Safety Specialty Ins. Co. v. Genesee Cnty. Bd. of Comm'rs

• Decision Date: 21 November 2022
• Docket Number: s. 22-1189/1196
• Parties: SAFETY SPECIALTY INSURANCE COMPANY ; Safety National Casualty Company, Plaintiffs-Appellees (22-1189), Plaintiffs-Appellants (22-1196), v. GENESEE COUNTY BOARD OF COMMISSIONERS; Deborah Cherry, Defendants-Appellants (22-1189), Thomas A. Fox; Tammy Puchlak, as Trustee of the Walter Puchlak Revocable Trust Agreement dated February 24, 2010, Defendants-Appellees (22-1196).
• Court: U.S. Court of Appeals — Sixth Circuit

53 F.4th 1014

SAFETY SPECIALTY INSURANCE COMPANY ; Safety National Casualty Company, Plaintiffs-Appellees (22-1189), Plaintiffs-Appellants (22-1196),

v. GENESEE COUNTY BOARD OF COMMISSIONERS; Deborah Cherry, Defendants-Appellants (22-1189),Thomas A. Fox; Tammy Puchlak, as Trustee of the Walter Puchlak Revocable Trust Agreement dated February 24, 2010, Defendants-Appellees (22-1196).

Nos. 22-1189/1196

United States Court of Appeals, Sixth Circuit.

Argued: October 19, 2022

Decided and Filed: November 21, 2022

ARGUED: Jeffrey C. Gerish, PLUNKETT COONEY, Bloomfield Hills, Michigan, for Genesee County and Deborah Cherry. John D. Hackett, CASSIDAY SCHADE, LLP, Chicago, Illinois, for Safety Specialty Insurance Company and Safety National Casualty Company. Philip L. Ellison, OUTSIDE LEGAL COUNSEL PLC, Hemlock, Michigan, for Thomas Fox and Tammy Puchlack. ON BRIEF: Jeffrey C. Gerish, PLUNKETT COONEY, Bloomfield Hills, Michigan, for Genesee County and Deborah Cherry. John D. Hackett, Adam H. McCabe, CASSIDAY SCHADE, LLP, Chicago, Illinois, Richard C.O. Rezie, GALLAGHER SHARP LLP, Cleveland, Ohio, for Safety Specialty Insurance Company and Safety National Casualty Company. Philip L. Ellison, OUTSIDE LEGAL COUNSEL PLC, Hemlock, Michigan, for Thomas Fox and Tammy Puchlack.

Before: SUTTON, Chief Judge; BOGGS and KETHLEDGE, Circuit Judges.

BOGGS, Circuit Judge.

This insurance-coverage dispute springs from two class-action lawsuits against several Michigan counties that retained surplus proceeds from the tax-foreclosure sales of private property. Genesee County was named as a defendant in the lawsuits and claimed coverage under two liability-insurance policies. The County's insurers, Safety National Casualty Company and Safety Specialty Insurance Company (together, "Safety"), denied the claim and filed this declaratory-judgment action in federal court against both the County and the underlying class representatives. The district court agreed with Safety that it has no duty to defend or indemnify the County from the lawsuits, but dismissed Safety's case against the class representatives for lack of federal jurisdiction. We affirm.

I. BACKGROUND

A. The Fox and Puchlak Lawsuits

In November 2018, Tammy Puchlak filed a class-action complaint in Michigan state court against five Michigan counties and their treasurers, including Genesee County and Deborah Cherry. She alleges that St. Clair County seized trust property to satisfy a $9,600 property-tax delinquency, sold the property at auction for $150,000—far below its fair-market value—and then kept the $140,400 difference. Seeking to represent a class of property owners who had their property seized and sold without receiving the surplus proceeds, Puchlak asserts that these counties committed takings without just compensation or imposed excessive fines in violation of the Michigan and federal constitutions.

In June 2019, Thomas A. Fox filed a class-action complaint in federal district court against fourteen Michigan counties and their treasurers. He later amended his complaint to add thirteen more counties and their treasurers, including Genesee County and Deborah Cherry. Fox claims that Gratiot County seized his property to satisfy a property-tax delinquency of $3,091.23, sold the property at auction for $25,500.00, then kept the $22,408.77 difference between what Fox owed and what Gratiot County received. Like Puchlak, Fox asserts that the counties named in his lawsuit committed takings without just compensation and imposed excessive fines; he also alleges unjust enrichment and violations of substantive and procedural due process. In October 2020, the district court certified Fox's class. Fox v. County of Saginaw , 2020 WL 6118487, at *11 (E.D. Mich. 2020).

B. The Insurance Policies

In 2018, Safety issued a Public Officials and Employment Practices Liability policy ("PO&EPL Policy") to Genesee County. The insurance policy is subject to a $2,000,000 liability limit and a $350,000 retention. Under the policy, Safety agreed to defend and indemnify Genesee County and its employees from covered claims alleging certain "wrongful acts." The policy includes two exclusions, among others. One precludes coverage for claims "[a]rising out of ... [t]ax collection, or the improper administration of taxes or loss that reflects any tax obligation." The second excludes claims "[a]rising out of eminent domain, condemnation, inverse condemnation, temporary or permanent taking, adverse possession, or dedication by adverse use."

Safety also issued Genesee County a separate Commercial General Liability ("CGL Policy") to cover liability for bodily injury and medical expenses, property damage, and "personal and advertising injury."

C. Procedural History

Genesee County claimed coverage from Safety for Fox's and Puchlak's lawsuits, which Safety denied. Safety then filed a declaratory-judgment action in federal court against Genesee County, Fox, and Puchlak, seeking a ruling that, under its insurance policies, it owes no duty to defend Genesee County from the lawsuits or to indemnify it from any subsequent damages. Genesee County and Cherry counterclaimed, seeking both a declaration that they are covered under the policies and damages for a breach of contract based on Safety's refusal to defend them. The parties filed cross-motions for summary judgment, with Fox and Puchlak arguing separately that Safety lacked standing to sue them.

The district court granted two motions for summary judgment: Fox and Puchlak's motion against Safety, and Safety's motion against Genesee County. The court found no Article III case or controversy between Safety and Fox and Puchlak. The court acknowledged that much of the relevant caselaw suggests that, in coverage disputes, "the insurer typically has standing to pursue a declaration against the injured party." However, the court distinguished this case on the ground that, here, "the alleged wrongdoers are not the [County] Defendants but two nonparties—Gratiot County and St. Clair County." Fox and Puchlak had joined Genesee County in their lawsuits only for class-representation purposes. Noting the uncertainty of 1) whether Fox and Puchlak would prevail in their lawsuits and 2) what damages, if any, they could recover from Genesee County, the court found that no "substantial controversy" of "sufficient immediacy and reality" exists between Safety and Fox and Puchlak. Safety timely appealed.

The court also held that Safety owes Genesee County no duty to defend under either insurance policy. The court held that the CGL Policy does not cover the Fox and Puchlak lawsuits. The court also assumed that the PO&EPL Policy arguably covers the lawsuits and their indemnification but held that two of the policy's exclusions applied: one for claims arising out of tax collection, another for claims arising out of condemnation, inverse condemnation, or taking. Genesee County timely appealed.

II. ANALYSIS

This court reviews de novo a district court's grant of summary judgment.

Bondex Int'l, Inc. v. Hartford Accident & Indem. Co. , 667 F.3d 669, 676 (6th Cir. 2011). Summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A genuine dispute of material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The court does not weigh evidence but rather "view[s] [the evidence] in the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quoting United States v. Diebold, Inc. , 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962) (per curiam)). This standard does not change when the parties present cross-motions for summary judgment; we evaluate each motion on its own merits. Westfield Ins. Co. v. Tech Dry, Inc. , 336 F.3d 503, 506 (6th Cir. 2003).

Below, we address Fox and Puchlak's summary-judgment motion against Safety, then turn to Safety's summary-judgment motion against Genesee County.

A. Article III Case or Controversy

1. Legal Framework

The U.S. Constitution limits the jurisdiction of federal courts to "Cases" and "Controversies." U.S. Const. art. III, § 2. Federal courts cannot issue advisory opinions. Arnett v. Myers , 281 F.3d 552, 562 (6th Cir. 2002). Article III's case-or-controversy requirement allows federal courts to resolve concrete disputes, but prohibits them from passing "judgments on theoretical disputes that may or may not materialize." Saginaw County v. STAT Emergency Med. Servs., Inc. , 946 F.3d 951, 954 (6th Cir. 2020) (citing Steel Co. v. Citizens for a Better Env't , 523 U.S. 83, 101–03, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) ).

The Supreme Court has delineated these limits with a number of justiciability doctrines, including standing and ripeness. See Nat'l Rifle Ass'n of Am. v. Magaw , 132 F.3d 272, 279–80 (6th Cir. 1997). To have standing, plaintiffs "must allege (1) an injury in fact (2) that's traceable to the defendant's conduct and (3) that the courts can redress." Gerber v. Herskovitz , 14 F.4th 500, 505 (6th Cir. 2021) (citing Lujan v. Defs. of Wildlife , 504 U.S. 555, 559–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) ). Plaintiffs "must show an imminent or actual injury before [entering] the federal courts." STAT Emergency , 946 F.3d at 954. They "cannot sue simply to avoid a ‘possible future injury.’ " Id. at 954–55 (quoting Clapper v. Amnesty Int'l USA , 568 U.S. 398, 409, 133 S.Ct. 1138, 185 L.Ed.2d 264 (2013) ). Suits based solely on the "mere risk of future harm" cannot establish an injury sufficient for standing. See TransUnion LLC v. Ramirez , ––– U.S. ––––, 141 S. Ct. 2190, 2211, 210 L.Ed.2d 568 (2021). Moreover, a claim is not ripe if it turns on "contingent future events that may...