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Parker Law Firm v. Travelers Indemnity Co.

United States District Court, W.D. Arkansas, Fayetteville Division

August 21, 2018

PARKER LAW FIRM and TIM PARKER PLAINTIFFS
v.
THE TRAVELERS INDEMNITY COMPANY and PS FINANCE, LLC DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          TIMOTHY L. BROOKS UNITED STATES DISTRICT JUDGE

         Currently before the Court are:

         • The Travelers Indemnity Company's ("Travelers") Motion to Dismiss (Doc. 12) and Brief in Support (Doc. 13); Parker Law Firm's and Tim Parker's Response in Opposition (Doc. 17), Brief in Opposition (Doc. 18), and Supplemental Response and Brief in Opposition (Doc. 19); and Travelers' Reply (Doc. 26);

         • Parker Law Firm's and Tim Parker's Motion for Default Judgment Against Separate Defendant PS Finance, LLC ("PSF") (Doc. 30); and

         • Parker Law Firm's and Tim Parker's Motion for Summary Judgment Against All Defendants (Doc. 32), Memorandum Brief in Support (Doc. 33), and Statement of Uncontested Material Facts in Support (Doc. 34).

         For the reasons given below, the Motion to Dismiss is GRANTED, the Motion for Default Judgment is DENIED, the Motion for Summary Judgment is MOOT, and the Complaint is DISMISSED WITHOUT PREJUDICE.

         I. BACKGROUND

         In early 2017, Tim Parker and the Parker Law Firm were sued by PSF in the Richmond County Supreme Court in Staten Island, New York. PSF, a litigation-financing company, claimed that Mr. Parker and his law firm breached their contract, breached the covenant of good faith and fair dealing, and breached their fiduciary duty, by failing to pay PSF settlement funds that a Parker Law Firm client received through litigation that PSF had financed. After being served with the lawsuit papers, Mr. Parker delivered them to Travelers, with whom the Parker Law Firm had an insurance policy, and asked Travelers to provide coverage and a defense in the lawsuit. Travelers denied this request, on the grounds that the policy does not provide coverage for that type of event, and does not give rise to any duty to defend against that type of claim. Near the end of 2017, the Richmond County Supreme Court directed the parties in that lawsuit to arbitration. For clarity, that lawsuit and the subsequent arbitration will be referred to as "the New York Litigation" throughout this Opinion and Order.

         Half a year after those parties were directed to arbitration, Mr. Parker and the Parker Law Firm filed a Complaint in this Court against Travelers and PSF. Their Complaint asserts four causes of action against Travelers: breach of contract, violation of the Arkansas Deceptive Trade Practices Act ("ADTPA"), violation of the Arkansas Insurance Code Trade Practices Act, and a request for declaratory and injunctive relief compelling Travelers to provide a defense to them and to pay any of PSF's claims against them. All four of these counts concern Travelers' denial of Mr. Parker's and his law firm's request for coverage and defense in the New York Litigation. Essentially, they all boil down to the same contention: that Travelers is obligated under their insurance policy to provide coverage and a defense, and that by refusing to do so, Travelers has harmed them. Travelers has filed a Motion to Dismiss (Doc. 12) all of these claims against it under Fed.R.Civ.P. 12(b)(6). That Motion has been fully briefed and will be discussed below, [1]but first the Court will quickly take up the matter of PSF's role in this case.

         Although Mr. Parker's and his law firm's Complaint also names PSF as a defendant, it does not identify any specific cause of action or claim against PSF. See Doc. 1, ¶¶ 25-40. Instead, it explains simply that "PSF is named as a party to this action because it is likely to claim an interest in the subject litigation and in its absence complete relief may not be afforded to all parties." Id. at ¶ 3. It further asserts that this Court has in rem or quasi in rem jurisdiction over PSF because, in the New York Litigation, PSF claimed damages "due to money it claims passed through Parker Law Firm." See Id. To date, no attorney has entered an appearance on behalf of PSF in this Court, and PSF has not filed any motion or pleading in response to the Complaint in this case.

         Mr. Parker and his law firm have filed a Motion for Default Judgment against PSF under Fed.R.Civ.P. 55, asking that "default judgment be entered against [PSF] to the effect that the Plaintiffs owe nothing to [PSF]" under the litigation-financing contract that is the subject of the New York Litigation. See Doc. 30, ¶ 6. The Court is perplexed by this request, given that the Complaint itself never seeks this (or any other) relief against PSF and, indeed, quite literally fails to state any claim at all against PSF. Neither the Motion for Default Judgment nor its Brief in Support identifies any paragraph or cause of action in the Complaint on which the requested relief is predicated. Therefore, the Motion for Default Judgment will be DENIED. With that matter out of the way, the Court will return to the Motion to Dismiss filed by Travelers.

         II. LEGAL STANDARD

         To survive a Rule 12(b)(6) motion to dismiss, a complaint must provide "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). The purpose of this requirement is to "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Erickson v. Pardus, 551 U.S. 89, 93 (2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The Court must accept all of the Complaint's factual allegations as true, and construe them in the light most favorable to the plaintiff, drawing all reasonable inferences in the plaintiffs favor. See Ashley Cnty., Ark. v. Pfizer, Inc., 552 F.3d 659, 665 (8th Cir. 2009).

         However, the complaint "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal,556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "A pleading that offers labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.' Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement."' Id. In other words, while "the pleading standard that Rule 8 ...


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