United States District Court,

N.D. Oklahoma.

Eric FORAKER, Plaintiff,

v.

Benjamin Lee REEVES, Harmon Transport, Inc., Trailiner Corporation, Does I through X, and Roes I through X, inclusive, Defendants.

 

No. 11–CV–0759–CVE–TLW.

April 11, 2012.

 

Jason Charles Messenger, Richardson Richardson BoudreauxKeesling PLLC, Tulsa, OK, Peter S. Christiansen, Richard E. Tanasi, Christiansen Law Office, Puneet K. Garg, Gordon Silver LLP, David A. Francis, David Francis Law Firm, Las Vegas, NV, for Plaintiff.

 

 

Jeremy Kalon Ward, Joseph R. Farris, Feldman Franden Woodard & Farris, Tulsa, OK, for Defendants.

 

OPINION AND ORDER

CLAIRE V. EAGAN, District Judge.

Now before the Court is Plaintiff’s Motion to Amend Complaint (Dkt. # 53). Plaintiff Eric Foraker requests leave to file an amended complaint clarifying the damages he is seeking and his jurisdictional allegations, and he also seeks to add defendants Harmon Transport, Inc.’s (Harmon) and Trailiner Corporation’s (Trailiner) liability insurer, Carolina Casualty Insurance Company (Carolina), as a party. Defendants do not oppose plaintiff’s request to amend his jurisdictional allegations or to clarify that he is seeking compensatory damages, but they do object to plaintiff’s request to seek punitive damages. They also object to plaintiff’s request to add Carolina as a party.

 

On or about June 25, 2009, Foraker alleges that he was involved in an automobile accident with a tractor-trailer driven by Benjamin Lee Reeves, and he claims that Reeves was employed by Harmon and/or Trailiner at the time of the accident. Dkt. # 1, at 6. The accident occurred on Interstate 44 in the state of Oklahoma. Foraker alleges that he suffered personal injuries from the accident, and he seeks damages in excess of $75,000. Foraker is a citizen of Nevada, and Reeves is a citizen of Missouri. Defendants Harmon and Trailiner are incorporated and have their principal places of business in Missouri. Foraker filed this case in the United States District Court for the District of Nevada, and each defendant filed a motion to dismiss on the grounds that they were not subject to personal jurisdiction in Nevada and venue was improper in the District of Nevada. Dkt.8, 12, 20. The court granted defendants’ motions and, instead of dismissing plaintiff’s claims, it transferred the case to the United States District Court for the Northern District of Oklahoma.

 

The Court entered a scheduling order and, inter alia, set a deadline of March 31, 2012 for the parties to file motions to amend pleadings or join additional parties. On March 30, 2012, plaintiff filed a motion to amend seeking to “clarify and further plead that actual, compensatory and punitive damages are sought …” and to remove references to the state of Nevada or the District of Nevada. Dkt. # 53, at 2. Plaintiff does not seek to add claims against the existing parties, but he does request leave to add Carolina as a party. Defendants argue that plaintiff’s factual allegations are not sufficient to show that punitive damages could be awarded, and plaintiff should not be permitted to file an amended complaint seeking punitive damages. Dkt. # 55, at 13–15. They also argue that Reeves was operating as a Trailiner employee on the day of the accident, and plaintiff may not maintain a direct action against Trailiner’s insurance carrier under Oklahoma law. Id. at 5–12.

 

Under Fed.R.Civ.P. 15(a)(2), after the opposing party has served a responsive pleading, “a party may amend its pleadings only with the opposing party’s written consent or the court’s leave.” Minter v. Prime Equipment Co., 451 F.3d 1196, 1204 (10th Cir.2006). The decision to grant leave to amend is within the discretion of the district court but, when leave is sought, it should be “freely given when justice so requires.” Bradley v.Val-Majias, 379 F.3d 892, 900–91 (10th Cir.2004). Leave to amend may be denied if the proposed amendment would be futile and would not survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6). Jefferson County Sch. Dist. No. R–1 v. Moody’s Investor’s Services, Inc., 175 F.3d 848, 859 (10th Cir.1999). Denial of a motion to amend may also be appropriate if the moving party unduly delayed when seeking leave to amend and has no adequate explanation for the delay.   Minter, 451 F.3d at 1206. A motion to amend is subject to denial when the “party seeking amendment knows or should have known of the facts upon which the proposed amendment is based but fails to include them in the original complaint….” Frank v. U.S. West, Inc., 3 F.3d 1357, 1366 (10th Cir.1993) (quoting Las Vegas Ice & Cold Storage Co. v. Far West Bank, 893 F.2d 1182, 1185 (10th Cir.1990)).

 

Plaintiff requests leave to add Carolina as a party because Oklahoma law allows for the joinder of a motor carrier’s liability insurer in the same case in which the motor carrier’s liability to the plaintiff is determined. The Oklahoma Motor Carrier Act of 1995 provides in relevant part:

 

A. No license shall be issued by the Commission to any carrier until after the carrier shall have filed with the Commission a liability insurance policy or bond covering public liability and property damage, issued by some insurance or bonding company or insurance carrier authorized pursuant to this section and which has complied with all of the requirements of the Commission, which bond or policy shall be approved by the Commission, and shall be in a sum and amount as fixed by a proper order of the Commission; and the liability and property damage insurance policy or bond shall bind the obligor thereunder to make compensation for injuries to, or death of, persons, and loss or damage to property, resulting from the operation of any carrier for which the carrier is legally liable. A copy of the policy or bond shall be filed with the Commission, and, after judgment against the carrier for any damage, the injured party may maintain an action upon the policy or bond to recover the same, and shall be a proper party to maintain such action.

 

OKLA. STAT. tit. 47, § 230.30. The Oklahoma Supreme Court interpreted a prior version of this statute, OKLA. STAT. tit. 47, § 169, to allow a direct action against a motor carrier’s liability insurer, and the language of § 230.30 is substantially similar to the former § 169. See Oklahoma Transp. Co. v. Claiborn, 434 P.2d 299 (Okla.1967); All American Bus Lines v. Saxon, 172 P.2d 424 (Okla.1946); Enders v. Longmire, 67 P.2d 12 (Okla.1937); Jacobsen v. Howard, 23 P.2d 185 (Okla.1933). To bring a direct claim against a motor carrier’s insurer, a plaintiff must allege that: “(1) he suffered injury; (2) the injury occurred by operation of a motor carrier; and (3) the motor carrier was required to be and was in fact insured pursuant to § 230.30.” Mize v. Liberty Mut. Ins. Co., 393 F.Supp.2d 1223, 1226 (W.D.Okla.2005).

 

Defendants do not dispute that a direct action against a motor carrier’s liability insurer is appropriate in some instances, and they are not asking the Court to disregard well-settled Oklahoma law. Instead, Trailiner argues that Reeves was acting in his capacity as Trailiner’s employee, and Trailiner does not have a motor carrier license issued by the Oklahoma Corporation Commission. Trailiner is an interstate motor carrier registered in the state of Missouri and, under the Interstate Motor Carrier Single State Registration regulations promulgated by the federal government, Trailiner was not required to register in any other state to operate an interstate motor carrier business. Dkt. # 55, at 8–10. Plaintiff responds that he should permitted to join Carolina as a party and conduct discovery to test defendants’ assertions about Trailiner’s state of registration. Dkt. # 56, at 7.

 

In Fierro v. Lincoln General Insurance Company, 217 P.3d 158 (Okla.Civ.App.2009), the Oklahoma Court of Civil Appeals held that a direct action against a motor carrier’s liability insurer is not permitted when the motor carrier is licensed or registered in a state other than Oklahoma pursuant to the Interstate Motor Carrier Single State Registration requirements. Elias Fierro alleged that he was involved in an automobile accident with a vehicle owned by German Diaz d/b/a GD Transport, Inc. (GD). GD was an interstate motor carrier and it was insured by Lincoln General Insurance Company (Lincoln General) and, pursuant to the Interstate Motor Carrier Single State Registration requirements, GD was registered in the state of California. Id. at 159. In 1995, Oklahoma enacted the Motor Carrier Act of 1995 and revoked all existing intrastate certificates issued to motor carriers by the Oklahoma Corporation Commission. Id. at 160. Under OKLA. STAT. tit. 47, § 230.22, Oklahoma law governing motor carriers “shall not be construed to interfere with the exercise by agencies of the government of the United States of its power of regulation of interstate commerce.” Oklahoma participates in the single state registration system and motor carriers may operate within Oklahoma if they file evidence of insurance in their home state. Id. As stated in Daigle v. Hamilton, 782 P.2d 1379 (Okla.1989), Oklahoma follows the general rule that a direct action against an insurer is prohibited without express statutory authorization. The Oklahoma Court of Civil Appeals found that § 230.30 does not apply to motor carriers registered in states other than Oklahoma, and GD did not have a license from the Oklahoma Corporation Commission. Thus, Fierro could not maintain a direct action against GD’s liability insurer, Lincoln General.

 

Plaintiff argues that Fierro is inconsistent with clearly established Oklahoma law allowing a direct action against a motor carrier’s liability insurer. However, in each case cited by plaintiff, the motor carrier was licensed by the Oklahoma Corporation Commission and had filed a bond pursuant to former § 169. Blanke v. Alexander, 152 F.3d 1224, 1229–30; Mize, 393 F.Supp.2d at 1226–27; Enders, 67 P.2d at 13. Trailiner states that it is registered in Missouri, not Oklahoma, and it is not required to file an insurance policy or bond with the Oklahoma Corporation Commission. Consequently, § 230.30 does not apply and there is no express statutory authority permitting for a direct action against Trailiner’s liability insurer. This conclusion is consistent with Fierro and numerous decisions by federal district courts located in Oklahoma. Beebe v. Flores, 2012 WL 137780 (W.D.Okla. Jan. 18, 2012); Adrean v. Lopez, 2011 WL 3880930 (N.D.Okla. Sept. 2, 2011); Green v. ACE American Ins. Co., 2008 WL 4372871 (W.D.Okla. Sept. 19, 2008); Hubbard v. Liberty Mutual Fire Insurance Co., 2007 WL 1299270 (E.D.Okla. May 1, 2007).

 

Plaintiff argues that defendant’s registration or licensing is a factual issue which should be explored in discovery and the Court should not accept defendant’s statements concerning Trailiner’s registration. Dkt. # 56, at 6–8. However, plaintiff offers no basis to dispute defendants’ statements that Trailiner is registered in Missouri, and he speculates that Trailiner may be licensed by the Oklahoma Corporation Commission. Id. at 8. Unless plaintiff has conducted an investigation into this matter and has a reasonable basis to believe that Carolina will likely be an appropriate party, the Court sees no reason to allow plaintiff to join Carolina as a party and subject it to the expense of litigation. Plaintiff also argues that Trailiner is required to file a MCS– 90 endorsement with the Secretary of Transportation containing proof on insurance, and the MCS– 90 endorsement creates a suretyship. Dkt. # 53, at 12. He claims that Oklahoma law allows an aggrieved party to bring claims against the principal and the surety, and he should be permitted to bring claims against Carolina in its capacity as a surety under the MCS– 90 endorsement. Assuming that plaintiff is correct, this general principle of Oklahoma law does not overcome the Oklahoma Supreme Court’s specific prohibition on bringing a direct action against a liability insurer absent express statutory authorization. Daigle, 782 P.2d at 1381–82. Plaintiff will not be permitted to join Carolina as a party, but he may re-urge this request if he discovers evidence showing that Trailiner has a license issued by the Oklahoma Corporation Commission.

 

As to the remaining issues, the Court finds that plaintiff’s motion to amend should be granted to the extent that it is unopposed by defendant. Plaintiff may file an amended complaint clarifying his jurisdictional allegations and his requests for actual and compensatory damages. Plaintiff also requests leave to add a demand for punitive damages in his amended complaint, and defendants oppose this request. Defendants argue that the mere fact that an automobile accident occurred does not support a demand for punitive damages, and the facts of this case do not warrant punitive damages. Dkt. # 55, at 13–15. Defendants also argue that plaintiff’s proposed amendment would cause additional expense to them, and his request to file an amended complaint seeking punitive damages would violate Fed.R.Civ.P. 11. However, the Court has reviewed plaintiff’s motion to amend and his reply, and finds that he should be permitted to file an amended complaint seeking punitive damages. Defendant may be correct that the facts of this case do not warrant an award of punitive damages, but that determination should be made on a motion for summary judgment. It would be improper to deny plaintiff leave to amend due to factual disputes concerning defendants’ alleged misconduct and the severity of the accident.

 

IT IS THEREFORE ORDERED that Plaintiff’s Motion to Amend Complaint (Dkt.# 53) is granted in part and denied in part: plaintiff may file an amended complaint clarifying his jurisdictional allegations and the damages sought, but plaintiff’s request to add Carolina as a party is denied.

 

IT IS FURTHER ORDERED that plaintiff may file an amended complaint as authorized in this Opinion and Order no later than April 13, 2012.

United States District Court, E.D. Tennessee.

April Telena MILLER and Roger Miller, Plaintiffs/Counter–Defendants,

v.

NORTHLAND INSURANCE COMPANY, INC., Defendant/Counter–Plaintiff

v.

Refa Watley d/b/a Refa Watley Trucking and Lewis Leo Watley, Defendants/Counter–Defendants.

 

No. 4:11–cv–26.

March 31, 2012.

 

D. Michael Kress, II, Law Office of D. Michael Kress, II, Sparta, TN, for Plaintiffs.

 

Scott W. McMickle, McMickle, Kurey & Branch, LLP, Alpharetta, GA, B. Thomas Hickey, Spicer Rudstrom, PLLC, Chattanooga, TN, for Defendant/Counter–Plaintiff.

 

Refa Watley, Altamont, TN, pro se.

 

Lewis Leo Watley, Altamont, TN, pro se.

 

MEMORANDUM AND ORDER

HARRY S. MATTICE, JR., District Judge.

Before the Court is the “Motion for Realignment of Parties” (Doc. 3) (“Mot.Realign”) filed by Defendant Northland Insurance Company, Inc. (“Northland”) on April 29, 2011 and Plaintiffs’ Motion to Remand (Doc. 10) (“Mot.Remand”), filed June 8, 2011. United States Magistrate Judge William Carter filed his Report and Recommendation on the Motion for Realignment (Doc. 16) (“R & R”) on November 1, 2011. Plaintiffs filed their Objections (Doc. 17) on November 15, 2011, and supplemented those objections (Doc. 20) pursuant to Eastern District of Tennessee Local Rule 7.1 on December 9, 2011. Northland filed its Response to Plaintiffs’ Objections to the R & R (Doc. 21) on December 13, 2011. Plaintiffs filed a second supplemental brief (Doc. 23) on January 5, 2012, to which Northland filed its Response (Doc. 24) on January 17, 2012. Finally, Plaintiffs filed a Motion for Leave to File an Amended Complaint (Doc. 22) on January 5, 2012, to which Northland filed its Response in Opposition (Doc. 25) on January 17, 2012.

 

 

For the reasons explained below, Plaintiffs’ Response and Objection to Report and Recommendation (Doc. 17) will be OVERRULED AS MOOT; Magistrate Judge Carter’s Report and Recommendation (Doc. 16) will be ADOPTED IN PART AND REJECTED IN PART; Defendant Northland’s “Motion for Realignment of Parties” (Doc. 3) will be DENIED; Plaintiffs’ Motion to Remand (Doc. 10) will be GRANTED; and this matter shall be REMANDED to the Circuit Court of Warren County, Tennessee.

 

I. LEGAL STANDARD

The Court must conduct a de novo review of those portions of the Report and Recommendation to which objection is made and may accept, reject, or modify, in whole or in part, the Magistrate Judge’s findings or recommendations. 28 U.S.C. § 636(b)(1)(B). The Court may also receive further evidence or recommit the matter to the magistrate judge with instructions. Id.

 

This case is somewhat unique, though, in that the motion under consideration is one affecting the subject-matter jurisdiction of the Court. Because “subject-matter jurisdiction … involves a court’s power to hear a case, [it] can never be forfeited or waived,” and this Court has “an independent obligation to determine whether subject-matter jurisdiction exists, even in the absence of a challenge from any party.” Arbaugh v. Y & H Corp., 546 U.S. 500, 514, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006) (internal citations and quotation marks omitted).

 

Finally, on a motion for realignment of the parties, “it is the court’s responsibility to ensure that the parties are properly aligned according to their interests in the litigation … [and] in accordance with the primary dispute in the controversy, even where a different, legitimate dispute between the parties supports the original alignment.” Cleveland Hous. Renewal Project v. Deutsche Bank Trust Co., 621 F.3d 554, 559 (6th Cir.2010) (internal citations and quotation marks omitted) (citing U.S. Fidelity & Guar. Co. v. Thomas Solvent Co., 955 F.2d 1085, 1089 (6th Cir.1992).

 

II. FACTUAL AND PROCEDURAL HISTORY

 

A. The Underlying Accident and Claim

 

As perhaps is appropriate in an action seeking a declaratory judgment, the facts of the underlying dispute do not need to be recounted at length.

 

On February 8, 2007, Northland issued a commercial auto liability insurance to Refa Watley—policy no. TN547120—with limits of $1,000,000 subject to the terms, conditions, and exclusions incorporated into the policy and effective February 1, 2007 to February 1, 2008. (Compl. ¶ 7; Ans. ¶ 7; Ex. A to Compl., Policy # TN547120.) On or about December 4, 2007, Lewis L. Watley was driving a commercial motor vehicle—a 2000 Kenworth tractor, listed in the “Schedule of Automobiles” as VIN IXKAD69X3YR835968—in Montgomery County, New York when a single vehicle auto accident occurred. (Compl. ¶ 11; Ans. ¶ 11.) Plaintiffs allege that Plaintiff April Miller was riding as a passenger in the vehicle when the accident occurred and was injured in the accident. Defendant further admits that she made a claim related to those injuries, which Northland denied on March 6, 2008. Plaintiffs seek a declaration that, among other things, adopts their view that April Miller was an independent contractor, not an employee.

 

B. Procedural History

On November 30, 2010, Plaintiffs Roger and April Miller filed the instant “Complaint for Declaratory Judgment to Determine Rights and Liabilities Under Commercial Motor Carrier Liability Insurance Policy” (Doc. 1–1) in the Circuit Court of Warren County, Tennessee.

 

1. Northland’s Motion to Realign (Doc. 3)

On April 29, 2011, Defendant Northland Insurance Company, Inc. (“Northland”) filed the Notice of Removal (Doc. 1) in this Court, contemporaneously with a “Motion for Realignment of Parties” (Doc. 3) (“Mot.Realign”). In that Motion, Northland argues that “[d]iversity jurisdiction cannot be determined by the parties’ own determination of who should be a plaintiff and who should be a defendant” and that “it is the duty of the Court to look beyond the pleadings and arrange the parties according to their interests in the primary issue in this action.” (Mot. Realign 1.) Northland asserts that “[t]he Sixth Circuit follows the ‘principal purpose test’ in determining the proper alignment of parties,” and that “[i]n the context of a declaratory judgment action regarding insurance coverage, purported insureds and insurers should be aligned as adverse parties.” (Id.)

 

Northland then filed its Answer and Counterclaim (Doc. 5) on May 2, 2011. Refa Watley d/b/a Refa Watley Trucking and Lewis Leo Watley have not filed a response and have yet to appear in this action.

 

2. Plaintiffs’ Response on the Motion to Realign (Doc. 9) and Motion to Remand (Doc. 10)

Plaintiffs filed their “Response Opposing Motion for Realignment” (Doc. 9) (“Realign Respon.”) on June 8, 2011, on which day they also filed their own Motion to Remand (Doc. 10) (“Mot.Remand”). In their Response on the Motion to Realign, Plaintiffs put forth four arguments. First, that Northland should be deemed to be a citizen of Tennessee, a state in which the insured, Refa Watley, is a citizen—because, pursuant to 28 U.S.C. § 1332(c)(1), this case was a “direct action against the insurer of a policy or contract of liability insurance,” and thus Northland “shall be deemed a citizen of every [State] of which the insured is a citizen, every [State] by which the insurer has been incorporated; and “the [State] where the insurer has its principal place of business.”

 

Second, Plaintiffs argue that even if the insured, Refa Watley, is realigned, that would not affect the party defendant status of Lewis Leo Watley; as the latter is a citizen of Tennessee, the action would still be nondiverse. (Realign Respon. 2.)

 

Third, Plaintiffs argue, the “Tennessee Declaratory Judgment Act is Remedial and Procedural.” (Realign Respon. 3.) While the substance of this argument is not clear, it seems as though they are arguing that, because declaratory judgment is a remedy, not a source of an independent claim, one cannot remove an action brought pursuant to the Tennessee Declaratory Judgment statute—Tenn. Code Ann. § 29–14–102 et seq.—to federal court.

 

Fourth, Plaintiffs argued that the “Principal Purpose Test” is not met in this case because they “have a pending case in New York against the very Watley Defendants which are named in the instant case as Defendants,” and that “[t]here can be little logical doubt that the Plaintiffs in both cases cannot be properly aligned as co-Plaintiffs in the instant case while also pursuing an action against the Watley parties in the New York case.” (Realign Respon. 3.) They also argue that they have “lodged a direct action in paragraph numbered ’14’ of the Complaint against the movant, claiming to constitute ‘intended third party beneficiaries’ under the terms of an insurance policy.” (Id.) They conclude by arguing that “the primary purpose of this action is to determine whether the movant is directly liable to the Plaintiffs pursuant to the terms of the subject policy” and that “[t]he only reason that the Watley Defendants were named as parties in the instant Tennessee action is because the Tennessee Declaratory Judgment Act [at Tenn.Code Ann. § 29–14–107] requires that they be named given their status as potential stakeholders in the outcome.” (Id. at 3–4.)

 

3. Northland’s Reply on the Motion to Realign (Doc. 11) and Response to Plaintiffs’ Motion to Remand (Doc. 12)

Defendant Northland filed its “Reply to Plaintiffs’ Response to Motion for Realignment of Parties” (Doc. 11) (“Realign Reply”) on June 10, 2011, along with its Response to Plaintiffs’ Motion to Remand (Doc. 12). In its Reply Brief, Northland argues first that “this is not a ‘direct action’ against an insurer as contemplated by section 1332(c)(1).” (Realign Reply 1.) Second, it argued, “Defendant Lewis Watley is a purported insured under the Northland policy, and should be realigned as a party Plaintiff along with the named insured, Refa Watley Trucking.” (Id. at 3.) Northland provides no support for its proposition that Lewis Watley “is a purported insured.” Third, it responds to Plaintiffs’ arguments about the subject matter jurisdiction over declaratory judgments brought pursuant to Tennessee’s declaratory judgment statute by stating “[i]t is well settled law that a federal court sitting in diversity applies the substantive law of the forum state and federal procedural law to adjudicate the dispute.” (Id. at 3–4.) Fourth, it replies that “[c]ontrary to the Plaintiffs [sic ] assertion, the principal purpose in this action is not to determine whether Northland is directly liable to the Plaintiffs pursuant to the terms of the Northland policy.” (Id. at 4.) Finally, it replies that—in response to Plaintiffs’ argument that Tenn.Code Ann. § 29–14–107 requires the Watley Defendants to be named as parties “given their status as potential stakeholders in the outcome”—“[t]here is nothing in the referenced statute that requires Refa Watley Trucking and Lewis Watley to be named only as defendants.” (Id. at 5.) Northland’s Response to Plaintiffs’ Motion to Remand does not contain any arguments of substance.

 

4. Magistrate Judge Carter’s Report and Recommendation (Doc. 16)

United States Magistrate Judge William Carter filed his Report and Recommendation on the Motion for Realignment (Doc. 16) (“R & R”) on November 1, 2011. After briefly recounting (accurately) the facts applicable to this situation, Magistrate Judge Carter found that (1) “this declaratory judgment action is not a ‘direct action’ within the meaning of Section 1332(c)(1)”; (2) “realignment of the parties as requested by Northland would not destroy diversity jurisdiction”; and (3) “the primary dispute is whether Refa Watley’s insurance policy with Northland covers April Miller’s injuries in the event Lewis and Refa Watley are found liable in the New York state action.” (R & R at 8, 10.)

 

On the second point, Magistrate Judge Carter makes two consequential observations. First, he bases this decision in part on his analysis of the orientation of this action—that is, his belief that “the Millers bring this action on the sole issue as to whether, if a judgment is rendered against the Watleys in the New York state action, April Miller will be covered under the Northland policy.” (R & R at 8.)

 

Second, he drops a footnote after his conclusion that “realignment of the parties as requested by Northland would not destroy diversity jurisdiction” that states as follows:

 

The Court understands that the insurance policy at issue is not a “no fault” policy which would not require a later adjudication of the issues of fault on the part of Lewis Watley and liability on the part of Refa Wately before Northland could be required to pay for April Miller’s injuries under the proceeds of the policy. If this were such a “no fault” policy, then the outcome of this motion would be different. If Northland’s policy with Refa Watley was a “no fault” policy, a finding that April Miller was covered under the policy would be tantamount to a direct action against Lewis and Refa Watley. See Ford Motor Co. v. Ins. Co. of N. Am., 669 F.2d 421, 425 (6th Cir.1982); Bauer v. Wausau Business Ins. Cos., 2002 WL 31409863(S.D.Ohio Sept.5, 2002) (“ ‘The no fault insurer … stands in the place of the tortfeasor in a manner strikingly similar to that originally envisioned by Congress in addressing the direct action problem …’ ”) (quoting Redmon v. Sumitomo Marine Mgmt. (USA) Inc., 179 F. Supp2d 787 (N.D.Ohio 2001).

 

(R & R at 8, n. 3.)

 

5. Objections to the R & R and the “No Fault” Issue

Plaintiffs filed their Objections (Doc. 17) (“Pl.’s Objs.”) on November 15, 2011 and twice supplemented those objections pursuant to Eastern District of Tennessee Local Rule 7.1, first on December 9, 2011 (Doc. 20) (“Pl.’s 1st Suppl. Br.”) and second on January 5, 2012 (Doc. 23) (“Pl.’s 2nd Suppl. Br.”). On December 13, 2011, Northland filed its Response to Plaintiffs’ Objections to the R & R (Doc. 21) (“Respon. to Objs.”), and, on January 17, 2012, its response to Plaintiffs’ Second Supplemental Objections (Doc. 24) (“Respon. to 2nd. Objs.”).

 

Without going into lengthy and unnecessary—given the resolution of the pending motions herein—detail, Plaintiffs seized upon Magistrate Judge Carter’s comment in footnote 3 that “the outcome of this motion would be different” if the policy at issue here “were [ ]a ‘no fault’ policy” to “raise an objection to the Report and Recommendation (Docket Entry No. 16) on the basis that the insurance policy at issue is to be properly deemed and construed as a ‘no-fault’ policy by federal, New York and Tennessee law.” (Pl.’s Objs. 1.) Briefly, the basis of this objection is that, they assert, New York state, where the accident occurred, is a “no-fault” state, insofar as it relates to non-resident motorists and passengers; requires such coverage of trucking companies operating in New York; and that the MCS– 90 endorsement and the BMC–90 (BMC–91X) endorsements—which help effect the Federal Motor Carrier Saftey Regulations (FMCSR) as they relate to this interstate no-fault requirement—“requires reimbursement of insurer by insured for monies paid,” which is part of the reason that the Watley Defendants’ interests are not aligned with those of Plaintiffs.

 

Northland’s essential response to Plaintiffs’ objections is that this argument over “no-fault” is not a true objection, but rather an attempt to seize on unimportant language in the R & R to reargue the merits of the motion or to introduce into the proceedings a new argument. They also argue that “no fault” is irrelevant to this action and that the FMCSR do not create a no-fault regime, although part of their basis for this argument is an assumption that April Miller is an employee, one of the very issues to be determined in the declaratory judgment action. (Respon. to Objs. 8, n. 3.)

 

The Court would note that Northland’s statement of the applicable standard of review is incorrect. Northland appears to believe that this was an Order on a simple pretrial matter pursuant to 28 U.S.C. § 636(b)(1)(A) to which Plaintiffs are objecting, but it is clearly a Report and Recommendation pursuant to 28 U.S.C. § 626(b)(1)(B), as Magistrate Judge Carter noted in the R & R: “The undersigned has prepared this decision as a report and recommendation rather than as an order because the outcome of the motion will affect the jurisdiction of the Court making the motion dispositive in nature.” (R & R at 1, n. 1.)

 

6. Other Post–R & R Motions

Plaintiffs filed a Motion for Leave to File an Amended Complaint (Doc. 22) on January 5, 2012, to which Northland filed its Response in Opposition (Doc. 25) on January 17, 2012.

 

These matters are now ripe for review.

 

III. ANALYSIS

The Court WILL ADOPT Magistrate Judge Carter’s Report and Recommendation insofar as it finds that Northland is not a Tennessee citizen because this is not a “direct action” within the meaning of 28 U.S.C. § 1332(c)(1), but the Court WILL REJECT the R & R to the extent that it fails to consider Plaintiffs’ arguments that Defendant Lewis Watley’s interests are separate from those of Defendant Refa Watley d/b/a Refa Watley Trucking.

 

As an initial matter, the Court would note that, while the R & R reached the correct conclusion that Northland does not share Refa Watley’s citizenship because this is not a “direct action” within the meaning of 28 U.S.C. § 1332(c)(1), the R & R also seems to have ignored that the full (relevant) text of the statute reads as follows: “except that in any direct action against the insurer of a policy or contract of liability insurance, whether incorporated or unincorporated, to which action the insured is not joined as a party-defendant, such insurer shall be deemed a citizen of….” 28 U.S.C. § 1332(c)(1) (emphasis added). The insured—Refa Watley—is joined as a party-defendant here, thus the statute’s provisions would seem not to apply on its face.

 

The R & R addresses only Northland’s arguments about the applicability of Section 1332(c)(1) and the “Primary Purpose” test and does not address at all Plaintiffs’ second and third arguments, about the separate interests of Defendant Lewis Watley and the potential subject matter jurisdiction issues with the Tennessee Declaratory JudgmentAct.

 

Plaintiffs’ Declaratory Judgment argument is not essential to the Court’s holding, but the Court would note that this argument may have some merit, in that “[i]t is well-settled that the Declaratory Judgment Act cannot serve as an independent basis for federal subject matter jurisdiction.” Mich. So. R.R. Co. v. Branch & St. Joseph Counties Rail Users Ass’n., Inc., 287 F.3d 568 (6th Cir.2002) (citing Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671, 70 S.Ct. 876, 94 L.Ed. 1194 (1950) as holding that “Congress enlarged the range of remedies available in federal courts but did not extend their jurisdiction”). But, it is the Court’s view that it is likely that, just as one could respond to a Complaint before removing and assert a defense for failure to state a claim upon which relief can be granted pursuant to Tennessee Rule of Civil Procedure 12.02(6) and have that defense preserved and converted into a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), so too could a request for a declaration of rights pursuant to Tennessee’s Declaratory Judgment Statute be converted to and analyzed pursuant to the federal Declaratory Judgment statute, 28 U.S.C. § 2201.

 

Part of the problem with Northland’s Motion for Realignment and the R & R on the same is that Northland makes several unsubstantiated statements that are challenged by Plaintiffs but unaddressed in the R & R. For instance, in its Motion for Realignment of Parties, Northland asserts that “Plaintiff Miller further asserts that the Northland Policy provides coverage for the alleged negligence of Refa Watley and Lewis Watley as ‘insureds’. See Complaint, pp. 4–5.” (Mot. Realign ¶ 4.) That is not true, however, nowhere on either pages four or five do Plaintiffs ever state that Lewis Watley is an “insured” under the terms of the policy. Likewise, while Northland attempts to cure this in its Reply by stating that “Defendant Lewis Watley is a purported insured under the Northland policy, and should be realigned as a Plaintiff party along with the named insured, Refa Watley Trucking,” as previously noted, it provides absolutely no support for the proposition that Lewis Watley “is a purported insured.” (Realign Reply at 3.) Further, the R & R fails to address this issue.

 

This is a crucial error. The entire premise of Northland’s motion is that Refa Watley d/b/a Refa Watley Trucking—due to the behavior of her/its employee, Lewis Watley—could be liable for Plaintiffs’ costs if the exclusion cited by Northland is found to be valid and applicable to Plaintiff April Miller. Lewis Watley’s name does not appear in the Policy or any of the addenda, such as the endorsements, exclusions, etc. Further, Northland did not supply the Court with any language from the policies indicating why the Court should assume that Lewis Watley is a “purported insured” under the Policy. Finally, it is certainly not clear to the Court that Lewis Watley’s interests are so aligned with Plaintiffs’ in this declaratory judgment action that, even without a finding that he enjoys insured status, he should be realigned. In fact, in many ways, it appears as though he would not necessarily share her interests.

 

Though not highlighted by Northland, the Court does observe that there is a “Named Driver Exclusion” which provides that “This Insurance does not apply to damages, “accidents,” or “losses” caused while a covered “auto” is being operated or used by LEWIS WATLEY whether or not you have given your express or Implied permission for this operation or use.” (Doc. 5–3 at PageID# 194.) The Court also notes, though, that that language is followed by “You or your authorized representative have accepted this endorsement and Indicated your agreement by signing below,” and that there is not any signature after that language. (Id.)

 

The Complaint alleges that negligence on his part caused Plaintiffs’ injuries, and the documents attached to the Complaint indicate that he suffered injuries as well. More importantly—and contrary to the finding in the R & R that “the primary dispute is whether Refa Watley’s insurance policy with Northland covers April Miller’s injuries in the event Lewis and Refa Watley are found liable in the New York state action”—the bulk of the declaratory judgment request involves the construction of the term “employee.” Because Plaintiffs allege Ms. Miller’s work status—allegedly as an independent contractor—renders her an employee (whose injuries are thereby not excluded) and Mr. Watley an employee (whose injuries are thereby excluded), it seems as though, as to much of the substance of the Complaint for Declaratory Judgment, Plaintiffs’ interests in the construction of that term appear to be almost in complete opposition to the interests of Lewis Watley.

 

Because Lewis Watley’s status as an “insured” is unclear, because the main thrust of the request for declaratory judgment puts Plaintiffs in direct opposition with Mr. Watley, and because the complaint appears to put Mr. Watley in at least some conflict financially with the Plaintiffs, the Court does not find it appropriate to realign him as a plaintiff.

 

Finally, due to the Court’s ruling herein, it is unnecessary for the Court to reach the question of the applicability of the “no fault” provisions or the motion to amend. The latter is unrelated to the subject-matter-jurisdiction-determinative motions before this Court and can be resolved upon remand. As to the “no fault” arguments, while the Court will not reach their substance, it will note that Northland is entirely incorrect in accusing Plaintiffs of attempting to reargue their motion or raising a new issue. The footnote at issue clearly stated that the finding that the insurance at issue was no fault was outcome-determinative, but neither of the parties had raised the issue to date. Therefore Plaintiffs were not rearguing previous points, nor did they raise a new argument they should have made in their response; the “no fault” issue was brought into the discussion by the R & R, and they kept their briefs strictly limited to addressing those issues newly-raised in the R & R.

 

Accordingly, the Court WILL ADOPT the R & R insofar as it finds that Northland is not a Tennessee citizen because this is not a “direct action” within the meaning of 28 U.S.C. § 1332(c)(1) but WILL REJECT the R & R to the extent that it fails to consider the interests of Defendant Lewis Watley separately from those of the actual named insured, Refa Watley d/b/a Refa Watley Trucking. Further, Defendant Northland’s Motion for Realignment is DENIED as to Mr. Lewis Watley.

 

As a final matter, the Court is aware that there is a pending “Counterclaim for Declaratory Judgment” (Doc. 5) filed by Northland on May 20, 2011. While none of the parties have addressed this issue, Northland pled the jurisdiction of the counterclaim by asserting that “[o]nce Refa Watley and Lewis Watley are properly realigned as party plaintiffs per the contemporaneous Motion for Realignment filed by Northland, complete diversity of citizenship will exist between Northland and the adverse parties.” (Counterclaim ¶ 6.) It thereby seems to have been relying on the Court’s granting its Motion for Realignment to establish jurisdiction for its counterclaim; because the Court will deny that motion, the counterclaim’s remand does not impede the remand of the entire action.

 

IV. CONCLUSION

Accordingly, and for the reasons stated above, Plaintiffs’ Response and Objection to Report and Recommendation (Doc. 17) are hereby OVERRULED AS MOOT; Magistrate Judge Carter’s Report and Recommendation (Doc. 16) is hereby ADOPTED IN PART AND REJECTED IN PART; Defendant Northland’s “Motion for Realignment of Parties” (Doc. 3) is hereby DENIED; Plaintiffs’ Motion to Remand (Doc. 10) is hereby GRANTED; and this matter is hereby REMANDED to the Circuit Court of Warren County, Tennessee. The Clerk is DIRECTED to mail a certified copy of this Order to the Clerk of the Circuit Court of Warren County, Tennessee. The Clerk is further DIRECTED to close the file in this case.

 

So ORDERED.