United States District Court, W.D. North Carolina, Charlotte Division
J. CONRAD, JR. UNITED STATES DISTRICT JUDGE.
MATTER comes before the Court on Catlin Specialty
Insurance Company’s (“Catlin”) Amended
Complaint for Declaratory Judgment, (Doc. No. 19); Jeffrey
Nicholson’s, Kristi Nicholson’s, and
L.C.N.’s (collectively, “the Nicholsons”)
Answer to Amended Complaint, (Doc. No. 20); Catlin’s
Motion for Summary Judgment, (Doc. No. 33); its memoranda in
support, (Doc. No. 33-1); the Nicholsons’ Motion for
Default, (Doc. No. 37); their Motion for Summary Judgment,
(Doc. No. 38); their Response in Opposition to Catlin’s
Motion for Summary Judgment, (Doc. No. 39); and
Catlin’s Reply, (Doc. No. 41).
August 11, 2016, Catlin filed its Complaint for Declaratory
Judgment against Stanley Recreation Club, Inc. (“the
Club”), Joshua Roberts, Jerry N. Ragan, James
Abernethy, and the Nicholsons. (Doc. No. 1). The Nicholsons
filed an Answer with accompanying crossclaims against the
Club and counterclaims against Catlin. (Doc. No. 8). Catlin
then amended its Complaint on October 7, 2016, to which the
Nicholsons filed a corresponding answer. (Doc. Nos. 19, 20).
Roberts, Abernethy, and the Club failed to answer or
otherwise appear before the Court. Accordingly, on December
19, 2016, the Clerk entered default against the Club,
Abernethy, and Roberts pursuant to a motion filed by Catlin.
(Doc. Nos. 25–28). On April, 28, 2017, Catlin filed its
Motion for Summary Judgment against the Nicholsons. (Doc. No.
33). On the same day, the Nicholsons then filed a Motion for
Default Judgment against the Club and a Motion for Summary
Judgment against Catlin. (Doc. Nos. 37, 38).
24, 2016, the Nicholsons filed an underlying tort action in
North Carolina State Court against the Club, James Abernethy,
and Joshua Roberts. In that suit, the Nicholsons allege that
the Club and the coaches of its swim team, Abernethy and
Roberts, were negligent when L.C.N., Jeffery and Kristi
Nicholson’s daughter, dove off of a starting block and
hit her head on the bottom of the Club’s pool,
resulting in injury. (Doc. No. 19-2; 38-1). Subsequent to the
filing of that action, Catlin, an insurance company, brought
this suit seeking a declaratory judgment clarifying the scope
of Catlin’s indemnity obligation in the state tort
action in light of the insurance policy it signed with the
Club. (Doc. No. 19). Catlin asserts that a Members Exclusion
Clause within its insurance policy (“the Policy”)
with the Club prevents coverage over the Nicholsons’
underlying state tort claim. While the clause may seem
straight forward, the Policy fails to later define the term
“member.” The main issue of Catlin’s
current action concerns whether the Nicholsons qualify as
“members” of the Club, which then determines
whether the Exclusionary Clause bars insurance coverage over
their state court negligence claim.
proceeding to this Policy’s application to the
Nicholsons, some background on the Club and its relationship
with Abernethy, Roberts, and the Nicholsons is necessary. To
begin with, the Club functions as a recreational center,
providing access to a pool. (Doc. Nos. 33 at 3; 38 at 5). The
Club solicits memberships, which grant unlimited pool access
as well as discount prices for services such as the
Club’s swim team and swim lessons. (Doc. No. 33 at 3;
33-2 ¶¶ 9, 25). Abernathy and Roberts served as
coaches of the Club’s swim team, the Stanley Sharks.
(Doc. No. 33-4 ¶ 17, 19). The record shows that the
Nicholsons first applied for membership with the Club in
2011. (Doc. Nos. 33-2; 38-1). This application was
subsequently accepted by the Club’s Board when they
signed the Nicholsons’ application. (Doc. No. 8-3).
From 2011–15, the Nicholsons continued to pay annual
dues to the Club and, in return, accepted the benefits of
membership. This included taking advantage of the
member-discounted registration price for the Club’s
swim team. (Doc. No. 33-2 ¶¶ 24–25). Rather
than paying the $55 price for non-members, the Nicholson
family paid the $45 member price to register their daughter,
Nicholsons do not dispute that they have continued to pay
annual dues in accordance to the Bylaws. Nor do they dispute
that the Board approved of their membership application or
that they took advantage of the benefits memberships usually
offer. The Nicholsons only assert that they never received a
membership certificate mentioned in the Club’s Articles
of Incorporation and Bylaws, which they argue precludes their
status of Stanley Club members. (Doc. No. 38-1 ¶ 6).
AND THE NICHOLSONS’ CROSS MOTIONS FOR SUMMARY
judgment shall be granted “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). A factual dispute is genuine “if
the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is
material only if it might affect the outcome of the suit
under governing law. Id. The movant has the
“initial responsibility of informing the district court
of the basis for its motion, and identifying those portions
of the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any,
which it believes demonstrate the absence of a genuine issue
of material fact.” Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986) (internal citations omitted).
“The burden on the moving party may be discharged by
‘showing’ . . . an absence of evidence to support
the nonmoving party’s case.” Id. at 325.
this initial burden is met, the burden shifts to the
nonmoving party. The nonmoving party “must set forth
specific facts showing that there is a genuine issue for
trial.” Id. at 322 n.3. The nonmoving party
may not rely upon mere allegations or denials of allegations
in his pleadings to defeat a motion for summary judgment.
Id. at 324. The nonmoving party must present
sufficient evidence from which “a reasonable jury could
return a verdict for the nonmoving party.”
Anderson, 477 U.S. at 248; accord Sylvia Dev.
Corp. v. Calvert Cty., Md., 48 F.3d 810, 818 (4th Cir.
ruling on a summary judgment motion, a court must view the
evidence and any inferences from the evidence in the light
most favorable to the nonmoving party. Anderson, 477
U.S. at 255. “Where the record taken as a whole could
not lead a rational trier of fact to find for the nonmoving
party, there is no genuine issue for trial.” Ricci
v. DeStefano, 557 U.S. 557, 586 (2009) (internal
citations omitted). The mere argued existence of a factual
dispute does not defeat an otherwise properly supported
motion. Anderson, 477 U.S. at 248. If the evidence
is merely colorable, or is not significantly probative,
summary judgment is appropriate. Id. at 249-50.
The Court Will Not Address the Nicholsons’ Status
as “Insureds” or “Uninsureds”
Court first addresses the Nicholsons’ counterclaim
seeking declaratory judgement regarding their status under
the Policy. (Doc. No. 8 at 17). Specifically, the Nicholsons
claim, and Catlin does not oppose, that they are not insureds
under the Policy (Doc. No. 38 at 8). Catlin contends rather
that the Court lacks jurisdiction over this issue because the
determination of the Nicholsons’ status “is not a
‘controversy of sufficient immediacy and
reality.’” (Doc. No. 33 at 19). Catlin points out
that no allegation exists imputing liability on the
Nicholsons under the policy, which renders the question of
their status as insureds moot. (Id.).
Court declines to extend jurisdiction over this issue. There
is no need to clarify the legal relationship of the
Nicholsons because no uncertainty exists regarding the
Nicholsons’ status as uninsureds. See Aetna Cas.
& Sur. Co. v. Ind-Com Elec. Co., 139 F.3d 419, 422
(4th Cir. 1998) (allowing district courts to exercise
discretion and decline issuing a judgment pursuant to the
Declaratory Judgment Act, 28 U.S.C. § 2201, when it
would not end any uncertainty, insecurity, or controversy
giving that gave rise to the proceeding).
The Nicholsons are “members” as used in the
main contention between the parties is how one interprets the
term “member” within Catlin’s insurance
policy with the Club? (Doc. Nos. 33, 38). Again, the relief
sought by both parties is declaratory in nature. (Doc. Nos.
8, 19). Here, the Court finds sufficient controversy to
warrant extending jurisdiction. The parties submit different
constructions of the term. The Court will exercise
jurisdiction over these claims for declaratory relief because
the issue, while referencing the underlying state tort claim,
is not necessarily within the scope of the state court
action. NGM Ins. Co., 642 F.Supp.2d at 515–16
(finding that, when determining if jurisdiction over
declaratory relief should be declined in the interest of
federalism, efficiency, and comity, district courts should
consider, among other factors, the scope of the state court
proceedings). The Nicholsons have voluntarily dismissed
Catlin from their underlying action, reducing the possibility
that this Court’s holding conflicts with the state
court’s conclusions. The notions of federalism,
efficiency, and comity are therefore sufficiently
safeguarded. See L.C.N., et. al. v. Abernethy, eta ...