Sevigny v. United States, Civil No. 13-cv-401-PB

CourtUnited States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of New Hampshire
Writing for the CourtPaul Barbadoro
PartiesRoger A. Sevigny, New Hampshire Insurance Commissioner v. United States, et al.
Decision Date21 July 2014
Docket NumberOpinion No. 2014 DNH 157,Civil No. 13-cv-401-PB

Roger A. Sevigny, New Hampshire Insurance Commissioner
United States, et al.

Civil No. 13-cv-401-PB
Opinion No. 2014 DNH 157


July 21, 2014


This case arises from efforts taken by the New Hampshire Insurance Commissioner, as liquidator of the Home Insurance Company, to disburse assets from Home's estate to its creditors. The United States notified the Commissioner that it may have claims against Home that are "not currently known" but nonetheless must be paid prior to any other distributions from Home's estate pursuant to the Federal Priority Act. See 31 U.S.C. § 3713. The Commissioner seeks (1) a declaratory judgment that the United States' claims are not subject to § 3713, and (2) an order compelling the United States to respond to his earlier request that it waive any claims it may have against Home. The United States moves to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). I grant the motion in part and deny it in part.

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On June 13, 2003, the Merrimack County Superior Court declared that the Home Insurance Company was insolvent, appointed the New Hampshire Insurance Commissioner as its liquidator, and "directed [the Commissioner] to administer and make payments on all claims against The Home estate filed with the Liquidator . . . in accordance with New Hampshire's priority statute, RSA 402-C:44." In re Rehabilitation of The Home Ins. Co., No. 03-E-0106, slip op. at 2, 7 (N.H. Super. Ct. June 13, 2003). New Hampshire Revised Statutes section 402-C:44 specifies that administration costs and policy-related claims "shall be paid in full or adequate funds retained for the payment before" the federal government and other lower priority claimants "receive any payment." The court set June 13, 2004 as the deadline for third parties to file claims against Home. The Home Ins. Co., No. 03-E-0106, at 8.

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On October 23, 2003, the court approved the Commissioner's request to distribute estate assets to certain insurance guaranty associations. The Commissioner subsequently made nine distributions to guaranty associations totaling $238 million. These distributions were subject to a "clawback" agreement in which the guaranty associations would return the assets in the event they were required to pay higher-priority claims. See N.H. Rev. Stat. Ann. § 402-C:29(III)(b)(4). The court's approval of the initial six distributions was made contingent on the Commissioner's receipt of a waiver of federal priority claims from the United States to ensure that the Commissioner would not be exposed to potential personal liability for the distributions. See 31 U.S.C. § 3713(b) ("A representative of . . . an estate . . . paying any part of a debt of the . . . estate before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government."). The United States provided a limited waiver with respect to the first six distributions, but refused to waive potential federal priority claims for the final three distributions. Nevertheless, relying on the protection afforded by the clawback agreements, the Commissioner sought and obtained the court's approval to make the final three distributions.

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On June 11, 2004,2 the Commissioner received the following "protective" proof of claim from the United States:

The United States of America, on behalf of the U.S. Environmental Protection Agency, the U.S. Department of Interior, the National Oceanic and Atmospheric Administration of the Department of Commerce, the Department of Defense, and any other agencies that may have a claims [sic], files this protective Proof of Claim as it relates to any claims held by these agencies that are not currently known or are not currently known to relate to the Home Insurance Company. If or when the United States learns of actual claims held by these agencies, the United States will file an Amended Proof of Claim relating to the specific actual claim. The United States reserves the right to supplement this Proof of Claim.

Doc. No. 10-1. The proof of claim also notes that "[t]he Federal Priority Act . . . provides the United States with certain rights of priority that may be applicable." Id.

After nearly nine years administering the Home estate, the Commissioner sought the court's approval on February 11, 2012 to make an interim distribution of approximately $194.1 million to partially satisfy certain court-approved, policy-related claims. Doc. No. 1-1; see N.H. Rev. Stat. Ann. § 402-C:46(I) ("Under the direction of the court, the liquidator shall pay dividends in a

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manner that will assure the proper recognition of priorities and a reasonable balance between the expeditious completion of the liquidation and the protection of unliquidated and undetermined claims . . . ."). In determining the amount of the proposed distribution, the Commissioner considered the estate's available assets, projected administration costs over the life of the estate, and a conservative estimate of Home's as yet undetermined policy-related obligations. On March 13, 2012, the court approved the interim distribution, which is not subject to clawback but is contingent on the Commissioner's receipt of a waiver of federal priority claims.3

Accordingly, the Commissioner sought a waiver of claims from the United States on April 12, 2012. Doc. No. 1-2. The United States requested and received additional information from the Commissioner in July 2012 and March 2013, but has not yet acted on the Commissioner's request. In its memorandum supporting the motion to dismiss, the United States notes that the Environmental Protection Agency has identified 7000 possible claims against Home; it asserts that it anticipates providing Home with a complete list of claims from all federal agencies by December 2014. Doc. No. 8.

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"Under Fed. R. Civ. P. 12(b)(1), a party may contest the court's subject matter jurisdiction by challenging the allegations in the complaint as insufficient on their face or by questioning the accuracy of those allegations." Hernández-Santiago v. Ecolab, Inc., 397 F.3d 30, 33 (1st Cir. 2005) (per curiam) (citing Valentin v. Hosp. Bella Vista, 254 F.3d 358, 363 (1st Cir. 2001)). Because the United States has pursued the former path here, I "must credit the [Commissioner's] well-pleaded factual allegations[,] . . . draw all reasonable inferences from them in [the Commissioner's] favor, and dispose of the challenge accordingly." Sanchez ex rel. D.R.-S. v. United States, 671 F.3d 86, 106 (1st Cir. 2012) (quoting Valentin, 254 F.3d at 363), cert. denied, 133 S. Ct. 1631 (2013).

"This standard is the same as is applied on a Rule 12(b)(6) motion," id. at 107 (citing McCloskey v. Mueller, 446 F.3d 262, 266 (1st Cir. 2006)), in which a plaintiff must make factual allegations sufficient to "state a claim to relief that is plausible on its face." See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it pleads

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"factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. at 678 (citation omitted).

In deciding a Rule 12(b)(6) motion, I employ a two-step approach. See Ocasio-Hernández v. Fortuño-Burset, 640 F.3d 1, 12 (1st Cir. 2011). First, I screen the complaint for statements that "merely offer legal conclusions couched as fact or threadbare recitals of the elements of a cause of action." Id. (alterations and internal quotation marks omitted). A claim consisting of little more than "allegations that merely parrot the elements of the cause of action" may be dismissed. Id. Second, I credit as true all non-conclusory factual allegations and the reasonable inferences drawn from those allegations, and then determine if the claim is plausible. Id. The plausibility requirement "simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence" of illegal conduct. Twombly, 550 U.S. at 556. The "make-or-break standard" is that those allegations and inferences, taken as true, "must state a plausible, not a merely conceivable, case

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for relief." Sepúlveda-Villarini v. Dep't of Educ. of P.R., 628 F.3d 25, 29 (1st Cir. 2010); see Twombly, 550 U.S. at 555 ("Factual allegations must be enough to raise a right to relief above the speculative level . . . .").


I first consider the United States' arguments to dismiss Count I, which seeks a declaratory judgment regarding the applicability of the Federal Priority Act to the claims referenced in the United States' protective proof of claim. I then turn to Count II, which seeks an order compelling the United States to respond to the Commissioner's waiver request.

A. Count I: Declaratory Judgment

The United States seeks dismissal of Count I on three grounds, all of which are jurisdictional: (1) lack of standing; (1) lack of a federal question; and (3) lack of a...

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