State v. Stonington Insurance Co., No Wncv (Toor, J., June, 29, 2006)
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1 State v. Stonington Insurance Co., No Wncv (Toor, J., June, 29, 2006) [The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the accompanying data included in the Vermont trial court opinion database is not guaranteed.] STATE OF VERMONT WASHINGTON COUNTY, SS STATE OF VERMONT, Plaintiff SUPERIOR COURT v. Docket No Wncv STONINGTON INSURANCE CO., et al., Defendants RULING ON MOTION TO STRIKE JURY DEMAND The State of Vermont filed this action for a declaratory judgment and to recover cleanup costs under the Petroleum Cleanup Fund statute, 10 V.S.A The State alleges that is has funded investigation and remediation of the site in question, and seeks reimbursement for those expenditures from three insurance companies who allegedly provided relevant coverage to parties who owned the land and the underground storage tanks in question (Stonington Insurance Co., Northern Security Insurance Co., and Great American Assurance Co.). All three insurers have demanded trial by jury. One of the insurers, Northern Security Insurance, has filed third-party complaints seeking (1) contribution and contractual indemnification from Bradford Oil Company, a former owner of the site, and (2) implied indemnification from Lawrence & Wheeler, an insurance agency that
2 allegedly served as Stonington s agent. Lawrence has asserted a jury demand. Bradford has not. The State now moves to strike all jury demands. Discussion The State argues that the complaint seeks only equitable relief, and that therefore none of the parties are entitled to a jury trial. Lawrence, Northern Security, and Stonington all argue that the State s claims against them, and Northern Security s claims against Lawrence, are more properly characterized as legal claims for which they are entitled to trial by jury under the Vermont Constitution. 1 As one commentator has noted, [d]etermining which actions belonged to law and which to equity for the purpose of delimiting the jury trial right continues to be one of the most perplexing questions of trial administration. 9 C. Wright & A. Miller, Federal Practice and Procedure, Civil 2nd 2302 p. 18 (1995). The Vermont Constitution provides as follows: That when any issue in fact, proper for the cognizance of a jury is joined in a court of law, the parties have a right to trial by jury, which ought to be held sacred. Vermont Constitution, Chapter I, Article 12. This has been construed to mean that a right to jury trial exists if it existed at common law at the time the Vermont Constitution was adopted. Hodgdon v. Mt. Mansfield Co., 160 Vt. 150, 155 (1992). See also, In re Weatherhead s Estate, 53 Vt. 651, (1881)(certain classes of cases are held not to be within the provisions of the constitution relating to jury trials; because by the custom of the common law no such trials are had in such cases. ). However, the fact that a particular statute or cause of action did not exist in the 1700s does not resolve the question. Instead, we look at the nature of the action and whether it is the type of controversy that would have been tried to a jury under common law at the time. Id. Specifically, neither federal nor state law provides a right to a jury trial in equitable matters. Murphy v. Stowe Club Highlands, 171 Vt. 144, 163 (2000). 1 None of the parties raises any issue with respect to whether any party s defenses entitle them to jury trials. 2
3 Vermont law is somewhat unclear about precisely how courts are to determine what is legal and what equitable. For example, although first stating that the nature of the action and type of controversy are the issues to be considered, the Court in Hodgdon later states that the right to a jury turns on whether the complaint seeks legal or equitable relief, regardless of whether the type of claim might otherwise allow a jury trial. 160 Vt. at 156 and See also, Merchants Bank v. Thibodeau, 143 Vt. 132, 134 (1983) ( entitlement to a jury trial is dependent upon the relief requested. If the relief requested is equitable, no right to a jury trial exists. ). As Wright & Miller note, a particular issue can be seen as legal in one context and as equitable in another: For example, suppose that a person who is purportedly a party to a contract claims that his name has been forged and that he never entered into the agreement. If suit is for damages for breach of contract, the forgery issue arises in a context historically legal, and there is a right to have a jury resolve the issue. If, however, the only remedy sought is specific performance, the context historically is equitable, and there is no right to have a jury decide whether the signature on the contract was genuine. Wright & Miller, supra, 2302 pp In sum, it appears that while the general nature of the claim is a starting point, the relief sought is the crucial determining factor. Accord, Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 42 (1989) (under the Seventh Amendment, [f]irst, we compare the statutory action to 18 th -century actions brought in the courts of England prior to the merger of law and equity. Second, we examine the remedy sought and determine whether it is legal or equitable in nature. The second stage of this analysis is more important than the first. ). 1. The Claims Asserted by the State 2 Thus, while ruling that jury trials are available under the Vermont Fair Employment Practices Act if a plaintiff seeks money damages, the Court concluded that the plaintiff in Hodgdon was not entitled to a jury because the specific relief she sought was purely equitable. Id. at
4 The State argues that the reimbursement it seeks from the insurers in this case is akin to restitution and is thus an equitable claim. However, merely calling a claim restitution does not make it equitable. Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002). In Great-West, the Court discussed the issue of whether restitution is legal or equitable relief, and explained that it depends upon the context. Specifically, for restitution to lie in equity, the action generally must seek not to impose personal liability on the defendant, but to restore to the plaintiff particular funds or property in the defendant s possession. Id. at 214. The Court went on to explain: The basis for petitioner s claim is not that respondents hold particular funds that, in good conscience, belong to petitioners, but that petitioners are contractually entitled to some funds for benefits they conferred. The kind of restitution that petitioners seek, therefore, is not equitable the imposition of a constructive trust or equitable lien on property but legal the imposition of personal liability for the benefits that they conferred upon respondents. Id. Substitute statutorily for contractually, and the description fits this case perfectly. And although the Great West case was not addressing the right to jury trial, its analysis applies equally in this setting. See, e.g., Pereira v. Farace, 413 F.3d 330, (2 nd Cir. 2005) (applying Great West analysis to hold that a claim characterized as restitution was in actuality one for compensatory damages requiring a jury trial). What the State seeks from the insurers in this case is really money damages pursuant to insurance contracts. This is a classically legal claim. The insurers are entitled to trial by jury. 2. The Claims Asserted By Northern Security Against Lawrence Lawrence first argues that the State has no standing to challenge the jury demand Lawrence asserts in response to a third-party claim brought against it by Stonington. However, the court has the power to address the issue even if not raised by a party. V.R.C.P. 39(a)(jury 4
5 demand shall be honored unless the court upon motion or of its own initiative finds no right to jury). The claims asserted against Lawrence are for breach of fiduciary duty and implied indemnification. The court will address each in turn. Breach of fiduciary duty can be either a legal or an equitable claim. Restatement (Second) of Torts, 874, Violation of Fiduciary Duty (1979) ( The remedy of a beneficiary against a defaulting or negligent trustee is ordinarily in equity; the remedy of a principal against an agent is ordinarily at law. ); Solomon v. Atlantis Development, Inc., 145 Vt. 70 (1984) (treating breach of fiduciary duty claim seeking rescission and accounting as equitable); Green Mountain Inv. Corp. v. Flaim, 174 Vt. 495 (2002)(breach of fiduciary duty claim involving agency theory sent to jury); Cooper v. Cooper, 173 Vt. 1, 10 (2001) ( one co-tenant who violates his or her fiduciary duties to another co-tenant is liable in tort. ). There appear to be no Vermont cases analyzing the question of when breach of fiduciary duty claims should be considered legal rather than equitable. In the absence of such guidance, the court finds the Restatement to shed the clearest light on the issue. Thus, because the claim here is based on an agency relationship, the court finds that the claim is one at law rather than at equity. Implied indemnification has been described in Vermont as an equitable remedy. City of Burlington v. Arthur J. Gallagher & Co., 173 Vt. 484, (2001) ( indemnity is implied for equitable reasons where it is fair to shift the loss resulting from negligence from one party to the more responsible party. ); White v. Quechee Lakes Landowners Ass n, 170 Vt. 25, 34 (1999)(referring to the equitable remedy of implied indemnification ). Although Lawrence points to one Vermont case in which an implied indemnification claim was apparently tried to a jury along with other claims, there is nothing to suggest that any party challenged that procedure, 5
6 and the decision offers no analysis on the issue. Morris v. American Motors Corp., 142 Vt. 566, 577 (1983).The case does not compel a finding of entitlement to a jury trial on such an equitable claim. Order The motion to strike the jury demands is denied with respect to the claims asserted by the State, denied with respect to the claim against Lawrence for breach of fiduciary duty, and granted with respect to the claim against Lawrence for implied indemnification. The latter issue will be decided by the court, not a jury. Dated at Montpelier this 29th day of June, Helen M. Toor Superior Court Judge 6
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