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IDS Property Casualty Insurance Co. v. Martell

United States District Court, E.D. Michigan, Southern Division

January 31, 2017




         Pending before the court is Plaintiff's Motion for Summary Judgment. (Dkt. #14.) The motion was originally to be heard on February 5, 2014, but a bankruptcy stay and administrative closing have long left this case in limbo. (Dkt. #19.) The court having now lifted the stay and reopened the case, (Dkt. #22.), Defendants have filed a response, (Dkt. #23), and Plaintiffs have filed a reply, (Dkt. #24). After reviewing the briefs, the court concludes that no hearing is necessary. See E.D. Mich. LR 7.1(f)(2). For the following reasons, the court will grant in part and deny in part Plaintiff's motion for summary judgment.

         I. BACKGROUND

         The instant case follows a suit filed by Defendants against several insurance companies, including Plaintiff IDS Property Casualty Insurance Company (“IDS”). (No. 10-14896). There, Defendants alleged that IDS had wrongly denied their claim for the loss of their home following a fire on June 14, 2010. After this court denied the claimants' motion for summary judgment in that proceeding, the case continued to trial where a jury found in favor of IDS, specifying that IDS had proved by the requisite standard its affirmative defenses, including that the claimants had “intentionally concealed or misrepresented [some] material fact or circumstance, or engaged in fraudulent conduct, or made a materially false statement[.]” (Dkt. #14-6.) The Sixth Circuit denied their appeal of this court's ruling on the motion for summary judgment.

         In the instant suit, Plaintiff IDS seeks recovery of moneys totaling $320, 087.34 paid out to Defendants during their pursuit of the fraudulent claim. Defendants have not responded point-by-point as directed in the court's scheduling order, (Dkt. #9, Pg. ID 31, 32), but rather provided a narrative “Counter Statement of Facts.” The material facts are not actually in dispute. In essence they are: 1) an intentionally-set fire destroyed Defendants' home; 2) Plaintiff, reserving its rights, paid out sums to Defendants and their mortgage-holder based on Defendants' statements about their claim; 3) Plaintiff ultimately denied the claim after completing its investigation; 4) Defendants sued; and 5) Defendants lost in large part because the jury determined that they had engaged in misrepresentation and fraudulent conduct.

         Plaintiff alleges here that Defendants' conduct -filing the claim and asserting that they were not the source of the fire- constituted fraud, and that Defendants were never entitled to any of the amounts Plaintiff had paid out to them or others on their behalf. Plaintiffs point to contract language that allows them to recover such wrongly-made payments, including those paid to the mortgagee (Aurora Bank FSB). Plaintiff also argues that public policy requires that Defendants repay the mortgage proceeds. Plaintiff argues that the claims are not barred by Federal Rule 13(a) governing compulsory counterclaims despite not having been brought in the original suit, because the claims did not “mature” until the jury rendered its verdict and made its finding of fraudulent conduct. Finally, IDS argues that it is due a declaratory judgment that it owns the subject property, all rights title and interest in which was conveyed to IDS by Aurora Bank FSB upon payment on the policy.

         In response, Defendants argue that Plaintiff's instant claims were compulsory counterclaims to the previous suit, and thus they are barred under Michigan rules governing res judicata and collateral estoppel. They argue that any claims IDS might have against them would have “matured” when IDS denied their claims, which preceded the filing of the first lawsuit.

         In reply, Plaintiff contends that Defendants' reliance on Michigan's res judicata law is inapplicable in cases such as this, which have been litigated exclusively in federal District Court. It also points out that the verdict in the underlying case turned on a determination that the Defendants had been untruthful.

         II. STANDARD

         Summary judgment is proper “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “In deciding a motion for summary judgment, the court must view the evidence in the light most favorable to the non-moving party, drawing all reasonable inferences in that party's favor.” Sagan v. United States, 342 F.3d 493, 497 (6th Cir. 2003). The movant has the initial burden of showing the absence of a genuine dispute as to a material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). “[T]hat burden may be discharged by showing . . . that there is an absence of evidence to support the nonmoving party's case.” Bennett v. City of Eastpointe, 410 F.3d 810, 817 (6th Cir. 2005) (internal quotation marks omitted).

         The burden then shifts to the nonmovant, who must put forth enough evidence to show that there exists “a genuine issue for trial.” Horton v. Potter, 369 F.3d 906, 909 (6th Cir. 2004) (citation omitted). Summary judgment is not appropriate when “the evidence presents a sufficient disagreement to require submission to a jury.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 243 (1986). In evaluating a summary judgment motion, “the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial . . . credibility judgments and weighing of the evidence are prohibited.” Moran v. Al Basit LLC, 788 F.3d 201, 204 (6th Cir. 2015) (internal quotation marks and citations omitted).


         Defendants do not attack the pertinent facts or claims advanced by Plaintiff in this case, but instead argue that, whatever the merits of Plaintiff's claims, because they were not brought in the earlier action they are barred by doctrines of res judicata and Federal Rule 13(a) governing compulsory counterclaims. Defendants tacitly admit that, if the claims are not barred, Plaintiff has established sufficient facts to warrant the grant of summary judgment.

         Plaintiff is correct that it is Federal Rule 13(a) and not Michigan law that controls here. The Supreme Court has established a framework for determining whether to apply the Federal Rules of Civil Procedure or state law when the Federal Rules address a question. In S ...

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