United States District Court, S.D. West Virginia, Huntington Division
MEMORANDUM OPINION AND ORDER
C. CHAMBERS, UNITED STATES DISTRICT JUDGE.
pending before the Court is a motion to strike filed by
Third-Party Defendant State Auto Property and Casualty
Insurance Company, Inc. (“State Auto”). Mot.
to Strike, ECF No. 61. Specifically, State Auto moves
the Court to strike-or, in the alternative, sever-the
Third-Party Complaint filed against it by Defendant Meridian
Holding Company, LLC (“Meridian”). See
Third-Party Compl., ECF No. 48. The issues have been
fully briefed and are ripe for resolution. For the reasons
explained herein, the Court GRANTS State
Branch Banking and Trust Company (“Branch
Banking”) initiated this action when it filed a
Complaint seeking monetary damages for an unpaid promissory
note it entered into with Meridian in 2008. Compl.,
ECF No. 1, at 2. The Note, payable to Branch Banking in the
original principal amount of $858, 276.62, was partially
secured by a commercial property located at 2401 Sissonville
Drive in Charleston, West Virginia. Mot. for Leave,
ECF No. 30, at 2. The Note matured on January 5, 2018.
Compl., at 2. Meridian, along with Defendants
Gregory Howard, Jr., Roger Harris, Jr., and Michael
Dragovich, allegedly breached the terms of the Note and the
individual defendants' subsequent Guaranty Agreements
when they defaulted on their debts to Branch Banking.
Id. at 3. As of March 22, 2018, Branch Banking
alleges that “Meridian was indebted to the Bank under
the terms of the Note in the principal sum of $614, 341.73,
plus accrued interest of $9, 594.85, and late fees and other
charges of $8, 065.88, for a total of $632, 002.46.”
Id. Meridian responded to these claims by filing a
set of counterclaims against Branch Banking, alleging breach
of contract, breach of the duty of good faith and fair
dealing, common law fraud and misrepresentation, negligence,
and promissory estoppel. Answer & Counterl., ECF
No. 11, at 5-9. Broadly speaking, these counterclaims are
based on a set of allegations that Branch Banking and its
officers made certain oral representations regarding the Note
that they later ignored. Id.
August 23, 2019, Meridian filed a motion for leave to file a
third-party complaint. Mot. for Leave, at 1.
Meridian alleged that State Auto's “improper
refusal to repair . . . damage” at the 2401 Sissonville
Drive property caused Branch Banking to break various
promises and initiate the instant action. Id. at 3.
What actually constituted the “damage” at the
property is somewhat unclear. What is clear is that the damage,
whatever it is, occurred after the Note's January 5, 2018
maturation. Beyond these factual allegations, the Third-Party
Complaint contains claims for declaratory judgment, breach of
contract, first-party recovery of common law damages for
substantially prevailing, and first-party statutory unfair
claims settlement practices. Id. at 5-10.
Court granted Meridian's unopposed Motion for Leave to
Amend on January 14, 2019. Order, ECF No. 47. On May
13, 2019, State Auto filed the instant Motion to Strike.
Mot. to Strike, at 1. Pursuant to a stipulation
extending deadlines, Meridian filed its Response in
Opposition to State Auto's motion on June 11, 2019.
Resp. in Opp'n, ECF No. 63. Though nominally a
response to State Auto's arguments, Meridian effectively
included a motion to amend the Third-Party Complaint as part
of its filing. Id. at 4-6. One week later, State
Auto filed a reply memorandum of law. Reply, ECF No.
65. Against this factual and procedural background, the Court
turns to the legal framework that will govern its analysis.
14(a)(1) of the Federal Rules of Civil Procedure provides
that a “defending party may, as third-party plaintiff,
serve a summons and complaint on a nonparty who is or may be
liable for all or part of the claim against it.” Where
a third-party claim is not proper, “[a]ny party may
move to strike” it. Fed.R.Civ.P. 14(a)(4).
“Granting leave to bring a third party into an action
pursuant to Rule 14(a)(1) falls within the sound discretion
of the trial judge and should be liberally construed.”
Wright v. Bigger, No. 5:08CV62, 2008 WL 4900566, at
*1 (N.D. W.Va. Nov. 13, 2008) (citing Baltimore &
Ohio R.R. Co. v. Saunders, 159 F.2d 481, 483-84 (4th
Cir. 1947)). Nevertheless, third-party complaints must be
based on a theory of secondary or derivative liability to be
raised under Rule 14. See Plumbers & Pipefitters Loc.
625 v. Nitro Constr. Servs., Inc., No. 2:18-cv-01097,
2018 WL 6031350, at *2 (S.D. W.Va. Nov. 16, 2018). It follows
that a “third-party complaint is not appropriate where
a defendant merely attempts to deflect blame onto another
party.” AIG Europe Ltd. v. Gen. Sys., Inc.,
No. RDB-13-0216, 2013 WL 6654382, at *2 (D. Md. Dec. 16,
2013). Nor may a third-party complaint institute a
new cause of action against a third- party defendant. APC
First, LLC v. T.H.T., Inc., No. 2:02-0942, 2006 WL
8438394, at *4 (S.D. W.Va. Apr. 20, 2006).
secondary or derivative liability notion is central” to
the scope of third-party claims. 6 Charles A. Wright &
Arthur R. Miller, Federal Practice and Procedure
§ 1446 (3d ed.). Claims that are simply related to the
basis of an action-“even those arising out of the same
transaction or occurrence”-do not automatically satisfy
the derivative requirement. AIG Europe Ltd., 2013 WL
665482, at *2; see also Erickson v. Erickson, 849
F.Supp. 453, 456 (S.D. W.Va. 1994) (“It is not
sufficient that the third-party claim is a related claim; the
claim must be derivatively based on the original
plaintiff's claim.”). Put slightly differently,
third-party claims are only viable “where a proposed
third party plaintiff says, in effect, ‘If I am liable
to plaintiff, then my liability is only technical or
secondary or partial, and the third party defendant is
derivatively liable and must reimburse me for all or part of
anything I must pay plaintiff.'” Watergate
Landmark Condo. Unit Owners' Ass'n v. Wiss, Janey,
Elstner Associates, Inc., 117 F.R.D. 576, 578 (E.D. Va.
1987). With this legal framework in mind, the Court turns to
an analysis of the instant dispute.
core, State Auto's motion to strike centers on its
argument that the claims contained in Meridian's
Third-Party Complaint are not secondary or derivative of
Branch Banking's original claims. True enough. Yet this
argument actually understates the degree of separation
between the claims contained in the Third-Party Complaint and
the claims that serve as the basis for this action, as a
comparison between both sets of allegations makes abundantly
original Complaint, Branch Banking seeks monetary damages for
Meridian's failure to repay a promissory note. The note
in question matured on January 5, 2018, at which time
Meridian and its co-defendants allegedly breached their
obligations to Branch Banking. The bank seeks repayment of
the balance of the Note, plus accrued interest and late fees.
This is the full extent of Branch Banking's relatively
straightforward claims. Meridian's Third-Party Complaint
focuses on an entirely different set of facts. It mentions
two instances of damage to the 2401 Sissonville Drive
property, and requests declaratory judgment on State
Auto's denial of coverage and various resulting damages.
As State Auto appropriately points out, both instances of
damages occurred after the Note's maturation on
January 5, 2018, and have no bearing at all on Meridian's
failure to repay its debts in a timely fashion. Revealingly, the
words “note” and “debt” appear
nowhere in the Third-Party Complaint. Far from simply failing
to present claims against State Auto that are secondary or
derivative to Branch Banking's original claims, Meridian
has advanced claims that are entirely unrelated to the very
basis for this action.
the completely independent nature of these claims is made
plain by the simple fact that State Auto's liability is
not remotely dependent on the outcome of Branch Banking's
claims. This Court could determine that Meridian and its
co-defendants breached the terms of their promissory note
with Branch Banking, or it could determine that no breach
occurred. Either way, resolution of Branch Banking's
underlying claims and Meridian's counterclaims would have
no effect whatsoever on the claims advanced in the
Third-Party Complaint. Even if every other aspect of this
suit were resolved in Meridian's favor, the Court would
still be left to address whether State Auto improperly denied
coverage on the losses at 2401 Sissonville Drive. Simply put,
a defendant may not assert such unrelated claims as a
third-party plaintiff under Rule 14. See,
e.g., Plumbers & Pipefitters Loc. 625,
2018 WL 6031350, at *3.
all this, Meridian attempts to salvage the Third-Party
Complaint by shoehorning a motion for leave to amend into its
Response. Setting aside the fact that no formal motion for
leave to amend is properly before the Court, Meridian's
request is futile. Of course, the Court recognizes that the
“law is well settled that leave to amend a pleading
should be denied only when the amendment would be
prejudicial to the opposing party, there has been bad faith
on the part of the moving party, or the amendment would be
futile.” Edwards v. City of Goldsboro, 178
F.3d 231, 242 (4th Cir. 1999) (internal quotations
omitted). The third exception-futility-is most immediately
applicable to the instant case. ...