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Atlantic Casualty Insurance Co. v. Cm Sellers, LLC

United States District Court, W.D. Arkansas, El Dorado Division

April 5, 2016

ATLANTIC CASUALTY INSURANCE COMPANY, Plaintiff,
v.
CM SELLERS, LLC et al., Defendants.

REPORT AND RECOMMENDATION OF A UNITED STATES MAGISTRATE JUDGE

BARRY A. BRYANT, Magistrate Judge.

On February 9, 2016, Defendants CM Sellers, LLC ("CM Sellers"), Kyler Johnson ("Johnson"), and Potlatch Corporation ("Potlatch") (collectively "Defendants") filed a Motion to Dismiss Complaint for Declaratory Judgment, which is currently pending before the Court. ECF No. 8. Plaintiff Atlantic Casualty Insurance Company ("Atlantic") responded to this Motion on February 23, 2016. ECF No. 13.

The Court held a hearing to address this Motion on March 30, 2016. See ECF No. 16. After considering the briefing of the Parties and the arguments of counsel at the hearing, the Court recommends this Motion (ECF No. 8) be DENIED for the reasons outlined below.

1. Background

There are two lawsuits involved in this case. The first lawsuit is the current lawsuit filed by Atlantic against CM Sellers, Johnson, and Potlatch. On January 13, 2016, Atlantic filed this action against CM Sellers, Johnson, and Potlatch. ECF No. 1. In the Complaint, Atlantic seeks a declaration regarding an insurance policy it issued to CM Sellers. Id. ¶ 8. Specifically, Atlantic claims it issued CM Sellers a "Commercial General Liability" insurance policy that was effective from February 18, 2014 to February 18, 2015. Id. Atlantic seeks a declaration that it owes no obligation to CM Sellers under that insurance contract to defend or provide coverage as to the second or underlying lawsuit. Id.

The second lawsuit or the underlying lawsuit was filed by Johnson against CM Sellers and Potlatch. By way of background, Johnson alleges his employer was contacted by CM Sellers to provide labor for Potlach. See ECF No. 1-2. On September 21, 2014, at the time Atlantic was providing insurance coverage to CM Sellers, Johnson claims he was injured while working for Potlach. Id. Specifically, he claims he fell 26 feet through the roof and onto the concrete below. Id. As a result of this injury, Johnson sued CM Sellers and Potlach for personal injury. Id. This lawsuit was filed on August 28, 2015 and is currently ongoing. Id.

After the underlying lawsuit was filed, Atlantic then filed the current lawsuit on January 13, 2016, seeking a declaration that it has no obligation to provide coverage or defend CM Sellers in the underlying lawsuit. ECF No. 1. In support of its claim that it owes no coverage under this insurance contract, Atlantic references three policy provisions: (1) Exclusion of Injury; (2) Classification Limitation; and (3) "Workers' Compensation exclusion set." Id. ¶¶ 27-29.

Thereafter, on February 9, 2016, Johnson, CM Sellers, and Potlatch filed the current Motion to Dismiss. ECF No. 8. With this Motion, Defendants claim this Court is without subject matter jurisdiction to consider this case, and this case should be dismissed without prejudice pursuant to Federal Rule of Civil Procedure 12(b)(1). Id. Specifically, Defendants claim the primary issue in this case is whether Johnson was CM Sellers's employee at the time of the accident, and the Arkansas Workers' Compensation Commission has exclusive jurisdiction over such a determination. Id. Thus Defendants argue, the current case brought by Atlantic must be dismissed. Id.

On February 23, 2016, Atlantic responded to this Motion. ECF No. 13. In its response, Atlantic claims the issues raised in this case are not within the exclusive jurisdiction of the Workers' Compensation Commission. Id. Thus, because the Court otherwise has subject matter jurisdiction over there is case, there is no basis for dismissal. Id. The Court will now address this Motion.

2. Applicable Law

The sole issue raised in this Motion is whether the Court has subject matter jurisdiction over this case. To determine whether a federal court has subject matter jurisdiction over a case, the federal court may look "to matters outside the pleadings." Osborn v. United States, 918 F.2d 724, 728 n.4 (8th Cir. 1998) (recognizing "[t]he district court has authority to consider matters outside the pleadings when subject matter jurisdiction is challenged under Rule 12(b)(1)"). Indeed, because "its very power to hear the case" is at issue, "there is substantial authority that the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case." Id. at 730. Further, "the plaintiff will have the burden of proof that jurisdiction does in fact exist." Id.

Where a federal district court has no subject matter jurisdiction over a case, the case must be dismissed. See FED. R. CIV. P. 12(b)(1); FED. R. CIV. P. 12(h)(3) ("If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action"). See also Biscanin v. Merrill Lynch & Co., 407 F.3d 905, 907 (8th Cir. 2005) ("[i]f the asserted basis of federal jurisdiction is patently meritless, then dismissal for lack of jurisdiction is appropriate"). Generally, where a federal court has no subject matter jurisdiction, the dismissal must be without prejudice. FED. R. CIV. P. 41(b).

3. Discussion

Defendants claim the Court does not have subject matter jurisdiction over Atlantic's case. The Court has reviewed the briefing of the Parties and the arguments made by the Parties. After reviewing those arguments and the relevant law, the Court finds the Workers' Compensation Commission does not have exclusive jurisdiction over this case, and ...


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