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Mid Continent Casualty Co. v. Engelke

United States District Court, D. Montana, Billings Division

October 31, 2017

MID CONTINENT CASUALTY COMPANY, Plaintiff,
v.
ALAN ENGELKE, STATE FARM FIRE & CASUALTY COMPANY, DRY PRAIRIE RURAL WATER AUTHORITY, and DOES 1-10, Defendants.

          ORDER AND ORDER

          SUSAN P. WATTERS UNITED STATES DISTRICT JUDGE

         Before the Court is Defendant State Farm Fire and Casualty Company's Motion to Dismiss Pursuant to Rule 12(b)(1), (Doc. 25), and Plaintiff Mid Continent Casualty Company's Motion for Leave to File Second Amended Complaint for Subrogation (Doc. 28). For the following reasons, the Court grants State Farm's Motion to Dismiss and denies Mid Continent's Motion to Amend.

         I. Background

         This action involves a salt water disposal line associated with oil field operations in eastern Montana. In 2013, Defendant Dry Prairie Rural Water Authority intended to install water piping in the ground to transport water to Bainville, Montana, a community in eastern Montana. (Doc. 10 at 1). Dry Prairie contracted with Defendant Alan Engelke to dig the trench in which Dry Prairie would lay its piping. (Id. at 2). While Engelke was trenching, he hit and damaged the underground salt water disposal line, which was owned by Avery Bakken Disposals, LLC. (Id. at 3). He covered up the damaged line with dirt. (Id.). He did not advise anyone that he had damaged the line or reburied it. (Id.)

         In May 2014, Avery Bakken placed the salt water disposal line back into service. (Id. at 4). Salt water seeped out of the damaged disposal line and caused damage to the neighboring land. (Id. at 4-5). Avery Bakken's insurer, Mid Continent, paid $134, 078 for the damage to the land and remediation efforts. (Id. at 7).

         Engelke asserts that before he started trenching, he contacted the property owner, and was told that any pipelines on the property were abandoned. (Doc. 11 at 1). Engelke also asserts that he sought information about pipelines on the property from the "one call" notification system, in compliance with the "Montana Dig Law, " Mont. Code Ann. § 69-4-501. (Doc. 17 at 2). Unfortunately, Avery Bakken did not participate in the notification system, so Engelke did not know about the salt water line before he started trenching. (Id. at 2-4).

         State Farm insured Engelke at the time of the loss. (Doc. 10 at 8). Mid Continent brought suit against Engelke, Dry Prairie, and State Farm in state court. (See gen. id.). Mid Continent alleges that State Farm has a duty to pay Mid Continent because of Engelke's alleged negligence. (Id. at 8). Dry Prairie crossclaimed against State Farm, seeking contribution or indemnity from State Farm in the event Dry Prairie is found liable. (Doc. 22). State Farm removed the case to this Court. (Doc. 1). State Farm now moves to dismiss the claims against it, arguing until Engelke's liability has been established, Mid Continent's and Dry Prairie's claims against State Farm are not ripe and must be dismissed. (Doc. 26 at 3).

         II. Legal Standard

         Dismissal under Fed.R.Civ.P. 12(b)(6) "is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory." Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir.2008). For purposes of a motion to dismiss, the plaintiffs allegations are taken as true, and the court must construe the complaint in the light most favorable to the plaintiff. Jenkins v. McKeithen, 395 U.S. 411, 421 (1969). At the same time, "[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiffs obligation to provide the 'grounds' of his 'entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted). Thus, a court need not accept as true conclusory allegations, unreasonable inferences, legal characterizations, or unwarranted deductions of fact contained in the complaint. Clegg v. Cult Awareness Network, 18 F.3d 752, 754-755 (9th Cir. 1994).

         Leave to amend must be granted unless it is clear that the complaint's deficiencies cannot be cured by amendment. Lucas v. Dep 't of Corrs., 66 F.3d 245, 248 (9th Cir. 1995). When amendment would be futile, dismissal may be ordered with prejudice. Dumas v. Kipp, 90 F.3d 386, 393 (9th Cir. 1996).

         III. Discussion

         State Farm moves to dismiss Mid Continent's claim for subrogation in its First Amended Complaint because it is not ripe and no justiciable controversy exists. State Farm also asserts that Mid Continent's motion for leave to file the Second Amended Complaint should be denied as futile because the new causes of action alleged are not recognized by Montana law. The Court addresses these arguments in order.

         1. Mid Continent's Subrogation Claim is Not Ripe.

         "Whether a claim is ripe for adjudication goes to a court's subject matter jurisdiction under the case or controversy clause of article III of the federal Constitution." St. Clair v. City o/Chico,880 F.3d 199, 201 (9th Cir. 1989). The test under Montana law for whether a justiciable controversy exists contains three elements, (1) the parties must have existing and genuine, as distinguished from theoretical, rights or interests; (2) the controversy must be one upon which the court's judgment may effectively operate, as distinguished from an argument invoking a purely political, philosophical, or academic conclusion; and (3) the court's judicial determination must be able to effect a final judgment in law or decree upon the rights, status or legal relationships of the real parties in interest in the controversy. See Brisendine v. State Dept. of Commerce,833 P.2d 1019, 1020 (Mont. 1992). The justiciable controversy test "prevent[s] courts from determining purely speculative or academic matters, entering anticipatory judgments, ...


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