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Bedivere Insurance Co. v. Blue Cross and Blue Shield of Kansas, Inc.

United States District Court, D. Kansas

September 30, 2019

BEDIVERE INSURANCE COMPANY f/d/b/a ONEBEACON INSURANCE COMPANY, Plaintiff,
v.
BLUE CROSS AND BLUE SHIELD OF KANSAS, INC. and ALLIED WORLD SURPLUS LINES INSURANCE COMPANY f/k/a DARWIN SELECT INSURANCE COMPANY, Defendants.

          MEMORANDUM AND ORDER

          Daniel D. Crabtree United States District Judge.

         Plaintiff Bedivere Insurance Company f/d/b/a OneBeacon Insurance Company (“OneBeacon”) seeks various declaratory relief against defendants Blue Cross and Blue Shield of Kansas, Inc. (“BCBSKS”) and Allied World Surplus Lines Insurance Company f/k/a Darwin Select Insurance Company[1] (“Allied World”) under 28 U.S.C. § 2201. This matter comes before the court on OneBeacon's Motion for Leave to File Its First Amended Complaint (Doc. 44), BCBSKS's Motion to Dismiss (Doc. 17), Allied World's Motion to Dismiss (Doc. 20), and OneBeacon's Motion for Leave to File Under Seal (Doc. 47).

         OneBeacon seeks leave to file its First Amended Complaint (the “Proposed Complaint”) under Fed.R.Civ.P. 15(a)(2). Doc. 44 at 1. BCBSKS opposes the motion. Doc. 50. OneBeacon's memorandum supporting its motion notes that Allied World was unwilling to stipulate to filing the Proposed Complaint, but Allied World has not filed a response to the motion. See Doc. 46 at 3. With respect to the pending Motions to Dismiss, OneBeacon opposes both motions and each defendant has replied. See Docs. 19, 26, 31, 32.

         For reasons explained below, the court (1) grants OneBeacon's Motion for Leave to File Its First Amended Complaint (Doc. 44), (2) denies BCBSKS's Motion to Dismiss (Doc. 17), (3) denies Allied World's Motion to Dismiss (Doc. 20), and (4) denies OneBeacon s Motion for Leave to File Under Seal (Doc. 47). The court orders OneBeacon to file its Proposed Complaint within 14 days of the filing of this Order.

         I. Procedural Background

         OneBeacon filed this lawsuit against BCBSKS and Allied World on July 17, 2018 (Doc. 1). On August 30, 2018, BCBSKS moved to dismiss all Counts against it (Doc. 17). Allied World moved to dismiss the single Count against it under the existing Complaint on September 21, 2018 (Doc. 20). On September 25, 2018, Allied World filed a related lawsuit against BCBSKS seeking declaratory relief, Allied World Specialty Insurance Company v. Blue Cross & Blue Shield of Kansas, Inc., No. 18-2515 (the “Related Case”), which is also pending before this court.[2] The parties fully briefed the Motions to Dismiss, but agreed that the court should not rule on the motions while the parties mediated their claims in both lawsuits. Doc. 39 at 3. All discovery in this case was stayed as well. Id. And, the deadline to amend the pleadings in this case was “deferred until after mediation.” Id. at 4.

         OneBeacon had requested the opportunity to file supplemental briefing to “address issues raised in the Related Case that was filed after [OneBeacon filed] its opposition” to BCBSKS's Motion to Dismiss. Doc. 35 at 3. But, Judge O'Hara-noting the extensive briefing already on file-determined that the court should decide whether to permit supplemental briefing after meditation, if unsuccessful, and only after a new motion explaining why supplemental briefing is necessary. Doc. 39 at 3-4. Judge O'Hara also directed the parties to file motions to consolidate this case and the Related Case once the court has resolved the pending Motions to Dismiss. Doc. 39 at 4-5. Meditation was unsuccessful. Doc. 43. OneBeacon now seeks leave to file its Proposed Complaint because, OneBeacon contends, the facts have developed since its original pleading and it desires to update its existing claims, add additional claims, and add an additional defendant. Docs. 44, 46.

         II. Factual Background

         The court takes the following facts from OneBeacon's Proposed Complaint (Doc. 44-1)[3]and attached supporting documents and views them in the light most favorable to OneBeacon. S.E.C. v. Shields, 744 F.3d 633, 640 (10th Cir. 2014) (explaining that the court must “accept as true all well-pleaded factual allegations in the complaint and view them in the light most favorable to the [plaintiff]” (citation and internal quotation marks omitted)); Hall v. Associated Int'l Ins., 494 Fed.Appx. 902, 904 (10th Cir. 2012) (explaining that a court may also consider “attached exhibits[] and documents incorporated into the complaint by reference”).

         BCBSKS purchased three insurance policies: (1) a Primary Managed Care Organization Errors and Omissions Liability Policy issued by Allied World, with a $10 million coverage limit (“Allied World E&O Policy”); (2) a Primary Healthcare Organizations Directors and Officers Liability Policy issued by Allied World, with a $15 million coverage limit (“Allied World D&O Policy”); and (3) a Managed Care Errors and Omissions Excess Indemnity Policy issued by OneBeacon (“OneBeacon Policy”). Doc. 44-1 at 1-2 (Am. Compl. ¶¶ 2-3).[4] BCBSKS has requested coverage from Allied World under both the Allied World E&O Policy and the Allied World D&O Policy in connection with several antitrust class actions (the “Antitrust Litigation”) against BCBSKS and Blue Cross Blue Shield Association (“BCBSA”), which have been “consolidated for pretrial discovery proceedings in the Northern District of Alabama.” Id. at 2 (Am. Compl. ¶¶ 5-6).[5] BCBSKS requested reimbursement of defense expenses and indemnity under both Allied World policies. Id. at 2 (Am. Compl. ¶ 6).[6] While Allied World, subject to a reservation of rights, agreed to provide coverage under the Allied World E&O Policy, it denied coverage under the Allied World D&O Policy. Id. (Am. Compl. ¶ 7).[7] BCBSKS believes it is entitled to coverage under the Allied World D&O Policy and has filed a counterclaim against Allied World for wrongful denial of coverage in the Related Case. Id. at 2-3 (Am. Compl. ¶¶ 8- 9).[8] The Allied World E&O Policy has been exhausted and OneBeacon has started to reimburse BCBSKS for defense expenses under the OneBeacon Policy. Id. at 3 (Am. Compl. ¶ 12).[9]

         New allegations in OneBeacon's Proposed Complaint assert that BCBSKS has a Blue Cross License Agreement (the “License Agreement”) with BCBSA, under which BCBSA agrees to defend and hold BCBSKS harmless against claims arising from the Antitrust Litigation. Doc. 44-1 at 2-3 (Am. Compl. ¶¶ 4, 9). But, BCBSKS “has not tendered its defense or sought indemnity from BCBSA, nor has BCBSA paid any defense expenses on behalf of BCBSKS.” Id. at 3 (Am. Compl. ¶¶ 10-11). OneBeacon's Proposed Complaint describes the Antitrust Litigation as alleging that BCBSKS, BCBSA, and other member plans “conspired to leverage their economic power and market dominance to under-compensate healthcare providers for their services and to increase healthcare costs to subscribers by coordinating their operations and limiting their activities through restrictions in their trademark licenses.” Id. at 7 (Am. Compl. ¶ 29).

         A. Proposed Count I and Original Count I against BCBSKS and Allied World

         Proposed Count I against BCBSKS and Allied World requests a judicial declaration that BCBSKS must exhaust “all other insurance and indemnity to which it is entitled” before the OneBeacon Policy is triggered, including coverage from BCBSA under the License Agreement and coverage from Allied World under the Allied World Primary D&O Policy. Doc. 44-1 at 28- 29 (Am. Compl. ¶¶ 84-91).[10] The OneBeacon Policy contains several provisions relevant to proposed Count I's request for declaratory relief.[11] First, the OneBeacon Policy, when outlining its insuring agreement for excess coverage, provides:

The Underwriter shall provide the Insured with insurance excess of the Underlying Insurance set forth in ITEM [5][12] of the Declarations for Claims first made against the Insured during the Policy Period, provided that the Underlying Insurance also applies and has been exhausted by actual payment thereunder, or would apply but for the exhaustion of the applicable limit(s) of liability thereunder.

Doc. 1-3 at 10. The OneBeacon Policy defines “Underlying Insurance” and “Primary Policy” as the Allied World E&O Policy. Id. at 3, 11. As OneBeacon acknowledges, the OneBeacon Policy makes no reference to the Allied World D&O Policy. See id.; Doc. 19 at 11.

         The OneBeacon Policy does state, however, that it “will apply in conformance with, and will follow the form of, the terms, conditions, agreements, exclusions, definitions and endorsements of the Underlying Insurance.” Doc. 1-3 at 10. It goes on to identify exceptions to conformance with the Allied World E&O Policy, including that OneBeacon, as underwriter, “will not have any obligation to make any payment hereunder unless and until the full amount of the applicable limit of liability of the Underlying Insurance has been paid by the issuer(s) of the Underlying Insurance.” Id. at 11. Meanwhile, Allied World's E&O Policy, from which the OneBeacon Policy follows form, contains a provision entitled “Other Insurance; Other Indemnification.” It provides:

         This Policy shall be excess of and shall not contribute with:

(a) any other insurance or plan or program of self-insurance (whether collectible or not), unless such other insurance or self-insurance is specifically stated to be in excess of this Policy; and
(b) any indemnification to which an Insured is entitled from any entity other than another Insured.
This Policy shall not be subject to the terms of any other policy of insurance or plan or program of self-insurance.

Doc. 1-1 at 24.

         The Allied World D&O Policy also contains an “Other Insurance” provision, which states, in relevant part:

The insurance provided by this Policy shall apply only as excess over any other valid and collectible insurance, whether such other insurance is stated to be primary, contributory, excess, contingent or otherwise, unless such other insurance is written specifically as excess insurance over the applicable Limit of Liability provided by this Policy. This Policy shall specifically be excess of any other valid and collectible insurance pursuant to which any other insurer has a duty to defend a Claim for which this Policy may be obligated to pay Loss. This Policy shall not be subject to the terms and conditions of any other insurance policy.

         Doc. 1-2 at 45-46.

         The Allied World E&O Policy, and the OneBeacon Policy by following form, provide coverage for any “Loss which the Insured is legally obligated to pay as a result of a Claim” made during the policy period. Doc. 1-1 at 52 (insuring agreement). The relevant portions of definitions related to this coverage are summarized below:

• “Loss” includes “Defense Expenses and any monetary amount which an Insured is legally obligated to pay as a result of a Claim” but does not include punitive or exemplary or multiplied damages for Claims for Antitrust Activity. Doc. 1-1 at 7.
• “Defense Expenses” include “reasonable legal fees and expenses incurred in the investigation, adjustment, defense, or appeal of a Claim.” Doc. 1-1 at 61; Doc. 1- 3 at 11 (defining “Defense Expenses” by referencing the Allied World E&O Policy definition).
• “Claim” is defined to mean “any written notice . . . that a person intends to hold an Insured responsible for a Wrongful Act.” Doc. 1-1 at 61; Doc. 1-3 at 11 (defining “Claim” by referencing the Allied World E&O Policy definition).
• “Insured” includes any “Insured Entity” (defined as BCBSKS, as the “Named Insured”)[13] and any “Insured Person” (defined to include “any past, present, or future . . . employee, director, officer, trustee, [or] member of the board of managers for” BCBSKS). Doc. 1-1 at 1, 17, 61; Doc. 1-3 at 11 (defining “Insured” to mean the insured under the Allied World E&O Policy).
• “Wrongful Act” is defined as “any actual or alleged act, error or omission in the performance of, or any failure to perform, a Managed Care Activity by any Insured Entity or by any Insured Person acting within the scope of his or her duties or capacity as such.” Doc. 44-1 at 11.[14]
• “Antitrust Activity” means “any actual or alleged: price fixing; restraint of trade; monopolization; unfair trade practices; or violation of the Federal Trade Commission Act, the Sherman Act, the Clayton Act or any other federal statute involving antitrust, monopoly, price fixing, price discrimination, predatory pricing or restraint of trade activities . . . .” Doc. 1-1 at 61.

         Under the “Conditions” of the Allied World E&O Policy, the Underwriter has no duty to defend any Claims, but “[u]pon written request of the Named Insured, the Underwriter will pay or reimburse, on a current basis, Defense Expenses for which this Policy provides coverage. Except for such Defense Expenses, the Underwriter will pay Loss only on the final disposition of a Claim” Doc. 1-1 at 26, 56.

         The Allied World D&O Policy generally provides coverage during the policy period for, among other coverage, Loss arising from a Claim (i) against any Insured Person or the Company for a Wrongful Act or (ii) against the Insureds for Antitrust Activities Doc 1-2 at 28. The relevant portions of definitions related to this coverage are summarized below:

• “Loss” includes “damages, settlements or judgments” and “Defense Costs” among other items. Doc. 1-2 at 12.
• “Defense Costs” include “reasonable and necessary fees, costs, charges or expenses incurred by or on behalf of an Insured in the investigation, defense or appeal of a Claim” Doc. 1-2 at 33.
• “Claim” is defined to mean any “written demand for monetary, non-monetary or injunctive relief made against an Insured” and any “judicial, administrative or regulatory proceeding” for such relief. Doc. 1-2 at 31.
• “Insured” includes the “Company” (defined to include BCBSKS, the “Named Insured”) and any Insured Person (defined to include any Executive, which includes any “past, present, or future duly elected or appointed director, officer, trustee . . . or member of the board of managers of the Company”). Doc. 1-2 at 32, 34-35, 37.
• “Wrongful Act” means “any actual or alleged, act, error, omission, neglect, breach of duty, breach of trust, misstatement, or misleading statement by an Insured Person in his or her capacity as such, or any matter claimed against an Insured Person by reason of his or her status as such” or “with respect to the Company and Insured Persons, any actual or alleged act, error or omission in connection with the performance of or failure to perform Provider Selection Practices.” Doc. 1-2 at 39.
• “Antitrust Activities” means “price fixing; restraint of trade; monopolization; unfair trade practices; or violation of the Federal Trade Commission Act, as amended, the Sherman Act[, ] the Clayton Act, as amended, or any other federal statute involving antitrust, monopoly, price fixing, price discrimination, predatory pricing or restraint of trade activities . . . .” Doc. 1-2 at 31.

         The Allied World D&O Policy explicitly states that it “shall not cover any Loss in connection with any Claim” that arises out of, is based on, or is attributable to “any actual or alleged act, error or omission in the performance of, or failure to perform, Managed Care Activities by any Insured or by any individual or entity for whose acts, errors or omissions an Insured is legally responsible, except that this Exclusion shall not apply to that portion of an otherwise covered Claim for Provider Selection Practices.” Doc. 1-2 at 24. The definitions of “Managed Care Activity and “Provider Selection” and “Managed Care Activities” and “Provider Selection Practices” from the Allied World E&O Policy and Allied World D&O Policy, respectively, which substantially align, are below:

Allied World E&O Policy

Allied World D&O Policy

‘“Managed Care Activity' means any of the following services or activities: Provider Selection; Utilization Review; advertising, marketing, selling, or enrollment for health care or workers' compensation plans; Claim Services; establishing health care provider networks; reviewing the quality of Medical Services or providing quality assurance; design and/or implementation of financial incentive plans; wellness or health promotion education; development or implementation of clinical guidelines, practice parameters or protocols; triage for payment of Medical Services; and services or activities performed in the administration or management of health care, consumer directed health care, behavioral healthcare, prescription drug, dental, vision, long or short term disability, life, automobile medical payments, workers compensation plans, long term care, EAP services, and TPA services, any and all of which Managed Care Activity may be referred or sponsored to or by the Insured entity; insurance broker/agency services” (Doc. 1-1 at 45, as amended at Doc. 1-1 at 62). It also includes “all such services and activities, listed above, whether provided on paper, in person, electronically, or via any other medium.” Doc. 1-1 at 15.

“Managed Care Activities” means any of the following services or activities: Provider Selection Practices; Utilization Review; advertising, marketing, selling, or enrollment for health care or workers' compensation plans; Claim Services; establishing health care provider networks; reviewing the quality of Medical Services or providing quality assurance; design and/or implementation of financial incentive plans; wellness or health promotion education; development or implementation of clinical guidelines, practice parameters or protocols; triage for payment of Medical Services; and services or activities performed in the administration or management of health care, consumer directed health care, behavioral health, prescription drug, dental, vision, long or short term disability, life, automobile medical payment, or workers' compensation plans, Employee Assistance Program services, Third Party Administrator services, or insurance broker/insurance agency services and activities. Doc. 1-2 at 17.

‘“Provider Selection' means any of the following, but only if performed by an Insured: evaluating, selecting, credentialing, contracting with or performing peer review of any provider of Medical Services.” Doc. 21- 1 at 62.[15]

‘“Provider Selection Practices' means the process of evaluating, by members of a formal duly constituted professional review board or committee, any individual or entity for the purpose of selecting, contracting with or credentialing providers for Medical Services, including peer review, but only if performed by a Company which is not a Managed Care Organization. Doc. 1-2 at 38.

         B. Proposed Counts II, III, and IV and Original Counts II, IV, and V against BCBSKS

         Relative to proposed Counts II-IV of the Proposed Complaint, the OneBeacon Policy contains a “Claim Participation” clause, stating:

The Underwriter may, at its sole discretion, elect to associate in the investigation, settlement or defense of any Claim against the Insured, even if the Underlying Insurance has not been exhausted. If the Underwriter so elects, the Insured will cooperate with the Underwriter and will make available all such information and records as the Underwriter may reasonably require.

Doc. 1-3 at 12 (italicized emphasis added). The Allied World E&O Policy, from which the OneBeacon Policy follows form, also contains a provision entitled “Assistance and Cooperation” which states: “In the event of a Claim, the Insureds shall provide the Underwriter with all information, assistance and cooperation that the Underwriter reasonably requests.” Doc. 1-1 at 56. The court refers to the “Claim Participation” and “Assistance and Cooperation” clauses collectively as the “Cooperation Clauses.” OneBeacon alleges it requested a series of documents to help it assess the possibility of a potential settlement of BCBSKS's liability in the Antitrust Litigation, and to determine what coverage it owed BCBSKS. Doc. 44-1 at 3-4 (Am. Compl. ¶ 14).[16] Paragraph 95 of OneBeacon's Proposed Complaint identifies 20 different types of requested documents, including documents acquired or produced during discovery in the Antitrust Litigation, analysis of events in the Antitrust Litigation and BCBSKS's potential liability in it, and documents about settlement discussions in the Antitrust Litigation. Id. at 30- 32 (Am. Compl. ¶ 95).[17] Thereafter, OneBeacon alleges BCBSKS “has not provided the majority of the information or documents” requested in Paragraph 95, as BCBSKS asserted attorney-client privilege and/or work-product doctrine in response to OneBeacon's requests. Id. at 32-33 (Am. Compl. ¶¶ 96-97).[18]

         From these allegations, OneBeacon seeks several seemingly alternative forms of relief. In the proposed Counts II and III, OneBeacon seeks a judicial declaration (i) that (a) BCBSKS must cooperate with OneBeacon in compliance with the Cooperation Clauses, (b) BCBSKS has failed to do so, and (c) the failure to cooperate “prevents it from seeking coverage, ” and (ii) “concerning the scope of the rights and obligations of the parties” under the Cooperation Clauses. Doc. 44-1 at 5, 29-34 (Am. Compl. ¶¶ 17, 92-104).[19] In the proposed Count IV, OneBeacon requests “specific compliance” in the form of a declaratory judgment requiring BCBSKS to produce the requested information and documents. Doc. 44-1 at 34-35 (Am. Compl. ¶¶ 105-111).[20]

         C. Proposed Count V and Original Count VI against BCBSKS

         Material to proposed Count V of the Proposed Complaint, the OneBeacon Policy contains a “Subrogation and Recoveries Clause” clause. It provides:

In the event of any payment under this Policy, the Underwriter will be subrogated to all the Insured's rights of recovery against any person or entity, and the Insured shall execute and deliver all instruments and papers and do whatever else is necessary to secure such rights. The Insured shall do nothing that may prejudice the Underwriter's position or potential or actual right of recovery. The obligations of the Insured under this provision shall survive the expiration or termination of this Policy. The expenses of all such recovery proceeds shall first be subtracted from the amount of any recovery and the remaining amount so recovered shall be apportioned in the inverse order of payment to the extent of actual payment.

Doc. 44-1 at 23-24 (Am. Compl. ¶ 66).[21] The Allied World E&O Policy, from which the OneBeacon Policy follows form, contains a provision entitled “Subrogation.” It states:

In the event of any payment hereunder, the Underwriter shall be subrogated to the extent of any payment to all of the rights of recovery of the Insureds. The Insureds shall execute all papers and do everything necessary to secure such rights, including the execution of any documents necessary to enable the Underwriter effectively to bring suit in their name. The Insureds shall do nothing that may prejudice the Underwriter's position or potential or actual rights of recovery. The obligations of the Insureds under this CONDITION (F) shall survive the cancellation or other termination of this Policy.

Doc. 1-1 at 56-57.

         OneBeacon alleges BCBSKS “has not agreed to assist OneBeacon with its efforts to obtain subrogation from BCBSA and Allied World and, in failing to provide the requested cooperation, has prejudiced OneBeacon's potential or actual right of recovery and forced it to prematurely reimburse defense expenses, ” leading OneBeacon to file this action trying to secure the information it requests. Doc. 44-1 at 4 (Am. Compl. ¶¶ 16-17).[22] In the proposed Count V, OneBeacon seeks a declaratory judgment about OneBeacon's right to subrogation against Allied World and BCBSA for any sums OneBeacon reimburses BCBSKS for under the OneBeacon Policy. Doc. 44-1 at 36-37 (Am. Compl. ¶¶ 112-118).[23] In a new but related proposed Count VI, OneBeacon requests a declaratory judgment (a) that BCBSKS has failed to comply with the Other Insurance/Other Indemnification clause and the Subrogation/Subrogation and Recoveries clauses in the One Beacon Policy and the Allied World E&O Policy by (i) not agreeing to cooperate in its subrogation efforts, (ii) failing to “provide information and documentation in order to assist OneBeacon with its subrogation efforts, ” and (iii) failing to pursue indemnification from BCBSA, and (b) that such failures “preclude[] it from seeking reimbursements or coverage under the OneBeacon Policy.” Doc. 44-1 at 37-39 (Am. Compl. ¶¶ 119-126).[24]

         III. Legal Standards for Motion for Leave to Amend and Motions to Dismiss

         The court first addresses the standards courts must apply when considering a motion for leave to amend a complaint. Next, because the decision whether to grant leave to amend depends in part on defendants' arguments for dismissal, the court sets forth the law governing motions to dismiss under Fed.R.Civ.P. 12(b)(1) and 12(b)(6).

         A. Leave to Amend

         Federal Rule of Civil Procedure 15(a)(1) permits a party to amend its pleadings in one of two ways: (A) first, as a matter of course within 21 days after serving it, or (B) second, within 21 days of service of a responsive pleading. Fed.R.Civ.P. 15(a)(1)(A)-(B). Outside those periods, any amendment to the pleadings requires leave, and courts should “freely give leave [to amend] when justice so requires.” Fed.R.Civ.P. 15(a)(2); Foman v. Davis, 371 U.S. 178, 182 (1962). A court should refuse to grant leave to amend only on “a showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies . . ., or futility of amendment.” Bylin v. Billings, 568 F.3d 1224, 1229 (10th Cir. 2009) (quoting Frank v. U.S. West, Inc., 3 F.3d 1357, 1365 (10th Cir. 1993)).

         The decision whether to grant leave to amend is within a court's sound discretion. Minter v. Prime Equip. Co., 451 F.3d 1196, 1204 (10th Cir. 2006) (quoting Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330 (1971)). “In exercising its discretion, the court must be mindful that the Federal Rules of Civil Procedure are designed to facilitate decisions on the merits rather than on pleading technicalities.” Bank Midwest, N.A. v. Millard, No. 10-2387-JAR-DJW, 2012 WL 4006423, at *1 (D. Kan. Sept. 12, 2012) (citing Koch v. Koch Indus., 127 F.R.D. 206, 209 (D. Kan. 1989)). Also, the court must keep in mind that the Federal Rules of Civil Procedure “should be construed, administered and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding.” Fed.R.Civ.P. 1. As our court has explained, “[t]his discretionary approach of the federal rules fosters a full adjudication of the merits of the parties' disputes within a single comprehensive proceeding.” First Savings Bank, F.S.B. v. U.S. Bancorp, 184 F.R.D. 363, 368 (quoting Katzman v. Sessions, 156 F.R.D. 35, 38 (E.D.N.Y. 1994)). The purpose is to ‘“promote as complete an adjudication of the dispute between the parties as is possible.'” Id. (quoting LaSalvia v. United Dairymen of Ariz., 804 F.2d 1113, 1119 (9th Cir. 1986)).

         BCBSKS opposes OneBeacon's motion, asserting the proposed claims against BCBSKS are futile.[25] Doc. 50 at 1-3. Except for a passing and generalized reference, [26] BCBSKS never argues the court should deny OneBeacon's motion for undue delay, undue prejudice, bad faith, or failure to cure deficiencies.

         “A proposed amendment is futile if the complaint, as amended, would be subject to dismissal for any reason . . . .” Watson ex rel. Watson v. Beckel, 242 F.3d 1237, 1239-40 (10th Cir. 2001) (citations omitted). “[A] district court is justified in denying a motion to amend if the amendment would be futile because it cannot withstand a motion to dismiss or otherwise fails to state a claim.” Lyle v. Commodity Credit Corp., 898 F.Supp. 808, 810 (D. Kan. 1995); see also Little v. Portfolio Recovery Assoc., LLC, 548 Fed.Appx. 514, 515 (10th Cir. 2013); Katzman, 156 F.R.D. at 38.

         Here, BCBSKS and Allied World argue that OneBeacon's original Complaint is subject to dismissal under Fed.R.Civ.P. 12(b)(1) and 12(b)(6). The court thus applies the standard governing motions to dismiss under Rules 12(b)(1) and 12(b)(6) to determine whether OneBeacon's Proposed Complaint, which seeks in part the same relief as the existing Complaint, states plausible claims for relief or if amendment is futile.

         B. Rule 12(b)(1)

         Under Rule 12(b)(1), a defendant may move to dismiss for lack of subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1). Federal district courts have original jurisdiction over all civil actions arising under the constitution, laws, or treaties of the United States or where there is diversity of citizenship. 28 U.S.C. § 1331; 28 U.S.C. § 1332. “Federal courts are courts of limited jurisdiction and, as such, must have a statutory basis to exercise jurisdiction.” Montoya v. Chao, 296 F.3d 952, 955 (10th Cir. 2002) (citation omitted). “A court lacking jurisdiction cannot render judgment but must dismiss the cause at any stage of the proceedings in which it becomes apparent that jurisdiction is lacking.” Basso v. Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir. 1974) (citation omitted). Since federal courts are courts of limited jurisdiction, the party invoking federal jurisdiction bears the burden to prove it exists. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994); see also Kinney v. Blue Dot Servs. of Kan.., 505 Fed.Appx. 812, 814 (10th Cir. 2012) (explaining that the “court may not assume that a plaintiff can establish subject matter jurisdiction; it is the plaintiff's burden to prove it”).

         Generally, a Rule 12(b)(1) motion to dismiss consists of either a facial attack or a factual attack. Davenport v. Wal-mart Stores, Inc., No. 14-2124-JAR-JPO, 2014 WL 3361729, at *1 (D. Kan. July 9, 2014). The Tenth Circuit has explained the difference between the two:

First, a facial attack on the complaint's allegations as to subject matter jurisdiction questions the sufficiency of the complaint. In reviewing a facial attack on the complaint, a district court must accept the allegations in the complaint as true. Id. Second, a party may go beyond allegations contained in the complaint and challenge the facts upon which subject matter jurisdiction depends. When reviewing a factual attack on subject matter jurisdiction, a district court may not presume the truthfulness of the complaint's factual allegations. A court has wide discretion to allow affidavits, other documents, and a limited evidentiary hearing to resolve disputed jurisdictional facts under Rule 12(b)(1).

Holt v. United States, 46 F.3d 1000, 1002-03 (10th Cir. 1995) (citations omitted).

         Here, defendants make a facial attack on certain Counts, arguing no case or controversy exists for the court to consider. Article III of the United States Constitution limits federal courts' jurisdiction to “cases” and “controversies.” Clapper v. Amnesty Int'l USA, 568 U.S. 398, 408 (2013). To constitute a “live, concrete controversy” in an action seeking declaratory relief, the “crucial question is whether granting a present determination of the issues offered will have some effect in the real world.” Rio Grande Silvery Minnow v. Bureau of Reclamation, 601 F.3d 1096, 1109-10 (10th Cir. 2010) (internal citations and quotations omitted). To make such relief a “case or controversy”-as opposed to an impermissible advisory opinion-the resolution must “settl[e] [ ] some dispute which affects the behavior of the defendant toward the plaintiff.” Id. at 1109-1110; see also Jordan v. Sosa, 654 F.3d 1012, 1025 (10th Cir. 2011) (“[W]here a plaintiff seeks declaratory judgment against his opponent, he must assert a claim for relief that, if granted, would affect the behavior of the parties listed in his complaint.”). “The difference between an abstract question and a ‘controversy' contemplated by the Declaratory Judgment Act is necessarily one of degree, and it would be difficult, if it would be possible, to fashion a precise test for determining in every case whether ...


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