The Travelers Indemnity Company v. The Plantation Oaks of Alabama, Inc. et al
OPINION AND ORDER as follows: (1) The 14 Motion to Dismiss is granted to the extent that the proceedings in this case are stayed; (2) The proceedings in this case are stayed; (3) On or before June 30 and December 31 of this year and each year thereafter, the parties are to file a joint report as further set out; and (4) The Clerk of the Court is to close this case administratively. Signed by Honorable Myron H. Thompson on 3/31/2009. (Attachments: # 1 Civil Appeals Checklist)(cb, )
IN THE DISTRICT COURT OF THE UNITED STATES FOR THE MIDDLE DISTRICT OF ALABAMA, EASTERN DIVISION
THE TRAVELERS INDEMNITY COMPANY, as successor to Gulf Insurance Company, Plaintiff, v. THE PLANTATION OAKS OF ALABAMA, INC., et al., Defendants.
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CIVIL ACTION NO. 3:08cv637-MHT (WO)
OPINION AND ORDER Plaintiff Travelers Indemnity Company filed this
lawsuit under the Declaratory Judgment Act of 1984, 28 U.S.C. § 2201(a), seeking a declaratory judgment that it need not defend or indemnify the defendants (Plantation Oaks, a hunting resort in Macon County, Alabama, and its owners Hilda, Robert and Bo Pitman ("Plantation Oaks parties")) against the claims of certain third parties and that it does not owe any coverage for the claims of these third parties. Travelers Indemnity contends that
the Plantation Oaks parties failed to notify Travelers
Indemnity of these claims in a timely manner and that some claims are excluded from the terms of coverage. Travelers Indemnity properly invoked this court's diversity-of-citizenship jurisdiction, as the parties are diverse and the amount in controversy exceeds $ 75,000. 28 U.S.C. § 1332. Before the court is a motion to The motion will
dismiss filed by some of the defendants.
be granted to the extent that the proceedings in this case will be stayed.
In September 2004, Stephanie M. Fitzpatrick, Larry V. Glass, John Glass, Roy Kirk, and Willie Kirk
("Fitzpatrick parties") filed a lawsuit in state court against the Plantation Oaks parties. In October 2005,
Willie Kirk Jr. ("Kirk") filed a separate lawsuit in state court against the same defendants. Both Kirk and
the Fitzpatrick parties own property abutting Plantation
beginning in 2003, the Plantation Oaks parties interfered with their access to their properties by improperly
identifying certain roads as private roads, rerouting these roads, and engaging in other related acts. Kirk
also alleges that the Plantation Oaks parties improperly removed timber from his property. these lawsuits, Travelers Prior to the filing of predecessor in
business, Gulf Insurance Company, had issued several commercial liability-insurance policies to the Plantation Oaks parties. Kirk's lawsuit settled and was dismissed. The
Fitzpatrick parties were awarded summary judgment on their claim that certain roads were public roads; that judgment is currently on appeal. The related issue of
damages has been stayed pending resolution of the appeal.
Parallel state proceedings
On August 1, 2008, the Plantation Oaks parties filed suit in state court against Travelers Indemnity and agent Rickey Elliott. This suit seeks damages for state-law
breach of contract and bad faith against the insurance company and damages for negligence against Elliott for failing to forward information from the Plantation Oaks parties, regarding the Fitzpatrick and Kirk claims, to the insurance company. On August 25, the complaint was
amended to add a count for a declaratory judgment that the Plantation Oaks parties timely notified Travelers Indemnity of the potential claims and that the insurance company has a duty to defend and indemnify the Plantation Oaks parties against the claims of Kirk and the
Fitzpatrick parties. Kirk and the Fitzpatrick parties subsequently filed a motion to dismiss and an alternative motion to stay the proceeding until the underlying litigation is resolved.
Federal declaratory-judgment action
On August 7, Travelers Indemnity filed this federalcourt lawsuit for a declaratory judgment that it does not owe coverage for the claims of Kirk and the Fitzpatrick parties, and that it has no duty to defend or indemnify the Plantation Oaks parties against such claims. The
federal action does not assert any claims that are not in the state-court proceeding.
A district court is "under no compulsion" to exercise its jurisdiction" under the Declaratory Judgment Act. Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 494 (1942); Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995). When a parallel state action is pending, a
federal court's exercise of its discretion to hear a declaratory-judgment principles of action should comity, be and guided by
Ameritas Variable Life Ins. Co. v. Roach, 411 F.3d 1328,
1330-31 (11th Cir. 2005).
"Gratuitous interference with
the orderly and comprehensive disposition of a state court litigation should be avoided." at 495. Brillhart, 316 U.S.
Generally, it is "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." Id.
The Eleventh Circuit Court of Appeals has enumerated a non-exhaustive list of "guideposts" to be considered by federal courts in determining action when whether parallel to hear a
proceedings are pending: (1) the state's interest in determining the matter; (2) whether the federal action would resolve the controversy; (3) whether the federal action would clarify the parties' legal relations; (4) whether the federal action is a form of "procedural fencing" being utilized "to provide an arena for a race for res judicata or to achieve a federal hearing in a
case not otherwise removable"; (5) whether a judgment in the federal action would heighten tension between federal and state courts or otherwise encroach on state
proceedings; (6) whether a superior alternative remedy exists; (7) whether underlying facts are important to informed resolution of the matter; (8) whether the state court is better situated to evaluate those facts; and (9) the nexus (if any) between the underlying issues and state law and policy, and whether federal common or statutory law requires resolution of the declaratory action. Id. at 1331 (adopting factors announced in
Scottsdale Ins. Co. v. Roumph, 211 F.3d 964 (6th Cir. 2000), and Centennial Life Ins. Co. v. Poston, 88 F.3d 255 (4th Cir. 1996)). As explained more fully below, after applying the Ameritas factors to this case, the court holds that it should decline to hear the case. For the sake of brevity
and because the Ameritas factors overlap to some degree,
Relative effectiveness of a federal judgment
The second, third, and sixth Ameritas factors address the relative effectiveness of a judgment in the federal action. They address whether a federal judgment would
resolve the controversy or lend clarity to the parties' legal relationship and whether a superior alternate
In this case, although a federal judgment
would lend clarity to the parties' legal relationship, a ruling would not necessarily settle the controversy. Travelers Indemnity's declaratory-judgment action does not capture the full set of issues pending in state court. For example, if this court were to rule that
Travelers Indemnity is obligated to cover and defend the Plantation Oaks parties, that would not resolve the
Plantation Oaks parties' assertion in the parallel state 8
suit that the insurance company acted in bad faith.
e.g., State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293, 318 (Ala. 1999) (explaining that a claim of bad faith not only requires a contractual breach, but also requires a showing that the insurance company failed to properly investigate the claim). Likewise, because
Elliott is not a party in this federal action, a ruling from this court would not answer whether Elliott is liable because he negligently failed to forward
information from the Plantation Oaks parties to Travelers Indemnity. Because these issues are before the state
court, but not this court, this court further concludes that the sixth factor, the presence of a more effective alternate remedy, also counsels against hearing the case. The better approach is for these issues to be determined together in one court, rather than allowing piecemeal, fractured litigation to emerge between the federal and state courts. Angora Enters., Inc. v. Condo. Ass'n of
Lakeside Village, 796 F.2d 384. 389 (11th Cir. 1986)
litigation" in federal and state courts). then, the in second, favor third, of and sixth to
On balance, factors federal
B. Whether the state court is in a better position to decide factual questions The seventh and eighth Ameritas factors also counsel in favor of declining jurisdiction. district courts to consider Those factors urge the underlying
factual issues are important to an informed resolution of the case" and, if so, "whether the state trial court is in a better position to evaluate those factual issues than is the federal court." Travelers Indemnity alleges Ameritas, 411 F.3d at 1331. that it need not cover
Plantation Oaks in part because Plantation Oaks did not immediately communicate to it that potential claims had arisen. Plantation Oaks contends that it did, in fact,
attempt to inform Travelers Indemnity through Elliott. Resolving the factual questions of what was communicated to whom and when would be central to this court's
resolution of this coverage issue.
Because Elliott is
already a party to the state-court proceeding, the state court is in a better position to resolve the factual dispute in a way that is binding on all. Further, it is
certainly better for one court to make this factual determination, rather than for two courts to duplicate each other's efforts.
C. Whether the parties are engaging in procedural fencing The fourth Ameritas factor, whether either party is engaging in procedural fencing, is a wash. The timing of
the federal action is somewhat suspicious, as it was filed only after the Fitzpatrick parties had obtained a judgment against the Plantation Oaks parties, and less than a week after a parallel suit was filed in state court by the Plantation Oaks parties. 11 However, counsel
for Travelers Indemnity represent that they were not aware of the parallel state suit at the time they filed this action. Moreover, the Plantation Oaks parties'
amendment adding a count for declaratory judgment against Travelers Indemnity in the parallel state proceeding is equally suspicious in timing; this count was added after the federal action was filed. Thus, the fourth factor is
not a particularly useful guidepost in the instant case.
D. The relative interests of the state and federal courts in adjudicating the case The remaining three factors (the first, fifth, and ninth) also counsel in favor of declining jurisdiction. These factors consider the relative interests of the state and federal courts in adjudicating the matter, as well as whether the federal court's exercise of
jurisdiction could increase friction between state and federal courts.
It is plain that the state courts have a far stronger interest in adjudicating this matter and that exercising jurisdiction here, when identical state-court proceedings are already pending, could cause friction. would be interpreting to an Alabama insurance business, policies an This court issued in
primarily implicates Alabama, not federal, law.
State of Alabama has a significant interest in these coverage issues. See Lexington Ins. Co. v. Rolison, 434
F. Supp. 2d 1228, 1239 (S.D. Ala. 2006) (Steele, J.) (dismissing substantial a federal action in a because question Alabama of had a
concerning whether an insurance contract issued to an Alabama business would cover a particular state-court judgment). The legal issues raised here are exclusively
within the purview of Alabama state law and policy, and federal law does not "dictate a resolution of the declaratory judgment action," Ameritas, 411 F.3d at 1331, a fact that further weighs in favor of abstaining. See
Sherwin-Williams Co. v. Holmes County, 343 F.3d 383, 390-91 (5th Cir. 2003) (finding that "if 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"). A federal court without
a strong interest in the matter, deciding exclusively state-law questions, could "increase the friction between ... federal and state courts." 1331. Further, proceeding with the federal action would result in a federal court and a state court Ameritas, 411 F.3d at
simultaneously wrestling with overlapping questions of state law, with the likely possibility that one court would rule upon the merits before the other, potentially rendering the second court's efforts futile. of federal jurisdiction commitment of in such a "Exercise risks
inconsistent rulings at numerous litigation junctures, and the appearance of disregard for the state trial court's authority and expertise in violation of basic norms of federal and state comity." United States
Fidelity & Guar. Co. v. Algernon-Blair, Inc., 705 F. Supp. 1507, 1514 (M.D. Ala. 1988) (Thompson, J.). In sum, the Ameritas over guideposts this strongly favor
Nevertheless, because a dismissal motion is
pending in the parallel state-court action and, thus, because it is unclear whether the state-court action will remain pending, this court will await the state-court's action on the dismissal motion and, for now, stay this federal lawsuit rather than dismiss it. See Wilton, 515
U.S. at 286 (district courts "have substantial latitude in deciding whether to stay or to dismiss a declaratory judgment suit in light of pending state proceedings").
*** Accordingly, it is ORDERED as follows: (1) The defendants' motion to dismiss (doc. no. 14) is granted to the extent that the proceedings in this case are stayed. (2) The proceedings in this case are stayed. (3) On or before June 30 and December 31 of this year and each year thereafter, the parties are to file a joint report regarding the status of the parallel state-court proceedings. (4) The clerk of this court is to close this case administratively. DONE, this the 31st day of March, 2009.
/s/ Myron H. Thompson UNITED STATES DISTRICT JUDGE
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