Opinion
Civ. No. 03-6561 (RHK/AJB).
November 8, 2004
Richard B. Allyn and Jessica S. Williams, Robins, Kaplan, Miller Ciresi, LLP, Minneapolis, Minnesota, for Plaintiff.
Patrick D. Reilly and Benjamin B. Bohnsack, Erstad Riemer, PA, Minneapolis, Minnesota, and Robert C. Moore and Melissa Ward, Stone Moore, Chartered, Chicago, Illinois, for Defendant.
MEMORANDUM OPINION AND ORDER
Introduction
Plaintiff Vine Street Limited Partnership ("Vine Street") and Defendant QBE International Insurance Limited ("QBE") dispute the coverage of an insurance policy after a fire damaged a Vine Street property. Before the Court are cross-motions for partial summary judgment. For the reasons set forth below, the Court will defer resolution of Vine Street's Motion and will deny QBE's Motion as moot.
Background and Procedural History
On April 5, 2003, a fire damaged a building Vine Street was constructing in Des Moines, Iowa. Vine Street had purchased an All-Risk Builder's Policy ("the Policy") on the property from QBE. Among other things, the Policy covers Soft Costs, which are certain defined economic losses. The Policy also contains an appraisal provision that either party can invoke should they fail to agree as to the amount of loss or damages. The Policy limit is $11,383,000 and it contains express sub-limits of $500,000 each for "Temporary Locations" and "Transit Expenses." The parties dispute whether the Policy covers all of Vine Street's approximately $2.5 million in Soft Costs incurred after the fire.A. The Iowa State Court Action
On December 10, 2003, QBE sued Vine Street in Iowa state court seeking (1) a declaratory judgment that the Policy provides sub-limits of $10,400,000 for Hard Costs (physical damages) and $983,000 for Soft Costs (economic losses), and (2) a corresponding reformation of the Policy on the grounds of mutual mistake. On that same day, QBE also sent Vine Street a letter allegedly invoking the appraisal process.
On February 16, 2004, QBE moved to compel Vine Street to comply with the Policy's appraisal provision. On June 3, 2004, the Iowa state court granted QBE's motion and ordered an appraisal:
Because appraisal is a condition precedent to Vine Street's suit on the Policy to recover benefits, appraisal should occur before Vine Street proceeds on its claims for breach of contract. . . .
* * *
Moreover, it is appropriate to proceed with appraisal before the coverage issues are resolved. While an appraisal cannot resolve coverage disputes, the appraiser can determine the value of Vine Street's claims. This may eliminate any further coverage dispute. I disagree with Vine Street's position that its losses cannot be appraised without resolution of coverage disputes. If a coverage dispute remains after the appraisal process is completed, the parties can resolve that coverage dispute in this action.
(Bohnsack Aff. Ex. L.)
B. The Instant Minnesota Federal Court Action
On December 30, 2003, a few weeks after the Iowa action began, Vine Street sued QBE in this Court seeking a declaratory judgment that QBE is obligated to pay all of its Soft Costs (Count I), and monetary damages for breach of contract (Count II). In response, QBE asserts that (1) Vine Street's claimed Soft Costs are capped by a $983,000 sub-limit intended to be included in the Policy, but absent due to mutual mistake (Third Affirmative Defense), and (2) Vine Street's breach of contract claim is barred because it failed to comply with a condition precedent to suit — namely, Vine Street failed to have its Soft Cost losses appraised (First Affirmative Defense). (See Answer and Affirmative Defenses of Def. QBE at ¶¶ 33, 38-39.)
In early 2004, QBE moved to dismiss or stay this action on three grounds: (1) Vine Street's Complaint failed to comply with Federal Rule of Civil Procedure 9(c); (2) Colorado River abstention; and (3) the Court's discretion to stay or dismiss under the Declaratory Judgment Act. That Motion was denied. See Order dated April 15, 2004.
C. The Current Motions and Supplemental Briefing
Both sides have now moved for partial summary judgment. Vine Street seeks summary judgment on QBE's Third Affirmative Defense in which QBE asserts that as a result of mutual mistake, the written Policy did not reflect the parties' intention that the Policy contain a soft cost sub-limit of $983,000. (See Vine Street Mot. at 1.) QBE seeks summary judgment on Vine Street's Count II breach of contract claim because Vine Street "fail[ed] to satisfy conditions precedent" under the Policy — i.e., it failed to take part in an appraisal. (See QBE Mot. at 1.)
In light of the Iowa state court's order directing an appraisal of Vine Street's Soft Costs, this Court requested supplemental briefing on the following two issues: "(1) Should the pending Motion of Vine Street be deferred until such time as the appraisal has been completed?; and (2) Is QBE's Motion moot (or will it be mooted) by the appraisal?" See Order dated October 6, 2004. Vine Street responded that its Motion should not be deferred, but that QBE's Motion was moot. (Vine Street's Suppl. Mem. at 1.) Conversely, QBE responded that Vine Street's Motion should be deferred, but that its Motion was not moot. (QBE's Suppl. Mem. at 1, 4.)
The Court may consider questions of ripeness and mootness sua sponte. 15 James Wm. Moore et al., Moore's Federal Practice §§ 101.73[2] (citing cases), 101.92 (citing cases) (3d ed. 2004).
Analysis
Whatever else the Iowa state court's order may mean for the parties in this case, this much seems clear: an appraisal determining the value of Vine Street's Soft Costs is occurring or will occur. That an appraisal is now in progress compels the conclusions that Vine Street's Motion should be deferred pending the appraisal and that QBE's Motion is moot (or will be mooted) by the appraisal.A. Vine Street's Motion Should Be Deferred Pending Appraisal
As noted above, Vine Street has moved for partial summary judgment on QBE's Third Affirmative Defense, which asserts that the Policy contains a $983,000 Soft Costs sub-limit that was not included because of mutual mistake. Because an on-going appraisal will determine the amount of Vine Street's Soft Costs losses, the issue is whether Vine Street's Motion is ripe for adjudication.
The ripeness doctrine flows both from the Article III "cases" and "controversies" limitations and also from prudential considerations for declining to exercise jurisdiction. Paraquad, Inc. v. St. Louis Housing Auth., 259 F.3d 956, 958 (8th Cir. 2001). The doctrine seeks to prevent the courts, through avoidance of premature adjudications, from entangling themselves in abstract disagreements. Id. "The ripeness inquiry requires examination of both the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration." Id. (citation and internal quotations omitted),see Texas v. United States, 523 U.S. 296, 300-01 (1998). To be ripe for decision, the harm asserted must have matured sufficiently to warrant judicial intervention. Paraquad, 259 F.3d at 958. "A claim is not ripe for adjudication if it rests upon contingent future events that may not occur as anticipated, or indeed may not occur at all." Texas, 523 U.S. at 300 (citations and internal quotations omitted).
The Court concludes that Vine Street's Motion is not ripe for adjudication and should be deferred pending the outcome of the appraisal. Simply put, the Court will not have to address the Soft Costs sub-limit issue unless Vine Street's loss is appraised at an amount greater than the asserted sub-limit of $983,000. While Vine Street contends that a low appraisal is unlikely given its claims of $2.5 million in Soft Costs (Vine Street's Suppl. Mem. at 3-4), the future appraisal "may not occur as [Vine Street] anticipate[s]," Texas, 523 U.S. at 300. The possibility of a low appraisal warrants deferral of this Motion because until the value of Vine Street's loss is known the issue has not "matured enough to warrant judicial intervention." Paraquad, 259 F.3d at 959. Additionally, the hardship of waiting for the appraisal imposed upon Vine Street is not substantial. See Texas, 523 U.S. at 302 (finding issue unripe where, in part, the hardship on plaintiff was "insubstantial"). If the appraised value of its Soft Costs exceeds QBE's asserted sub-limit, Vine Street may then have its Motion considered. Vine Street contends that "[d]elaying the determination of this issue until the appraisal is complete . . . leaves open the potential for at least QBE's appraiser to apply QBE's urged sub-limit." (Vine Street's Suppl. Mem. at 3.) This potential, however, is pure speculation and the Court will not assume that the appraiser would act in that manner.
B. QBE's Motion Is Moot (or Will Be Mooted) By the Appraisal
As also noted above, QBE has moved for partial summary judgment on Vine Street's breach of contract claim (Count II) on the ground that Vine Street did not comply with an alleged condition precedent to suit — namely, the appraisal. Because an appraisal is on-going, however, the Court concludes that QBE's Motion is moot or will be mooted. Although QBE argues that "Vine Street's failure to submit to the appraisal process before it filed its Breach Of Contract action in this Court made the claim premature" (QBE's Suppl. Mem. at 4 (emphasis in original)), its argument, under present circumstances, places form over substance — the appraisal is being conducted and, in that respect, QBE is getting what it wants. If Vine Street's breach of contract claim was dismissed now, it is likely that Vine Street would simply re-file the claim after the appraisal is completed. What's more, the Court would still have to resolve Vine Street's claim for declaratory relief, as QBE does not seek summary judgment on that claim. Such circumstances would needlessly waste judicial resources.
Conclusion
Based on the foregoing, and on all of the files, records, and proceedings herein, IT IS ORDERED:
1. Plaintiff Vine Street's Motion for Partial Summary Judgment (Doc. No. 25) is DEFERRED until such time as the appraisal ordered by the Iowa state court is completed.
2. Defendant QBE's Motion for Partial Summary Judgment (Doc. No. 22) is DENIED AS MOOT.