Specialty Underwriters Alliance v. Peebles McManus LLC et al
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.
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
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]
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.
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.
(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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