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Harford Mutual Insurance Co. v. The New Ledroit Park Building, LLC

United States District Court, District of Columbia

April 27, 2018

HARFORD MUTUAL INSURANCE COMPANY, Plaintiff,
v.
THE NEW LEDROIT PARK BUILDING COMPANY, LLC et al., Defendants

          MEMORANDUM OPINION AND ORDER

          TIMOTHY J. KELLY United States District Judge

         In this declaratory-judgment action, a liability insurer (Plaintiff Harford Mutual Insurance Company, or “Harford”) brings suit against its insured, a construction company and its owners (the Defendants). This Opinion addresses three outstanding issues. First, the Court has raised sua sponte the issue of whether it has jurisdiction over this action under Article III of the U.S. Constitution and the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202. Second, Harford has moved to strike Defendants' Second Amended Answer and Counterclaim. See ECF No. 28. Third, Harford has moved to dismiss Defendants' first amended counterclaim, which seeks attorney's fees, for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). See ECF No. 25.

         For the reasons set forth below, the Court will dismiss Harford's Amended Complaint for lack of subject matter jurisdiction. Harford may seek to remedy the deficiencies identified in this Opinion by filing a second amended complaint on or before May 28, 2018. The pending motions for summary judgment (ECF Nos. 15 and 17) will be denied as moot, although the parties may file renewed motions if Harford files a second amended complaint over which this Court has jurisdiction. The Court will also grant both Harford's motion to strike and its motion to dismiss.

         I. Factual and Procedural Background

         A. Harford's Claim for Declaratory Judgment

         This case is a dispute over attorney's fees. Defendants face two lawsuits filed in the Superior Court of the District of Columbia by customers who allege that Defendants improperly performed certain construction work. See ECF No. 4 (“Am. Compl.”) ¶¶ 6-8, 18. Harford concedes that, as Defendants' liability insurer, it has a duty to defend them in the Superior Court lawsuits, even though it is doing so under a reservation of rights. Id. ¶¶ 10-11. It disagrees with Defendants, however, on how much it should have to pay. Defendants assert that their chosen counsel in the Superior Court lawsuits has reasonably charged fees as high as $625 per hour. Id. ¶ 15. Harford claims that those fees are unreasonably high, and has agreed to pay only a “blended rate” of $275 per hour. Id. ¶ 13.

         In this declaratory-judgment action, Harford asks the Court to determine what a reasonable attorney's fee would be to defend against the two Superior Court lawsuits. Id. ¶ 21. Specifically, in its prayer for relief, Harford asks that the Court:

1. Enter a judgment declaring the reasonable and fair market rate, on an hourly basis, that will apply to the work undertaken by counsel of the Defendants' choosing in connection with the defense of the two cases now pending in the Superior Court for the District of Columbia against the Defendants; and
2. For such other and further relief as this Court deems necessary and just.

Id. at 6. Harford asserts that this Court has jurisdiction based on the Declaratory Judgment Act and diversity of citizenship. Id. ¶¶ 2, 20-21. The parties agree that Harford's claim is governed by District of Columbia law. See ECF No. 15 at 8-9; ECF No. 17-1 at 10. The parties have filed motions for summary judgment on the merits of Harford's claim. ECF Nos. 15, 17.

         On December 7, 2017, the Court held a status conference during which it questioned whether it could properly exercise jurisdiction over this action. The parties subsequently submitted supplemental briefing on that issue. See ECF Nos. 29, 30. Both parties agree that Harford has a duty to defend Defendants in the underlying Superior Court actions, and argue jurisdiction exists because there is an actual case or controversy regarding the amount of attorney's fees that Harford should pay. See ECF No. 29 at 5; ECF No. 30 at 9-10.

         B. Defendants' Counterclaim for Attorney's Fees

         On October 13, 2017, Defendants answered Harford's Amended Complaint and filed a counterclaim for attorney's fees under District of Columbia law. ECF No. 14. Harford moved to dismiss the counterclaim on November 3. ECF No. 16. On November 17, Defendants filed an Amended Answer and Counterclaim, ECF No. 20 (“Am. Ans.”), mooting Harford's initial motion to dismiss. The amended counterclaim generally asserts that Harford's conduct in the insurance dispute has been vexatious, oppressive, and in bad faith. Id. ¶¶ 75-76. The amended counterclaim further specifies that Harford has unreasonably refused to pay Defendants' legitimate attorney's fees, has unreasonably delayed making payments, and has made misstatements of fact and law that benefited Harford at Defendants' expense. See Id. ¶¶ 77-87. Based on these allegations, Defendants request various forms of relief, including “litigation expenses and attorney's fees” incurred in this action. See Id. at 11-12.

         Harford filed a renewed motion to dismiss the first amended counterclaim on December 1. ECF No. 25. Defendants then filed a Second Amended Answer and Counterclaim, ECF No. 26, and a “notice” asserting that Harford's renewed motion was now moot, ECF No. 27. Harford moved to strike the Second Amended Answer and Counterclaim, asserting that it was improperly filed under Federal Rule of Civil Procedure 15 and did not moot Harford's renewed motion to dismiss. ECF No. 28. Defendants opposed the motion to strike, and in doing so also set forth arguments opposing ...


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