Sparta Insurance Company v. Smith
MEMORANDUM OPINION AND ORDER that the 11 Motion to Dismiss is GRANTED, and this case is DISMISSED without prejudice; Costs are taxed against the Plf. Signed by Honorable Judge W. Harold Albritton, III on 6/3/2011. (wcl, )
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
SPARTA INSURANCE COMPANY,
a Foreign Corporation,
MARY W. SMITH, as Personal
Representative of the Estate of LAURA
ELIZABETH PULLAM, deceased,
) CIVIL ACTION NO. 2:11cv108-WHA-SRW
MEMORANDUM OPINION AND ORDER
This case is before the court on a Motion to Dismiss (Doc. #11) filed by Defendant Mary
W. Smith (“Smith”).
Plaintiff, Sparta Insurance Company (“Sparta”), filed a Complaint in this court on
February 15, 2011, against Smith. In the Complaint, Sparta requests that this court grant
declaratory judgment in its favor and find that it owes no obligation to provide insurance benefits
to Smith in a currently-pending Alabama state court action. Smith has moved to dismiss Sparta’s
Complaint in its entirety, on the basis of abstention, due to the fact that the issue Sparta seeks to
resolve in this declaratory judgment action is currently being litigated in the state court action.
The court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332 (diversity),
because there is complete diversity of citizenship, and the amount in controversy exceeds
$75,000, exclusive of interest and costs.1
For reasons to be discussed, the Motion to Dismiss is due to be GRANTED.
II. MOTION TO DISMISS STANDARD
The court accepts the plaintiff’s factual allegations as true, Hishon v. King & Spalding,
467 U.S. 69, 73 (1984), and construes the complaint in the plaintiff’s favor, Duke v. Cleland, 5
F.3d 1399, 1402 (11th Cir. 1993). In analyzing the sufficiency of pleading, the court is guided by
a two-prong approach: one, the court is not bound to accept conclusory statements of the
elements of a cause of action and, two, where there are well-pleaded factual allegations, a court
should assume their veracity and then determine whether they plausibly give rise to entitlement
to relief. See Ashcroft v. Iqbal, _ U.S. _, 129 S. Ct. 1937, 1949-50 (2009). “[A] plaintiff’s
obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citation omitted). To survive a motion to
dismiss, a complaint need not contain “detailed factual allegations,” but instead the complaint
must contain “only enough facts to state a claim to relief that is plausible on its face.” Id. at 570.
The factual allegations “must be enough to raise a right to relief above the speculative level.” Id.
The parties agree at this time that there is $225,000 in underinsured motorist coverage
available under the policy. Doc. #18.
The allegations of the Plaintiff’s Complaint are as follows:
On December 15, 2010, Laura Elizabeth Pullam died after she was struck by a motor
vehicle while in or around the median of Interstate 65 in Montgomery County, Alabama. At the
time she died, Pullam was employed by Lifestar Response Corporation (“Lifestar”). Sparta is
Lifestar’s underinsured2 motorist insurance carrier.
Smith, the personal representative of Pullam’s estate, filed suit in the Circuit Court of
Montgomery, Alabama against the driver of the vehicle that hit Pullam. Subsequently, Smith
amended her Complaint to add a claim against Sparta, under Alabama Code Section 32-7-23. In
this claim, Smith alleged that Lifestar’s underinsured motorist policy, issued by Sparta, covered
Pullam at the time of her death, and that “[t]he full amount of the insurance policy, plus interest,
is due from [Sparta] for injuries Laura Pullam sustained which lead [sic] to her death.” Doc. #12 ¶ 27.
Sparta asserts that Pullam was not covered by the policy at the relevant times of this case,
because Pullam was not “occupying” a vehicle as defined by the underinsured motorist policy.
Compl. ¶ 6. Therefore, after Smith filed the state court action, Sparta brought the instant
declaratory judgment action to have this court order that Sparta has no duty to provide
underinsured motorist benefits to Pullam’s estate.
In 1984, the Alabama Legislature “amended the term ‘uninsured motor vehicle’ to
include ‘underinsured’ motor vehicle.” See, e.g., Guess v. Allstate Ins. Co., 717 So. 2d 389, 390
(Ala. Civ. App. 1998) (citing Ala. Code § 32-7-23(b)(4)).
Smith argues that this court should abstain from exercising jurisdiction over Sparta’s
declaratory judgment action, under the Wilton-Brillhart Abstention Doctrine, and dismiss this
action in favor of the currently-pending state court action. The court agrees.
“[D]istrict courts possess discretion in determining whether and when to entertain an
action under the Declaratory Judgment Act, even when the suit otherwise satisfies subject matter
jurisdictional prerequisites.” Wilton v. Seven Falls Co., 515 U.S. 277, 281-82 (1995) (citing
Brillhart v. Excess Ins. Co., 316 U.S. 491, 494 (1942)). In declaratory judgment actions, “the
normal principle that federal courts should adjudicate claims within their jurisdiction yields to
considerations of practicality and wise judicial administration.” Id. at 288.
The Supreme Court has stated that: “[o]rdinarily it would be uneconomical as well as
vexatious for a federal court to proceed in a declaratory judgment suit where another suit is
pending in a state court presenting the same issues, not governed by federal law, between the
same parties.” Brillhart, 316 U.S. at 495; see also Wilton, 515 U.S. at 279-81 (declining to
exercise jurisdiction over a federal declaratory judgment action when an insurer sought, in the
federal action, a declaration that it was not liable on an insurance policy, and the insured filed a
state lawsuit raising the same coverage issues). Under the Wilton-Brillhart Abstention Doctrine,
both the Eleventh Circuit and Supreme Court have followed this guidance and cautioned against
a district court exercising its jurisdiction over a declaratory judgment action when the declaratory
judgment action is parallel to a state proceeding. Ameritas Variable Life Ins. Co. v. Roach, 411
F.3d 1328, 1330 (11th Cir. 2005) (quoting Brillhart, 316 U.S. at 495).
If a declaratory judgment action is parallel to a state proceeding, the Eleventh Circuit has
set forth nine factors for district courts to consider when determining whether to exercise
jurisdiction over such a suit. Id. at 1331. However, if a suit is not parallel to a state court suit,
then the Wilton-Brillhart Abstention Doctrine does not apply, and the court need not analyze its
nine factors. Specialty Underwriters Alliance v. Peebles McManus LLC, 643 F. Supp. 2d 1298,
1301 (M.D. Ala. 2009) (Fuller, C.J.) (“Here, neither the parties nor the issues are the same in the
underlying state suit. . . . Hence, this case is unlike Brillhart, Wilton, and [Ameritas], which all
involved (and only bind this Court with respect to) ‘parallel’ proceedings between the same
parties and involving the same issues.”); Nat’l Trust Ins. Co. v. Burdette, No.
2:11cv71–WHA–TFM, 2011 WL 1807675 (M.D. Ala. May 11, 2011) (Albritton, J.) (same);
Auto-Owners Ins. Co. v. Emerald Star Casino & Resorts, Inc., No. 8:09-cv-1129-T-24 MAP,
2009 WL 3446745, at *2 (M.D. Fla. Oct. 21, 2009) (same).3
The first issue this court must address is whether this declaratory judgment action is
parallel to the state court action. To be parallel, under Ameritas, the declaratory judgment action
must (1) present the same issues; (2) not be governed by federal law; and (3) be between the
same parties as the state court action. Ameritas, 411 F.3d at 1330. All three elements are
satisfied in this case.
The court may also exercise its discretion not to exercise jurisdiction over a non-parallel
declaratory judgment action, albeit under a reason other than the Wilton-Brillhart Abstention
First, the exact issue presented in this declaratory judgment action is presented in the state
court action. In the state court action, Smith seeks an insurance payout from Sparta, on the
ground that Pullam was covered by Sparta’s policy at the time of the accident. Similarly, in this
case, Sparta seeks a determination that Pullam was not covered by the policy at the time of the
accident, and therefore, that Sparta need not pay benefits to Smith in the state court action.
Sparta argues that the issues in the two cases differ. Sparta argues that the issue of
whether Pullam was covered by the insurance policy cannot be raised in the state court action,
because the interpretation of an insurance contract is neither an element that an insured need
prove, nor is it an available defense, in an action for underinsured motorist benefits. The court
disagrees. There is a large amount of Alabama case law that supports the notion that the
interpretation of an insurance contract is indeed an issue, if not the central issue, that must be
resolved in an action for a payout of insurance benefits. See, e.g., Roberts v. Am. Nat’l Prop. &
Cas. Co., 976 So. 2d 1005, 1006-07 (Ala. 2007) (Cobb, C.J., dissenting); Cook v. Aetna Ins. Co.,
661 So. 2d 1169, 1170 (Ala. 1995). Indeed, in a recent order in Smith’s state court action staying
Smith’s claims against the tortfeasor, the state court stated that “[t]he parties shall be allowed to
conduct limited discovery on the issues of insurance coverage which may be available to provide
coverage for the claims asserted by [Smith] in this case.” Doc. #16-1 ¶ 2 (emphasis added).
Therefore, not only is it possible that the issue of insurance coverage could be raised in the state
court action, but that issue has actually been raised and is pending before the state court.
Second, the issue of whether Sparta’s insurance policy covered Pullam at the time of the
accident is not governed by federal law. Rather, this issue involves the interpretation of an
Alabama contract. Neither party contests this point.
Third, both the state and federal actions have identical parties in all relevant respects.
Sparta first argues that the parties are not identical, because in Alabama, an insurer has a right to
opt out of litigation against it by an injured party for uninsured motorist coverage, so long as the
trial court approves the withdrawal for timeliness. Pl.’s Resp. at 2 (citing Lowe v. Nationwide
Ins. Co., 521 So. 2d 1309, 1310 (Ala. 1988)). Whether or not this doctrine applies to the instant
case, the court notes that Sparta has not opted out of the state court suit at this time, and Sparta
cites no authority that the mere ability to opt out of the state court suit would make the
declaratory judgment action non-parallel to the state court suit. Cf. Ameritas, 411 F.3d at 1331
(“[T]he district court expressed concern about its ability to appropriately exercise supplemental
jurisdiction over the non-diverse third-party litigants if Mrs. Roach were to seek to join them.
The district court noted that . . . the issue was moot because Mrs. Roach had not attempted such a
Sparta next argues that the parties are not identical because, in this declaratory judgment
action, the only parties are Smith and Sparta, whereas in the state court suit, Smith has sued both
Sparta and an additional party–the tortfeasor who struck and killed Pullam. However, the
“identical parties” requirement does not mean that each party in the federal action must be
identical to each party in the state court action. See, e.g., Universal Underwriters Serv. Corp. v.
Melson, 953 F. Supp. 385, 386 (M.D. Ala. 1996) (Thompson, J.) (abstaining when federal suit
was between Universal Underwriters and Melson, but state court suit was between Melson,
Universal Underwriters, and three other parties); Ryan Int’l Airlines, Inc. v. E. Trust SUB-2, No.
10 C 50135, 2011 WL 893041, at *5 (N.D. Ill. Mar. 14, 2011) (finding parties identical for
Wilton-Brillhart purposes despite the fact that state complaint named parties who were not
parties to federal complaint, so long as the relevant counts of the state court complaint contained
identical parties to the federal action). The real question is not the presence of parties in any
capacity to the state court suit, but rather, the presence of parties to the state court suit who are
involved in the same issue that is presented in the federal declaratory action. See Travelers Cas.
& Sur. Co. of Am., Inc. v. E. Beach Dev., LLC, No. 07-0347-WS-B, 2007 WL 3407049, at *6
(S.D. Ala. Nov. 9, 2007) (finding additional claims and parties in state court action irrelevant to
parallelism analysis if the additional claims “have nothing to do with [the federal] request for a
declaratory judgment”); cf. Melson, 953 F. Supp. at 387 (abstaining, and noting that “the relevant
determinant is not whether the state court litigation involves the identical issues in form as the
federal action, but rather whether the substance of the federally pleaded issues will be resolved in
Applying that rule to this case, the court concludes that the “identical parties”
requirement is met in this case. The common issue between this case and the state court action is
the issue of insurance coverage. Smith and Sparta are parties to this federal action, and Smith,
Sparta, and the tortfeasor are parties to the state court action. However, in the state court action,
only Sparta, and not the tortfeasor, is involved with the issue of insurance coverage. Therefore,
with respect to the common issue, the parties are identical, and the “identical parties”
requirement is met.
In sum, the court concludes that this action is parallel to the state court action.
When a federal declaratory judgment action is parallel to a state court action, a district
court should consider the nine factors discussed by the Eleventh Circuit in Ameritas. The
Eleventh Circuit has stated that this list is “neither absolute nor is any one factor controlling.”
Ameritas, 411 F.3d at 1331. These factors are:
(1) the strength of the state’s interest in having the issues raised in the federal
declaratory action decided in the state courts;
(2) whether the judgment in the federal declaratory action would settle the
(3) whether the federal declaratory action would serve a useful purpose in clarifying
the legal relations at issue;
(4) whether the declaratory remedy is being used merely for the purpose of
“procedural fencing”-that is, to provide an arena for a race for res judicata or to
achieve a federal hearing in a case otherwise not removable;
(5) whether the use of a declaratory action would increase the friction between our
federal and state courts and improperly encroach on state jurisdiction;
(6) whether there is an alternative remedy that is better or more effective;
(7) whether the underlying factual issues are important to an informed resolution of
(8) whether the state trial court is in a better position to evaluate those factual issues
than is the federal court; and
(9) whether there is a close nexus between the underlying factual and legal issues and
state law and/or public policy, or whether federal common or statutory law dictates
a resolution of the declaratory judgment action.
The first factor weighs in favor of abstention. Alabama has a strong interest in having the
issues raised in this suit decided in the state courts, because Pullam was an Alabama resident
(and Smith is an Alabama resident), and Pullam was allegedly covered by the underinsured
motorist policy issued by Sparta in Alabama to Pullam’s employer, Lifestar Corporation of
Alabama. See, e.g., Lexington Ins. Co. v. Rolison, 434 F. Supp. 2d 1228, 1239 (S.D. Ala. 2006)
(finding first factor favored abstention when the legal issues presented “are all Alabama state law
issues concerning[, among other issues,] interpretation of an insurance contract issued to an
Alabama business in the state of Alabama . . . .”); Amerisure Mut. Ins. Co. v. Paragon Const. &
Dev., Inc., No. 2:06cv1047-MHT, 2007 WL 2893404, at *2 (M.D. Ala. Sept. 28, 2007)
The second and third factors, when considered together, favor abstention. While ruling
on the instant declaratory judgment action would provide some clarification and utility to the
parties, the ruling would not fully and finally resolve the parties’ dispute. This is because the
state action involves not only Smith’s claim against Sparta, but also Smith’s claim against a
separate party, on separate legal grounds. See, e.g., Rolison, 434 F. Supp. 2d at 1239 (finding
second factor favored abstention because the state court action contained parties and issues in
addition to those raised in the federal court action); Paragon, 2007 WL 2893404, at *2 (finding
that second and third factors, considered together, favored abstention because, although a ruling
would “lend clarity to the parties’ legal relationship, such a ruling would not necessarily settle the
controversy”). For instance, if it is determined that there is coverage, the total amount that Smith
may recover from Sparta may not be certain until the claims against the tortfeasor are resolved.
See McKinney v. Nationwide Mut. Fire Ins. Co., 33 So. 3d 1203 (Ala. 2009) (discussing setoff).
The fourth factor, “procedural fencing,” weighs in favor of abstention. This factor asks
whether the declaratory judgment action was used for forum-shopping purposes, by, for instance,
trying to “race for res judicata” or “achieve a federal hearing in a case otherwise not removable.”
Ameritas, 411 F.3d at 1331. Some courts have found the timing of the filing of the declaratory
action in relation to the filing of the state court action to be an important fact in determining
whether procedural fencing has occurred. See, e.g., Paragon, 2007 WL 2893404, at *3 (finding
the fourth factor did not favor or disfavor abstention when the declaratory judgment action was
filed before the state court action). In this case, the declaratory judgment action was filed after
the state court action, which could not be removed to federal court, suggesting procedural fencing
The fifth factor weighs in favor of abstention because this court’s declaratory judgment
decision might conflict with how the state court might otherwise interpret the insurance contract
based on Alabama law, as to Sparta’s liability. This court’s ruling may have “res judicata effect
on the [state] court’s ability to hear and decide the same issue, even if the [state] court disagrees
with [this] court’s determinations.” Rolison, 434 F. Supp. 2d at 1241.
The sixth factor weighs in favor of abstention because an adequate, and better, alternative
remedy to the instant action is available: to have the claim in this case resolved in state court.
Paragon, 2007 WL 2893404, at *3 (“It is the wiser course to have these issues determined
together, rather than allowing piecemeal, fractured litigation to emerge between the federal and
The seventh and eighth factors are neutral. Those factors ask whether “the underlying
factual issues are important to an informed resolution of the case,” and, “whether the state trial
court is in a better position to evaluate those factual issues than is the federal court.” Ameritas,
411 F.3d at 1331. In this case, the litigated issue appears to be a legal, not factual one: whether
Pullam was covered under the terms of the policy.4
The ninth factor weighs in favor of abstention as well, because the state court complaint
raises “exclusively state law issues and implicates exclusively state law public policies, with no
reference whatsoever to federal common or statutory law.” Rolison, 434 F. Supp. 2d at 1242; see
also Sherwin-Williams Co. v. Holmes Cnty., 343 F.3d 383, 390-91 (5th Cir. 2003) (“[I]f the
federal declaratory judgment action raises only issues of state law and a state case involving the
same state-law issues is pending, generally the state court should decide the case and the federal
court should exercise its discretion to dismiss the federal suit.”).
Sparta argues that several of these factors actually weigh in its favor, because “the
declaratory action also serves the useful purpose of preventing the injection of insurance
coverage into the liability suit.” Pl.’s Resp. at 5. In other words, Sparta claims that it filed this
declaratory judgment action to avoid the prejudice of combining an insurance coverage issue
with a tort liability issue at trial in the state court. The court rejects Sparta’s argument, because
the state court has the authority to alleviate the potential prejudice that Sparta complains of.
First, Alabama Rule of Civil Procedure 18(c) states that “in no event shall this or any other rule
To the extent that there is a factual issue, the state trial court is in a better position than
this court to resolve this issue due to the fact that it potentially faces overlapping factual issues
that this court does not face. Specifically, there are two claims in the underlying state court
action, and only one before this court in the declaratory judgment action, and these claims may
have overlapping factual predicates. Sparta’s argument that Pullam was not covered by its
insurance policy may turn on the fact of where Pullam’s body was at the time of the accident, a
fact that also may be relevant to the issue of the tortfeasor’s liability for striking Pullam with a
car. By deciding this factual issue, the state court (or jury) will potentially find a fact that applies
to both claims. Moreover, if this court were to decide that fact differently, it would create a
potential for inconsistent judgments. Paragon, 2007 WL 2893404, at *4 (finding seventh and
eighth factors favored abstention because of factual overlap).
be construed to permit a jury trial of a liability insurance coverage question jointly with the trial
of a related damage claim against an insured.” Ala. R. Civ. P. 18(c). Second, in the non-jury
context, if the state court finds that trying both issues in the same trial would be problematic, it
may order separate trials. Ala. R. Civ. P. 42. In other words, while both the insurance coverage
issue and tort liability issue are present in the state court action, they need not be tried together.
Therefore, Sparta’s argument on this point is unpersuasive.5
The above analysis demonstrates that the nine Ameritas factors collectively counsel in
favor of this court declining jurisdiction over the declaratory judgment action at this time.
Stay Versus Dismissal
The Wilton-Brillhart Abstention Doctrine gives this court authority to decide “whether to
stay or dismiss a declaratory judgment suit in light of pending state proceedings.” Wilton, 515
U.S. at 286 (emphasis added). Smith has requested that the court dismiss the declaratory
judgment action, and Sparta requests that this court stay, rather than dismiss, the action.
Sparta argues that a stay is more appropriate than a dismissal because it would “spare the
Plaintiffs a risk of a time bar should the matter not be resolved in state court.” Pl.’s Resp. at 10.
In support, Sparta cites Amer. Nat’l Prop. & Cas. Co. v. Crawford, No. CIV.A.00-0123-P-M,
2000 WL 1137218 (S.D. Ala. July 19, 2000), which stayed a case after deciding to abstain under
Wilton-Brillhart, and quoted Wilton for the proposition that “where the basis for declining to
proceed is the pendency of a state proceeding, a stay will often be the preferable course, because
The court notes that the state court suit is currently stayed with respect to the tortfeasor
but not with respect to Sparta. Ex. A to Pl.’s Reply Br. at 1.
it assures that the federal action can proceed without risk of a time bar if the state case, for any
reason, fails to resolve the matter in controversy.” Id. at *2 (quoting Wilton, 515 U.S. at 288
n.2). Sparta’s argument is problematic for two reasons. First, the Crawford case is easily
distinguishable from the facts of the case at bar, as the Crawford court noted that the declaratory
judgment claims were “not issues which the state court actions will directly resolve.” Id. In this
case, as previously discussed, the state court will directly address the issues in the instant
declaratory judgment action. Second, Sparta fails to explain how it could potentially be timebarred from filing a later declaratory judgment action.
The court concludes that dismissing, rather than staying, this case is the appropriate
action. While the court recognizes Wilton’s statement that a stay is often preferable to avoid the
risk of a time bar, Sparta has made no serious argument that there is any such risk. Additionally,
final resolution of the state court action would completely resolve the issue in this declaratory
judgment action. See Rolison, 434 F. Supp. 2d at 1246 (finding dismissal warranted because
there was no risk of time bar, and to avoid the potential for forum shopping); Cincinnati
Specialty Underwriters Ins. Co. v. M&M, LLC, No. 1:10–CV–1053–WKW, 2011 WL 1545314,
at *3 (M.D. Ala. Apr. 25, 2011) (Watkins, J.) (dismissing state action because (1) neither party
argued that the action would be left unresolved by the state court and thus return to federal court;
(2) there were no statute of limitations problems with respect to re-filing the declaratory
judgment action later; and (3) dismissing the suit would discourage forum-shopping); but see
Travelers Indem. Co. v. Plantation Oaks of Ala., Inc., No. 3:08cv637-MHT, 2009 WL 902484, at
*5 (M.D. Ala. Mar. 31, 2009) (Thompson, J.) (staying rather than dismissing “because a
dismissal motion is pending in the parallel state-court action and, thus, . . . it is unclear whether
the state-court action will remain pending”); Southern-Owners Ins. Co. v. Alpha Homes, No.
8:10-cv-1590-T-23TBM, 2010 WL 5060826, at *2 (M.D. Fla. Dec. 6, 2010) (choosing to stay,
rather than dismiss, “because of the possibility that a final resolution of the state case would not
completely dispose of the controversy”).
For the foregoing reasons, it is hereby ORDERED that the Motion to Dismiss (Doc. #11)
is GRANTED, and this case is DISMISSED without prejudice. Costs are taxed against the
Done this 3rd day of June, 2011.
/s/ W. Harold Albritton
W. HAROLD ALBRITTON
SENIOR UNITED STATES DISTRICT JUDGE
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