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Hartford Casualty Insurance Company v. Rudolfo Cardenas

March 21, 2013

HARTFORD CASUALTY INSURANCE COMPANY, PLAINTIFF,
v.
RUDOLFO CARDENAS, DEFENDANT.



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

MEMORANDUM RE: MOVANTS' MOTIONS FOR INTERVENTION OR JOINDER AND DEFENDANT'S MOTION FOR DEFAULT JUDGMENT

I. Introduction

Seldom do people or entities fight hard to become parties to litigation. However, the existence of an insurance policy may provide the ordinarily lacking motivation. This dispute resonates from Mozart's The Marriage of Figaro: Did the Count properly "intervene" in Figaro's desire to marry and Susanna, and did the putative stud, Cherubino, properly "join" in the resolution?

This case requires exploration of joinder and intervention pursuant to Rules 19 and 24, as well as somewhat unsettled Third Circuit jurisprudence on the nature of interests that qualify for protection under those rules. This opinion concludes by denying both joinder and intervention, and also with entry of a final default judgment against Defendant. Unlike the happy ending in Figaro, the movants' requests will be passed to the existing state court litigation.

Plaintiff Harford Casualty Insurance Company ("Plaintiff") seeks a declaratory judgment, pursuant to 28 U.S.C. § 2201 and Fed. R. Civ. P. 55(b), that it has been relieved of its obligation under an insurance policy it issued to Defendant Rodolfo Cardenas ("Defendant") to defend or indemnify him or his business in a personal injury lawsuit pending in the Lancaster County Court of Common Pleas.

Movants Brian and Lynette Zern (the "Zerns"), Smucker Company ("Smucker"), Paramount Contracting, Inc. ("Paramount"), and Jessup Drywall Services, LLC ("Jessup") (collectively, "Movants") seek intervention or joinder pursuant to Fed. Rs. Civ. P. 24 or 19 (the "Motions to Intervene or Join").

II. Background

Plaintiff's insurance coverage dispute with Defendant arises out of a separate state court lawsuit filed by the Zerns to recover for personal injuries that Brian Zern sustained on March 4, 2010 in Lancaster, Pennsylvania. The Zerns alleged joint and several liability among Defendant, Smucker, Paramount, and Jessup. Details of the Zerns' action are largely irrelevant to the insurance coverage dispute.

What is relevant to the insurance dispute is that Defendant apparently absconded from Pennsylvania, reputedly to Mexico, and Plaintiff has been unable to contact him regarding the Zerns' lawsuit, or even to serve him in this case. Plaintiff claims that Defendant's disappearance amounts to a breach of his insurance policy, thereby relieving Plaintiff of its obligation to defend or indemnify Defendant in the Zerns' suit.

Plaintiff filed its Complaint (ECF 1) on May 22, 2012 and an Amended Complaint (ECF 5) on June 29, 2012. Plaintiff filed a Motion for Service by Publication (ECF 7) on September 6, 2012, which the Court granted (ECF 13) on October 15, 2012. Defendant never filed an answer, made an appearance, or otherwise participated in this case. Plaintiff filed a Request for Default (ECF 22) on December 4, 2012, which the Clerk of the Court entered on the same day. Plaintiff subsequently moved for entry of a default judgment pursuant to Fed. R. Civ. P. 55(b)(2) (ECF 24) on December 19, 2012.*fn1

Movants seek to intervene in this action pursuant to Rule 24 or to be joined as required parties pursuant to Rule 19 in order to defend against Plaintiff's Amended Complaint and Motion for Default Judgment. Movants' Motions to Intervene or Join (ECF 8-10) were filed on October 1, 2012 and October 9, 2012.*fn2 Plaintiff filed its Response to the motions (ECF 11) on October 12, 2012. The Court held a hearing on January 17, 2013, at the conclusion of which Plaintiff and Movants were invited to submit supplemental letter briefs. They submitted their letter briefs approximately seven days after the hearing.

III. Summary of the Movants' Contentions

Having thoroughly reviewed Movants' submissions and their arguments at the January 17, 2013 hearing, the Court summarizes their arguments as: Movants should be allowed to intervene in or join as parties to this insurance coverage dispute because either Rule 24 or Rule19(a)(1)(B) *fn3 mandates that they be provided an opportunity to protect certain interests that would be adversely affected by the entry of a final default judgment against Defendant:

1. The Zerns have an interest in the proceeds of the insurance policy to ensure their full recovery for Brian's injuries; and

2. The remaining Movants, who face joint and several liability with Defendant in the Zerns' lawsuit, have interests in

a. Defendant being represented in the Zerns' suit in order to prevent prejudice that would result from a named co-defendant not being represented at the trial to determine liability, and

b. The proceeds of the insurance policy to ensure recovery for any contribution action they may bring against Defendant.

IV. Unsettled Third Circuit Jurisprudence Regarding Intervention and Joinder

As detailed below, Movants' asserted interest in Defendant being represented in the Zerns' personal injury action is patently insufficient to qualify them for intervention or joinder.

Movants' financial interests in this insurance dispute would also appear to be insufficient under Liberty Mut. Ins. Co. v. Treesdale, Inc., 419 F.3d 216, 220 (3d Cir. 2005). *fn4 Treesdale affirmed a district court's denial of intervention and joinder to injured parties in an insurance coverage declaratory judgment action between an insured and its insurer.*fn5 Particularly relevant to this case, the Third Circuit held that the injured parties' financial interests in the outcome of the insurance dispute were neither the kind of "legally protected interests" required by Rules 24(a) and 19(a)(1)(B),*fn6 nor capable of providing a common issue of law or fact with the insurance dispute as required for by Rule 24(b). Therefore, if Treesdale controls this case, the Court would be compelled to deny Movants' requests for intervention and joinder.

However, Movants have relied on Third Circuit cases that they assert undermine Treesdale. As detailed below, relatively recent Third Circuit jurisprudence establishes that for purposes of standing, financial interests may qualify as "legally protected interests." Consequently, this Court must assess whether Treesdale remains authoritative precedent for the types of interests that should be considered "legally protected" under Rules 24 and 19.

A. The Third Circuit's Standing Jurisprudence

In Am. Auto. Ins. Co. v. Murray, 658 F.3d 311 (3d Cir. 2011), the Third Circuit held that an injured party who had been named as a defendant in an insurance coverage declaratory judgment action had standing to appeal the district court's grant of summary judgment in favor of the insurer. In doing so, the Third Circuit applied the test for constitutional standing from Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992), and determined that the injured party had "interests in the [insurance coverage] lawsuit . . . independent of the insured" that satisfied Lujan's "legally protected interest" requirement, "because a determination of [the insured's] coverage would dictate [the injured party's] ability to receive the full benefit of [his] lawsuit" against the insured. Murray, 658 F.3d at 318-19.

Essential to the Third Circuit's holding in Murray was its holding in Fed. Kemper Ins. Co. v. Rauscher, 807 F.2d 345 (3d Cir.1986). Rauscher held that because a "case or controversy" existed between an insurer and injured parties sued as defendants in an insurance coverage declaratory judgment action, the injured parties had standing to defend against the insurer's complaint, even after a default judgment had been entered against the insured. Murray should be read as recasting Rauscher in Lujan's standing terminology, because Murray described Rauscher as "[t]he controlling case in this [c]court on whether injured parties have standing in a declaratory judgment action in the insurance coverage context" and simply "[a]ppl[ied] the principles set forth in Rauscher" to reach its holding regarding standing. Murray, 658 F.3d at 318-19.

B. The Relationship of Treesdale's Holdings on Rules 24 and 19 to the Third

Circuit's Standing Jurisprudence

Treesdale's determination that financial interests are not recognized as "legally protected interests" under Rules 24 and19(a)(1)(B) is at least superficially inconsistent with the Third Circuit's standing jurisprudence dating back almost thirty years. The Murray court recognized this discord with respect to Rule 24, stating in a footnote that:

1. Treesdale had not addressed standing and, therefore, was inapplicable to the standing analysis; and

2. It remains unsettled "whether a potential intervenor [under Rule 24] must even have ...


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