition of any conditions on the Insurers' intervention that might prejudice IP's rights." ECF No. 140. IP now opposes the Intervenors' proposed conditions to intervention, ECF No. 148, arguing that the Intervenors waived their right to request conditions and that IP would suffer prejudice by the proposed conditions.

Discussion

In this diversity suit, on substantive matters, the Court applies the substantive law of the forum state, which in this case is Florida, see So. Owners Ins. Co. v. Easdon Rhodes & Assocs., LLC, 872 F.3d 1161, 1164 (11th Cir. 2017), while "federal law governs matters of procedure," Palm Beach Golf Ctr.-Boca, Inc. v. John G. Sarris, D.D.S., P.A., 781 F.3d 1245, 1259 (11th Cir. 2015). See Erie R.R. v. Tompkins, 304 U.S. 64 (1938).

A. Ripeness

The doctrine of ripeness, "[b]orn from both Article III and prudential concerns," is related to standing in that it prevents courts from the premature adjudication of abstract disagreements.⁴ See Temple B'Nai Zion, Inc. v. City of Sunny Isles Beach, 727 F.3d 1349, 1356 (11th Cir. 2013) (citing Nat'l Park Hospitality Ass'n v. Dep't of Interior, 538 U.S. 803, 807 (2003)); see also Reno v. Catholic Soc. Servs., Inc., 509 U.S. 43, 57 n. 18 (1993). "Ripeness is peculiarly a question of timing." Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568, 580 (1985) (internal quotation and marks omitted). Determining whether a dispute is ripe requires courts to undertake a two-step analysis: (1) evaluating the fitness of the issues for judicial determination, and (2) considering the hardship to the parties if judicial determination is withheld. Midrash Sephardi, Inc. v. Town of Surfside, 366 F.3d 1214, 1224 (11th Cir. 2004).

In this case, the fitness of the issue for judicial determination turns on the nature of the subrogation claim. In Florida, subrogation is described as "the substitution of one person in the place of another with reference to a lawful claim or right." Dade Cty. Sch. Bd. v. Radio Station WQBA, 731 So. 2d 638, 646 (Fla. 1999)(quoting W. Am. Ins. Co. v. Yellow Cab Co. of Orlando, 495 So. 2d 204, 206 (Fla. 5th DCA 1986)). Legal subrogation (also called "equitable subrogation") is "a creature of equity" that arises as "a legal consequence of the acts and relationship of the parties" and "is based on the policy that no person should be unjustly enriched by another's loss."⁵ Yellow Cab Co., 495 So. 2d at 207; see also Dade Cty., 731 So. 2d at 647. A claim for equitable subrogation is "generally appropriate" if: "(1) the subrogee made the payment to protect his or her own interest, (2) the subrogee did not act as a volunteer, (3) the subrogee was not primarily liable for the debt, (4) the subrogee paid off the entire debt, and (5) subrogation would not work any injustice to the rights of a third party." Dade Cty., 731 So. 2d at 646. Ordinarily, a release of other responsible parties is also required. See id. at 646-47; see also Welch v. Complete Care Corp., 818 So. 2d 645, 648 (Fla. 2d DCA 2002) (noting equitable subrogation requires a showing that the claim has been paid and that the party seeking subrogation has obtained a release). The Florida Supreme Court hasconsistently applied this test in the tort context to the "prototypical case" where a tortfeasor asserts an equitable subrogation claim. Holmes Reg'l Med. Ctr., Inc. v. Allstate Ins., 225 So. 3d 780, 785-86 (Fla. 2017) (dismissing a tortfeasor's intervention in a victim's suit against a subsequent tortfeasor in the absence of full payment of an existing judgment); Dade Cty., 731 So. 2d at 646 (stating equitable subrogation requires a tortfeasor to first pay the entire debt, not merely a partial payment). Florida's "made whole doctrine" provides that an "insurer has no right as against the insured where the compensation received by the insured is less than his loss." Holmes, 225 So. 3d at 786 (quoting Rubio v. Rubio, 452 So. 2d 130, 132 (Fla. 2d DCA1984)); see also Intervest Constr. of Jax, Inc. v. Gen. Fidelity Ins. Co., 133 So. 3d 494, 504 (Fla. 2014) (discussing Florida's made whole doctrine); Dade Cty., 731 So. 2d at 646 (rejecting a "liberal application of the equitable subrogation doctrine" that would allow subrogation for partial payment). Thus, until the obligation to the victim is fully discharged, the victim is "entitled to enforce the balance of his claim" and the person whose property has been used in discharging only a part of the claim is not entitled to occupy his position" in the litigation. Holmes, 225 So. 3d at 785 (quoting Restatement (First) of Restitution § 162 com. C (Am. Law Inst. 1937)).

Plaintiffs contend that these principles squarely apply and the Intervenors have failed to state a ripe subrogation claim because no judgment has been entered and they did not pay in full and secure a release from the insureds. The Intervenors argue that the context here is different from the "prototypical tort case,"⁶ Dade Cty., 731 So. 2d at 646, because they are not tortfeasors attempting to recover without paying the entirety of the insured's claim. They insist that a release is not necessary because they paid their entire contractual obligation to the insureds based on what the insureds represented as their total proof of loss. The Court agrees with the Intervenors. Allowing them to intervene and assert a subrogation claim on these facts, where the insurers have satisfied the whole demand of each insured, is consistent with Florida law. See Morgan v. Gen. Ins. Co. of Am., 181 So. 2d 175, 178 (Fla. 1st DCA 1965) (holding that intervention by insurer in suit by the insured against the tortfeasor and participation in settlement negotiations was effective to protect insurer's subrogation rights); see also QBE Ins. Corp. v. Jorda Enters., Inc., No. 10-21107-CIV, 2012 WL 12844302, at *7 (S.D. Fla. Aug. 6, 2012) ("Florida law is clear that no right of subrogation may be claimed until the whole demand of the creditor has been satisfied.") (internal quotations omitted). Having paid the loss,the insurer may join the insured's suit, see Holyoke Mut. Ins. v. Concrete Equip., 394 So. 2d 193, 195 (3d DCA 1981) (stating the injured party's insurer "had the right, as the real party in interest, to prosecute the action in its name"),⁷ provided that the insured is entitled to be "made whole" before the subrogated insurer is permitted to any recovery from the tortfeasor, Ins. Co. of N. Am. v. Lexow, 602 So. 2d 528, 531 (Fla. 1992) (insurer paid a claim and joined the insured in bringing suit). Notably, the Florida Supreme Court in Lexow observed that the insurer's "right to claim subrogation exists solely by virtue of having...