Travelers Indem. Co. v. Dingwell

• Decision Date: 27 July 1988
• Docket Number: Civ. No. 87-0288-P.
• Citation: 691 F. Supp. 503
• Parties: The TRAVELERS INDEMNITY COMPANY and Charter Oak Fire Insurance Company, Plaintiffs, v. Richard A. DINGWELL d/b/a McKin Company, American Policyholders Insurance Company, National Union Fire Insurance Company of Pittsburgh, Pa., and Chicago Insurance Company, Defendants.
• Court: U.S. District Court — District of Maine

691 F. Supp. 503

The TRAVELERS INDEMNITY COMPANY and Charter Oak Fire Insurance Company, Plaintiffs, v. Richard A. DINGWELL d/b/a McKin Company, American Policyholders Insurance Company, National Union Fire Insurance Company of Pittsburgh, Pa., and Chicago Insurance Company, Defendants.

Civ. No. 87-0288-P.

United States District Court, D. Maine.

July 27, 1988.

John J. O'Leary, Catherine R. Connors, Pierce, Atwood, Scribner, Allen, Smith & Lancaster, Portland, Me., Geraldine Mack, Conrad K. Harper, Simpson, Thacher & Bartlett, New York City, for plaintiffs.

Peter S. Plumb, Portland, Me., for defendant Chicago Ins.

Richard P. Romeo, Smith & Elliott, Saco, Me., for defendant Dingwell.

Robert F. Hanson, Norman & Hanson, Portland, Me., Darrell M. Seife, Siff, Rosen & Parker, New York City, for American Policyholders.

Emily Dickinson, Portland, Me., Rosanna Sattler, Posternak, Blankstein & Lund, Boston, Mass., for National Union Fire.

MEMORANDUM OF DECISION AND ORDER GRANTING DEFENDANT DINGWELL'S MOTION TO DISMISS

GENE CARTER, District Judge.

This matter comes before the Court on Defendant Dingwell's motion to dismiss for failure to join indispensable parties. For the reasons set forth below, Defendant's motion shall be granted.

I. INTRODUCTION

Defendant Richard Dingwell, d/b/a The McKin Company ("Dingwell"), owned and operated a landfill site in Gray, Maine, which is now listed by the United States Environmental Protection Agency as a "Superfund" site pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. § 9601, et seq. Plaintiffs Travelers Indemnity Company and Charter Oak Fire Insurance Company ("Travelers") issued numerous comprehensive general liability insurance policies to Dingwell between 1963 and 1978. The third interested group is comprised of fifteen waste generators and transporters ("the McKin Generator Group" or "the Group"), who have paid for virtually all of the government-mandated environmental cleanup at the site.

In 1977, the Town of Gray ordered Dingwell to cease operations at the McKin site after it discovered that hazardous substances had contaminated groundwater and aquifers throughout the area. Travelers agreed to provide a defense to Dingwell, but expressly reserved all rights to deny indemnification for any and all damages for which Dingwell may be held liable. In light of Travelers' reservation of rights, Dingwell began to negotiate with the Generator Group about apportionment of the cleanup costs.¹ Travelers was aware of the negotiations, and communicated extensively with counsel for the Group, defense counsel for Dingwell, personal counsel for Dingwell, and counsel for Dingwell's excess insurance carriers as to whether Dingwell should enter into the proposed Settlement Agreement. Affidavit of John O'Leary, Jr. at 3-4. Dingwell and the Group eventually executed the Settlement Agreement, under which Dingwell would assume sixty-five percent of the McKin site cleanup costs and consent to the entry of a judgment ordering him to comply with the terms of the Agreement. Dingwell would also assign to the Group whatever rights he might have to seek damages from his insurers for their failure to indemnify him for his cleanup liabilities. In turn, the Group would agree to compromise its claims for indemnity against Dingwell, and seek satisfaction of Dingwell's obligations solely from the assets that might be available under his insurance policies.² Travelers objected to the proposed settlement.

The Group and Dingwell planned to make the Agreement effective as of September 30. By September 24, 1987, Travelers knew that the execution of the Agreement was imminent, and filed this declaratory judgment action on September 28 against Dingwell and the excess insurance carriers.

The first twenty-one claims asserted in Travelers' Complaint are based upon state law and seek a declaration that Travelers is not liable to indemnify Dingwell for the cleanup costs. In the twenty-third claim, Travelers seeks an order enjoining Dingwell from consenting to the entry of a judgment against him under the terms of the proposed Settlement Agreement without first giving Travelers reasonable notice and an opportunity to be heard. Simultaneously, Travelers filed a motion for a preliminary injunction. With Defendants' consent, the Court granted the motion for preliminary injunction on September 30, and ordered that Dingwell, until further order of the Court, provide adequate notice to Travelers of any action or motion seeking entry of default judgment against Dingwell relating to the McKin site.

Travelers' twenty-second claim states that "Travelers and Charter Oak are informed and believe that by October 1, 1987, Dingwell will have entered into a settlement agreement with" the McKin Generator Group. Complaint ¶ 76. The Complaint goes on to describe the Agreement, and notes that "Travelers and Charter Oak have not consented to the settlement agreement between Dingwell and the Generator Group because the settlement is unreasonable." Id. Travelers claims that Dingwell owed his insurers the duty to cooperate and not to enter into any settlement without first obtaining Travelers' consent, and that

the settlement agreement between Dingwell and the Generator Group and/or performance of the covenants therein constitute a material breach by Dingwell of one or more of the duties and obligations owed by Dingwell to Travelers and Charter Oak. Travelers and Charter Oak are therefore entitled to a declaration that they are not obligated to indemnify Dingwell with respect to any payments, obligations, expenses, damages, judgments, claims and/or suits addressed in the settlement agreement between Dingwell and the Generator Group.

78. The insurance policies issued by Travelers and/or Charter Oak to Dingwell provide coverage for sums which Dingwell becomes legally obligated to pay as damages because of bodily injury or property damage caused by an occurrence. Any payments, obligations, expenses, damages and/or judgments addressed in Dingwell's settlement agreement with the Generator Group do not constitute sums which Dingwell is legally obligated to pay within the meaning of the policies. Travelers and Charter Oak are therefore entitled to a declaration that they are not obligated to indemnify Dingwell with respect to any such payments, obligations, expenses, damages and/or judgments.

Id. at ¶¶ 77-78. The Agreement, when fully executed, purported to become effective between Dingwell and the Group on September 30.

Dingwell subsequently filed this motion to dismiss pursuant to Rule 12(b)(1) and (7) of the Federal Rules of Civil Procedure. The Group filed a memorandum as amici curiae in support of Dingwell's motion to dismiss. Counsel for all three parties argued their positions before the Court on June 27.

II. DINGWELL'S MOTION

Dingwell contends that Travelers' allegations of federal question jurisdiction, which are based solely upon the Complaint's twenty-third claim, are flawed because there remains no justiciable case or controversy. If Dingwell is correct, then the Court's jurisdiction is based exclusively on diversity of citizenship among the parties. Dingwell also asserts that while members of the Group should be joined, under Rule 19(a) joinder of the Group is not feasible because one of the members of the Group, Champion International Corporation, maintains its principal place of business in Connecticut, the same state in which Travelers is incorporated and has its principal place of business.³ Dingwell asserts that Group members are indispensable parties and the Court should dismiss the case pursuant to the test set forth in Rule 19(b).

III. JURISDICTION

In its memorandum supporting Dingwell's motion, the Group asserts correctly that Travelers' basis for federal claim jurisdiction is moot. Travelers' only assertion of federal claim jurisdiction arises out of its twenty-third claim, which contends that Travelers' Fifth and Fourteenth Amendment rights will be irreparably harmed if the Court enters a consent judgment against Dingwell without first giving Travelers reasonable notice and an opportunity to be heard with respect to the consent judgment.⁴ Complaint, ¶ 82. Travelers sought a "judgment enjoining Dingwell from consenting to the entry of such a default judgment against him without first giving Travelers ... reasonable notice and opportunity to be heard with respect to the commencement of such claim, suit or proceeding, and the proposed and actual entry of such default judgment." Complaint, ¶ 84. Notably, Travelers did not request notice and an opportunity to be heard prior to the Group's action pursuant to Maine's reach and apply statute. Travelers received from this Court an order enjoining Dingwell from entering into a consent judgment without first giving Travelers notice and an opportunity to be heard in opposition to the proposed consent judgment. Dingwell complied with the order by notifying Travelers of the Settlement Agreement and the proposed judgment, and Travelers was provided with a hearing on the proposed consent judgment. Quite simply, the Court has provided Travelers with everything it requested. The Court can grant no further relief pursuant to this count. Thus, there remains no justiciable case or controversy, and the claim is now moot. See Steffel v. Thompson, 415 U.S. 452, 459 n. 10, 94 S.Ct. 1209, 1216 n. 10, 39 L.Ed.2d 505 (1974).

Since the twenty-third claim is moot, there remains no basis for federal question jurisdiction. The twenty-two remaining claims are based upon state law, and the Court's jurisdiction is grounded exclusively upon diversity. 28 U.S.C. § 1332.

IV. JOINDER

The Group argues that the case must be dismissed because of Travelers' failure to join Group members as parties. Rule 19 provides for the joinder of parties to a suit where those parties are needed for a just adjudication. Acton Co., Inc. of...