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SUPERIOR COURT OF THE VIRGIN ISLANDS DIVISION OF ST CROIX MICHAEL KITNURSE, PLAINTIFF, v. MARSHALL AND STERLING, AND CERTAIN SX 14 CV 361 UNDERWRITERS AT LLOYDS OF LONDON Cite as 2020 V I Super 060 SUBSCRIBING T0 POLICY NUMBER CP8200601660 DEFENDANTS FOR PUBLICATION Appearances Lee J RohII, Esq Christiansted USVI For Plamtzfi" James L Hymes, III, Esq St Thomas USVl For Defendant Marshall & Sterling Garry Garten, Esq St Thomas USVl For Defendant Underwriters ofLloyds MEMORANDUM OPINION and ORDER WILLOCKS, Presiding Judge 111 THIS MATTER is before the Court on the Motion to Quash Service and Dismiss Complaint Against Certain Underwriters at Lloyds of London (hereinafter Motion”), filed September 4, 2015 The Plaintiff‘s Opposition was filed on September 25, 2015, and a Reply was submitted on October 6, 2015 Kltnurse 1 Ma: shall & Sterling 2020 V I Super 060 SX 2014 CV 361 MEMORANDUM OPlNION & ORDER Page 2 of 1 1 BACKGROUND 112 In 2012 the Plaintiff(hereinafier “Kitnurse”) filed suit in District Court (hereinafter ‘Kltnurse v Nazis Tzme”) against John Phuoc le d/b/a Nails Time (hereinafter Nails Time’) after receiving injuries during a pedicure Certain Underwriters at Lloyds ofLondon v Le, 2014 U S Dist LEXIS 95988 *1 2 (D V 1 July 15 2014) Nails Time had an insurance policy through Marshall and Sterling which was underwritten by Lloyds of London (hereinafter ‘Lloyds’) Id Kitnurse ultimately settled with Nails Time in a Consent Judgment for the amount of$1,000,000 (Compl SI 9 ) On May 7 2014 Nails Time assigned Kitnurse all potential claims against Marshall and Sterling and Lloyds arising from Kitnurse’s injuries in exchange for Kitnurse’s agreement not to execute the Consent Judgment (Id See Exhibit 1 to Compl ) 1i3 However, during the pendency of Kztnurse v NLRB Ttme Lloyds filed a declaratory action in District Court (hereinafter “Lloyds v Nazls Time’ ) seeking a determination that the policy did not cover Kitnurse s injuries and that Lloyds was not obligated to defend and indemnify Nails Time The District Court granted summary judgment in favor of Lloyds Le 2014 U S Dist LEXIS 95988 at *10 12 Nails Time subsequently appealed to the Third Circuit Court ofAppeals, but the appeal was denied as moot because the Consent Judgment between Kitnurse and Nails Time terminated any liability and responsibility Lloyds may have had to [Nails Time] in the Kztnurse case ’ Certain Underwriters of Lloyds ofLondon Subscribing to PolIcy No CP5'200601660 v Le 629 Fed App 358 361 (3d Cir Oct 19 2015) {[4 The present case was filed in Superior Court before the Third Circuit issued its ruling Proofof service for Marshall and Sterling was filed by Kitnurse on October 23, 2014 but service was not made on Lloyds On March 24 2015 the Court issued an order sua sponte seeking proofofservice Kimurse then filed a motion for leave to serve out of time, which the Court granted on June 23, 2015 Despite Kitnurse v Marshall & Sterling 2020 V I Super 060 SX 2014 CV 36] MEMORANDUM OPINION & ORDER Page 3 of l l finding that Kitnurse had not demonstrated good cause for the delay the Court exercised its discretion to grant an extension oftime due to the preference that cases be heard on the merits 15 According Lloyds service should be quashed pursuant to Rule 4(m) of the Rules of Civil Procedure1 because [Kitnurse] waited nearly a year to serve the Complaint on Lloyds far in excess of the 120 day requirement, even though it served the Complaint on [Marshall and Sterling] at least nine months [prior] and began discovery, knowing that Lloyds was not participating in the case and knowing that most of the same issues in this case were already being litigated with Lloyds in another case ” (Mot l ) 116 Lloyds asserts that the delay in service was a deliberate act to gain a litigation advantage to the prejudice of Lloyds in both this case and in [the Lloyds v Nails Tzme] Third Circuit appeal of the same issues (Id) Though the Court granted Kitnurse an extension oftime to serve Lloyds, it did so without knowing about the other case (Id at 2 ) The extension of time was also granted despite a finding that Kitnurse had not demonstrated good cause (1d ) Further since Lloyds was not served with the motion for an extension of time, it did not have the opportunity to file an opposition (Id) Lloyds requests that the Court reconsider and vacate its order granting an extension of time pursuant to Rule 60(b)(2) or 60(b)(6) of the Rules of Civil Procedure because Kitnurse’s failure to disclose all circumstances may be viewed as misrepresentation to the Court (1d) {[7 Lloyds also argues that there is good cause to quash service because Kitnurse did not serve Lloyds within the 120 day timeframe articulated in Rule 4(m) and the issues, at the time this motion was filed were already being litigated in District Court and on appeal (Id at 3 ) At oral argument before the Third Circuit Kitnurse s counsel was unable to articulate a reason why proceeding with the present matter would not moot the District Court case other than that she did not want the District Court’s holdings to stand because it would undermine this case (1d ) In Lloyds View Kitnurse ‘ was ‘ Though this motion was filed prior to the adoption of the Virgin Islands Rules of Civil Procedure in March 2017, Rule 4(m) of the Federal Rules of Civil Procedure was subsequentl) adopted by the Virgin Islands and the rules are identical Kitnurse v Marshall & Sterling 2020 V 1 Super 060 SX 2014 CV 361 MEMORANDUM OPINION & ORDER clearly hedging his bets to see what happens in the District Court/Appeal before involving Lloyds here (Id at 4 ) 118 Lloyds goes on to allege prejudice in the form of costs and delays from having to litigate the same issues in the District Court and Third Circuit as well as in the Superior Court (Id) Additionally, Kitnurse is not prejudiced because he ‘ freely chose to pursue the appeal and many if not all of the issues in the instant case wili be decided by that appeal or made moot ” (Id) ‘Lloyds did not initiate the appeal and had no reason to respond to this case as it was not timely served ” (Id) {[9 In Opposition, Kitnurse asserts that service was sufficient because he was granted leave to serve out oftime (Opp’n 2 ) Though Rule 12(b)(5) ofthe Rules of Civil Procedure allow a defendant to challenge service, Kitnurse states that Lloyds challenge must fail because it cannot meet its burden ofproof given because Kitnurse obtained the Court’s permission to file out oftime and the motion for an extension of time was supported by an affidavit indicating that the failure to serve Lloyds was a mistake on the part of new office employee (Id at 3 ) Further, Kitnurse states that Lloyds had actual notice that the present suit had been filed because it was informed by an opening briefsubmitted to the Third Circuit and by the Complaint which was attached to the Joint Appendix filed before the Third Circuit (Id at 4 ) 1110 Kitnurse also argues that the Court should not reconsider its grant of an extension of time because Lloyds challenge is not based on one ofthe usual grounds of reconsideration l) intervening change in controlling law, 2) availability of new evidence; or 3) need to correct a clear error of law or fact or to prevent manifest injustice (Id at 4, citing Max s Seafood Cafe by Lou Ann Inc v Qumteros 176 F 3d 669 (3d Cir 1999)) Specifically Kitnurse states that Lloyds had actual notice of this litigation and therefore cannot claim prejudice (Opp’n at 5 ) fill Moreover, Kitnurse alleges that a comparison between this case and the District Court case demonstrates that no issues here were ever actually litigated in the District Court matter ” (Id) The Kltnurse v Mai shall & Stet/mg 2020 V I Super 060 SX 2014 CV 361 MEMORANDUM OPINION & ORDER District Court case was a declaratory action regarding whether Policy Number CP8200601660 covered claims filed by Kitnurse against Nails Time (Id) Here, however, Kitnurse filed suit alleging breach of fiduciary duty for failure to underwrite the policy properly failure to correct the policy so that it provided adequate coverage, and for fraudulent misrepresentation in selling an inadequate policy (Id at 5 6 ) According to Kitnurse ‘[t]o the extent Lloyds believes that any issues were previously litigated and were the subject of an {sic} final dispositive order then it should be required to file the proper dispositive motion (1d at 6 ) 1112 In the Reply Lloyds asserts that Kitnurse missed the point of its argument regarding a reconsideration of the order granting an extension of time to serve Lloyds (See Reply 1 ) Kitnurse’s motion was untimely lacked good cause, and did not fully inform the Court of the circumstances of Lloyds v Nazls sze (Id ) Additionally, Lloyds does not accept the explanation that the failure to serve was clerical error because ‘it should have been obvious to everyone that Lloyds was not participating in the case including discovery which was ongoing with the other co defendant ” (Id) 1113 Moreover, Lloyds argues that the copy of the Complaint that it was provided ‘clearly shows that the same coverage issues pled in this action are addressed in the District Court and the very coverage issues presented in that case are a precondition to even having the claims presented here ’ (Id at 2) STANDARD OF LAW 1) Reconsideration of extension of time pursuant to 60(b)(2) or (6) 1114 A motion for reconsideration must be made within fourteen days after the entry of a ruling except as stated in Rules 59 and 60 of the Rules of Civil Procedure In this case, Lloyds has invoked Rule 60(b)(2) and (b)(6) Under Rule 60(b)(2) the Court may relieve Lloyds ofthe order granting an extension oftime ifthere is newly discovered evidence that could not, with reasonable diligence, have been discovered in time to move for a new trial under Rule 59(b) ” V l R Civ P 60(b)(2) The KIInurse 1 Marshall & Sterling 2020 V 1 Super 060 SX 2014 CV 361 MEMORANDUM OPINION & ORDER evidence must have been discovered alter trial and the failure to learn must not have been caused by a lack of diligence Strtdlron v Strzdlron 698 F 2d 204 207 (3d Cir 1983) Additionally 1t]he evidence must be material to the issues involved, yet not merely cumulative or impeaching and must be of such a nature that it would probably change the outcome’ Id, citing Unzted States v Meyers, 484 F 2d 113 116 (3d Cir 1973) In this case the parties have not yet gone to trial in this matter which makes consideration of Rule 60(b)(2) inappropriate Accordingly, the Court will consider only Rule 60(b)(6) 1115 Under that rule [t]he movant must Show extraordinary and special circumstances justifying relief Lucan Corp v RobertL Merwm & C0 2008 V 1 Supreme LEXIS l9 *7 (Sup Ct 2008) Moreover ‘the preceding five categories [of Rule 60(b)] are considered mutually exclusive, and ifthe reason for which relief is sought fits within one ofthe five specific categories even ifthe facts fail to meet the prerequisites for that relief, Rule 60(b)(6) is inapplicable ’ Griffith v Carpenter 2012 V I LEXIS 84 *5 (V 1 Super June 7 2012) 1116 Another basis for relief is ‘fraud misrepresentation, or misconduct by an opposing party as per V l R Civ P 60(b)(3) but Lloyds notably does not argue, cite or otherwise invoke this principle despite alleging bad faith Since the Court is only empowered to consider relief from an order ‘on motion and just terms ” V I R Civ P 60, the Court will not give 60(b)(3) its fiill consideration 2) Quashing service 1117 If a defendant is not served within 120 days after the complaint is filed, the court on motion or on its own after notice to the plaintiff must dismiss the action without prejudice against that defendant or order that service be made within a specified time V I R Civ P 4(m) A motion to quash service is proper when service of process is improper or inadequate “Generally, where service of process is insufficient courts allow a plaintiff the opportunity to re serve the defendant, provided that service is not futile Daley Jeffers v Graham 69 VI 931 (Sup Ct 2018) [(11an v Marsha/18: Sterling 2020 V 1 Super 060 SX 2014 CV 36] MEMORANDUM OPINION & ORDER Page 7 of ll DISCUSSION 1) Lloyds is not entitled to relief under Rule 60(b)(6) because there are no extraordinary circumstances warranting relief and Lloyds’ motion should have been made pursuant to Rule 60(b)(3) {[18 The Court may relieve Lloyds of the order granting Kitnurse an extension of time to serve if Lloyds has demonstrated extraordinary circumstances that warrant the order be vacated under Rule 60(b)(6) Lloyds alleges bad faith based on the fact that it was not timely served and that Lloyds v Nazls Tme was being litigated in District Court 1i19 With regard to the untimely service, the Court addressed the issue sua sponte and gave Kitnurse fourteen days to either submit proofof service or to Show good cause why it should give an extension oftime Kitnurse subsequently filed a motion for an extension oftime explaining that a legal secretary had inadvertently forgotten to prepare the Summons and Complaint intended for Lloyds and that Kitnurse had not acted in bad faith The Court found that excuse inadequate but still decided to exercise its discretion and grant an extension of time in order to hear this case on its merits The Court is therefore in agreement with Lloyds that Kitnurse should have realized much sooner that Lloyds had not been properly served, but the fact that the Court exercised discretion in granting an extension does not indicate an extraordinary circumstance for vacating an order 1120 As for bad faith, the Complaint discloses the fact that Kitnurse filed suit against Nails Time in 2012 and that the parties entered into a Consent Judgment It does not disclose the fact that Lloyds filed its declaratory action Lloyds v Nazis Tune, during the pendency Kitnurse v Nails Twe to determine whether the insurance policy covered Kitnurse’s claims That information should have been disclosed along with the outcome of the case or its current status However, there is no hard evidence of misconduct in this matter It is not necessarily bad faith for a party to ‘hedge their bets ’ by filing a subsequent suit and assuming the affidavit regarding the inadvertent failure to serve is true than there is no cause to believe that Kitnurse intended to exclude Lloyds for a litigation advantage A lack of Kltnurse v Ma; shall & Sm [mg 2020 V I Super 060 SX 2014 CV 36] MEMORANDUM OPINION & ORDER Page 8 of 1] response could simply indicate a default Whether a duplicate case is pending or whether resJudzcata applies to claims already litigated are questions that can be resolved by an appropriate motion 1121 Regardless reliefcannot be granted under Rule 60(b)(6) ifthe reason for which relief is sought fits within another category of Rule 60(b) In this case, the Court beiieves the proper claim for relief is for Rule 60(b)(3), which allows for relief from an order due to fraud, misrepresentation, or misconduct by an opposing party V I R Civ P 60(b)(3) The Plaintiffs alleged bad faith as articulated by Lloyds, would be misconduct and a misrepresentation to the Court Since Lloyds requested relief only pursuant to Rules 60(b)(2) and (b)(6), neither of which is applicable in this case, the Court will deny Lloyds’ request to reconsider the extension oftime granted to the Plaintiff 2) Service ofprocess will not be quashed because the service was not futile, but the Plaintiffs contract claims against Lloyds are barred by resjudtcam €122 There is no dispute that Lloyds was not served within the 120 day period required by Rule 4(m) However the Court exercised its discretion in granting Kitnurse the opportunity to serve Lloyds out oftime which is allowable under the rule as an alternative to dismissal The question then becomes whether that service is futile Beyond the Rule 60(b) argument discussed above, Lloyds asserts that the issues in this case have been litigated elsewhere Though Lloyds does not expressly say it, this is an argument that res Judicata applies If so, then not only would service have been futile at the time the Court granted an extension oftime, but the claims against Lloyds may be dismissed now {[23 ResJudicata prevents re litigation ofa claim when (I) the priorjudgment was valid, final, and on the merits, (2) the parties in the subsequent action are identical to or in privity with the parties in the prior action and (3) the claims in the subsequent action arise out of the same transaction or occurrence as the prior claims Stewart v Virgin Islands Bd ofLand Use Appeals, 66 V I 522, 532 (Sup Ct 2017) (adopting resJudicata by Banks analysis) (citations omitted) The Virgin Islands has adopted the ‘transactional test for determining when a claim arises out of the same transaction or Kltnurse v Mats/tall & Sterling 2020 V I Super 060 SX 2014 CV 36] MEMORANDUM OPINION 8; ORDER Page 9 of l I occurrence as prior claims Stewart 66 V I at 541 This means that subsequent claims will be barred when they rely on the same ‘group ofoperative facts giving rise to the assertion ofrelief as the earlier claim or claims Id citing River Park Inc v Czty ofHighland Park 703 N E 2d 883 891 (Ill 1998) (internal brackets omitted) ‘Requiring a plaintiff to pursue all rights he or she may have against a defendant that arise out of a single transaction or series of connected transactions promotes both judicial economy and the public perception ofthe stability and finality ofcourt decisions ” Stewart, 66 VI at 542 citing Beegan v Schmidt 54] A 2d 642 646 (Me 1982) 1124 [T]he measure of a cause of action is the aggregate of connected operative facts that can be handled together conveniently for purposes oftrial A priorjudgment bars a later suit arising out of the same aggregate of operative facts even though the second suit relies on a legal theory not advanced in the first case, seeks different relief than that sought in the first place, and involves evidence different from the evidence relevant to the first case Stewart 66 V l at 543 citing Connecticut Nat [Bank v Kendall 617 A 2d 544 547 (Me 1992) In applying this test the court must pragmatically consider whether the connected operative facts are related in time space origin or motivation whether they form a convenient trial unit and whether their treatment as a unit conforms to the parties’ expectations or business understandings or usage Stewart 66 V I at 543 citing River Park 703 N E 2d at 312 1125 In this case, the District Court granted summary judgment in favor of Lloyds that it was not obligated to indemnify Nails Time, which is a valid and final judgment on the merits The parties in this action (the subsequent action) are also identical to or in privity with the parties in the declaratory action because Nails Time assigned any claims it had against Lloyds to Kitnurse Finally, the claims against Lloyds in this action arise out of the same transaction or occurrence as the claims Lloyds v Nails Twe The purpose ofthe declaratory action was to determine whether Nails Time had insurance coverage for Kitnurse s injury claims and whether Lloyds was obligated to defend and indemnify Nails Time The underlying transaction/occurrence is the issuance ofthe insurance policy and the aggregate Kztnwse 1 Marshall & Sterling 2020 V I Super 060 SX 2014 CV 361 MEMORANDUM OPINION & ORDER Page 10 of 1 1 of operative facts includes those related to its issuance, such as whether Lloyds breached duties to Nails Time 1126 As such, the Plaintiff’s claims against Lloyds in this case are barred by resJudicata because they should have been brought as counterclaims in the declaratory judgment action Pragmatically the claims and issues outlined in the Complaint are related by origin to the question of whether Nails Time’s insurance policy covered Kitnurse s injury They also constitute a convenient trial unit and could have easily been resolved by the District Court 1127 Despite the fact that Kitnurse’s contract claims against Lloyds are barred, the Court will not quash service because Kitnurse may still pursue its requested declaratory relief, meaning that service is not entirely futile and there may still be a reason for Lloyds to be involved in this litigation IfLloyds feels that it is not a proper party to those claims or that they can be resolved by summary judgment Lloyds may file the appropriate motion CONCLUSION 1128 In sum the Court will not reconsider its decision to grant Kitnurse an extension oftime to serve Lloyds pursuant to Rule 60(b)(2) and (b)(6) of the Rules of Civil Procedure because Lloyds has not articulated a sufficiently extraordinary circumstance warranting relief from the order and because Lloyds argument that Kitnurse acted in bad faith must be assigned to Rule 60(b)(3) instead of60(b)(6) The two are mutually exclusive but Lloyds did not argue the applicability of Rule 60(b)(3) {[29 Additionally, the Court will not quash service for untimeliness because the Court exercised its discretion to grant an extension of time and therefore the service was not untimely or deficient With regard to the Lloyds v Nazis Tme, the Court finds that Nails Time neglected to bring countersuits for Kitnurse v Mat shall & Sterling 2020 V I Super 060 SX 2014 CV :6] MEMORANDUM OPINION & ORDER breach of contract, breach of contractual duties, and misrepresentation and those claims as assigned to Kitnurse are now barred by resjudzcata Accordingly, it is hereby ORDERED that the Motion to Quash Service and Dismiss Complaint Against Certain Underwriters at Lloyds of London is GRANTED IN PART DENIED IN PART Count 1] Count IV, Count VI, and Count VII of the Complaint are DISMISSED as against Certain Underwriters of Lloyds Subscribing to Policy Number CP8200601660 DONE and so ORDERED this ,9@ day of May 2020 // // / 2 )/ ATTEST W Tamara Charles HAROLD W L WILLOCKS Clerk of the Court Presiding Judge of the Superior Court By::"‘%?M: Court Clerk Supervisor E Dated ‘52fféflfi