MARCO A. HERNANDEZ, District Judge.
On instructions from the Ninth Circuit in a May 12, 2014 Memorandum Disposition,
This case began when Ionian filed suit in Multnomah County Circuit Court against Country Mutual Insurance Company. Ionian brought a breach of contract claim against Country Mutual, contending that Ionian owned a warehouse which was destroyed by fire, that Precision was Ionian's lessee, that Precision had obtained an insurance policy on the warehouse from Country Mutual, and that Ionian was a "loss payee, additional insured, and/or third-party beneficiary under the policy." Compl. at ¶¶ 1-6 (Ex. A to Notice of Removal). Ionian alleged that despite a demand for payment and despite its and Precision's performance of all conditions precedent, Country Mutual had failed to pay the proceeds of the policy to Ionian.
Country Mutual removed the case to this Court on the basis of diversity jurisdiction. Ionian moved to amend its Complaint to add Precision as a Defendant. Ionian sought to bring breach of lease and negligence claims directly against Precision. Proposed Am. Compl. at ¶¶ 12-20 (Ex. 1 to Mtn to Amend; ECF 6). It also named Precision as a Defendant in the rent claim previously asserted against Country Mutual.
In a November 5, 2010 filing, Ionian represented that based on the summary judgment rulings, it would not file an amended complaint. The case remained in this Court.
On February 2, 2011, Country Mutual filed an Amended Answer to the claims brought against it in Ionian's original, and still controlling, Complaint. ECF 61. Country Mutual also brought an interpleader counterclaim against Ionian and added Precision as a Defendant to that claim. There, Country Mutual alleged that it faced competing claims from Ionian and Precision to the insurance proceeds for the covered property. It deposited $372,750 with this Court on February 23, 2011, representing $350,000 for property loss, $12,750 for separate coverage for a motor control system, and $10,000 for cleanup costs.
Next, Ionian and Precision both filed Answers to the interpleader claim. ECF 66, 69. Precision's Answer included unjust enrichment and conversion crossclaims against Ionian. ECF 69. Ionian then answered Precision's crossclaims and brought its own crossclaims for rent and cleanup costs against Precision. ECF 72. Precision answered Ionian's crossclaims. ECF 73.
In early May 2011, all counterclaims brought by Precision against Country Mutual were dismissed by stipulation. ECF 75, 76. On May 16, 2011, Judge Stewart granted the parties' oral motion to dismiss Country Mutual from the case. ECF 84. Thus, at this point, the only claims remaining were the crossclaims between Ionian and Precision as interpleader Defendants. Precision amended its Answer on May 24, 2011, deleting any affirmative defenses to the interpleader claim and any counterclaims against Country Mutual. ECF 87. Precision added three new crossclaims against Ionian.
Ionian and Precision then filed cross motions for summary judgment. In a September 27, 2011 Findings & Recommendation, Judge Stewart made several rulings. ECF 125. I adopted the Findings & Recommendation in a December 2, 2011 Order. ECF 133.
Relevant to the current motion is that several of the crossclaims were dismissed for lack of jurisdiction. As Judge Stewart explained in the September 27, 2011 F&R, Federal Rule of Civil Procedure 13(g) governs this Court's subject matter jurisdiction over the crossclaims. The crossclaim must "arise[] out of the transaction or occurrence that is the subject matter of the original action" or "relate[] to any property that is the subject matter of the original action." Fed. R. Civ. P. 13(g). "The `property that is the subject matter of the original action' filed by Ionian against Country Mutual is the insurance proceeds deposited with the Court payable under the policy as a result of the fire." Sept. 27, 2011 F&R at 10. Judge Stewart explained that as a result of Country Mutual's deposit of the insurance proceeds, the case involved the competing claims of Ionian and Precision to those insurance proceeds, as well as the other crossclaims between those parties.
Given the limited jurisdiction under Rule 13(g), only the crossclaims involving entitlement to any part of the insurance proceeds were properly before this Court.
Following the adoption of Judge Stewart's F&R, Ionian had no crossclaims remaining against Precision, and Precision had only its unjust enrichment and conversion claims remaining against Ionian. Ionian almost immediately moved to amend its answer to assert two new crossclaims against Precision. In a March 5, 2012 Opinion & Order, I denied the motion. ECF 149. Rule 13(g) again provided the basis for part of my decision because the proposed crossclaims of breach of lease and negligence did not arise out the payment of the insurance proceeds.
Ionian also sought to add the crossclaim that is now the only remaining claim in this case. As asserted by Ionian in its proposed amended answer filed with its motion to amend, Ionian sought an equitable lien or constructive trust. Proposed Am. Answer & Cross-Claims at ¶¶ 32-33 (Ex. 1 to Mtn to Amend; ECF 139). In support of this crossclaim, Ionian alleged that under the lease, Precision agreed to furnish and pay for fire insurance on the building and improvements for the benefit of Ionian, and/or to make Ionian an additional insured.
Although there was no dispute that this Court had jurisdiction over the "claim" for constructive trust/equitable lien, Precision argued that the claim should not be allowed because it was futile. March 5, 2012 Op. & Ord. at 9. In the March 5, 2012 Opinion, I agreed with Precision that Oregon law does not recognize a "claim" for constructive trust.
Ionian moved to reconsider my conclusion on the "unjust enrichment/constructive trust/equitable lien claim." The arguments Ionian made in that motion suggested to me that Ionian's "unjust enrichment" claim was based on a negligence theory, unrelated to the interpleaded funds, or was based on a breach of the lease theory which was also unrelated to the interpleaded funds. June 4, 2012 Op. & Ord.; ECF 188. As a result, Ionian provided no basis for reconsidering my previous denial of its motion to amend to add new crossclaims of breach of lease, negligence, and constructive trust/equitable lien (construed as a claim for unjust enrichment).
Shortly before trial, Precision moved for summary judgment on a discrete issue concerning whether Ionian was an additional insured and thus entitled to any of the proceeds under the policy. As explained in previous Opinions in this case, I granted that motion which effectively granted Precision's unjust enrichment crossclaim against Ionian. July 17, 2012 Op. & Ord.; ECF 190. Precision then dismissed its remaining conversion crossclaim and a Judgment in Precision's favor was entered. ECF 193, 195.
Ionian appealed the ruling denying its motion to amend to add the constructive trust/equitable lien crossclaim.
In its May 12, 2014 Memorandum Disposition, the Ninth Circuit agreed with Ionian, explaining that this Court erred "by denying Ionian leave to timely add an unjust enrichment crossclaim and clearly erred by awarding all of the proceeds to Precision." 572 F. App'x at 515. The court relied on the "Loss Payment" provision of the insurance policy, previously unasserted by Ionian as a basis for the proposed crossclaim, under which Country Mutual "`will not pay Precision more than its financial interest in the Covered Property and may adjust losses with the owners of the property but will not pay the owners more than their financial interest in the property.'"
The court remanded to this Court to "grant Ionian leave to add a crossclaim for unjust enrichment" and to "determine each parties' insured financial interest in the proceeds and award them accordingly."
Upon remand by the Ninth Circuit, Ionian filed, on July 11, 2014, an "Answer to Country Mutual's Interpleader, Answer to Amended Cross-Claims of Precision Seed, and Amended Cross-Claims Against Precision Seed." ECF 219. In that pleading, Ionian brought a crossclaim against Precision entitled "Breach of Contract/Unjust Enrichment."
Ionian also alleged that under the Loss of Payment provision of the insurance policy, Country Mutual was not to pay Precision more than its financial interest in the covered property and that Country Mutual was allowed, under the policy, to "adjust losses" with the property owner but that it would not pay the owner more than its financial interest in the covered property.
Precision moved to dismiss or strike several allegations made in support of the crossclaim. I held oral argument on that motion on October 8, 2014 and granted Precision's motion in part and denied it in part, ordering as follows:
Oct. 8, 2014 Ord. ECF 229. I ordered Ionian to file an amended crossclaim by October 16, 2014.
On October 16, 2014, Ionian filed a new pleading entitled "Answer to Country Mutual Insurance Company's Interpleader, Answer to Amended Cross-Claims of Precision Seed and Cross-Claims to Ionian and Corrected Amended Cross-Claim Against Precision Seed." ECF 231. In this "Corrected Amended Cross-Claim," Ionian asserts a crossclaim of unjust enrichment. Oct. 16, 2014 Crossclaim at ¶¶ 19-24. Although there is some slight variation in the language in one paragraph, the crossclaim asserted on October 16, 2014 is identical to that asserted on July 11, 2014. This is the crossclaim on which Ionian seeks a jury trial.
The parties agree that the right to a jury trial on Ionian's unjust enrichment crossclaim is governed by federal law.
The Seventh Amendment provides that "[i]n suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved[.]" U.S. Const. amend. VII. "`Suits at common law' refer[] to suits in which legal rights are to be ascertained and determined, in contradistinction to those where equitable rights alone are recognized, and equitable remedies are administered."
To determine whether a particular claim will resolve legal rights, the court "examine[s] both the nature of the issues involved and the remedy sought."
At least one court has noted that "[t]he origins of unjust enrichment are both legal and equitable[.]"
In contrast, other Oregon cases state that an unjust enrichment claim is premised on the concept of "quasi-contract," or a contract implied by law, and which ordinarily sounds in law.
The Supreme Court has similarly noted, in the context of an action seeking enforcement of an ERISA plan's reimbursement provision, that historically, in cases where the plaintiff could not assert title or right to possession of particular property, but where the plaintiff might be able to show "just grounds for recovering money to pay for some benefit the defendant had received from him, the plaintiff had a right to restitution at law through an action derived from the common-law of assumpsit."
In contrast, a plaintiff could also "seek restitution in equity, ordinarily in the form of a constructive trust or an equitable lien, where money or property identified as belonging in good conscience to the plaintiff could clearly be traced to particular funds or property in the defendant's possession."
Under the first part of the
Ionian's unjust enrichment crossclaim is equitable. First, while the crossclaim is currently captioned as one for unjust enrichment, the claim that I disallowed in my March 5, 2012 Opinion and which was the basis of Ionian's appeal to the Ninth Circuit was in fact a claim for constructive trust or equitable lien. Proposed Am. Answer & Cross-Claims at ¶¶ 32-33 (Ex. 1 to Mtn to Amend; ECF 139); Ionian Corp.'s Opening Brief on Appeal (arguing that Ionian had a valid state law claim for constructive trust/equitable lien). It was only my construction of that claim as one for unjust enrichment based on Oregon law's non-recognition of constructive trust or equitable lien as substantive claims in their own right that caused the claim to be referred to as one for unjust enrichment. Given that the claim as originally pleaded was obviously an equitable claim, there is no basis for concluding that the Ninth Circuit considered it as anything else even though that court referred to it as a claim for unjust enrichment.
Second, as explained in the procedural history section of this Opinion above, any crossclaim must arise out of or relate to the insurance proceeds under Rule 13(g). Several claims not meeting this standard have been dismissed from the case. The Ninth Circuit indicated that jurisdiction over Ionian's unjust enrichment crossclaim was not as a result of the lease, but was based on the loss payment provision of the insurance policy with the policy being the basis of the interpleader action. With this statement, the Ninth Circuit implicitly recognized that the crossclaim must, under Rule 13(g), be a claim to the insurance proceeds which is the "property that is the subject matter of the original action."
As a result, the unjust enrichment crossclaim has to be directed to the insurance proceeds, a particular and discrete fund of money currently deposited with this Court. As I explained in my February 13, 2015 Opinion & Order resolving Ionian's Rule 12 Motions directed to Precision's October 27, 2014 Answer, Ionian's claim is based on a theory that to the extent Precision receives insurance proceeds from Country Mutual in an amount greater than Precision's financial interest in the covered property, Precision is unjustly enriched.
Such a claim is not based on a theory of quasi-contract. Country Mutual, in interpleading the insurance proceeds, recognized Ionian's and Precision's competing claims to those proceeds based on the insurance policy contract. But, my July 17, 2012 Opinion on the additional insured issue disposed of the notion that Ionian was a party to the insurance contract. ECF 190. Thus, Ionian's claim to the insurance proceeds is not based on any contractual relationship, express or implied, it had with Country Mutual. There is no express contractual relationship and one is not implied because Ionian conferred no benefit on Country Mutual, which, in any event, is not a defendant to the crossclaim.
The "unjustness" arises based on Ionian's status as the owner of the property, not as a party to the insurance contract or to the lease. Ionian's contention is that it is unjust for Precision to retain more than its financial interest in the proceeds, not because of the lease but because of the language of the policy between Precision and its insurer which instructs that the insured cannot recover more than its financial interest in the property and that the insurer may consider the property owner's financial interest as well. The liability here is not a personal liability upon Precision in which damages are to awarded. Instead, the liability is tied to particular property — the interpleaded funds. In fact, Ionian's own pleading does not seek damages but seeks to "recover the proceeds on deposit herein, less only Precision Seed's proportionate uncompensated financial interest in the covered property, if any there be, after deducting rent due[.]" Ionian's Oct. 16, 2014 Answer & Cross-Claim at p. 6.
Third, although
In summary, in order to avoid Rule 13(g) jurisdictional issues, Ionian's crossclaim must relate to the insurance proceeds. With that understanding, the only basis for the claim is an equitable one. This Court cannot imply a quasi-contractual relationship between Ionian and Country Mutual in support of this claim because Ionian conferred no benefit on Country Mutual and Country Mutual is not the defendant. This Court cannot imply a quasi-contractual relationship between Ionian and Precision in support of this claim because the only contractual relationship between those two parties is the lease which does not relate to the insurance proceeds for Rule 13(g) purposes and because without the lease, Ionian conferred no benefit on Precision. Additionally, the original claim was expressly pleaded as seeking an equitable remedy, the claim is directed to particular funds, and Ionian's requested relief is the recovery of the proceeds on deposit with this Court.
Ionian's motion for jury trial [253] is denied.
IT IS SO ORDERED.