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Jose Lara v. Inex and Prime Insurance Syndicate

July 11, 2012


The opinion of the court was delivered by: Joyner, C.J.


Before the Court are Defendant Prime Insurance Syndicate, Inc.'s Motion for Summary Judgment (ECF No. 17), Plaintiff's Response in Opposition thereto (ECF No. 18) and Defendant's Reply in further support thereof (ECF No. 20). For the reasons stated in this Memorandum of Law, the Motion is GRANTED in part and DENIED in part.

I. Background

In 2008, Jose Lara ("Plaintiff") sued Philadelphia nightclubs "Club Flow" and "The Cave," their parent corporation DUP, Incorporated ("DUP"), and principal officers Robert Oliver and Donald K. Palmucci in the Philadelphia Court of Common Pleas (the "Pennsylvania Action"). (See Compl. Ex. A, ECF No. 1.) Plaintiff sued the defendants under Pennsylvania's dram shop law for injuries he sustained in an automobile accident involving an intoxicated driver. (See id.) On October 13, 2006, Plaintiff was severely injured in an automobile accident by a driver who left Club Flow visibly intoxicated. (Pl.'s Mem. Opp'n Summ. J. 1-2.) The Prime Insurance Syndicate, Incorporated ("Defendant") issued policies for dram shop and general liability insurance coverage to the nightclubs that were in effect at the time of Plaintiff's injury and the Pennsylvania Action.*fn1 (Compl. ¶ 4; Def.'s Mot. Summ. J. 4-5, 7.) Defendant provided a legal defense in the case but on March 3, 2008, based on a contractual reservation of rights, Defendant filed a declaratory judgment action in a Utah court against DUP (the "Utah Action"). (Def.'s Mot. 12 & Ex. H.) Defendant sought a declaration that it owed no duty to defend or indemnify DUP in the Pennsylvania Action. (Id.) Despite receipt of service by DUP's president, Robert Oliver, DUP failed to appear in Utah court or otherwise defend the declaratory judgment action. (Def.'s Mot. 13 & Ex. I.) On August 19, 2008, the Utah trial court, upon the additional submission of a memorandum of law from Defendant, entered a default judgment in Defendant's favor (the "Utah Judgment"), finding Defendant had no duty to defend or indemnify DUP in the Pennsylvania Action. (Def.'s Mot. 13 & Ex. J.) Shortly thereafter, Defendant apparently withdrew its representation of DUP in Pennsylvania court.

On May 27, 2010, the Philadelphia court entered a $750,000 judgment for Plaintiff. (Compl. Ex. D.) DUP assigned to Plaintiff all legal claims and rights it had against Defendant. (Compl. ¶ 2 & Ex. B.) On January 19, 2011, Plaintiff filed the instant action against Defendant in the Philadelphia Court of Common Pleas. Defendant removed the case before this Court on March 8, 2011 pursuant to the Court's diversity jurisdiction, 28 U.S.C. § 1332. Plaintiff is a Pennsylvania resident and Defendant is incorporated in Illinois and has its principal place of business in Utah. Plaintiff, acting pursuant to his assignment of rights, alleges Defendant's failure to defend and indemnify DUP in the Pennsylvania Action was a breach of contract done in bad faith and in violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("PUTPCPL"). Defendant moves for summary judgment, arguing inter alia that the Utah Judgment is entitled to full faith and credit and precludes the instant suit.

II. Legal Standard

The Court shall grant a motion for summary judgment "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In making a determination, "inferences to be drawn from the underlying facts . . . must be viewed in the light most favorable to the party opposing the motion."

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (alteration in original) (internal quotation marks omitted). "[T]here is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). The movant bears the burden of proving that no genuine issue of material fact is in dispute. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970).

III. Analysis

A Utah court entered a declaratory judgment stating, in effect, that Defendant had no duty to defend or indemnify Plaintiff in the Pennsylvania Action. Defendant argues the Utah Judgment should be given full faith and credit, that is, the instant claims should be precluded. (See Def.'s Mot. 21.)

Full Faith and Credit

The Full Faith and Credit Clause binds every state to recognize and enforce the judgments rendered by courts of other states. See U.S. Const. art. IV § 1; Underwriters Nat'l Assurance Co. v. N.C. Life & Accident & Health Ins. Guar. Ass'n, 455 U.S. 691, 703-04 (1982). The Full Faith and Credit Clause has been extended by statute to give state court judgments the same preclusive effect in federal courts. See 28 U.S.C. § 1738. The federal court "applies 'the same preclusion rules as would the courts of that state.'" Manu v. Nat'l City Bank of Indiana, No. 11-1705, 2012 WL 928158, at *3 (3d Cir. Mar. 20, 2012) (quoting Edmundson v. Borough of Kennett Square, 4 F.3d 186, 189 (3d Cir. 1993)). Therefore, the Court applies Utah res judicata, or preclusion law.

Personal Jurisdiction

Defendant raises the issue of the Utah court's personal jurisdiction over DUP in entering judgment. Defendant argues the Utah court properly exercised jurisdiction over the parties. Plaintiff contests the Utah court's jurisdiction but provides barely any substantive argument. The extent of Plaintiff's argument is "the only possible connection for jurisdiction is the forum selection clause included in the Prime Insurance contract of adhesion." (Def.'s Opp'n Mem. 12.)*fn2 If the Utah court was without personal jurisdiction, the Utah Judgment cannot be given preclusive effect.*fn3 See Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 805 (1985); Brandon v. Teague, 299 P.2d 1113, 1114 (Utah 1956). Although personal jurisdiction is ordinarily ...

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