Progressive N. Ins. Co. v. Mitchell
| Decision Date | 10 March 2021 |
| Docket Number | Civil Action No. 9:20-cv-673-BHH |
| Parties | Progressive Northern Insurance Company, Plaintiff, v. Kennedy Mitchell, Angeline Gadson, Clarke Taylor, and Clyde Harriot, Defendants. |
| Court | U.S. District Court — District of South Carolina |
This matter is before the Court on Defendants Kennedy Mitchell, Angeline Gadson, Clarke Taylor, and Clyde Harriot's (collectively "Defendants") motions to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), or as an exercise of the Court's discretion to decline jurisdiction pursuant to 28 U.S.C. § 2201. (ECF Nos. 8, 12, 13, 14.) For the reasons set forth in this Order, the motions are denied.
Progressive Northern Insurance Company ("Progressive") issued a personal automobile insurance policy to Kennedy Mitchell, policy number 930226902, with effective dates of June 3, 2019 to December 3, 2019 (hereinafter the "Policy"). The Policy lists a 2007 Dodge Charger and a 2001 Ford Expedition as insured vehicles. For each insured vehicle, the Policy provides bodily injury liability coverage with limits of $25,000 per person and $50,000 per accident and property damage liability coverage with limits of $25,000 per accident. The Policy also provides uninsured and underinsured motorist ("UIM") coverage up to the same bodily injury and property damage limits and medical payments coverage with limits of $500 per person. The Policy obligates Progressive to provide a defense to persons qualifying as an "insured" for claims that fall within the Policy's coverage and are not otherwise excluded. Under the terms of the Policy, Progressive may deny coverage for an accident or loss if the named insured or other persons seeking coverage engaged in fraudulent conduct, or concealed or misrepresented material facts, in the presentation of a claim for insurance proceeds.
Progressive learned of an automobile accident that allegedly occurred on October 3, 2019. Defendant Mitchell was driving a vehicle listed on the Policy and carrying Defendants Taylor and Harriot as passengers. Defendant Mitchell contends he made a right-hand turn and struck a vehicle operated by Defendant Gadson that was stopped at a stop sign. (See ECF No. 8-2 at 2, 6, 10 ().) Based on its investigation, Progressive concluded the collision either did not occur or was intentionally staged by Defendants.
On February 7, 2020, Progressive initiated this declaratory judgment action to determine its obligations under the Policy in light of the alleged collision. Progressive seeks four declarations: two regarding the Policy's coverage for a collision that was not an "accident" and two regarding the provision of insurance benefits under the Policy in light of alleged fraudulent insurance claims arising out of the purported collision. (See Compl. ¶¶ 26-42, ECF No. 1.)
Defendants Gadson, Taylor, and Harriot subsequently filed, on March 2, 2020, underlying tort suits seeking damages for bodily injury against Defendant Mitchell. (ECF No. 8-2.) Defendant Mitchell filed a defamation suit against Progressive on April 6, 2020, alleging that an agent of Progressive falsely accused Defendant Mitchell of staging theauto accident in the Estill Public Library in the presence of a number of individuals unconnected to the insurance claim or Progressive's business. (Id.) Defendants Gadson, Taylor, and Harriot each filed a similar defamation suit against Progressive on April 7, 2020.
Defendant Mitchell filed a motion to dismiss for lack of subject matter jurisdiction, for failure to plead fraud with specificity, and for the Court to abstain from exercising jurisdiction on April 21, 2020. (ECF No. 8.) Defendants Gadson, Taylor, and Harriot each filed motions to dismiss asserting that the Court lacks subject matter jurisdiction and that the Court should decline to exercise its discretionary jurisdiction over this declaratory judgment action. (ECF Nos. 12, 13, 14.) The motions have been fully briefed, the matter is ripe for disposition, and the Court now issues the following ruling.
When a party challenges the factual basis for a federal court's subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1), the plaintiff bears the burden of proving the district court possesses subject matter jurisdiction. Richmond, Fredericksburg & Potomac R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991) (citing Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982)). In considering a Rule 12(b)(1) motion to dismiss, the district court is to regard the pleadings as mere evidence on the issue of subject matter jurisdiction and may consider evidence outside the pleadings without converting the proceeding into one for summary judgment. Id. (citing Adams, 697 F.2d at 1219; Trentacosta v. Frontier Pacific Aircraft Indus., 813 F.2d 1553, 1558 (9th Cir. 1987)). "The Declaratory Judgment Act provides that, '[i]n a case of actual controversywithin its jurisdiction . . . any court of the United States . . . may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.'" MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 126 (2007) (quoting 28 U.S.C. § 2201(a)). "Basically, the question in each case is 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." Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941). Federal district courts have original jurisdiction over all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between citizens of different States. 28 U.S.C. § 1332(a)(1).
A motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6) "challenges the legal sufficiency of a complaint, considered with the assumption that the facts alleged are true." Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009) (internal citations omitted). When a claim sounds in fraud the plaintiff must satisfy both Rule 8(a)'s plausibility requirement and Rule 9(b)'s heightened standard to plead fraud with particularity. Universal Health Servs., Inc. v. U.S. ex rel. Escobar, 136 S. Ct. 1989, 2004 n.6 (2016).
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim for relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows thecourt to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (quoting Twombly, 550 U.S. at 556)). Although the allegations in a complaint generally must be accepted as true, that principle "is inapplicable to legal conclusions," and the Court is "not bound to accept as true a legal conclusion couched as a factual allegation." Id. (citations and quotation marks omitted). Id. at 678 (quoting Twombly, 550 U.S. at 557). Stated differently, "where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not 'show[n]'—'that the pleader is entitled to relief.'" Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)). Still, Rule 12(b)(6) "does not countenance . . . dismissals based on a judge's disbelief of a complaint's factual allegations." Colon Health Centers of Am., LLC v. Hazel, 733 F.3d 535, 545 (4th Cir. 2013) (quoting Neitzke v. Williams, 490 U.S. 319, 327 (1989)). "A plausible but inconclusive inference from pleaded facts will survive a motion to dismiss . . . ." Sepulveda-Villarini v. Dep't of Educ. of Puerto Rico, 628 F.3d 25, 30 (1st Cir. 2010).
Rule 9(b) imposes a heightened pleading standard on fraud claims, under which a plaintiff must "state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). The purposes of Rule 9(b) include "providing notice to a defendant of its alleged misconduct," "preventing frivolous suits," "eliminating fraud actions in which all the facts are learned after discovery," and "protecting defendants from harm to theirgood will and reputation." U.S. ex rel. Nathan v. Takeda Pharm. N. Am., Inc., 707 F.3d 451, 456 (4th Cir. 2013) ().
"[D]istrict courts possess discretion in determining whether and when to entertain an action under the Declaratory Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional prerequisites." Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995). "It is well established that a declaration of parties' rights under an insurance policy is an appropriate use of the declaratory judgment mechanism." United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 494 (4th Cir. 1998). Declaratory judgment actions to ascertain liability coverage typically involve a separate proceeding, often in state court, by a tort plaintiff against the insured defendant. Federal courts have not held that such declaratory judgment actions inherently create undue entanglement with the underlying state tort actions. "Such a rule would . . . be flatly inconsistent with...
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