Court Opinion

ID: 4122336
Source: CourtListenerOpinion
Date Created: 2017-02-01 18:05:43.584972+00
Date Added: 2024-06-11T14:34:17.411625
License: Public Domain

COURT OF CHANCERY
                                   OF THE
                             STATE OF DELAWARE

                                                             417 S. State Street
JOSEPH R. SLIGHTS III                                     Dover, Delaware 19901
 VICE CHANCELLOR                                         Telephone: (302) 739-4397
                                                         Facsimile: (302) 739-6179

                          Date Submitted: January 20, 2017
                           Date Decided: February 1, 2017

Richard H. Cross, Jr., Esquire           Paul A. Bradley, Esquire
Cross & Simon, LLC                       Maron Marvel Bradley & Anderson LLC
913 N. Market Street, 11th Floor         1201 N. Market Street, Suite 900
Wilmington, DE 19801                     Wilmington, DE 19801

      Re:    Green v. GEICO General Insurance Company
             C.A. No. 9431-VCS

Dear Counsel:

      After carefully reviewing this matter, including the parties’ recent

submissions on the jurisdictional issue, I have determined that I must dismiss the

Amended Verified Class Action Complaint (“the Complaint”) for lack of subject

matter jurisdiction.1 This is a court of limited subject matter jurisdiction. By statute,

1
 See IBM Corp. v. Comdisco, Inc., 602 A.2d 74, 77 n.5 (Del. Ch. 1991) (“judges in the
Delaware Court of Chancery are obligated to decide whether a matter comes within the
Green v. GEICO General Insurance Company
C.A. No. 9431-VCS
February 1, 2017
Page 2

the Court is conferred with subject matter jurisdiction to hear and adjudicate all

matters and causes in equity; it may not, however, exercise its subject matter

jurisdiction where an adequate remedy of law is available.2 In determining whether

there is an adequate remedy at law, the “issue for the Equity court is not whether

another remedy would be preferable to the plaintiffs, but whether the available

remedy at law will provide a full, adequate and complete remedy to the plaintiffs.”3

As then-Chancellor Allen succinctly observed:

         Chancery jurisdiction is not conferred by the incantation of magic words.
         Neither the artful use nor the wholesale invocation of familiar Chancery terms
         in a complaint will excuse the court . . . from a realistic assessment of the
         nature of the wrong alleged and the remedy available in order to determine
         the whether a legal remedy is available and fully adequate. If a realistic
         evaluation leads to the conclusion that an adequate remedy [at law] is
         available, this court, in conformity with the command of Section 342 of
         Title 10, will not accept jurisdiction over the matter.4

equitable jurisdiction of this Court regardless of whether the issue has been raised by the
parties. . .”).
2
    10 Del. C. §§ 341, 342.
3
    Chateau Apts. Co. v. City of Wilm., 391 A.2d 205, 207 (Del. 1978).
4
 McMahaon v. New Castle Assocs., 532 A.2d 601, 603 (Del. Ch. 1987). See also IBM
Corp., 602 A.2d at 78 (“equity will take a practical view of the complaint and will not
permit a suit to be brought in Chancery where a complete legal remedy otherwise exists
Green v. GEICO General Insurance Company
C.A. No. 9431-VCS
February 1, 2017
Page 3

After taking a “practical view”5 of the Complaint, it appears to me that the Plaintiffs

have adequate remedies at law.

         Plaintiffs seek an injunction that would “prohibit GEICO from employing the

Geographic Reduction Rule and Passive Modality Rule” when adjusting claims for

benefits presented under Delaware’s personal injury protection (“PIP”) statute,

21 Del. C. § 2118, and a mandatory injunction that would “require GEICO to

recalculate all previously paid claims [for PIP benefits] from the period March 10,

2011 to the date an injunction is issued . . . without using the Geographic Reduction

Rule or Passive Modality Rule.”6 Presumably these prayers are the “hooks” for

equitable jurisdiction. The requests for injunctive relief, in turn, are predicated upon

the Court having determined that GEICO has either breached its contracts of

insurance with its insureds or violated the applicable provisions of Delaware’s PIP

statute. Yet the Complaint offers no well-pled facts that would support the notion

but where the plaintiff has prayed for some type of traditional equitable relief as a kind of
formulaic ‘open sesame’ to the Court of Chancery”).
5
    See id.
6
    Amended Verified Class Action Complaint at Prayers, ¶¶ b, c.
Green v. GEICO General Insurance Company
C.A. No. 9431-VCS
February 1, 2017
Page 4

that a declaration of rights under the applicable contracts of insurance and/or

Delaware’s PIP statute, coupled with an award of damages and statutory penalties,

if appropriate, would not provide an adequate remedy to the putative class of

plaintiffs.7

       A declaration that either the insurance policies at issue or the applicable

statute(s) do not permit GEICO to employ the Geographic Reduction Rule or Passive

Modality Rule in its claims processing would not require an accompanying

injunction. There is no indication that GEICO would refuse to abide by a final

declaratory judgment to this effect.8 Plaintiffs’ identification of instances where

GEICO allegedly ignored orders issued in connection with Insurance Commissioner

arbitration proceedings does not persuade me that GEICO would ignore a final

7
  W. Air Lines, Inc. v. Allegheny Airlines, Inc., 313 A.2d 145, 149 (Del. Ch. 1973) (this
Court will adjudicate a prayer for declaratory relief only when there otherwise exists “some
special, traditional basis for equity jurisdiction”).
8
  See Chateau Apts., 391 A.2d at 208 (“declin[ing] to assume” that a defendant would
refuse to heed a determination of liability such that an injunction would be required to
insure compliance and facilitate enforcement of the judgment); Levenberg v. Southland
Corp., 1976 WL 5203, at *1 (Del. Ch. Aug. 5, 1976) (“it is a generally accepted principle
that injunctive relief will not issue against a mere possibility of future harm or to allay mere
apprehensions”).
Green v. GEICO General Insurance Company
C.A. No. 9431-VCS
February 1, 2017
Page 5

declaratory judgment of the Superior Court of Delaware. Moreover, Plaintiffs would

have remedies available in the Superior Court to compel compliance, including a

contempt citation, in the unlikely event that GEICO demonstrated any reluctance to

comply fully with the Superior Court’s order(s).

      Plaintiffs maintain that their request for a mandatory injunction that would

compel GEICO to reexamine all bills submitted to it “without using the Geographic

Reduction Rule or Passive Modality Rule” is the only adequate remedy because

GEICO has resisted providing discovery in the past that would allow for a

calculation of damages.9 Even assuming this is accurate, I am satisfied that Plaintiffs

can resort to the Superior Court’s Civil Rules, particularly Rule 37, to compel

9
  Damages evidence, in this case, presumably would be in the form of medical and other
bills that were submitted on behalf of the putative class during the timeframe GEICO
applied the Geographic Reduction Rule or Passive Modality Rule when adjusting claims.
I note that this same evidence would be relevant and discoverable in the event this Court
were to enter the mandatory injunction Plaintiffs seek here. Once the bills were produced,
Plaintiffs presumably would present evidence regarding the amounts that should have been
paid as reimbursement using “proper” claims adjustment methods and would contrast that
amount with the amount actually paid as a basis to calculate compensatory damages.
GEICO, of course, could rebut that evidence. See Clark v. State Farm Mut. Auto. Ins. Co.,
2015 WL 1518662 (Del. Super. Ct. Mar. 30, 2015) (plaintiff brought claims on behalf of a
putative class of policyholders that insurer engaged in improper claims practices when
adjusting PIP claims and sought, inter alia, compensatory damages on behalf of the class).
Green v. GEICO General Insurance Company
C.A. No. 9431-VCS
February 1, 2017
Page 6

GEICO to produce damages evidence in the event the Superior Court determines

that GEICO either breached its insurance contracts or violated the PIP statute by

applying the Geographic Reduction Rule or Passive Modality Rule when adjusting

claims.10 In this regard, I note that the mere fact a plaintiff may have to go to some

lengths to prove damages does not mean that damages are not an adequate remedy.11

       Having reviewed the Complaint, and Plaintiffs’ requested remedies, I am

satisfied that this Court lacks subject matter jurisdiction since “[t]he true nature of

this action is contractual; [and] complete relief is available at law.”12 I appreciate

10
  I express no view at this stage whether the statutory remedies available to Plaintiffs under
18 Del. C. § 317 or 21 Del. C. § 2118(j) would also constitute adequate remedies at law.
11
  See, e.g., Willis v. PCA Pain Ctr. of Va., Inc., 2014 WL 5396164, at *3 (Del. Ch. Oct. 20,
2014) (finding that, in a challenge to the defendants’ alleged failure to proceed with
agreements to transfer a business to plaintiffs, while pro forma projections provided by the
business were arguably “incompetent and misleading” and therefore not a sound basis for
a damages award, there was no reason why the plaintiff could not engage a third party to
undertake a valuation and therefore make adequate damages calculations); Metro
Ambulance Inc. v. Eastern Med. Billing, Inc., 1995 WL 409015, at *4 (Del. Ch. July 5,
1995) (holding that damages were an adequate remedy as they could be easily calculated,
even where documents necessary to calculate damages were allegedly wrongly withheld
by the defendants as these documents could “be ‘recovered’ through discovery in a court
of law.”).
12
   Charlotte Broadcasting, LLC v. Davis Broadcasting of Atlanta, LLC, 2013 WL 1405509,
at *6 (Del. Ch. Apr. 2, 2013) (dismissing action for lack of subject matter jurisdiction and
Green v. GEICO General Insurance Company
C.A. No. 9431-VCS
February 1, 2017
Page 7

that neither Plaintiffs nor the Defendant raised the jurisdictional issue, a

circumstance that suggested initially that all parties were content to litigate their

claims and defenses here. I raised the jurisdictional issue sua sponte because I am

obliged to do so.13 GEICO has since advised the Court that it agrees the Court lacks

subject matter jurisdiction.14        In any event, this court’s jurisdiction cannot be

conferred by consent.15 Having now afforded the parties an opportunity to be heard

on the issue, I conclude that dismissal with prejudice is appropriate subject to

noting that Plaintiff may “timely seek a transfer to the Superior Court”). See also Clark v.
State Farm Mut. Auto. Ins. Co., 2015 WL 3882528 (Del. Super. Ct. Mar. 30, 2015), aff’d,
131 A.3d 806 (Del. 2016) (adjudicating claims of bad faith claims practices relating to
Delaware’s personal injury protection insurance statute); Johnson v. GEICO Cas. Co., 310
F.R.D. 246 (D. Del. 2015) (adjudicating claims relating to the insurance carrier’s use of
the Geographic Reduction Rule and Passive Modality Rule after the case was removed
from the Delaware Superior Court).
13
     IBM Corp., 602 A.2d at 77 n.5.
14
  Having determined that the Court lacks subject matter jurisdiction, I decline GEICO’s
invitation to adjudicate the question of whether, under Clark v. State Farm Mut. Auto. Ins.
Co., 131 A.3d 806 (Del. 2016), the Insurance Commissioner of Delaware is vested with
exclusive jurisdiction to address Plaintiffs’ claims.
15
  See El Paso Nat. Gas Co. v. TransAmerican Nat. Gas Corp., 669 A.2d 36, 39 (Del. 1995)
(“It is a cardinal principle of the law that jurisdiction of a court over the subject matter
cannot be conferred by consent or agreement.”) (quoting Timmons v. Cropper, 172 A.2d
757, 760 (Del. Ch. 1961)).
Green v. GEICO General Insurance Company
C.A. No. 9431-VCS
February 1, 2017
Page 8

Plaintiffs’ election to have the case transferred to the Superior Court of Delaware

pursuant to 10 Del. C. § 1902.

      IT IS SO ORDERED.

                                      Very truly yours,

                                      /s/ Joseph R. Slights III