Specialty Underwriters Alliance v. Peebles McManus LLC et al

Filing 39

MEMORANDUM OPINION AND ORDER directing as follows: (1) the 21 motion to dismiss is DENIED; (2) the 35 motion for a status hearing is DENIED as moot. Signed by Hon. Chief Judge Mark E. Fuller on 7/7/09. (Attachments: # 1 Civil Appeals Checklist)(djy, )

IN THE UNITED STATES DISTRICT COURT FOR T H E MIDDLE DISTRICT OF ALABAMA E A S T E R N DIVISION S P E C IA L T Y UNDERWRITERS ALLIANCE, ) ) P l a i n t if f , ) ) v. ) ) PEEBLES McMANUS LLC, and ) D E N N IS AND PAMELA DICKEY, ) ) D e f e n d a n ts . )

C A S E NO. 3:08-cv-888-MEF (W O ­ P u b lis h )

M E M O R A N D U M OPINION AND ORDER I . INTRODUCTION P la in tif f Specialty Underwriters Alliance ("SUA") initiated this action pursuant to the D e c la ra to ry Judgment Act. 28 U.S.C. § 2201, et seq. SUA seeks a declaration from this C o u rt that it owes no duty to defend or indemnify Peebles McManus LLC ("Peebles M c M a n u s" ), which is a defendant in a related state court proceeding. Defendants Dennis and P a m e la Dickey ("the Dickeys"), who are plaintiffs in the state court proceeding, filed a M o tio n to Dismiss on December 9, 2008. (Doc. # 21.) In the Motion, the Dickeys ask this C o u rt to exercise its discretion to dismiss this declaratory judgment action. The Court has c a re f u l ly considered the submissions of the parties and the applicable authorities. For the re a so n s set forth below, the Court finds that the Motion is due to be DENIED. A Motion for a Status Hearing (Doc. # 35) is also pending and is due to be DENIED as moot. II. JURISDICTION AND VENUE 1

T h e Court exercises subject matter jurisdiction over this action pursuant 28 U.S.C. § 1 3 3 2 , based upon the parties' diversity of citizenship and an amount in controversy e x c ee d in g $75,000.00, exclusive of interest and costs.1 The parties contest neither personal ju ris d ic tio n nor venue and the Court finds adequate grounds alleged to support both. III. FACTS AND PROCEDURAL HISTORY A. State Court Action S o m e time prior to December, 2006, the Dickies contracted with Peebles McManus t o construct a home for them. Because the Dickies believed that they suffered various in ju rie s because of the malfeasance of Peebles McManus, they filed a lawsuit in the Circuit C o u rt of Macon County, Alabama on December 13, 2006. They claimed that Peebles M c M a n u s falsely represented that it was qualified to complete their home and would c o n stru c t it in compliance with the applicable building codes. They also claimed that after th e y moved into the home they noticed many defects and deficiencies, which Peebles M cM anus failed to correct. They claim they suffered injuries and damages including property lo s s , economic loss, extensive structural damage, and extreme mental anguish. SUA is not a party to that action, which is still pending in the Circuit Court of Macon County, Alabama. B . Declaratory Judgment S U A brought this action pursuant to the Federal Declaratory Judgment Act, 28 U.S.C.
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SUA is an insurance company incorporated in Delaware with its principal place of business in Illinois. Peebles McManus is an Alabama Limited Liability Company with two members: Sandra McManus and Paul Peebles. Sandra McManus and Paul Peebles are both citizens of Alabama. The Dickeys are citizens of Macon County, Alabama or Lee County, Alabama. 2

§ 2201, et seq. By this action, SUA seeks a declaration of its rights and obligations, if any, w ith respect to its duty to defend and indemnify Peebles McManus for the underlying state c o u rt suit described above. The declaratory judgment would resolve rights and obligations u n d e r an insurance policy issued by SUA to Peebles McManus. The policy provides c o m m e rc ia l general liability coverage with limits of $1,000,000.00 per occurrence, subject to a $1,000.00 deductible per property damage claim, and $2,000,000.00 aggregate coverage. S U A claims that the wrongs the Dickies complain of in the underlying state court suit are e x c lu d e d from coverage by the terms of the policy, including the definitions of "bodily in ju ry," "property damage," and "occurrence" in that policy. Roughly a month after SUA filed the complaint in this case, the Dickeys filed a M o tio n to Dismiss. (Doc. # 22.) They argue in the Motion that this Court should decline to re s o lv e this declaratory judgment action because the Circuit Court of Macon County, A la b a m a is, for a variety of reasons, a better forum to adjudicate the coverage question. SUA re sp o n d e d to this Motion with reasons why this Court should adjudicate the rights and o b lig a tio n s of the parties, as the Declaratory Judgment Act empowers it to do. The Motion to Dismiss is therefore ripe for disposition. IV. DISCUSSION T h e Declaratory Judgment Act provides that "[i]n a case of actual controversy within its jurisdiction, . . . any court of the United States . . . may declare the rights and other legal re la tio n s of any interested party seeking such declaration whether or not further relief is or

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c o u ld be sought." 28 U.S.C. § 2201(a). While the power granted by this statute gives federal c o u r ts competence to declare rights even when no other relief is sought, it does not impose a compulsory duty to do so. Am. Variable Life Ins. Co. v. Roach, 411 F.3d 1328, 1330 (11th C ir . 2005); see also Wilton v. Seven Falls Co., 515 U.S. 277, 287 (1995) (holding that the D e c la ra to ry Judgment Act is "an enabling Act, which confers a discretion on courts rather th a n an absolute right upon the litigant."). Nevertheless, federal district courts should e x e rc ise that discretion "liberally in favor of granting [declaratory] relief in order to a c co m p lis h the purposes of the Declaratory Judgment Act." United Ins. Co. of Am. v. Harris, 9 3 9 F. Supp. 1527, 1532 (M.D. Ala. 1996) (Thompson, C.J.); accord Coregis Ins. Co. v. M c C o llu m , 955 F. Supp. 120, 123 (M.D. Fla. 1997). T h e Dickeys argue in the Motion to Dismiss that the Court should abstain from a d ju d ica tin g this declaratory judgment action because of the pendency of a "parallel state a c tio n ." (Doc. # 21 2.) They rely on Brillhard v. Excess Insurance Company of America, 3 1 6 U.S. 491 (1942) and Wilton v. Seven Falls Co., 515 U.S. 277 (1995). The Dickeys also p o in t out that the Eleventh Circuit has articulated a list of nine factors a court should consider w h e n deciding whether to abstain from resolving a declaratory judgment action under B rill h a r d and Wilton. See Roach, 411 F.3d at 1330-31. SUA argues that these cases are in a p p o site because the underlying state action is not "parallel" and is not the kind of suit co n tem p lated by either Brillhard and Wilton or Roach. Courts are to consider the nine f a cto rs , SUA argues, only in cases when there is both "a declaratory judgment suit [and]

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a n o th e r suit is pending in a state court presenting the same issues, not governed by federal la w , between the same parties." See id. at 1330. SUA points out that resolution of insurance c o v e ra g e disputes is among the most common uses of the Declaratory Judgment Act in f e d e r a l courts, and that the Court should therefore exercise its discretion to decide this case in order to further the purposes of the Act. S U A presents the better arguments and the Court is in wholesale agreement with th e m . Brillhart and Wilson both discussed cases in which there were pending federal d e c la ra to ry judgment actions and parallel state proceedings with the same legal issues and p arties . See Brillhart, 316 U.S. at 492-98; Wilton, 515 U.S. at 279-82. This reading is s u p p o rte d by the statement in Roach that a court considering whether to abstain under B rillh a rt and Wilson should consider the nine factors when "a declaratory judgment suit [ a n d ] another suit is pending in a state court presenting the same issues, not governed by f e d era l law, between the same parties." Roach, 411 F.3d at 1330-31. Here, neither the parties n o r the issues are the same in the underlying state suit. Plaintiff in this action, SUA, is the in su re r of the policyholder Peebles McManus, which is the defendant in the underlying state c o u rt action. SUA is not a party to that state court proceeding and the coverage issues p re se n te d by this declaratory judgment action have not been presented to that forum. Hence, th is case is unlike Brillhart, Wilson, and Roach, which all involved (and only bind this Court w i t h respect to) "parallel" proceedings between the same parties and involving the same is s u e s . See, e.g., Allstate Indemnity Co. v. Lewis, 985 F. Supp. 1341, 1345-1346 (M.D. Ala.

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1 9 9 7 ) (Thompson, C.J.); Allstate Ins. Co. v. Smith, No. 3:05-CV-49, 2005 WL 1309019 (M .D . Ala. May 31, 2005) (Albritton, J.). Therefore, these cases, relied upon so heavily

b y the Dickeys, do not require--and do not suggest--that this Court abstain from a d ju d ic a tin g this declaratory judgment action. The Court's decision to exercise jurisdiction is supported by the purposes of the D e c l a r a t o r y Judgement Act and the longstanding practice in this and other districts. The D e c la ra to ry Judgment Act provides a mechanism to adjudicate disputes when the plaintiff is unsure of his duties and seeks to avoid either a breach of a legal duty or unnecessary e x p e n d itu re s in the absence of such a duty. See generally 5 Charles Alan Wright & Arthur R . Miller, Federal Practice and Procedure §§ 1238, 2751 (3d ed. 2009) This is precisely the c a se here. Moreover, this Court routinely adjudicates coverage disputes brought under the D e c la ra to ry Judgment Act when there is an underlying state court case on the merits, which in v o lv e s different issues and different parties (as is the case here). See, e.g., Lewis, 985 F. S u p p . at 1345-1346; Guaranty Nat. Ins. Co. v. Beeline, 945 F. Supp. 1510 (M.D. Ala. 1996) ( T h o m p s o n , C.J.); State Auto Prop. & Cas. Ins. Co. v. Calhoun, No. 2:05-CV-122-MEF, 2 0 0 5 WL 2406055 (M.D. Ala. 2005) (Fuller, C.J.); Smith, 2005 WL 1309019. V . CONCLUSION For the foregoing reasons, it is hereby O R D E R E D as follows: (1 ) The Motion to Dismiss (Doc. #21) is DENIED.

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(2 ) The Motion for a Status Hearing (Doc. # 35) is DENIED as moot. Done this 7th day of July, 2009. /s/ Mark E. Fuller CHIEF UNITED STATES DISTRICT JUDGE

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