United States District Court, D. Colorado
TIMOTHY KUZAVA, and KATHY JO KUZAVA, as assignees of Lyon Trucking, Inc. and Eric Kubby, Plaintiffs,
UNITED FIRE & CASUALTY COMPANY, Defendant.
RECOMMENDATION OF UNITED STATES MAGISTRATE
Y. Wang, Magistrate Judge
matter comes before the court on Defendant United Fire &
Casualty's (“Defendant” or
“United”) Rule 12(b)(1) Motion to Dismiss or, in
the Alternative, Motion to Stay Proceedings (“Motion to
Dismiss” or “Motion”), filed November 15,
2017. [#12]. The undersigned Magistrate Judge considers the
Motion to Dismiss pursuant to 28 U.S.C. § 636(b), the
Order Referring Case dated November 9, 2017 [#11], and the
Memorandum dated November 16, 2017 [#13]. Having carefully
reviewed the Motion and associated briefing, the applicable
case law, the entire case file, and the comments offered
during the February 9, 2018 Motion Hearing, this court
respectfully RECOMMENDS that the Motion to Dismiss be
GRANTED. ALTERNATIVELY, to the extent that the presiding
judge, the Honorable Christine M. Arguello, finds that this
court has subject matter jurisdiction over some (but not all)
of the claims in this matter, this court respectfully
RECOMENDS that this matter be ADMINISTRATIVELY CLOSED pending
the disposition of United's appeal to the Colorado Court
Kuzava and Kathy Jo Kuzava (collectively,
“Plaintiffs”) initiated this action in the
District Court for the City and County of Denver on September
6, 2017. [#6]. The following day, Plaintiffs filed an Amended
Complaint [#8], the operative complaint in this matter. On
November 8, 2017, United removed this action to federal court
pursuant to 28 U.S.C. § 1332(a). [#1].
facts giving rise to this matter involve an automobile
accident between Mr. Kuzava and Eric Kubby [#7 at ¶ 5],
which occurred near Avon, Colorado on or about June 7, 2013,
[#12 at 2]. “At the time of the accident, Mr. Kubby was
acting within the course and scope of his employment with
Lyon Trucking, Inc., and was operating a truck owned by Lyon
Trucking, Inc.” [#7 at ¶ 6]. Plaintiffs
subsequently filed suit against Mr. Kubby and Lyon Trucking,
Inc. (“Lyon Trucking”), seeking damages for their
injuries in Eagle County District Court, No. 2014CV30452 (the
“Underlying Action”). [Id. at ¶
time of the accident, United insured Lyon Trucking and Mr.
Kubby as an employee of Lyon Trucking. [Id. at
¶¶ 7-8]. United's insurance policy provided a
$1, 000, 000 liability limit per accident; United also agreed
to defend Lyon Trucking and Mr. Kubby in the Underlying
Action. See [id. at ¶ 9; #12 at 2].
Plaintiffs made several unsuccessful settlement demands for
the policy limit during the Underlying Action. [#7 at
¶¶ 13-18]. Though set for a two-week jury trial
beginning June 20, 2016, Plaintiffs, Mr. Kubby, and Lyon
Trucking agreed to arbitration in Denver to resolve the
Underlying Action. See [id. at ¶ 20;
#12 at 2-3]. Defendant then sought to intervene as a matter
of right in the Underlying Action to bar the arbitration
proceedings and to receive a declaration that it owed no
further defense or indemnity obligations to Lyon Trucking and
Mr. Kubby. [#12 at 3]. The Eagle County District Court denied
United's Motion to Intervene. [Id. at 4]. United
therefore defended Lyon Trucking and Mr. Kubby at
arbitration, but United itself elected not to participate in
the arbitration proceedings. [#7 at ¶¶ 21-25].
arbitration proceedings lasted “over 8 days, ”
and resulted in an award of more than $3, 000, 000 to
Plaintiffs-an award Lyon Trucking and Mr. Kubby were jointly
and severally liable for. [Id. at ¶¶
26-27]. The Eagle County District Court confirmed the
arbitration award and entered judgment against Lyon Trucking
and Mr. Kubby for the full amount of the arbitration award
plus post-judgment interest. [Id. at ¶ 28].
Subsequently, Lyon Trucking and Mr. Kubby assigned to
Plaintiffs the rights and interests in any and all present
and future claims Lyon Trucking and Mr. Kubby may have had
against United under its insurance policy, including the full
judgment amount of the Underlying Action as well as state law
claims for breach of contract and bad faith breach of an
insurance contract (the
“Agreement”). See [id. at ¶
32]; see also [#12 at 3; #12-5 (assigning all claims
to Plaintiffs in exchange for Plaintiffs' agreement not
to execute or enforce the arbitration judgment against Lyon
Trucking and Mr. Kubby)]. United has yet to pay any portion
of the judgment entered against Lyon Trucking and Mr. Kubby.
[#7 at ¶ 29].
Plaintiffs initiated the present action alleging claims
against Defendant for breach of contract and bad faith breach
of an insurance contract. [#7]. At oral argument, the Parties
disagreed as to whether Plaintiffs had asserted a breach of
contract claim based on the failure of the duty to defend as
well as a failure of the duty to indemnify. [#35]. When asked
by the court to clarify, Plaintiffs contended the Amended
Complaint contained a separate cause of action for breach of
contract arising from a failure to defend, but Defendant
contended that such a separate breach could not lie because
United, in fact, provided a defense to Lyon Trucking and Mr.
Kubby in the Underlying Action. This court's review of
the Amended Complaint indicates that, while the supporting
paragraphs in the breach of contract claim refer to
Defendant's obligation to defend and “provide
competent counsel to advocate for Mr. Kubby and Lyon
Trucking, Inc.'s best interests, ” [#7 at
¶¶ 35-36], the breach asserted arises not from a
failure to defend but “failing and refusing to
indemnify Mr. Kubby and Lyon Trucking, Inc. for any portion
of the judgment entered against them in the Underlying
Lawsuit.” [Id. at ¶ 39]. Plaintiffs also
allege that Defendant acted in bad faith throughout the
Underlying Action because of its refusal to reasonably settle
the claims when it had an opportunity to do so within the
policy limits; wrongfully refusing to indemnify Mr. Kubby and
Lyon Trucking; failing to reasonably investigate and evaluate
the claims brought by Plaintiffs in the Underlying Action;
moving to bifurcate the non-covered claims from the
Underlying Action; and failing to reasonably communicate with
Lyon Trucking and Mr. Kubby in the Underlying Action.
[Id. at ¶ 44]. Plaintiffs contend that these
actions were unreasonable, reckless, and negligent, causing
damages and losses to Lyon Trucking and Mr. Kubby.
See [id. at ¶¶ 43-47].
here, Defendant appealed the Eagle County District
Court's denial of its Motion to Intervene, among other
issues, on June 16 and August 16, 2017, respectively. [#12 at
4]. In its instant Motion, Defendant avers that
Plaintiffs' breach of contract and bad faith breach of an
insurance contract claims are not ripe for judicial review by
this court given its appeal of the Underlying Action.
[Id. at 6]. This is because, should United win its
appeal, “thereby obtaining a decision that its
intervention should have been granted before the 
arbitration commenced, that arbitration proceeding and the
result thereof will be void as to United Fire, and all
proceedings in this Court (which are based upon the Award)
will be nullified.” [Id.]. As an alternative,
United requests that this court stay the instant matter until
the Underlying Action “becomes final and
non-appealable.” [Id.]. Plaintiffs oppose the
requested relief, and argue that United's appeal of the
Underlying Action has no effect on whether their claims in
this action are ripe and that an indefinite stay of this
action is unwarranted. [#22]. This court considers the
Parties' arguments below.
courts are courts of limited jurisdiction and, as such,
“are duty bound to examine facts and law in every
lawsuit before them to ensure that they possess subject
matter jurisdiction.” The Wilderness Soc. v. Kane
Cty., Utah, 632 F.3d 1162, 1179 n.3 (10th Cir. 2011)
(Gorsuch, J., concurring). Indeed, courts have an independent
obligation to determine whether subject matter jurisdiction
exists, even in the absence of a challenge from any party.
1mage Software, Inc. v. Reynolds & Reynolds,
Co., 459 F.3d 1044, 1048 (10th Cir. 2006) (citing
Arbaugh v. Y & H Corp., 546 U.S. 500 (2006)).
to Rule 12(b)(1) of the Federal Rules of Civil Procedure, a
party may bring either a facial or factual attack on subject
matter jurisdiction, and a court must dismiss a complaint if
it lacks subject matter jurisdiction. See generally
Pueblo of Jemez v. United States, 790 F.3d 1143, 1147
n.4 (10th Cir. 2015). For a facial attack, the court takes
the allegations in the Complaint as true, but when reviewing
a factual attack the court may not presume the truthfulness
of the Complaint's factual allegations and may consider
affidavits or other documents to resolve jurisdictional
facts. Holt v. United States, 46 F.3d 1000, 1002-03
(10th Cir. 1995). The burden of establishing jurisdiction
rests with the party asserting jurisdiction. Basso v.
Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir.
Subject Matter Jurisdiction
subject matter jurisdiction may exist in one of two ways.
First, to invoke federal question jurisdiction under 28
U.S.C. § 1331, a plaintiff's well-pleaded complaint
must either establish “that federal law creates the
cause of action or that the plaintiff's right to relief
necessarily depends on resolution of a substantial question
of federal law.” Nicodemus v. Union Pac.
Corp., 440 F.3d 1227, 1232 (10th Cir. 2006) (internal
quotations and citation omitted). Second, under 28 U.S.C.
§ 1332(a)(1), federal courts “have original
jurisdiction of all civil actions where the amount in
controversy exceeds the sum or value of $75, 000 . . . and is
between (1) citizens of different States.” In removing
this action to this District, Defendant invoked the
court's diversity jurisdiction. [#1]. Plaintiffs suggest
that the disposition of Defendant's Motion to Dismiss may
divest this court of subject matter jurisdiction.
See [#28]. Because this court has an independent
obligation to assure itself that subject matter jurisdiction
exists, I turn to Plaintiffs' supplemental briefing on
this issue first.
aver that Defendant's ripeness arguments address only the
economic damages associated with the judgment in the
Underlying Action. [#28 at 3]. Should the court then agree
with Defendant on this point, the only damages remaining
would be Plaintiffs' claims for “damage to credit
and reputation by virtue of the judgment being entered, and
in the case of . . . Mr. Kubby, non-economic damages[, ]
including the stress of having the judgment entered against
him.” [Id.]. Under this scenario, Plaintiffs
argue the court would be divested of diversity jurisdiction
because United has not demonstrated that each Plaintiff seeks
damages in excess of $75, 000 and, therefore, immediate
remand to the District Court for the City and County of
Denver is warranted. [Id. at 3-4]. United disagrees,
and argues that its ripeness challenge encompasses
all damages sought by Plaintiffs. [#33 at 3].
Further, Defendant argues that the rule against claim
splitting counsels against dismissing some claims while
allowing others to proceed. [Id. at 4]. For the
following reasons, this court concludes that, regardless of
the disposition of United's Motion to Dismiss, federal
subject matter exists.
purposes of diversity jurisdiction, the amount in controversy
“is an estimate of the amount that will be put at issue
in the course of the litigation.” McPhail v. Deere
& Co., 529 F.3d 947, 956 (10th Cir. 2008). In
removal actions it is the defendant's burden to prove
“jurisdictional facts that make it possible that $75,
000 is in play.” Bellman v. NXP Semiconductors USA,
Inc., 248 F.Supp.3d 1081, 1106 (D.N.M. 2017) (quoting
id. at 955). There is no dispute that Defendant
satisfied this initial burden based on Plaintiffs'
Amended Complaint and civil cover sheet, both of which
indicated that the amount in controversy well exceeded the
$75, 000 requirement. See Paros Properties LLC v.
Colorado Cas. Ins. Co., 835 F.3d 1264, 1272-73 (10th
Cir. 2016) (holding that a state civil cover sheet indicating
a judgment over $100, 000 is sought was sufficient to satisfy
amount in controversy); Laughlin v. Kmart Corp., 50
F.3d 871, 873 (10th Cir. 1995) (“The amount in
controversy is ordinarily determined by the allegations of
the complaint, or, where they are not dispositive, by the
allegations in the notice of removal.”).
argument, however, focuses on the amount in controversy
should the court grant United's Motion to
Dismiss. But what matters most for diversity jurisdiction is
“the condition of the parties . . . as it was at the
commencement of the suit.” Symes v.
Harris, 472 F.3d 754, 758 (10th Cir. 2006) (citations
and internal quotation marks omitted) (emphasis added);
accord Naegele v. Albers, 110 F.Supp.3d 126, 141
(D.D.C. 2015) (“The amount in controversy is
established at the commencement of the action.”
(brackets, citations, and internal quotation marks omitted)).
That is, if the amount in controversy is satisfied at the
commencement of the suit, including upon removal,
“jurisdiction has attached, [and] events subsequently
defeating it by reducing the amount in controversy are
unavailing.” Miera v. Dairyland Ins. Co., 143
F.3d 1337, 1340 (10th Cir. 1998). “A distinction must
be made . . . between subsequent events that change the
amount in controversy and subsequent revelations that, in
fact, the required amount was or was not in controversy at
the commencement of the action.” Watson v.
Blankinship, 20 F.3d 383, 387 (10th Cir. 1994).
because the amount in controversy was satisfied at the time
of removal, the disposition of Defendant's Motion to
Dismiss will have no effect upon the court's subject