Murphy-Brown, LLC v. Ace Am. Ins. Co.

Murphy-Brown, LLC v. Ace Am. Ins. Co., 2020 NCBC 19.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF WAKE 19 CVS 2793

MURPHY-BROWN, LLC and
SMITHFIELD FOODS, INC.,

Plaintiffs,

v.

ACE AMERICAN INSURANCE
COMPANY, et al.,

Defendants.

AMERICAN GUARANTEE &
LIABILITY INSURANCE
COMPANY,

ORDER AND OPINION ON
Counterclaim/ COUNTERCLAIM DEFENDANTS’
Third Party MOTIONS TO DISMISS
Plaintiff,

v.

MURPHY-BROWN, LLC and
SMITHFIELD FOODS, INC.,

Counterclaim
Defendants,

and

BANDIT 3 LLC DBA CROOKED
RUN FARM, et al.,

Third Party
Defendants.
THIS MATTER comes before the Court upon Counterclaim Defendants

Murphy-Brown, LLC (“Murphy-Brown”); Murphy-Brown’s Hog Growers (“Growers”)

and the Growers’ insurance providers’ (“Grower Insurers”) (collectively Murphy-

Brown, Growers, and Grower Insurers are referred to as “Counterclaim Defendants”)

Motions to Dismiss American Guarantee & Liability Insurance Company’s (“Zurich”)

Counterclaim. (“Motions,” ECF Nos. 231, 233, 234, 237, 238, 239, 240, 243, 247, 258,

276 1.)

THE COURT, having considered the Motions, the briefs filed in support of and

in opposition to the Motions, the arguments of counsel at the hearing on the Motions,

and other appropriate matters of record, concludes that the Motions should be

GRANTED.

Middlebrooks Law, PLLC by James Middlebrooks for Plaintiffs Murphy-
Brown, LLC and Smithfield Foods, Inc.

Reed Smith LLP by Evan T. Knott and John D. Shugrue for Plaintiffs
Murphy-Brown, LLC and Smithfield Foods, Inc.

Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, LLP by Michael
W. Mitchell for Plaintiffs Murphy-Brown, LLC and Smithfield Foods,
Inc.

Ragsdale Liggett PLLC by Henry Lee Evans and Amie C. Sivon for
Counterclaim Defendant Hog Growers.

1
On January 21, 2020, Nicholas Herring d/b/a/ Langston Nursery (“Langston”) filed its
Motion to Dismiss. (“Langston Motion,” ECF No. 276.) Langston incorporates by reference
the Growers’ arguments for dismissal. (Id.) Langston’s Motion was filed subsequent to the
Court’s Notice of Hearing on the Motions (ECF No. 275), but prior to the hearing. In response,
Zurich filed a brief that is substantively identical to the brief Zurich filed in response to the
Growers’ Motions. (ECF No. 278.) Accordingly, the Court will treat Langston’s Motion as if
it was filed along with the Growers’ Motions.
Morningstar Law Group by Shannon R. Joseph, Jeffery L. Roether, and
Eric R. Hunt for Counterclaim Defendant Hog Growers.

Young Moore and Henderson, P.A. by Walter E. Brock, David W. Earley,
Andrew P. Flynt, and Matthew C. Burke for Counterclaim Defendant
Grower Insurers.

Nexsen Pruet, PLLC by James West Bryan, Brett Becker, and David S.
Pokela for Defendant/Counterclaim Plaintiff American Guarantee &
Liability Insurance Company.

McGuire, Judge.

I. FACTS AND PROCEDURAL BACKGROUND

1. The facts and procedural background of the underlying law suit in this

matter are recited in this Court’s Order and Opinion on Defendants’ Motions for

Judgment on the Pleadings. (“Motion for Judgment,” ECF No. 269.) The Court

recites herein only those facts necessary to decide the Motions.

2. Murphy-Brown is in the business of producing and growing hogs on

farms owned by Murphy-Brown (“company-owned farms”) and on farms owned by the

Growers. Murphy-Brown and the Growers enter into contracts (the “Grower

Agreements”) to memorialize their business relationships. (“Counterclaim,” ECF No.

99, at ¶ 107.)

3. Murphy-Brown is a defendant in twenty-six (26) nuisance lawsuits

pending in federal court (“Federal Nuisance Actions”). (Id. at ¶ 87.) Twenty-three of

the twenty-six Federal Nuisance Actions involve farms owned by Growers

(hereinafter, the “Twenty-Three Nuisance Actions”). (Id. at ¶ 88.) The plaintiffs in

the Twenty-Three Nuisance Actions allege that “Murphy-Brown is liable based on,
among other things, the following: (1) that Murphy-Brown is in a principal-agent

relationship with the [Growers] and thus is vicariously liable for the alleged nuisance

caused by the [Growers]; or (2) that Murphy-Brown employed the [Growers] to do

work which Murphy-Brown knew or had reason to know would create a nuisance and

thus cause harm.” (Id. at ¶ 89.)

4. Five trials have been conducted in the Federal Nuisance Actions, 2

resulting in jury verdicts against Murphy-Brown of “$98,402,400, not including any

accrued prejudgment or post-judgment interest.” (Id. at ¶ 90.)

5. Zurich is one of Murphy-Brown’s excess insurers. (Id. at ¶ 93.) Zurich

issued four separate polices (the “Zurich Policies”) to Murphy-Brown which insure

Murphy-Brown for “certain risks during the periods of 2010 to 2014.” (Id.) The

Zurich Polices contain the following provision, or a provision with substantially the

same wording, pertaining to defense coverage:

SECTION III. DEFENSE AND SUPPLEMENTARY
PAYMENTS

A. We have the right and duty to assume control of the
investigation and settlement of any claim, or defense of any
suit against the insured for damages covered by this policy:

1. Under Coverage A, when the applicable limit of
underlying insurance and other insurance has
been exhausted by payment of claims for which
coverage is afforded under this policy; or

2. Under Coverage B, when damages are sought for
bodily injury, property damage, or personal and

2 It is unclear from the pleadings, motions, and briefs whether all five of the trials have

involved Grower farms that are part of the Twenty-Three Nuisance Actions, or whether some
of the trials have involved company-owned farms.
advertising injury to which no underlying
insurance or other insurance applies.

(Id. at ¶ 100.)

6. Based on this provision, Zurich alleges that: “[t]o the extent any such

‘other insurance’ . . . is applicable to the nuisance claims, actions and damages alleged

against Murphy-Brown in the Twenty-Three Nuisance Actions, then any alleged

coverage under the Zurich Policies, which coverage is denied, is excess to such ‘other

insurance.’” (Id. at ¶ 101.)

7. The Grower Insurers entered into insurance policies (the “Grower

Insurer Policies”) with the Growers, agreeing “to pay those sums that the [Growers

become] legally obligated to pay as damages because of bodily injury or property

damage to which the insurance applies.” (Id. at ¶ 102.) Zurich alleges that the

Grower Insurer Policies provide “contractual liability” and apply to liability for

damages assumed in an “insured contract.” (Id. at ¶ 103.) “An ‘insured contract’ is

that part of any contract or agreement pertaining to the insured [Grower’s] business

under which the insured [Grower] assumes the tort and/or nuisance liability of

another party.” (Id.)

8. The Grower Agreements include a clause (the “Indemnity Agreements”)

requiring the Growers “to indemnify Murphy-Brown with respect to the [Growers’]

acts and omissions in performing under the [Grower Agreements].” (Id. at ¶ 108.)

For example, some of the Grower Agreements contain the following Indemnity

Agreement:
Indemnification. Producer does hereby agree to hold and
save [Murphy-Brown, LLC] harmless from all losses,
claims, damages, or expenses, including reasonable
attorney fees and court costs, resulting from any act of
Producer, Producer’s employees, representatives, invitees,
guests, and agents, or from any omission of Producer,
whether said act or omission was required by any State,
Federal or local law, rule, regulation or ordinance or under
the terms of this Swine Agreement.

(Id. at ¶ 109.) 3

9. Zurich maintains that each indemnification clause in the Grower

Agreements constitutes an “insured contract” under the Grower Insurer Policies and

the Grower Insurer Policies constitute “other insurance” as defined in the Zurich

Policies. (Id. at ¶¶ 105–06.)

10. Accordingly, Zurich alleges that pursuant to the Indemnity Agreements,

the Growers “contractually assumed the tort/nuisance liability of Murphy-Brown,

which would include the nuisance claims asserted in the Twenty-Three Nuisance

Actions”; the Grower Insurer Policies “provide primary insurance coverage to the

[Growers] for the contractual liability related to the . . . indemnity agreements”; and

the Grower Insurer Policies are a source of defense and indemnity for Murphy-Brown.

(Id. at ¶¶ 115, 117–18.)

11. On March 7, 2019, Zurich demanded that Murphy-Brown seek

enforcement of the Indemnity Agreements against the Growers and Grower Insurers.

3 Zurich acknowledges that there is at least one other form of indemnification clause found

in the Grower Agreements and there may well be additional forms of indemnification clauses.
(Id. at ¶¶ 109–11.)
(Id. at ¶ 133.) However, on May 13, 2019, Murphy-Brown refused to enforce the

Indemnity Agreements. (Id. at ¶ 134.)

12. Plaintiffs initiated the underlying lawsuit on March 5, 2019, by filing a

complaint in the Superior Court of Wake County, North Carolina. (Compl., ECF No.

4.) Contemporaneous with the filing of the Complaint, Plaintiffs filed a Notice of

Designation to have the case designated as a mandatory complex business case.

(Notice of Desig., ECF No. 6.) On March 6, 2019, this action was designated to the

North Carolina Business Court (Desig. Order, ECF No. 3), and was assigned to the

undersigned on March 7, 2019 (Assign. Order, ECF No. 2).

13. On March 19, 2019, Plaintiffs amended their Complaint. (“Amended

Complaint,” ECF No. 9.) On May 16, 2019, Zurich filed its Answer to Plaintiffs’

Amended Complaint. (“Answer to Amended Complaint,” ECF No. 72.) On June 14,

2019, Zurich filed its Counterclaim for Declaratory Judgment by way of Amendment

of [Zurich’s] Answer to Plaintiffs’ Amended Complaint. (ECF No. 99.)

14. Between September 13, 2019 and November 5, 2019, the Grower

Insurers filed their Motions to Dismiss (ECF Nos. 231, 243, 258) and all joined in the

Grower Insurers’ Joint Brief in Support of [their] Motion[s] to Dismiss. (“Grower

Insurers’ Brief in Support,” ECF No. 232.) On October 25, 2019, Zurich filed its

Response Brief in Opposition to [the Grower Insurers’] Motions to Dismiss

Counterclaim. (“Zurich Response to Grower Insurers,” ECF No. 255.) On November

15, 2019, the Grower Insurers filed a Joint Reply Brief in Support of their Motion[s]

to Dismiss. (“Grower Insurers’ Reply,” ECF No. 260.)
15. Between September 13, 2019 and January 21, 2020, the Growers filed

their Motions to Dismiss (ECF Nos. 233, 234, 237, 238, 240, 247, 276) and all joined

in the Joint Brief of [Growers] in Support of their Motions to Dismiss (“Growers’ Brief

in Support,” ECF No. 235). On October 25, 2019, Zurich filed its Response Brief in

Opposition to [the Growers’] Motions to Dismiss Counterclaim. (“Zurich Response to

Growers,” ECF No. 256.) On November 15, 2019, the Growers filed a Joint Reply

Brief in Support of their Motion[s] to Dismiss. (“Growers’ Reply,” ECF No. 259.)

16. On September 13, 2019, Murphy-Brown filed its Motions to Dismiss

(ECF No. 239) and filed a Brief in Support of its Motion to Dismiss [Zurich’s

Counterclaim] (“Murphy-Brown’s Brief in Support,” ECF No. 241). On October 25,

2019, Zurich filed its Response Brief in Opposition to [Murphy-Brown’s] Motion to

Dismiss Counterclaim. (“Zurich Response to Murphy-Brown,” ECF No. 254.) On

November 15, 2019, Murphy-Brown filed a Reply Brief in Support of its Motion to

Dismiss. (“Murphy-Brown’s Reply,” ECF No. 261.)

17. This matter came before the Court for a hearing where the Court heard

oral argument from counsel. The Motions are now ripe for decision.

II. ANALYSIS

18. Grower Insurers move to dismiss Zurich’s Counterclaim pursuant to

North Carolina Rule of Civil Procedure (“Rules”) 12(b)(1); Growers move to dismiss
the Counterclaim pursuant to Rules 12(b)(1), 12(b)(6), 13, and 21; 4 and Murphy-

Brown moves to dismiss the Counterclaim pursuant to Rules 12(b)(1) and 12(b)(6).

A. Standard of Review

i. 12(b)(1) Standard

19. “Standing concerns the trial court’s subject matter jurisdiction and is

therefore properly challenged by a Rule 12(b)(1) motion to dismiss.” Fuller v. Easley,

145 N.C. App. 391, 395, 553 S.E.2d 43, 46 (2001) (citations omitted); see also Aubin v.

Susi, 149 N.C. App. 320, 324, 560 S.E.2d 875, 878 (2002) (“Standing is a necessary

prerequisite to a court’s proper exercise of subject matter jurisdiction.”). “If a party

does not have standing to bring a claim, a court has no subject matter jurisdiction to

hear the claim.” Estate of Apple v. Commercial Courier Express Inc., 168 N.C. App.

175, 177, 607 S.E.2d 14, 16 (2005). “A motion to dismiss for lack of subject matter

jurisdiction is not viewed in the same manner as a motion to dismiss for failure to

state a claim upon which relief can be granted.” Tart v. Walker, 38 N.C. App. 500,

502, 248 S.E.2d 736, 737 (1978). A court may consider matters outside the pleadings

in determining whether subject matter jurisdiction exists. Id.; see also Keith v.

Wallerich, 201 N.C. App. 550, 554, 687 S.E.2d 299, 302 (2009). “As the party invoking

jurisdiction, plaintiffs have the burden of proving the elements of standing.” Neuse

River Found. v. Smithfield Foods, Inc., 155 N.C. App. 110, 113, 574 S.E.2d 48, 51

(2002).

4 Since the Court decides the Motions exclusively under Rule 12(b)(1), the Court does not

address the Growers’ arguments for dismissal under Rules 12(b)(6), 13, and 21 or Murphy-
Brown’s arguments for dismissal under Rule 12(b)(6).
B. Nature of Zurich’s Declaratory Judgment Action

20. To decide the Counterclaim Defendants’ Motions, the Court must first

determine the theory under which Zurich seeks declaratory relief.

21. In the Amended Complaint, Murphy-Brown seeks a declaration that

Zurich and other insurers are required to reimburse Murphy-Brown for the defense

costs associated with, and to indemnify Murphy-Brown for damages arising from, the

Federal Nuisance Actions. (See ECF No. 9; ECF No. 99, at ¶ 123.) Zurich has denied

coverage. (ECF Nos. 72, 99.)

22. Zurich alleges that Murphy-Brown’s liability for the jury verdicts in the

Twenty-Three Nuisance Actions arises from the Growers’ acts or omission which

occurred while the Growers were performing under the Grower Agreements. (ECF

No. 99, at ¶¶ 125–29.) Accordingly, Zurich believes that, pursuant to the Indemnity

Agreements, the Growers owe indemnity to Murphy-Brown with respect to the

Twenty-Three Nuisance Actions. (Id. at ¶ 130.)

23. Zurich avers that the Growers’ indemnity obligations under the Grower

Agreements can and should be determined by this Court by conducting a “review of

the pleadings, written discovery and/or evidence in the Twenty-Three Nuisance

Actions” and conducting a “review of the pleadings in this action.” (Id. at ¶ 131(a)–

(b).) Alternatively, Zurich requests that this “Court determine all issues of fact

necessary to adjudicate the legal question of whether the [Growers] owe indemnity to

Murphy-Brown with respect to the Twenty-Three Nuisance Actions pursuant to the

respective terms of each [Indemnity Agreement].” (Id. at ¶ 131(c).)
24. Zurich next contends that the Grower Insurer Policies provide

contractual liability coverage for the Growers’ obligations under the Indemnity

Agreements, “and these liability policies constitute primary coverage in relation to

the excess policies of Zurich . . . . Until [the Grower Insurer Policies] are properly and

completely exhausted . . . Zurich has no potential liability to Plaintiffs.” (Id. at ¶ 136.)

25. As a result, Zurich alleges that a priority dispute and uncertainty exists

between Zurich and Counterclaim Defendants regarding the allocation of

responsibility to indemnify Murphy-Brown for costs associated with the Twenty-

Three Nuisance Actions. (Id. at ¶¶ 135–38.) In Zurich’s view, the dispute creates an

actual controversy between Zurich and Counterclaim Defendants regarding: (a)

Murphy-Brown’s indemnity rights; and (b) the extent of coverage and priority of

coverage between Zurich and the Grower Insurers. (Id. at ¶ 140.) Zurich asserts that

a declaratory judgment is “necessary to guide the parties’ future conduct in order to

fulfill and/or preserve their respective legal rights and/or obligations relating to the

indemnification of Murphy-Brown, if any, with respect to the Twenty-Three Nuisance

Actions.” (Id. at ¶ 141.)

26. Based on the foregoing, Zurich seeks the following declarations from this

Court:

i. From 2010 to the present, the Growers assumed the tort/nuisance

liability of and are liable to Murphy-Brown pursuant to the Indemnity

Agreements for “Murphy-Brown’s defense costs and any other costs
Murphy-Brown pays or is required to pay in the Twenty-Three Nuisance

Actions[;]”

ii. The Grower Insurer Policies apply to and provide coverage for the

“nuisance claims, actions and damages alleged against Murphy-Brown

in the Twenty-Three Nuisance Actions[;]”

iii. “[A]ny alleged coverage under the Zurich Policies, which coverage is

denied, is excess to such ‘other insurance’ of the liability insurance

policies of the [Grower Insurers;]”

iv. “[U]ntil the Zurich Payment Conditions are satisfied . . . Zurich has no

potential liability to Murphy-Brown.”

(Id. at ¶¶ 143–44, Prayer for Relief.)

27. With this understanding of Zurich’s Counterclaim, the Court now

addresses the merits of Counterclaim Defendants’ Motions. The Court will begin by

analyzing Zurich’s standing to maintain its Declaratory Judgment Action.

C. Zurich’s Standing to Maintain its Declaratory Judgment Action

28. Counterclaim Defendants argue that Zurich lacks standing to bring its

Declaratory Judgment action because Zurich is not a party to, nor an intended third-

party beneficiary of, any of the Grower Agreements or any of the Grower Insurer

Policies. (ECF No. 232, at pp. 5–8; ECF No. 235, at pp. 11–14; ECF No. 241, at pp.

3–8.)
i. Zurich’s standing to seek a declaration regarding the indemnity
rights and obligations under the Grower Agreements

29. The Declaratory Judgment Act provides that “Courts of record within

their respective jurisdictions shall have power to declare rights, status, and other

legal relations, whether or not further relief is or could be claimed.” N.C.G.S. § 1-

253. Pursuant to N.C.G.S. § 1-254:

Any person interested under a deed, will, written contract
or other writings constituting a contract, or whose rights,
status or other legal relations are affected by a . . . contract
. . . , may have determined any question of construction or
validity arising under the . . . contract, . . . , and obtain a
declaration of rights, status, or other legal relations
thereunder. A contract may be construed either before or
after there has been a breach thereof.

30. The first clause of § 1-254—“any person interested under a deed, will,

written contract or other writings constituting a contract”— has been interpreted as

only allowing “a party to a contract or a direct beneficiary to have standing

under N.C.[G.S.] § 1-254 to file a declaratory judgment action under N.C.[G.S.] § 1-

253.” Whittaker v. Furniture Factory Outlet Shops & Auto-Owners Ins. Co., 145 N.C.

App. 169, 173, 550 S.E.2d 822, 824 (2001).

31. However, under the second clause of § 1-254, “a third party who has

‘rights, status or other legal relations [that] are affected by . . . [a] contract’” may have

standing to seek a declaration regarding the contract if the party seeking the

declaration has “an enforceable contractual right under the [ ] agreement.”

Whittaker, 145 N.C. App. at 174, 550 S.E.2d at 825 (citing DeMent v. Nationwide

Mutual Ins. Co., 142 N.C. App. 598, 601, 544 S.E.2d 797, 799 (2001)). In other words,
under either clause of § 1-254, “[a]bsent an enforceable contract right, an action for

declaratory relief to construe or apply a contract will not lie.” Terrell v. Layers Mut.

Liab. Ins. Co., 131 N.C. App. 655, 661, 507 S.E.2d 923, 926–27 (1998) (emphasis

added).

32. Zurich does not argue that it is a party or third-party beneficiary to the

Grower Agreements; nor does Zurich argue that it has an enforceable contractual

right in the Grower Agreements. Rather, Zurich takes the position that it has

standing to pursue a declaration of the Growers’ indemnity obligations under the

Grower Agreements because Zurich “has a ‘cognizable interest’ in the Grower

Agreements and whether indemnity is owed under them from the Growers to

Murphy-Brown.” (ECF No. 256, at p. 12.) Zurich relies on the North Carolina Court

of Appeals’ holding in Coca-Cola Bottling Co. Consol. v. Durham Coca-Cola Bottling

Co., 141 N.C. App. 569, 541 S.E.2d 157 (2000), to support its position that Zurich has

standing to seek a declaration of rights under the Grower Agreements pursuant to a

less demanding “cognizable interest” standard, even without having an “enforceable

contractual right.” (ECF No. 256, at pp. 9–13.)

33. The facts and procedural background of Coca-Cola Bottling are

complicated. See Coca-Cola Bottling, 141 N.C. App. at 571–76, 541 S.E.2d at 159–62.

In sum, Durham Coca-Cola Bottling Company (“Durham”) sought to purchase

Reidsville Coca-Cola Bottling Company (“Reidsville”). Id. at 571, 541 S.E.2d at 159.

On February 26, 1999, Durham made an offer by letter to purchase Reidsville and on

March 3, 1999, “the president of Reidsville, responded by signing this letter under
the language ‘Accepted and Agreed’ and returning it to Durham.” Id. Thereafter,

Durham learned that Coca-Cola Bottling Company Consolidated (“Consolidated”)

was attempting to purchase Reidsville. Id. at 572, 541 S.E.2d at 159–60. In April of

1999, Consolidated filed a complaint naming Durham and Reidsville as defendants

and alleging that Reidsville accepted a purchase offer from Consolidated prior to

Durham’s offer. Id. at 572, 541 S.E.2d at 160. Consolidated then purportedly

purchased Reidsville in May of 1999, and filed an amended complaint seeking, inter

alia, “a declaratory judgment as to . . . whether Durham [had] an enforceable contract

to purchase Reidsville.” Id. at 572–73, 541 S.E.2d at 160.

34. Durham argued that Consolidated did not have standing to maintain a

declaratory judgment action to determine the validity of Durham’s contract with

Reidsville because Consolidated was not a party to that contract. Id. at 575, 541

S.E.2d at 161. The court then cited the second clause of § 1-254 5 and discussed the

Declaratory Judgment Act’s purpose and the requirements for establishing

jurisdiction in declaratory judgment actions as explained by North Carolina’s

Supreme Court and other authorities. Id. at 575–76, 541 S.E.2d at 162. Ultimately,

the court concluded that:

5 The second clause of §1-254 provides that “[a]ny person interested under a . . . written

contract . . . or whose rights, status or other legal relations are affected by a . . . contract . . .
may have determined any question of construction or validity arising under the . . . contract
. . . and obtain a declaration of rights, status, or other legal relations thereunder.” N.C.G.S.
§ 1-254 (emphasis added).
[T]he fact that Consolidated is not expressly a party to the
contract at issue does not necessarily preclude it from
bringing a declaratory judgment suit. A party who seeks a
declaratory judgment as to the validity of a contract need
only have some cognizable interest under the contract.
See Terrell v. Lawyers Mut. Liab. Ins. Co., 131 N.C. App.
655, 660, 507 S.E.2d 923, 926 (1998) . . . .

If the alleged contract between Durham and Reidsville is,
in fact, enforceable, Consolidated may find that it has also
purchased some liability to Durham along with its
purported purchase of Reidsville. If Reidsville is at some
point found to have breached a contract with Durham,
Durham may have a claim to some of the assets which now
purportedly belong to Consolidated. Simply put, it appears
to us that Consolidated does have a cognizable interest
under the alleged contract between Durham and Reidsville
as a result of having purportedly purchased Reidsville.
Thus, we do not agree with Durham’s contention that
Consolidated is precluded from maintaining this
declaratory judgment suit simply because Consolidated
seeks to determine the validity of a contract to which it is
not expressly a party.

141 N.C. App. at 576, 541 S.E.2d at 162 (emphasis added).

35. Counterclaim Defendants argue there is no lesser “cognizable interest”

standard in North Carolina, that Zurich’s characterization of Coca-Cola Bottling

would swallow the general rule regarding standing to bring a declaratory judgment

action, and that no court has applied the cognizable interest standard since Coca-

Cola Bottling was decided. (ECF No. 259, at pp. 2–5; ECF No. 260, at pp. 1–2; ECF

No. 261, at pp. 2–5.)

36. Assuming that there is a lesser “cognizable interest” standard that can

confer standing on parties in declaratory judgment actions, the Court is not

persuaded that it is applicable to the facts of this case. Before and after Coca-Cola
Bottling, North Carolina’s appellate courts have repeatedly held that “[a]bsent an

enforceable contract right, an action for declaratory relief to construe or apply a

contract will not lie.” Terrell, 131 N.C. App. at 661, 507 S.E.2d at 926–27 (emphasis

added) (a purported assignee under an insurance policy lacked standing to have a

trial court construe the policy because it was not assignable and therefore, the

“plaintiff [could not be] a person who is or can be ‘interested . . . under [the]

contract.’”); DeMent, 142 N.C. App. at 605, 544 S.E.2d at 802 (holding that a party

who sought to have medical expenses paid under another party’s insurance policy

lacked standing to seek a declaration as to the extent of coverage under said

insurance policy because he was neither a party or third-party beneficiary of the

policy); Beachcomber Props., L.L.C. v. Station One, Inc., 169 N.C. App. 820, 824, 611

S.E.2d 191, 194 (2005) (potential condominium purchasers, whose purchase contract

was terminated, did not have standing to maintain a declaratory judgment action

against the condominium’s homeowner’s association); Brookline Residential, LLC v.

City of Charlotte, 251 N.C. App. 537, 544–47, 796 S.E.2d 369, 373–76 (2017).

37. Contrary to Zurich’s argument, the Court of Appeals’ holding in Coca-

Cola Bottling does not afford Zurich “standing to pursue a declaratory judgment

Counterclaim seeking a declaration of the indemnity obligations of the Growers.”

(ECF No. 256, at p. 13.) The court’s holding in Coca-Cola Bottling does not supplant

North Carolina’s long line of authority regarding the requirements for standing to

maintain a declaratory judgment action. Rather, in Coca-Cola Bottling, under unique

circumstances where the moving party claimed to own rights and liabilities that
would be affected by the validity of a contract between two other parties, the court

narrowly held that “[a] party who seeks a declaratory judgment as to the validity of

a contract need only have some cognizable interest under the contract.” Coca-Cola

Bottling, 141 N.C. App. at 576, 541 S.E.2d at 162 (emphasis added).

38. Here, Zurich is not seeking a declaration as to the validity of the Grower

Agreements or the Indemnity Agreements. Instead, in its declaratory judgment

action, Zurich seeks to have this Court construe and apply the Grower Agreements

by declaring that from 2010 to the present, the Growers “assumed the tort/nuisance

liability of and are liable to Murphy-Brown under the [Grower Agreements and

Indemnity Agreements] with respect to Murphy-Brown’s defense costs and with

respect to any monetary judgments or settlements Murphy-Brown pays or is required

to pay in the Twenty-Three Nuisance Actions.” (See ECF No. 99, at ¶ 143.) Zurich

may, theoretically, have a “cognizable interest” in the Grower and Indemnity

Agreements. However, under current North Carolina law, such an interest does not

give Zurich standing to maintain a declaratory judgment action to have this Court

construe or apply the Grower and Indemnity Agreements.

ii. Zurich’s standing to seek a declaration regarding the priority of
insurance between Zurich and the Grower Insurers

39. In its Brief in Opposition to the Grower Insurers’ Motions to Dismiss,

Zurich advances an alternative ground for standing under N.C.G.S. § 1-257. (ECF

No. 255, at pp. 1–10.) Section 1-257 provides trial courts with broad discretion to

“refuse to render or enter a declaratory judgment” if entering the judgment “would

not terminate the uncertainty or controversy giving rise to the proceeding.” N.C.G.S.
§ 1-257. However, “a controversy between insurance companies, . . . with respect to

which of two or more of the insurers is liable . . . and the insurers’ respective liabilities

and obligations, constitutes a justiciable issue and the court should, . . . render a

declaratory judgment as to the liabilities and obligations of the insurers.” Id.

(emphasis added). Zurich contends that this provision counsels in favor of the Court

issuing the requested declarations.

40. Zurich’s argument for standing under § 1-257 is summarized as follows:

Zurich’s Counterclaim pertains to “a controversy between
insurance companies . . . with respect to which of two or
more of the insurers is liable under its particular policy and
the insurers’ respective liabilities and obligations.”
[N.C.G.S. § 1-257]. This is a controversy between Zurich
and the Grower Insurers. Consequently, under N.C.[G.S.]
§ 1-257, this Court is required to “render a declaratory
judgment as to the liabilities and obligations of the
insurers.” Id.

(ECF No. 255, at p. 3.)

41. The Grower Insurers argue that § 1-257 only applies to controversies

between insurers who are liable and not when two or more insurers may be liable.

(ECF No. 260, at p. 5.) Additionally, the Grower Insurers contend that § 1-257

“presumes that each policy at issue covers the same loss such that only priority or

allocation of coverage is at issue.” (Id.) Therefore, § 1-257 is inapplicable here

because the Zurich Policies and the Grower Insurer Policies insure different losses

for different insureds. (Id. at p. 6.)

42. Preliminarily, the Court finds it questionable whether this is truly a

“controversy between insurance companies” as to which one is liable to Murphy-
Brown. This case simply has not reached that point. As of right now, Zurich has

completely denied coverage and no coverage whatsoever has been sought from the

Grower Insurers. Moreover, the Court reads § 1-257 as applying to factual scenarios

where two or more insurers insure the same party. Indeed, the only North Carolina

case cited by Zurich in support of its interpretation of § 1-257, Smith v. USAA Cas.

Ins. Co., 819 S.E.2d 610 (N.C. Ct. App. 2018), involved a dispute between two insurers

who owed the same type of coverage to the same insured. (ECF No. 255, at pp. 2–5.)

The situation here, where Zurich and the Grower Insurers cover different parties and

different losses, is inapposite.

43. Finally, even if section 1-257 applies to the factual scenario presented

here, the Court, in its discretion, would decline to rule on Zurich’s Counterclaim. The

Court disagrees with Zurich’s claim that the Court is required to render a declaratory

judgment in this action. Section 1-257 does not contain the strong language, “must”

or “shall,” typically associated with mandatory standards. See In re Williamson Vill.

Condos., 187 N.C. App. 553, 561, 653 S.E.2d 900, 904 (2007); Thigpen v. Ngo, 355

N.C. 198, 202, 558 S.E.2d 162, 165 (2002). Rather, the section states that when the

section applies, a Court should render a declaratory judgment. Under these facts,

the Court is not persuaded that it should render a declaratory judgment.

44. Therefore, Counterclaim Defendants’ Motions should be GRANTED,

and Zurich’s Counterclaim should be DISMISSED, without prejudice, for lack of

standing.
THEREFORE, it is ORDERED that the Counterclaim Defendants’ Motions are

GRANTED, and Zurich’s Counterclaim is DISMISSED WITHOUT PREJUDICE.

SO ORDERED, this the 18th day of March, 2020.

/s/ Gregory P. McGuire
Gregory P. McGuire
Special Superior Court Judge
for Complex Business Cases