Tudor Insurance Company v. Smith et al

Filing 13

MEMORANDUM OPINION AND ORDER re 7 MOTION to Dismiss filed by Cahaba Pest Control Inc, Arthur G Hawkins, Jr.. Signed by Judge James H Hancock on 9/18/2012. (JLC)

FILED
2012 Sep-18 PM 03:50
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION

TUDOR INSURANCE COMPANY,
a corporation,

)
)

PLAINTIFF,
)
V.

2:12-cv-2224-JHH
)

DEBBIE SMITH, an individual;
CAHABA PEST CONTROL, INC.,
a corporation; and ARTHUR G.
HAWKINS, JR., an individual,
DEFENDANTS.

)
)
)

MEMORANDUM OPINION AND ORDER
The court has before it the Motion (Doc. #7) to Dismiss filed by Defendants
Cahaba Pest Control, Inc. (“Cahaba”) and Arthur G. Hawkins, Jr. (“Hawkins”) on
July 25, 2012 and the Motion (Doc. #9) to Dismiss, or in the Alternative, Motion for
Stay, Based on Abstention due to Pendency of Parallel State Court Action filed by
Defendant Debbie Smith (“Smith”) on July 27, 2012.1 The Motions (Docs. #7, 9)
have been fully briefed (see Docs. #7, 9, 11, 12), and are currently before the court
for review. (See Docs. #8, 10).

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The Motion (Doc. #9) to Dismiss, or in the Alternative, Motion for Stay, Based
on Abstention due to Pendency of Parallel State Court Action was filed as an Answer.

I.

Background and Relevant Facts.
Plaintiff Tudor Insurance Company (“Tudor”) filed a Complaint (Doc. #1) for

Declaratory Judgment in this court on June 20, 2012. Tudor issued to Defendant
Cahaba Pest Control, Inc. a commercial general liability insurance policy, policy
number PGL0755147, for the policy period of December 16, 2006 to December 16,
2007. (Compl., ¶ 8).
On January 12, 2009, a Complaint styled Debbie Smith v. Cahaba Pest Control
and A.G. Hawkins, Jr. was filed in the Circuit Court of Shelby County, Alabama,
Civil Action No. 2008-900791 (referred to hereinafter as the “underlying complaint”).
(Compl., ¶ 9). The underlying complaint sought recovery from the underlying
Defendants Cahaba Pest Control, Inc. and A.G. Hawkins, Jr. for damages allegedly
arising from termite damage to Debbie Smith’s house. (Compl., ¶ 9). On or about
March 5, 2009, Tudor informed Cahaba and Hawkins that it would not defend or
indemnify with regards to the claims made in the underlying complaint. (Compl., ¶
10). On December 12, 2009, Debbie Smith filed a First Amended Complaint against
Cahaba and Hawkins. (Compl., ¶ 11). The Circuit Court of Shelby County entered
a judgment dismissing A.G. Hawkins and in favor of Debbie Smith against Cahaba
on April 18, 2012 in the amount of $225,000. (Compl., ¶ 12).

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Tudor had been advised that Debbie Smith intended to file a Direct Action
under Alabama’s Direct Action Statute, Alabama Code § 27-23-2 (1975) against
Tudor since coverage had been declined for the subject judgment. (Compl., ¶ 13).
Tudor seeks a declaration from this court that coverage is not afforded under policy
number PGL0755147 for the claims and allegations of the underlying complaint and
that Tudor owes no duty to indemnify Cahaba or Hawkins for the subject judgment.
(Compl., ¶ 14).
Tudor is one of three insurance carriers of Cahaba sued by Debbie Smith in
Shelby County, Alabama on July 27, 2012 (that is, after the declaratory judgment
action was filed in this federal court) to collect a judgment under Ala. Code § 27-23-2
(1975) in the case styled Debbie Smith v. Tudor Ins. Co., Am. Safety Ins. Co., Markel
Ins. Co., Cahaba Pest Cntrl., Inc., et al. (the “Parallel Action”). (See Doc. #9, ¶ 2;
see also Exh. B to Doc. #9). The Parallel Action against Tudor alleges coverage for
the same judgment for which Tudor disclaims responsibility in the case before this
court, the declaratory judgment action. (See generally Compl.).
Cahaba and Hawkins filed a Motion (Doc. #7) to Dismiss pursuant to Federal
Rule of Civil Procedure 12(b)(1)(2) and (6) on July 25, 2012. Defendant Debbie
Smith filed a Motion (Doc. #9) to Dismiss, or in the Alternative, for Stay, Based on
Abstention due to Pendency pf Parallel State Court Action on July 27, 2012. The
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Motions (Docs. #7, 9) have been fully briefed (see Docs. #9, 11, 12) pursuant to the
court’s schedules (see Docs. #8, 10) and are properly before the court for review.
II.

Discussion.
The two motions to dismiss raise three grounds for dismissal: (1) that

Defendant Cahaba Pest Control is not a legal entity capable of being sued; (2) that
there exists no justiciable controversy between Tudor Insurance Company (“Tudor”)
and Arthur G. Hawkins, Jr.; and (3) that this court should abstain from exercising
control over the litigation because there is a parallel state proceeding. (See generally
Docs. #7, 9). In the alternative, Debbie Smith (“Smith”) moves the court to stay the
federal case pending the outcome of the parallel state court action. (See Doc. #9 at
4). Because the abstention doctrine counsels for dismissal of this federal case, its
consideration takes the forefront of discussion.
The Declaratory Judgment Act “confer[s] on federal courts unique and
substantial discretion in deciding whether to declare the rights of litigants.” Wilton
v. Seven Falls Co., 515 U.S. 277, 286 (1995). Indeed, the Supreme Court has
“repeatedly characterized the Declaratory Judgment Act as an enabling Act, which
confers a discretion on the courts rather than an absolute right upon the litigant.” Id.
at 287 (citations omitted). As the Eleventh Circuit has observed, the Act “only gives
the federal courts competence to make a declaration of rights; it does not impose a
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duty to do so.” Ameritas Variable Life Ins. Co. v. Roach, 411 F.3d 1328, 1330 (11th
Cir. 2005). A district court has discretion to “decline to entertain a declaratory
judgment action on the merits when a pending proceeding in another court will fully
resolve the controversy between the parties.” Ven-Fuel, Inc. v. Department of the
Treasury, 673 F.2d 1194, 1195 (11th Cir. 1982). District courts must balance the
interests of federalism, comity, and efficiency in determining whether to hear a
declaratory judgment action when confronted with a parallel state action. See
Ameritas Variable Life Ins. Co., 411 F.3d at 1330-31. To assist district courts in this
endeavor, the Eleventh Circuit listed a non-exhaustive set of “guideposts” to be
considered, including: (i) the state's interest in deciding the matter; (ii) whether a
judgment in the federal action would completely resolve the controversy; (iii) whether
the declaratory judgment action would clarify the parties’ legal relations; (iv) whether
the federal action amounts to procedural fencing; (v) whether a ruling in the federal
action would increase friction between federal and state courts or otherwise encroach
on state proceedings; (vi) whether a superior alternative remedy exists; (vii) whether
underlying facts are important to informed resolution of the matter; (viii) whether the
state court is better situated than the federal court to evaluate those facts; and (ix) the
nexus (if any) between the underlying issues and state law/policy, and whether federal
common or statutory law requires resolution of the declaratory action. See Ameritas
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Variable Life Ins. Co., 411 F.3d at 1331. That is, in some cases “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 v. Excess
Ins. Co. of Am., 316 U.S. 491, 494 (1942). The Supreme Court has warned that
“[g]ratuitous interference with the orderly and comprehensive disposition of a state
court litigation should be avoided.” Id.
Several different factors support the conclusion that Shelby County’s Circuit
Court is the better venue for the parties to litigate this controversy, despite the fact
that it was the later-filed of the cases. The complete controversy stands only in the
state court. See Ameritas, 411 F.3d at 1331 (listing one of the considerations to be
“whether the judgment in the federal declaratory action would settle the
controversy”). Alabama has a superior interest in deciding the issue of coverage
under its own Direct Action statute. See id. (listing considerations to be “the strength
of the state’s interest in having the issues raised in the federal declaratory action
decided in the state courts” and “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”). Indeed, having entered judgment in favor of Debbie Smith in the underlying
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action, the state court is in a better position to evaluate parallel factual issues than is
this court. See id. For this court to engage in piecemeal litigation would undoubtedly
“increase the friction between our federal and state courts and improperly encroach
on state jurisdiction.” Id. Allowing the federal declaratory judgment action to
proceed would amount to unnecessary and inappropriate “[g]ratuitous interference”
with the more encompassing and currently pending2 state court litigation. See Wilton
v. Seven Falls Co., 515 U.S. 277, 283 (1995) (evaluating and ultimately upholding
decision to stay Declaratory Judgment Act action under abuse of discretion standard)
(citing Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 495 (1942)).
III.

Conclusion.
The Circuit Court of Shelby County is the more appropriate forum to hear the

parties’ complete controversy. Accordingly, Defendant Debbie Smith’s Motion (Doc.
#9) to Dismiss is due to be granted and the Motion (Doc. #7) to Dismiss of

2

As noted earlier, the court recognizes that the state court action was filed after this
case. Although in some cases that is an appropriate point to consider in determining
whether to continue to exercise jurisdiction over a declaratory judgment action, the court
does not believe it is a significant factor here. (See Doc. #12 at 4-6).
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Defendants Cahaba Pest Control, Inc. and Arthur G. Hawkins, Jr. is MOOT.3 A
separate order will be entered dismissing this case.
DONE this the

18th

day of September, 2012.

SENIOR UNITED STATES DISTRICT JUDGE

3

The Motion (Doc. #7) to Dismiss does, however, have merit. Based on the
supporting documents and argument asserted by Cahaba, Plaintiff Tudor has now agreed
that the claims asserted against Cahaba are due to be dismissed. (See Doc. #11 at 1).
And because there has been no judgment against Hawkins in the underlying action, ” (see
Compl., Exh. C at ¶ 3), it is beyond dispute that this court cannot proceed to judgment on
the question of whether Tudor had a duty to indemnify Hawkins.
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