Auto-Owners Insurance v. Madison at Park West Property Owners Ass'n

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 11-1848
AUTO-OWNERS INSURANCE COMPANY,
Plaintiff – Appellant,
v.
MADISON AT PARK WEST PROPERTY OWNERS ASSOCIATION, INC.;
MADISON AT PARK WEST TARRAGON LLC, a South Carolina Limited
Liability Company; NORTHLAND MADISON AT PARK WEST LLC, a
South Carolina Limited Liability Company; NORTHLAND
PROPERTIES MANAGEMENT LLC, a Delaware Limited Liability
Company; NORTHLAND INVESTMENT CORPORATION, a Delaware
Corporation; ELIZABETH O'DONNELL; MARY ANN NEATON; JOHN
BUIEL, on behalf of themselves and others similarly
situated,
Defendants – Appellees.
Appeal from the United States District Court for the District of
South Carolina, at Charleston. Margaret B. Seymour, District
Judge. (2:09-cv-00802-MBS)
Argued: September 19, 2012 Decided: October 26, 2012
Before MOTZ, KING, and WYNN, Circuit Judges.
Dismissed by unpublished per curiam opinion.
ARGUED: Morgan Stuart Templeton, WALL TEMPLETON & HALDRUP, PA,
Charleston, South Carolina, for Appellant. Clayton B.
McCullough, MCCULLOUGH KHAN, LLC, Charleston, South Carolina;
Michael S. Seekings, LEATH, BOUCH & SEEKINGS, LLP, Charleston,
South Carolina, for Appellees. ON BRIEF: Taylor H. Stair, WALL
TEMPLETON & HALDRUP, PA, Charleston, South Carolina, for
Appellant. W. Jefferson Leath, Jr., LEATH, BOUCH & SEEKINGS,
LLP, Charleston, South Carolina, for Appellees Elizabeth
O'Donnell, Mary Ann Neaton, and John Buiel; Jamie A. Khan,
MCCULLOUGH KHAN, LLC, Charleston, South Carolina, for Appellees
Madison at Park West Property Owners Association, Inc., Madison
at Park West Tarragon LLC, Northland Madison at Park West LLC,
Northland Properties Management LLC, and Northland Investment
Corporation.
Unpublished opinions are not binding precedent in this circuit.
2
PER CURIAM:
In these declaratory judgment proceedings, the district
court ruled that the plaintiff, Auto-Owners Insurance Company
(“Auto-Owners”), is obliged to defend and indemnify three of the
defendants, Madison at Park West Property Owners Association,
Inc. (the “POA”), Madison at Park West Tarragon LLC
(“Tarragon”), and Northland Madison at Park West LLC (“Northland
Madison”), in an ongoing state action concerning the development
and maintenance of a condominium complex in Mount Pleasant,
South Carolina. See Auto-Owners Ins. Co. v. Madison at Park W.
Prop. Owners Ass’n, Inc., No. 2:09-cv-00802 (D.S.C. July 6,
2011) (the “Decision”). 1 Significantly, in rendering its
Decision, the court only “assume[d], without deciding,” a key
condition of coverage under the relevant Auto-Owners insurance
policies: “that an ‘occurrence’ caused ‘property damage’”
within the policies’ terms. See id. at 9. Consequently, the
court did not issue a final decision, and we are constrained to
dismiss this appeal for lack of jurisdiction.
1
The Decision is found at J.A. 770-86. (Citations herein
to “J.A. __” refer to the contents of the Joint Appendix filed
by the parties in this appeal.)
3
I.
By its Complaint of March 30, 2009, Auto-Owners invoked the
district court’s diversity jurisdiction under 28 U.S.C.
§ 1332(a) and sought a declaration pursuant to 28 U.S.C.
§ 2201(a) that three commercial general liability policies
issued by it to the POA “do not provide liability insurance
coverage in the underlying lawsuit.” See Complaint ¶¶ 5-7. 2 The
“underlying lawsuit” referenced in Auto-Owners’s Complaint is a
class action brought in the Court of Common Pleas for Charleston
County, South Carolina, by Madison at Park West condominium
owners Elizabeth O’Donnell, Mary Ann Neaton, and John Buiel
against the POA, Tarragon, Northland Madison, Northland
Properties Management LLC, and Northland Investment Corporation.
The condominium owners have alleged in the underlying lawsuit
that, inter alia, they are entitled to monetary damages for
water intrusion resulting from the defective development and
maintenance of the condominium complex. Auto-Owners named all
parties to the underlying lawsuit, which remains pending, as
defendants in these declaratory judgment proceedings.
Auto-Owners’s Complaint asserted, among other theories of
non-coverage, that “an ‘occurrence’ and ‘property damage’ may
2
The Complaint, including its exhibits, is found at J.A.
15-187.
4
not be present as defined under the policies.” See Complaint
¶ 7; see also id. ¶ 13 (reciting common policy provision that
“[t]his insurance applies to . . . ‘property damages’ only if
[the] ‘property damage’ is caused by an ‘occurrence’ . . .
during the policy period”). On October 23, 2009, Auto-Owners
filed a motion for partial summary judgment, without contending
that there was no covered “occurrence” and resulting “property
damage”; rather, Auto-Owners pursued other non-coverage
theories. In reply to the defendants’ joint opposition to Auto-
Owners’s summary judgment motion, however, Auto-Owners argued
that the defendants bore the burden of proving “that ‘property
damage’ . . . occur[red] within the policy period,” and had
“failed to set forth any evidence that ‘property damage’
occurred within any policy period.” J.A. 486. On April 23,
2010, the district court denied Auto-Owners’s motion, as well as
a cross-motion for summary judgment that had been filed by the
condominium-owner defendants, on the ground that material facts
were genuinely disputed.
During closing arguments at a subsequent bench trial on
July 27, 2010, Auto-Owners elaborated on its stance that the
defendants were required, but had failed, to prove a covered
“occurrence” and “property damage.” See J.A. 736-38. For
example, Auto-Owners argued to the district court that
5
you have not heard any evidence, you have not heard
any testimony, you have not received any stipulation
of fact, you have not seen any exhibit that in fact
concludes that an occurrence took place and that
property damages occurred during the policy period.
You have received no evidence of that. So, we would
respectfully submit [that the defendants] have not met
their burden of proof from an insured’s standpoint to
establish those things.
Id. at 737-38. In response, the defendants maintained that they
had not addressed the “occurrence” and “property damage” issue
because the closing arguments were the first time Auto-Owners
had raised that issue. See id. at 766.
By its Decision of July 6, 2011, encompassing its “Findings
of Fact and Conclusions of Law,” the district court ruled that
Auto-Owners is obliged to defend and indemnify the POA,
Tarragon, and Northland Madison in the underlying lawsuit. In
so doing, the court acknowledged Auto-Owners’s argument that the
defendants failed to produce evidence “that would support a
finding that there had been an ‘occurrence’ that caused
‘property damage,’” but determined that such matter was “not
properly before the Court” because it “was never discussed in
Auto-Owners’ briefing.” Decision 9 n.3. The court deemed it
appropriate, “[f]or the purposes of this declaratory judgment
action, [to] assume[], without deciding, that an ‘occurrence’
caused ‘property damage’ within the Policy period and that Auto-
6
Owners could not properly deny coverage on that basis.” Id. at
9. 3
The district court noted that its Decision “concludes this
action” and directed the Clerk of Court “to close the case.”
See Decision 17. On July 7, 2011, the court entered a Judgment
reflecting that the “[d]efendants are entitled to coverage under
the general liability policies provided by [Auto-Owners]
assuming that an occurrence that caused property damage
triggered coverage as discussed in the Findings of Fact and
Conclusions of Law entered by the court on July 6, 2011.” See
Auto-Owners Ins. Co. v. Madison at Park W. Prop. Owners Ass’n,
Inc., No. 2:09-cv-00802 (D.S.C. July 7, 2011), ECF No. 96
(emphasis added).
Auto-Owners timely noted this appeal, and the parties
expressed agreement in their subsequent briefs that we possess
appellate jurisdiction pursuant to 28 U.S.C. § 1291 (providing,
in pertinent part, that “[t]he courts of appeals . . . shall
have jurisdiction of appeals from all final decisions of the
3
Proceeding on the assumption that an “occurrence” caused
“property damage,” the district court assessed — and largely
rejected — Auto-Owners’s assertion of various coverage
exclusions and limitations. See Decision 9-17. The court also
found that, because Tarragon was identified as an additional
insured in the Auto-Owners policies and had simply changed its
name to Northland Madison during the coverage period, Northland
Madison also is an additional insured. Id. at 7-9, 17.
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district courts of the United States, . . . except where a
direct review may be had in the Supreme Court”). Although the
briefs addressed the district court’s mere assumption of an
“occurrence” and resulting “property damage” — with Auto-Owners
claiming that the court erred in not resolving that issue, and
the defendants responding that the issue could not be properly
decided absent a judgment in the underlying lawsuit — neither
side acknowledged the potential jurisdictional ramifications.
Thus, we advised the parties to be prepared to answer questions
at oral argument as to the finality of the district court’s
Decision and existence of jurisdiction for this appeal, and we
directed them to file post-argument supplemental briefs
expounding on their jurisdictional arguments. The parties have
continued to maintain, though not convincingly, that this appeal
is properly before us.
II.
We “are obliged to inquire into jurisdiction sua sponte if
there is doubt as to its existence.” Dickens v. Aetna Life Ins.
Co., 677 F.3d 228, 230 (4th Cir. 2012) (citing Mt. Healthy City
Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 278 (1977)). In
ascertaining “whether we possess jurisdiction of an appeal,
. . . we assess [the issue] de novo.” United States v.
8
Jefferson, 546 F.3d 300, 308 (4th Cir. 2008) (citing Bender v.
Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986)).
A.
Of course, “[j]urisdiction in a court of appeals is
generally reserved for the ‘final decisions of the district
courts of the United States.’” Dickens, 677 F.3d at 231(quoting 28 U.S.C. § 1291). A “final decision” under § 1291 has
been described as one that “ends the litigation on the merits
and leaves nothing for the court to do but execute the
judgment.” Catlin v. United States, 324 U.S. 229, 233 (1945).
Section 1291’s finality requirement serves, inter alia, “to
eliminate the universally disfavored pursuit of ‘piecemeal’
appeals” and “promote[] the interests of judicial efficiency.”
Penn-Am. Ins. Co. v. Mapp, 521 F.3d 290, 294-95 (4th Cir. 2008).
Mapp involved a declaratory judgment action in which the
district court decided that the insurer (Penn-America) had a
duty to defend its insured in pending state litigation, but
deemed it necessary to await the state court’s judgment before
ruling on whether Penn-America also owed indemnification. See
521 F.3d at 295. The district court then specified that the
declaratory judgment action “would be ‘dismissed from [the
court’s] active docket [but] may be reinstated upon proper
motion by any party.’” Id. (first alteration in original)
(quoting Penn-Am. Ins. Co. v. Mapp, 461 F. Supp. 2d 442, 459
9
(E.D. Va. 2006)). Rather than pausing for the conclusion of the
state litigation and a subsequent ruling by the district court
on the indemnification question, Penn-America immediately noted
an appeal from the court’s duty-to-defend decision. See id. at
294-95. In assessing whether our Court possessed § 1291
jurisdiction, “we recognized that the removal of a case from a
[district] court’s ‘active docket’ is the functional equivalent
of an administrative closing, which does not end a case on its
merits or make further litigation improbable.” Id. at 295.
Because the district court thus had not rendered a final
decision, we concluded that we lacked jurisdiction under § 1291
to hear Penn-America’s appeal. Id. at 296.
Here, by “assum[ing], without deciding, that an
‘occurrence’ caused ‘property damage,’” Decision 9, the district
court acknowledged that the presence of an “occurrence” and
“property damage” was — like the existence of the duty to
indemnify in Mapp — a live issue being left unresolved.
Accordingly, notwithstanding the court’s purported Judgment, its
Decision was not a final one, i.e., a decision “‘which puts an
end to the suit, deciding all the points in litigation between
the parties, leaving nothing to be judicially determined, with
nothing remaining to be done, but to enforce by execution what
has been determined.’” See Clinton Foods, Inc. v. United
States, 188 F.2d 289, 291 (4th Cir. 1951) (quoting Cox v.
10
Graves, Knight & Graves, Inc., 55 F.2d 217, 218 (4th Cir.
1932)). In these circumstances, we are plainly devoid of
jurisdiction under § 1291 to entertain this appeal.
B.
As noted above, the parties have unsuccessfully endeavored
to persuade us that this appeal is legitimately before us.
Nonetheless, a couple of the parties’ contentions merit brief
discussion.
First, both sides assert that, having determined that the
“occurrence” and “property damage” issue was disputed but not
properly before it, the district court was entitled to limit
these declaratory judgment proceedings to other coverage
questions — even though its Decision could later be nullified by
a finding of no covered “occurrence” or “property damage.” The
parties’ position is irreconcilable with the express language of
the Declaratory Judgment Act, which authorizes relief only “[i]n
a case of actual controversy.” See 28 U.S.C. § 2201(a). That
is, “the dispute must be a ‘case or controversy’ within the
confines of Article III of the United States Constitution.”
White v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 913 F.2d
165, 167 (4th Cir. 1990). To qualify, “‘[i]t must be a real and
substantial controversy admitting of specific relief through a
decree of a conclusive character, as distinguished from an
opinion advising what the law would be upon a hypothetical state
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of facts.’” Id. (quoting Aetna Life Ins. Co. of Hartford, Conn.
v. Haworth, 300 U.S. 227, 241 (1937)); see also MedImmune, Inc.
v. Genentech, Inc., 549 U.S. 118, 127 n.7 (2007) (“[A] litigant
may not use a declaratory-judgment action to obtain piecemeal
adjudication of defenses that would not finally and conclusively
resolve the underlying controversy.” (citing Calderon v. Ashmus,
523 U.S. 740, 749 (1998))). Thus, the district court was
powerless to complete these declaratory judgment proceedings
without somehow resolving the “occurrence” and “property damage”
issue. 4
Next, the defendants maintain that we may review the
district court’s Decision under the collateral order doctrine
and Federal Rule of Civil Procedure 54(b). See Cohen v.
Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949)
(recognizing the applicability of the collateral order doctrine
to “that small class [of decisions] which finally determine
claims of right separable from, and collateral to, rights
4
To be clear, the defect in the district court’s Decision
is its mere assumption that an “occurrence” caused “property
damage” within the relevant coverage period. The deficiency is
not necessarily the failure to await a judgment in the
underlying state litigation, assuming that the “occurrence” and
“property damage” issue could be decided absent such a judgment.
See White, 913 F.2d at 168 (recognizing that “a controversy
[may] exist[] between an insurer and a person injured by the
insured even though the injured person ha[s] not yet obtained a
judgment against the insured” (citing Md. Cas. Co. v. Pac. Coal
& Oil Co., 312 U.S. 270, 274 (1941))).
12
asserted in the action, too important to be denied review and
too independent of the cause itself to require that appellate
consideration be deferred until the whole case is adjudicated”);
Fed. R. Civ. P. 54(b) (providing that, “[w]hen an action
presents more than one claim for relief[,] or when multiple
parties are involved, the court may direct entry of a final
judgment as to one or more, but fewer than all, claim or parties
only if the court expressly determines that there is no just
reason for delay”). Those alternative jurisdictional arguments
need not long detain us. The collateral order doctrine does not
apply because, inter alia, no claim addressed in the Decision
will be effectively unreviewable on appeal from a true final
judgment in this case. See Mapp, 521 F.3d at 296-98. Moreover,
“a Rule 54(b) determination was neither sought by [Auto-Owners]
nor independently made by the district court.” See id. at 296(describing certification procedure for pursuing Rule 54(b)
appeal).
C.
Absent jurisdiction, we must dismiss this appeal. We
recognize, however, that the district court has numerous options
for handling these declaratory judgment proceedings going
forward. For instance, the court may resolve — on the merits or
procedural grounds, with or without a stay pending the state
court’s judgment in the underlying litigation — the “occurrence”
13
and “property damage” issue. Or, the court may determine that
this matter is nonjusticiable for lack of an Article III case or
controversy. Rather than express our views on any such
possibilities, we allow the district court to freely exercise
its good judgment in the first instance.
III.
Pursuant to the foregoing, we dismiss this appeal for lack
of jurisdiction.
DISMISSED
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