Ratajczak v. Beazley Solutions Ltd.
| Decision Date | 07 July 2014 |
| Docket Number | Case No. 13-C-045 |
| Parties | DANIEL J. RATAJCZAK, JR., ANGELA RATAJCZAK, SCOTT A. RATAJCZAK, and ELIZABETH RATAJCZAK, Plaintiffs, v. BEAZLEY SOLUTIONS LIMITED, R-T SPECIALTY, LLC, and MESIROW INSURANCE SERVICES, INC. Defendants. |
| Court | U.S. District Court — Eastern District of Wisconsin |
ORDER GRANTING MOTION TO DISMISS
Plaintiffs Daniel, Angela, Scott, and Elizabeth Ratajczak filed this diversity action for declaratory relief against Beazley Solutions Limited when it failed to defend and indemnify them for liability arising out of the sale of their interests in a company called Packerland Whey Products, Inc. Plaintiffs were insured under a Seller's Warranty and Indemnity Policy which they purchased from Beazley with the assistance of R-T Specialty, LLC and Mesirow Insurance Services, Inc. After discovering that Beazley was not authorized to sell insurance in Wisconsin, Plaintiffs added R-T Specialty and Mesirow as defendants alleging they were liable under a state statute that makes liable those who assist in the procurement of an illegal policy if the unauthorized insurer fails to pay a covered claim. Wis. Stat. § 618.44. The Third Amended Complaint currently before the court contains seven counts: (I) declaratory judgment on Policy coverage; (II) breach of contract (breach of the Policy); (III) illusory coverage - reformation of the Policy; (IV) declaration of illegal policyunder Wis. Ch. 618; (V) bad faith investigation, association, and/or consent to settlement; (VI) bad faith denial of coverage; and (VII) violation of Wis. Stat. § 628.46. (ECF No. 82.) Counts I-IV are asserted against Beazley as well as R-T Specialty, LLC, and Mesirow Insurance Services, Inc., the two intermediary insurers that allegedly assisted in procuring the Policy. Counts V-VII are asserted only against Beazley.
The Court will now address three pending motions: (1) Beazley's motion for reconsideration or to drop R-T Specialty as a party in order to preserve the Court's subject matter jurisdiction (ECF No. 98); (2) Mesirow's motion to dismiss Plaintiffs' Third Amended Complaint (ECF No. 87); and (3) all parties' joint motion to bifurcate (ECF No. 100).
On May 14, 2014, after the Third Amended Complaint was filed, the Court issued an order to show cause directing defendants R-T Specialty and Mesirow to provide a statement of jurisdiction. (ECF No. 94.) R-T Specialty indicated that one of its members is a citizen of Wisconsin, which is the same state of citizenship as all four plaintiffs. (ECF No. 96.) For purposes of 28 U.S.C. § 1332, this revelation destroys diversity of citizenship and deprives the Court of subject matter jurisdiction. See Belleville Catering Co. v. Champaign Marketplace, LLC, 350 F.3d 691, 692 (7th Cir. 2003) ().
On May 27, 2014, Beazley filed a motion seeking to keep the case in federal court. (ECF No. 98.) Beazley proposed that the Court should either reconsider its orders granting the plaintiffs leave to file their Second and Third Amended Complaints (which joined R-T Specialty to the lawsuit) or exercise its powers under Fed. R. Civ. P. 21 to dismiss R-T Specialty as a party. UnderFed. R. Civ. P. 21, the Court may "at any time, on just terms, add or drop a party." A district court may maintain subject matter jurisdiction by dismissing a "dispensable" non-diverse defendant either before or after final judgment. Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 832 (1989). To determine whether dismissal is appropriate, the Court must consider whether R-T Specialty is "indispensable" under Fed. R. Civ. P. 19, which sets forth a two-part test. The Court must determine:
(1) if in the [party's] absence, complete relief cannot be accorded among those who are already parties; or (2) if the [party] claims an interest relating to the subject of the action and is so situated that disposition of the action in its absence may (i) impair or impede its ability to protect that interest, or (ii) leave any of the persons already joined subject to a substantial risk of incurring multiple or otherwise inconsistent obligations.
North Shore Gas Co. v. Salomon Inc., 152 F.3d 642, 647 (7th Cir. 1998) (citing Fed. R. Civ. P. 19).
Here, if Plaintiffs are successful in the action, Plaintiffs will be able to obtain full relief from Beazley. Indeed, as explained below, liability on the part of R-T Specialty and Mesirow does not even arise until and unless Beazley fails to pay a claim payable under the policy. Neither Mesirow nor R-T Specialty are parties to the Policy. Their liability, if any, arises under Section 618.44 of the Wisconsin Statutes. Under that section, an insurance contract with a foreign insurer not authorized to sell insurance in Wisconsin is "unenforceable by, but enforceable against, the insurer." Wis. Stat. 618.44. In other words, Plaintiffs may lawfully enforce the contract against Beazley, as they seek to do in this lawsuit. Only if Beazley does not pay a covered claim can R-T Specialty and/or Mesirow be liable. Id. Although Beazley denies that Plaintiffs' claims are covered under the policy, there is no reason to believe that it will not pay the claims if coverage is found. Beazley is actively defending the case and has filed a declaration establishing that Beazley is an underwriter for LloydsCorporation, London. The declaration establishes that Beazley has access to more than sufficient funds to pay any judgment that might be entered in the action. (ECF No. 24.)
Under these circumstances, it is clear that R-T Specialty is not an indispensable party to this lawsuit. Given that a substantial amount of litigation has already been conducted here, the Court will exercise its powers under Fed. R. Civ. P. 21 and dismiss R-T Specialty as a party without prejudice. Dismissal under Fed. R. Civ. P. 21 obviates the need to reconsider any previous orders.
On March 4, 2004, Mesirow filed a motion to dismiss Plaintiffs' Third Amended Complaint, or alternately, to stay all claims against the insurance intermediary defendants until Beazley's liability for coverage under the Policy is determined. In considering a motion to dismiss, the Court construes the allegations in the complaint in the light most favorable to the plaintiff, accepts all well-pleaded facts as true, and draws all inferences in favor of the non-moving party. Estate of Davis v. Wells Fargo Bank, 633 F.3d 529, 533 (7th Cir. 2011). The court may consider "the complaint itself, documents attached to the complaint, documents that are critical to the complaint and referred to in it, and information that is subject to proper judicial notice." Geinosky v. City of Chi., 675 F.3d 743, 745 n.1 (7th Cir. 2012). To state a claim, a complaint must contain sufficient factual matter, accepted as true, "that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556). The complaint allegations "must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555 (citation omitted).
Plaintiffs do not contest that Mesirow is entitled to dismissal from Counts I, II, and III, all of which are predicated on their contract with Beazley. As already noted, Mesirow is not a party to that contract. Count IV is the only count that focuses on Mesirow's conduct. In Count IV, Plaintiffs allege that the Policy was illegally procured because Beazley and the intermediary insurers failed to properly notify Plaintiffs that Beazley was an unauthorized insurer in Wisconsin, as required by Wis. Stat. § 618.41(4) and Wis. Admin. Code Ins § 6.17(3)(a). Plaintiffs' claim against Mesirow, like their claim against R-T Specialty, rests on Section 618.44 of the Wisconsin Statutes. That Section states in its entirety:
618.44 Effect of illegal contracts. An insurance contract entered into in violation of this chapter is unenforceable by, but enforceable against, the insurer. The terms of the contract are governed by chs. 600 to 646 and 655 and rules promulgated thereunder. If the insurer does not pay a claim or loss payable under the contract, any person who assisted in the procurement of the contract is liable to the insured for the full amount of the claim or loss, if the person knew or should have known the contract was illegal.
(italics added). Plaintiffs contend that the statute creates joint and several liability among the defendants, and thus Mesirow's liability under the Policy is independent of and equal to that of Beazley. Mesirow, on the other hand, contends that its liability, if any, is not joint and several with Beazley, but is contingent upon Beazley not paying a claim or loss covered by the policy. Mesirow has the better argument based on the plain language of the statute.1
By its plain terms, Section 618.44 imposes liability for a claim payable under an illegal insurance contract on the person who procured it only if the insurer does not pay it. Thus, Mesirow's liability under Section 618.44 is contingent upon Beazley refusing or otherwise failing to pay a covered claim. As noted above, there is no reason to believe that contingency will occur here. Beazley is vigorously defending the claim and has established both its ability and willingness to pay any judgment obtained by the Plaintiffs. Absent a plausible allegation that Beazely might not pay a judgment entered against it, Plaintiffs have failed to state a claim against Mesirow. Their complaint does not contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2) (italics...
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