United States District Court, D. Minnesota
ORDER ON MOTIONS
E. Brasel United States District Judge
on the motions before it, the Court must consider two issues
of subject- matter jurisdiction. The first is whether this
Court has subject-matter jurisdiction over a counterclaim
brought by an injured-party defendant in an insurance
declaratory action when state law prohibits direct actions by
an injured party. The second is whether this Court has
subject-matter jurisdiction over a third-party complaint
brought by an injured- party defendant adding another
insured. For the reasons below, the Court finds it does not
have subject-matter jurisdiction over the counterclaim or the
third-party complaint in these circumstances, and accordingly
2017, Esther and Jeffrey Oldenburg were involved in a car
crash with Michael Hayner. Hayner had purchased his car from
Terrance Childers, the owner of LAC Industries
(“LAC”). At the time of the crash, the car was
still listed as an insured vehicle on the Commercial Auto
Policy and Commercial Umbrella Policy (together
“policies”) issued by plaintiff SECURA Insurance
(“SECURA”) to LAC.
the crash, the Oldenburgs brought a personal injury action
against Childers and Hayner in Minnesota state court. [ECF
No. 12-1.] LAC is not a named defendant in the state court
action, but the Oldenburgs have proposed to join LAC as a
party in that suit. [ECF No. 12-2.] In response to the state
court action, SECURA brought this declaratory judgment action
in federal court, seeking a determination of its obligations
under the policies. [ECF No. 1.] SECURA names Childers and
the Oldenburgs as defendants and claims that Childers is not
an insured under the policies. Id. at ¶4. The
Oldenburgs then filed an answer, a counterclaim, and a
third-party complaint against LAC and Hayner. [ECF Nos. 9,
12.] The Oldenburgs' counterclaim against SECURA seeks
(1) a declaration that SECURA provides coverage for Childers
under the Commercial Auto Policy, (2) a declaration that
SECURA provides coverage to Childers and LAC under the
Commercial Umbrella Policy, and (3) a denial of SECURA's
request for a declaration of no coverage. [ECF No. 9 at 7.]
The third-party complaint against LAC and Hayner seeks a
declaration that SECURA's policies cover LAC and Hayner.
[ECF No. 12.] SECURA moved to dismiss the counterclaim and
SECURA and LAC moved to dismiss the third-party complaint
under Rule 12(b)(1) of the Federal Rules of Civil Procedure
for lack of subject-matter jurisdiction. [ECF Nos. 15, 26,
party brings a challenge to the Court's subject-matter
jurisdiction under Federal Rule of Civil Procedure 12(b)(1),
the Court must determine if it has the authority to decide
the claims at issue. Spine Imaging MRI, LLC v. Liberty
Mut. Ins. Co., 743 F.Supp.2d 1034, 1038-39 (D. Minn.
2010). A Rule 12(b)(1) motion may either challenge a
complaint on its face or the “factual
truthfulness” of its assertions. Titus v.
Sullivan, 4 F.3d 590, 593 (8th Cir. 1993). SECURA has
made a facial challenge, so “all of the factual
allegations concerning jurisdiction are presumed to be true
and the motion is successful if the plaintiff fails to allege
an element necessary for subject-matter jurisdiction.”
Id. The burden of proving subject-matter
jurisdiction falls on the party asserting jurisdiction.
See V S Ltd. P'ship v. Dep't. of Hous. &
Urban Dev., 235 F.3d 1109, 1112 (8th Cir. 2000). Both
standing and ripeness “are requirements for Article III
subject matter jurisdiction.” Kennedy v.
Ferguson, 679 F.3d 998, 1001 (8th Cir. 2012). If a
plaintiff lacks standing to sue, then the district court
lacks subject-matter jurisdiction. ABF Freight Sys., Inc.
v. Int'l Bhd. of Teamsters, 645 F.3d 954, 958 (8th
Cir. 2014). If a claim is not ripe, the court also lacks
subject-matter jurisdiction. See Dakota, Minn. & E.
R.R. Corp. v. South Dakota, 362 F.3d 512, 520 (8th Cir.
The Court does not have subject-matter jurisdiction over the
counterclaim because the Oldenburgs do not have
Oldenburgs have the burden of demonstrating the Court's
subject-matter jurisdiction over their counterclaim. See
V S Ltd. P'ship, 235 F.3d at 1112. They argue that
because they are joined as defendants in SECURA's
complaint, they have the right to bring counterclaims. This
argument is squarely foreclosed by Eighth Circuit precedent.
See W. Heritage Ins. Co. v. Asphalt Wizards, 795
F.3d 832, 836 (8th Cir. 2015). In Asphalt Wizards,
an insurer brought a declaratory judgment action seeking a
declaration that it did not owe coverage to its insured.
Id. at 835. As here, the insured counterclaimed.
Id. The Eighth Circuit found there was no
subject-matter jurisdiction for the counterclaim based on
Missouri's prohibition on direct actions. Id. at
836. Because the plaintiffs did not have standing to sue
under state law, the federal courts did not have
subject-matter jurisdiction. Id.
like Missouri, prohibits direct actions. See Camacho v.
Todd & Leiser Homes, 706 N.W.2d 49, 56 (Minn. 2005).
A direct action occurs when an injured party directly sues
the defendant's insurer before obtaining a judgment as to
the defendant's liability. Id. Under Minnesota
law, an injured party may not preemptively seek a declaration
that an insurer must cover a defendant prior to a judgment
finding the defendant liable for the injury. See Id.
Here, the Oldenburgs' counterclaim is a direct action, or
at least has the effect of a direct action, because it
requests a declaration of affirmative coverage prior to a
judgment, precisely what the prohibition against direct
actions does not allow. Because the counterclaim amounts to a
direct action, the Oldenburgs do not have standing to pursue
Oldenburgs' counterclaim for an insurance declaratory
judgment is barred by the state prohibition against direct
actions. Consequently, this Court does not have
subject-matter jurisdiction. Accordingly, the Court dismisses
the counterclaim under Federal Rule of Civil Procedure
The Court does not have subject-matter jurisdiction over the
third-party complaint because the Oldenburgs do not have
standing and because their claim against LAC is not
and LAC also filed motions to dismiss the third-party
complaint filed by the Oldenburgs. Because the parties make
similar arguments about the Court's subject- matter