Opinion
Case No. 6:00-cv-489-Orl-28KRS
January 22, 2001
ORDER
This cause came on for consideration of the following motions:
1) Plastic Tubing Industry, Inc.'s Motion to Dismiss with Prejudice (Doc. 5, filed June 9, 2000), as to which Plaintiff filed a Response (Doc. 10, filed July 7, 2000); 2) Allied System Carrier's Motion to Dismiss (Doc. 21, filed July 20, 2000); 3) Keith Brown's Motion to Dismiss with Prejudice (Doc. 22, filed July 24, 2000); 4) Plaintiff's Amended Motion to Amend Complaint (Doc. 16, filed July 13, 2000); and 5) Plaintiff's Amended Motion to Deposit Funds with the Court (Doc. 17, 2000, filed July 13, 2000).
The United States Magistrate Judge submitted a Report and Recommendation recommending Defendants' motions to dismiss be granted due to lack of subject matter jurisdiction. The Magistrate Judge recommends dismissal of the complaint in this interpleader suit because the plaintiff, General Accident Insurance Company ("General"), has not deposited funds into the Court registry as required under the interpleader statute, 28 U.S.C. § 1335. The Magistrate Judge also recommends that General be granted leave to deposit funds and to amend its complaint to clarify information pertaining to three defendants. However, the Magistrate Judge recommends denying General's request to file an amended complaint that seeks a declaratory judgment on the bad faith claims because she concluded that this Court lacks jurisdiction to adjudicate bad faith claims against an insurance carrier before the underlying liability of the insured is determined.
General Accident filed an objection to the Report and Recommendation (Doc. 73, filed December 13, 2000), as to which Plastic Tubing filed a Response (Doc. 75, filed January 3, 2001) and Keith Alfonzo Brown filed a Response (Doc. 76, filed January 10, 2001). After consideration of the Report and Recommendation along with the objection and responses filed, this Court adopts the Report and Recommendation in part. The Court agrees with the Magistrate Judge that subject matter jurisdiction has not been established because General has not deposited funds. The Magistrate Judge's analysis that this court lacks subject matter jurisdiction to adjudicate the bad faith claims against General before the underlying liability claims have been determined is also sound. However, the Court declines to adopt the Magistrate Judge's recommendation that General should be granted leave to deposit funds and file its proposed amended complaint to correct claims against three defendants. Accordingly, this action shall be dismissed for lack of jurisdiction, and all pending motions are denied as moot.
I. Factual Background
General filed this interpleader action pursuant to 28 U.S.C. § 1335 requesting injunctive and declaratory relief. The numerous defendants in this suit were involved in a multi-vehicle accident and have either filed claims in state court or have potential claims in state court against General and its insured, Defendant Plastic Tubing Industry ("PTI").
The accident giving rise to these claims involved a tractor-trailer owned by PTI, operated by a PTI employee, and insured by General. As a result of injuries suffered in the accident, Kashmirah Shah died. Ms. Shah's estate and members of her family (hereinafter collectively referred to as the "Shah Family") brought suit in Florida state court against PTI for wrongful death, property damage, and personal injury. PTI referred the Shah Family's claims and those brought by others to General. Fifty days after the collision, the Shah Family extended a formal offer to General with a thirty-day deadline to settle the Shah Family's claim against PTI. The Shah Family alleges that General failed to respond to the offer, failed to respond to a follow up phone call, and failed to inform PTI about the offer. PTI and the Shah Family accuse General of acting in bad faith for failing to settle with the Shah Family for the $500,000 policy limit. The parties indicate that the state lawsuit is still pending and PTI has not yet been found liable for Ms. Shah's death.
II. Plaintiff's Objectives
As summarized by the Magistrate Judge, General requests that this Court "1) allow General to deposit with the Court the limits of the Insurance Policy, $500,000; 2) require that each defendant be restrained from instituting any action against General in any other Court; 3) require the defendants to determine how the $500,000 should be distributed among them; and 4) discharge General from all liability." (Doc. 72 at 5). The Magistrate Judge further notes that "[a]lthough this facially appears to be a classic interpleader complaint, counsel for General explained . . . that General's goal in filing the interpleader complaint is for this Court to determine whether General acted in bad faith before the question of PTI's liability is decided in the Shah Family's state court action." General concedes that if the Court rules that General acted in bad faith, the interpleader action must be dismissed as to the bad faith claims because the claim would be made against General's business assets, not merely against the specific fund payable pursuant to the insurance policy. Defendants argue that this Court lacks jurisdiction and that General cannot state a claim for a declaratory judgment as to the bad faith claims until PTI's liability is established.
III. Standard of Review
A. Motion to Dismiss for Lack of Jurisdiction
A complaint should not be dismissed for failure to state a claim unless it appears beyond a doubt that the plaintiff can prove no set of facts that would entitle the plaintiff to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). In ruling on a motion to dismiss, a trial court is required to view the complaint in the light most favorable to the plaintiff. Scheuer v. Rhodes, 416 U.S. 232 (1947).
B. Motion to Amend Complaint
Federal Rule of Civil Procedure 15(a) provides that leave to amend a party's pleadings "shall be freely given when justice so requires." It is also well recognized, however, that justice does not require a court to grant leave to amend a complaint when the amendment would be futile. Brewer-Giorgio v. Producers Video, Inc., 216 F.3d 1281, 1284 (11th Cir. 2000).
IV. Analysis
A. Motion to Dismiss for Lack of Jurisdiction
As advised by the Magistrate Judge, this Court lacks subject matter jurisdiction because General has not yet deposited the $500,000 insurance policy limit into the registry of the Court as required by the interpleader statute, 28 U.S.C. § 1335.
B. Motion to Amend the Complaint
The crux of the dispute in this case has been whether General should be granted leave to restate in an amended complaint its request that this Court make a determination as to whether General acted in bad faith. Recognizing the rule under Florida law that a court lacks jurisdiction to adjudicate bad faith claims before the insured's liability is established for damages exceeding the policy limit, this Court denies General's request to deposit the funds with the Court and then file an amended complaint. See Vest v. Travelers Ins. Co., 753 So.2d 1270, 1275-76 (Fla. 2000). In Cunninaham v. Standard Guaranty Insurance Co., 630 So.2d 179, 181 (Fla. 1994), the Florida Supreme Court stated:
Under ordinary circumstances, a third party must obtain a judgment against the insured in excess of the policy limits before prosecuting a bad-faith claim against the insured's liability carrier. See Blanchard v. State Farm Mut. Auto. Ins., 575 So.2d 1289 (Fla. 1991) (announcing analogous rule to that of a first-party bad-faith claim).
In the present case, PTI's liability has not been established and there is no determination that PTI must pay damages that exceed the policy limit. Accordingly, as the Magistrate Judge has advised, "the bad faith claim is not yet ripe for consideration, whether directly or by declaratory judgment, because an essential element of the claim cannot be established." (Doc. 72 at 8).
Cunningham, however, contained an exception to the rule requiring an excess judgment prior to prosecution of a bad faith claim which General claims may be extended to the facts of the present case. The Cunningham court held that a trial court would have jurisdiction to decide the issue of bad faith handling of an insurance claim prior to the determination of liability and damages in the underlying tort claim where the parties so stipulated. The parties in fact had stipulated "to try the bad faith action before trying the underlying negligence claim . . . and that if no bad faith was found, the . . . claims would be settled for the policy limit, and [the plaintiff] would not be exposed to an excess judgment." Id. at 180. In explaining its ruling, the Florida Supreme Court stated, "In an arrangement such as the one in the instant case, trying the bad-faith claim before the underlying negligence action would result in a full release of the insured if no bad faith were found, thereby avoiding a time consuming and expensive trial on negligence." Id. at 182. As emphasized by the Supreme Court, the stipulation furthered judicial economy objectives because the agreement and stipulation circumvented the need for a trial of the underling liability if the insurance company prevailed in defending the bad faith claim. With regard to the usual requirement of an excess judgment, the court explained that the parties' stipulation was the "functional equivalent of an excess judgment." Id. at 182. General contends the same exception applies in the instant case based on its assertion that PTI will be found liable and that the damages will exceed the limits of the policy.
However, the instant case is distinguishable and the Cunningham exception does not apply because: 1) the Shah family has not waived its rights to seek recovery from PTI in excess of the policy limit, 2) PTI has not waived its rights to seek recovery from General for judgments against PTI that exceed the policy limit, and 3) the parties have not all stipulated that the bad faith claim may be tried before the Shah Family's state court claims are resolved. Further, the judicial economy rationale recognized by the Florida Supreme Court in Cunninaham does not apply to the present action. Unlike Cunningham, here there is no objective and enforceable agreement, but instead only the shared speculation and expectation of the parties reflected in their pleadings as to the outcome of the underlying tort action. This Court is not willing to alter the result contemplated by Florida common law on this point by expanding the Cunningham exception. Without a stipulation by all the parties that this Court has jurisdiction to adjudicate the bad faith claims first, General cannot, under the rationale of Cunningham, dodge the established rule in Florida that a bad faith claim is not ripe before the insured's liability is established for an amount that exceeds the policy limit. Accordingly, General shall not be granted leave to file an amended complaint, and the instant action is dismissed.
V. Conclusion
Thus, it is ORDERED and ADJUDICATED as follows:
1. The Report and Recommendation (Doc. 72, filed December 13, 2000) is ADOPTED in part as specified in this Order.
2. The Motions by Plastic Tubing Industry, Inc. (Doc. 5, filed June 9, 2000), Allied Systems Carrier (Doc. 21, filed July 20, 2000), and Keith Brown (Doc. 22, filed July 24, 2000) to dismiss are GRANTED insofar as they seek dismissal for the reasons specified in this Order.
3. The case is DISMISSED without prejudice.
4. All pending motions are DENIED as moot.