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Ford v. Psychopathic Records, Inc.

United States District Court, Seventh Circuit

July 3, 2013

JAMES FORD, JR., Plaintiff,
v.
PSYCHOPATHIC RECORDS, INC., INSANE CLOWN POSSE LLC, JUGGALO GATHERING LLC, FAYGO BEVERAGES, INC., HOGROCK, INC., & TIMOTHY F. YORK, individually & d/b/a Hogrock Campground, Defendants. TIMOTHY YORK, individually and d/b/a Hogrock Campground, HOGROCK, INC., & JUGGALO GATHERING LLC, Third-Party Plaintiffs, ATAIN SPECIALTY INS. CO., f/k/a USF Insurance Co., Third-Party Defendant.

MEMORANDUM & ORDER

MICHAEL J. REAGAN, District Judge.

Insane Clown Posse ("ICP") is a music duo from Detroit, Michigan.[1] In 2000, the group (and others) founded the Gathering of the Juggalos, an annual festival that features a variety hip hop and rock acts-though the majority of the acts perform horrorcore (see FN1 below) and hardcore hip hop. The Eleventh Annual Gathering of the Juggalos ("the Gathering") was held in Cave Rock, Illinois from August 12 to August 15, 2010. ICP performed on the final night.

During part of ICP's show known as "Faygo Armageddon, " the band allowed members of the audience onstage to throw bottles of Faygo soft drink into the crowd. According to the Second Amended Complaint, Plaintiff James Ford-one of the Faygo-throwing fans-was injured when he fell onto an overturned trampoline with sharp, sheet metal edges.

Alleging negligence and invoking this Court's diversity jurisdiction under 28 U.S.C. § 1332, Plaintiff sued ICP, the Gathering (which is a Michigan limited liability company), Faygo Beverages, Timothy York (d/b/a HogRock Campground-where the Gathering was held), HogRock, Inc. ("HogRock"), and Psychopathic Records (the Gathering's promoter). The operative pleading is the Second Amended Complaint, filed July 20, 2012. In their Answer (filed March 14, 2013, three weeks after their motion to dismiss was denied), Defendants ICP, the Gathering, York, HogRock, and Psychopathic Records enumerated eleven affirmative defenses.

On August 8, 2012 (about three weeks after Plaintiff filed the Second Amended Complaint), Juggalo Gathering, York, and HogRock, Inc. filed a third-party complaint for a declaratory judgment against the Gathering's insurance carrier, Atain Specialty Insurance Co. ("Atain, " which at the time the Gathering policy was signed, was known as USF Insurance Co.). In addition to a claim for a declaratory judgment (that any injury to Plaintiff Ford is covered under their policy with Atain), Third-Party Plaintiffs allege breach of contract, negligence, unjust enrichment, and bad faith. But the Third-Party Complaint here was filed over a month after Atain filed for declaratory judgment in the Circuit Court of the Second Judicial Circuit in Franklin County, Illinois. Atain's state action seeks a declaration that it owes no coverage to the Gathering, York, or HogRock. The state case has been stayed since December 2012.

Now before the Court are two motions. Third-Party Defendant Atain has moved to dismiss the Third Party Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiff has moved, via Rule 12(f), to strike the eleven affirmative defenses in Defendants' Answer. For the reasons explained below, Atain's Motion to Dismiss (Doc. 63) is DENIED as MOOT, and Plaintiff's Motion to Strike (Doc. 82) is GRANTED IN PART and DENIED IN PART.

ATAIN'S MOTION TO DISMISS

Third-Party Defendant Atain moves to dismiss the Third-Party Complaint (Doc. 49) pursuant to Federal Rule of Civil Procedure 12(b)(6), which allows a party to challenge the sufficiency of a complaint to state a claim upon which relief can be granted. Hallinan v. Fraternal Ord. of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). Atain's argument is fourfold: (1) the third-party action against it is a "direct action" against an insurer, and therefore barred by Illinois law; (2) a previously-filed Illinois state court action somehow precludes the case; (3) Count III of the Third-Party Complaint-that Atain negligently failed "to provide adequate insurance coverage" based on the "circumstances of the Gathering and the performances held therein"-does not state a claim because Atain had no duty to provide coverage advice; and (4) bad faith is not a separate action under Illinois law.

1. Pendency of Illinois State Court Case

Of greatest concern are the parties' arguments about whether the pendency of Atain's July 2012 state court case-filed over a month before the instant third-party action-means the third-party claims should not proceed in this Court. Atain, relying on Schwartz v. Nat'l Van Lines, Inc., 317 F.Supp.2d 829 (N.D. Ill. 2004), presses the notion that "the case should proceed in the forum where the action was filed first" (Doc. 64, 5). Third-Party Plaintiffs counter that there is no rigid "first-to-file" rule in the Seventh Circuit, and that Atain's "suspicious actions" amount to forum shopping (Doc. 71, 11).

An insurance company filing a declaratory action in any court hardly amounts to "suspicious" behavior. More troublesome is that the parties' arguments (and the Schwarz case) invoke cases about which federal forum is proper under 28 U.S.C. § 1404(a) (the venue transfer statute) and 28 U.S.C. §§ 2201-2202 (the Declaratory Judgment Act). When one action is filed in federal court and another in state court, concerns of comity and federalism are necessarily implicated. Tempco Elec. Heater Corp. v. Omega Eng'g, 819 F.2d 746, 748-49 (7th Cir. 1987) (citing Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 495 (1942)). The parties' arguments ignore those important concerns.

The issue here is not whether to transfer this case to another district court, but whether this Court should abstain from exercising its jurisdiction over the third-party complaint. Because abstention doctrines "involve a common complex of considerations about the role of federal courts vis-à-vis state institutions, " the Seventh Circuit has indicated that a district court may address an abstention doctrine sua sponte. Barichello v. McDonald, 98 F.3d 948, 955 (7th Cir. 1996) (citing Waldron v. McAtee, 723 F.2d 1348 (7th Cir. 1983) ( Pullman abstention); General Ry. Signal Co. v. Corcoran, 921 F.2d 700 (7th Cir. 1991) ( Burford abstention)). The Court, on its own motion, must consider whether abstention is appropriate.

2. Wilton/Brillhart Abstention

District courts, under what is known as the Wilton / Brillhart abstention doctrine, possess significant discretion to dismiss (or stay) claims seeking declaratory relief, even though they have subject matter jurisdiction over such claims. Envision Healthcare, Inc. v. Preferredone Ins. Co., 604 F.3d 983, 986 (7th Cir. 2010). The discretion arises from the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202, which provides that district courts " may declare the rights and other legal relations of any interested party seeking such declaration." Id. (citing 28 U.S.C. § 2201(a) (emphasis in original)). In Brillhart, the Supreme Court held that district courts may stay or dismiss an action seeking a declaratory judgment in favor of the ongoing state court case. Envision Healthcare, 604 F.3d at 986 (citing Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494-95 (1942); and Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995)). The "classic" example of when Wilton / ...


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