Charter Oak Fire Insurance Company, The v. G & R Mineral Services Inc et al
MEMORANDUM OPINION. Signed by Magistrate Judge John E Ott on 2/9/2018. (KAM)
2018 Feb-09 PM 03:10
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
THE CHARTER OAK FIRE
G&R MINERAL SERVICES, INC. and
LHOIST NORTH AMERICA OF
Case No.: 2:17-cv-0752-JEO
This is a declaratory judgment action filed by the Charter Oak Fire Insurance
Company (“Charter Oak”) against two defendants: G&R Mineral Services, Inc.
(“G&R”) and Lhoist North America of Alabama, LLC (“Lhoist”). (See Docs.1 1,
20). The cause comes to be heard on a motion filed by Lhoist, joined by G&R,
asking the court to dismiss the action based on abstention principles recognized in
Ameritas Variable Life Ins. Co. v. Roach, 411 F.3d 1328 (11th Cir. 2005)
References to “Doc(s). ___” are to the document number(s) of the pleadings, motions, and
other materials in the court file as compiled and designated on the docket sheet by the clerk of
the court. Unless otherwise noted, pinpoint citations are to the page of the electronically filed
document in the court’s CM/ECF system, which may not correspond to pagination on the
original “hard copy” of the document presented for filing.
(“Ameritas”) (Docs. 9, 14). Upon consideration, the court 2 concludes that the
motion to dismiss is due to be granted.
According to Charter Oak’s latest pleading and the submissions on the
motion to dismiss, the salient facts, assumed to be true for present purposes, are
these: Lhoist owns and operates a lime quarry in Shelby County, Alabama (the
“Quarry”). In April 2009, Lhoist entered into a Master Agreement for Services
with G&R (“Master Agreement”), pursuant to which G&R performed contract
work at the Quarry. 3 On August 28, 2010, David Vinson, Jr., a temp service
employee assigned to work for G&R, filed a lawsuit in the Circuit Court of Shelby
County, Alabama, against both G&R and Lhoist (the “Vinson Lawsuit”). Vinson
there raised tort claims alleging he suffered personal injuries as a result of being
exposed to lime dust while working for G&R at the Quarry on March 5, 2010.
(See Doc. 9-1). In April 2013, G&R was dismissed from the Vinson Lawsuit on
summary judgment, an order the Alabama Supreme Court affirmed on
interlocutory appeal in January 2014. Vinson v. G&R Mineral Services, Inc., 150
The parties have consented to an exercise of plenary jurisdiction by a magistrate judge pursuant
to 28 U.S.C. § 636(b) and Rule 73, Fed. R. Civ. P. (Doc. 23).
Strictly speaking, the Master Agreement was between G&R and the “Chemical Lime Company
of Alabama, LLC” (“Chemical Lime”), the name by which Lhoist was formerly known. (Compl.
¶ 10; Doc. 9 at 2, ¶ 1). However, insofar as the difference in name is not material to the present
dispute, the court will not distinguish between Lhoist and Chemical Lime and will refer to both
simply as “Lhoist.”
So. 3d 749 (Ala. 2014). Vinson’s claims against Lhoist thereafter went to trial,
resulting in a defense verdict on May 23, 2017. Vinson appealed the final
judgment to the Alabama Supreme Court, and that appeal remains pending.
Meanwhile, on March 24, 2017, Lhoist filed a separate lawsuit, also in the
Circuit Court of Shelby County, against G&R and a number of insurance carriers,
including Charter Oak, seeking insurance coverage and indemnity for amounts
Lhoist spent defending itself in the Vinson Lawsuit (hereinafter the “State-Court
Insurance Lawsuit”; see Doc. 9-2 (“State-Ct. Ins. Lawsuit Compl.”)). With regard
to G&R, Lhoist there demands a declaratory judgment and damages for breach of
contract under Alabama law based on allegations that G&R has a duty under the
Master Agreement to indemnify Lhoist for its defense in the Vinson Lawsuit.
(State-Ct. Ins. Lawsuit Compl., Counts One & Two). Lhoist also brings state-law
claims against Charter Oak and other insurers, seeking a declaratory judgment and
damages for breach of contract and the tort of bad faith. (Id., Counts Three, Four,
and Five). As it relates to Charter Oak, those claims are based on a Commercial
General Liability (“CGL”) insurance policy (hereinafter the “Policy”) that Charter
Oak issued to G&R that provides occurrence-based coverage from September 30,
2009, through September 30, 2010, and includes coverage for Lhoist as an
additional insured. (Id., ¶¶ 19(d), 31). In support, Lhoist says it demanded
indemnity under the Policy for amounts spent defending itself in the Vinson
Lawsuit and that that Charter Oak’s ensuing denial of coverage based on a
pollution exclusion was not even arguably justified in light of Alabama Supreme
Court precedent. (Id., ¶¶ 20, 30, 32, 33; id., Counts Three, Four, and Five).
Charter Oak, in turn, filed the instant action against G&R and Lhoist on May
10, 2017, pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201 et seq.,
founding jurisdiction on the diversity statute, 28 U.S.C. § 1332. (Doc. 1). In its
now-governing, first amended pleading, Charter Oak demands relief in the form of
a declaration that it has no duty under the Policy to either defend (Count I) or
indemnify (Count II) G&R with respect to the declaratory-judgment and breach-ofcontract claims that Lhoist makes against G&R in the State-Court Insurance
Lawsuit. (Doc. 20 (hereinafter “Complaint” or “Compl.”)). In particular, Charter
Oak maintains that those legal claims against G&R do not constitute “bodily
injury” or “property damage” that occurred during the policy period and were not
caused by an “occurrence,” as those terms are defined in the Policy. (Compl. ¶
32). Charter Oak also insists that there is no coverage for Lhoist’s claims against
G&R because of enumerated exclusions in the Policy. Specifically, Charter Oak
cites exclusions for “pollution injury or damage” (id. ¶¶ 34-37), for bodily injury or
property damage that is either related to silica exposure (id. ¶¶ 38-39), for
“expected or intended [injury] from the standpoint of the insured,” “by reason of
the assumption of liability in a contract or agreement,” as well as an exclusion for
bodily injury to an “employee of the insured arising out of and in the course of …
[e]mployment by the insured.” (Id. ¶¶ 40-41). Charter Oak has named Lhoist as a
co-defendant in this action because Lhoist’s interests would be adversely affected
by a declaration that Charter Oak is not required to defend or indemnify G&R with
respect to Lhoist’s claims. (See Compl. ¶ 24; see also Doc. 29 at 2 & n. 2).
Lhoist has moved to dismiss this action based on the abstention doctrine
recognized by the Eleventh Circuit in Ameritas. (Doc. 9). G&R has joined in that
motion. (Doc. 14). Charter Oak filed a response in opposition (Doc. 29), and
G&R (Doc. 30) and Lhoist (Doc. 31) have each filed a reply thereto. Incorporated
in G&R’s reply is a motion to stay these proceedings in relation to Count Two of
Charter Oak’s pleading, which seeks a declaratory judgment with respect to
Charter Oak’s potential duty to indemnify G&R with respect to any judgment or
settlement G&R might pay in the State-Court Insurance Lawsuit. (Doc. 30 at 4-6).
Charter Oak has opposed that motion to stay. (Doc. 32).
On September 18, 2017, G&R filed a “Supplemental Document” in support
of its motion asking the court to abstain, attaching a copy of a pleading that G&R
had filed in the State-Court Insurance Lawsuit several days earlier on September
13th. (Doc. 35). By that pleading, G&R asserts cross-claims against Charter Oak
for a declaratory judgment, breach of contract, and fraud. (Doc. 35 at 5-18 (“G&R
Cross-Claim”)). Those are based on allegations that Charter Oak breached the
Policy by refusing to pay (1) an insurance claim that G&R submitted on behalf of
Lhoist as an additional insured for amounts Lhoist paid defending itself in the
Vinson Lawsuit (G&R Cross Claim, Counts One, Two, and Three) and (2) an
insurance claim that G&R submitted on its own behalf in connection with
defending itself in the Lhoist Lawsuit. (Id., Counts Four and Five).
On October 16, 2017, Charter Oak responded to G&R’s “Supplemental
Document.” (Doc. 36). Charter Oak advises therein that it filed a motion in the
State-Court Insurance Lawsuit on October 12th asking that court to dismiss G&R’s
cross-claims against Charter Oak. In support, Charter Oak argues that G&R’s
cross-claims would be compulsory counterclaims in this federal declaratory
judgment suit and that, as such, the cross-claims are subject to dismissal under Ala.
Code § 6-5-440. (Doc. 36-1). That provision, often referred to as Alabama’s
“abatement statute,” states:
No plaintiff is entitled to prosecute two actions in the courts of this
state at the same time for the same cause and against the same party.
In such a case, the defendant may require the plaintiff to elect which
he will prosecute, if commenced simultaneously, and the pendency of
the former is a good defense to the latter if commenced at different
A review of court records available on www.Alacourt.com, indicates that the state
trial court was to hear oral arguments on the motion to dismiss G&R’s cross-claims
and that the motion remains pending at this time.
There is no dispute that this declaratory judgment action comes within the
court’s subject-matter jurisdiction. The diversity statute gives the district courts
original jurisdiction over civil actions that are (1) between citizens of different
States and (2) the amount in controversy exceeds $75,000, exclusive of interests
and costs. 28 U.S.C. § 1332(a)(1). Charter Oak’s pleading supports the existence
of both elements. First, the statute requires complete diversity, i.e., no plaintiff can
share citizenship with any defendant. See Triggs v. John Crump Toyota, Inc., 154
F.3d 1284, 1287 (11th Cir. 1998). To that end, Charter Oak alleges that, for
purposes of 28 U.S.C. § 1332(c)(1), it is a Connecticut citizen and that G&R is an
Alabama citizen. (Compl, ¶¶ 1, 2). Charter Oak also sufficiently alleges that
Lhoist is a citizen of both Delaware and Mississippi, because it is a limited liability
company whose sole member is a corporation that is a citizen of those states. (Id. ¶
3); see also Rolling Greens MHP v. Comcast SCH Holdings, LLC, 374 F.3d 1020,
1021-22 (11th Cir. 2004).
Charter Oak further alleges that the amount in controversy exceeds $75,000.
(Compl. ¶ 6). No one seriously disputes that is so given the pled coverage limits of
the Policy, $1,000,000 for “each occurrence” and a $2,000,000 “general aggregate
limit” (id. ¶ 9), and the nature of G&R’s demands for indemnity for its defense in
the State-Court Insurance Lawsuit. See also generally First Mercury Ins. Co. v.
Excellent Computing Distributors, Inc., 648 F. App’x 861, 865 (11th Cir. 2016)
(“[W]hen an insurer seeks a judgment declaring the absence of liability under a
policy, the value of the declaratory relief to the plaintiff-insurer is the amount of
potential liability under its policy.” (citing Stonewall Ins. Co. v. Lopez, 544 F.2d
198, 199 (5th Cir. 1976)4).
Lhoist and G&R insist, however, that the court should abstain based on
Ameritas. In that vein, this court has previously explained:
While federal district courts have a “virtually unflagging
obligation” to exercise their jurisdiction over actions that are
traditionally considered to have been “at law,” those courts have
discretion, jurisdiction notwithstanding, to abstain from and dismiss
actions that are purely equitable in nature, including those seeking a
declaratory judgment. See Quackenbush v. Allstate Ins. Co., 517 U.S.
706, 716-20 (1996); Wilton v. Seven Falls Co., 515 U.S. 277, 286
(1995); Brillhart v. Excess Ins. Co. of Amer., 316 U.S. 491, 495
(1942); Ameritas, 411 F.3d at 1331-32. Thus, “federal courts are
more likely to abstain from hearing a declaratory judgment action
based on the standards articulated in [Brillhart], [Wilton], and their
progeny than they are to abstain from hearing a coercive action based
on the standards set forth in Colorado River Water Conservation Dist.
v. United States, 424 U.S. 800 (1976), and its progeny.” New
Hampshire Ins. Co. v. Hill, 2012 WL 1598155, at *1 (S.D. Ala. May
7, 2012)). “Under Colorado River, a district court may dismiss or
stay an action where there is an ongoing parallel action in state court
only in ‘exceptional circumstances.’” Id. (citing Moorer v. Demopolis
Waterworks & Sewer Bd., 374 F.3d 994, 997 (11th Cir. 2004)).
Decisions of the United States Court of Appeals for the Fifth Circuit handed down before
October 1, 1981 are binding precedent in the Eleventh Circuit. Bonner v. City of Prichard, 661
F.2d 1206, 1207 (11th Cir. 1981) (en banc).
The Eleventh Circuit has articulated the relevant analytical
framework in this context in Ameritas, as follows:
The Declaratory Judgment Act is “an enabling Act,
which confers a discretion on courts rather than an
absolute right upon the litigant.” Wilton [v. Seven Falls
Co., 515 U.S. 277, 287 (1995)] (citations omitted). It
only gives the federal courts competence to make a
declaration of rights; it does not impose a duty to do so.
Brillhart v. Excess Ins. Co. of America, 316 U.S. 491,
494 (1942). In fact, in cases such as this, the Supreme
Court has expressed that “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.” Id. at 495.
The Supreme Court has warned that “[g]ratuitous
interference with the orderly and comprehensive
disposition of a state court litigation should be avoided.”
Id. This warning should be heeded.
Guided by these general principles expressed by the
Supreme Court, as well as “the same considerations of
federalism, efficiency, and comity that traditionally
inform a federal court’s discretionary decision whether to
abstain from exercising jurisdiction over state-law claims
in the face of parallel litigation in the state courts,” we
provide the following factors for consideration to aid
district courts in balancing state and federal interests.
(1) the strength of the state’s interest in
having the issues raised in the federal
declaratory action decided in the state
(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 the
(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
Our list is neither absolute nor is any one factor controlling;
these are merely guideposts in furtherance of the Supreme
Court’s admonitions in Brillhart and Wilton.
Ameritas Variable Life Ins. Co., 411 F.3d at 1330-31 (footnotes
Metropolitan Prop. & Cas. Ins. Co. v. Butler, 2016 WL 2939633, at *3-4 (N.D.
Ala. May 20, 2016) (Ott, M.J.).
The parties first clash over whether the pending State-Court Insurance
Lawsuit represents parallel state litigation to this federal declaratory judgment
action for abstention purposes. In that context, lawsuits are parallel when they
involve “substantially the same parties and substantially the same issues.” First
Mercury Ins. Co. v. Excellent Computing Distributors, Inc., 648 F. App’x 861, 866
(11th Cir. 2016); see also Employers Mut. Cas. Co. v. Kenny Hayes Custom
Homes, LLC, 101 fed 1186, 1189 (S.D. Ala. 2015); Wesco Ins. Co. v. Southern
Mgmt. Servs., Inc., 2017 WL 1354873, at *2 (N.D. Ala. Apr. 13, 2017). It is
undisputed that all three parties to this action, i.e., Charter Oak, G&R, and Lhoist,
are also parties to the State-Court Insurance Lawsuit. Charter Oak has contended,
however, that the two suits are not parallel because they do not involve
substantially the same issues. In particular, Charter Oak emphasized that the StateCourt Insurance Lawsuit, at least as framed when Charter Oak filed its opposition
to the instant motion to dismiss, involved whether Lhoist is entitled to indemnity
from G&R (under the Master Agreement) and/or Charter Oak (as an additional
insured under the Policy) for the claims made against Lhoist in the Vinson
Lawsuit. By contrast, this federal declaratory judgment action asks a subsequent
question: whether G&R is entitled to indemnity from Charter Oak under the
Policy for claims made against G&R in the State-Court Insurance Lawsuit. As
such, Charter Oak argues that abstention under Ameritas is not warranted because
the issue posed by this action, namely, Charter Oak’s liability to defend and
indemnify G&R under the Policy for the claims Lhoist has asserted against G&R
in the State-Court Insurance Lawsuit, was not presented in the State-Court
Insurance Lawsuit itself.
However, whatever the merits of that argument might have once been, it is
undisputed that after Charter Oak filed its opposition to the motion to dismiss,
G&R amended its pleadings in the State-Court Insurance Lawsuit to assert crossclaims alleging that Charter Oak is liable to G&R under the Policy for claims
Lhoist makes against G&R in the State-Court Insurance Lawsuit. (See G&R
Cross-Claim). Charter Oak does not challenge that those cross-claims do, in fact,
present the same issues underlying Charter Oak’s claims in this federal declaratory
judgment action. Rather, Charter Oak merely says, rather, that it has moved in the
trial court in the State-Court Insurance Lawsuit to dismiss G&R’s cross-claims
under Ala. Code § 6-5-440. However, unless and until the cross-claims are
actually dismissed, the State-Court Insurance Action qualifies as parallel litigation
to the present action. With that, the court will proceed to consider the Ameritas
Considering the Ameritas factors and all the surrounding facts and
circumstances in their entirety, the court in its discretion will decline to exercise
jurisdiction over Charter’s Oak’s declaratory judgment action. The identical issues
are pending in the State-Court Insurance Lawsuit, by virtue of G&R’s cross-claims
against Charter Oak. Those claims raise exclusively issues of Alabama state law
relating to G&R, an Alabama corporation based in Alabama, and all of the
underlying events occurred in Alabama, including the issuance of the Policy by
Charter Oak. Accordingly, Alabama has a substantial interest in having the claims
litigated in its state courts. The circumstances and timing of Charter Oak’s filing
do not particularly suggest procedural fencing. That is, the question of Charter’s
Oak’s coverage obligations to G&R as it relates to Lhoist’s claims in the StateCourt Insurance Lawsuit were not directly presented in any state court litigation
until G&R filed its counterclaims against Charter Oak in the State-Court Insurance
Lawsuit, which occurred only after Charter Oak filed this federal action.
Nevertheless, the interests of efficiency, comity, federalism, noninterference with state-court litigation, and avoidance of inconsistent results would
all be served by allowing the parties to pursue their various claims against each
other in the State-Court Insurance Lawsuit. 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. That is because the
State-Court Insurance Lawsuit involves not only G&R’s cross-claims against
Charter Oak relative to coverage under the Policy for Lhoist’s claims in the StateCourt Insurance Lawsuit but also Lhoist’s original claims both against Charter
Oak, under the same Policy, and against G&R, under the Master Agreement, with
respect to the claims asserted against Lhoist in the Vinson Lawsuit.
Finally, Charter Oak insists that abstention is improper on the theory that
this federal declaratory judgment action serves a unique purpose because,
according to Charter Oak, only in this court is there “an avenue for Charter Oak
and G&R to litigate this insurance coverage issue without injecting insurance
issues as to G&R in the [State-Court Insurance Lawsuit], a jury action, where G&R
is a defendant.” (Doc. 29 at 15). In support, Charter Oak posits that its “coverage
dispute with G&R cannot be included in the same action as Lhoist’s claims against
G&R for which G&R seeks coverage” because “ ‘Rule 18(c)5 [of the Alabama
Rules of Civil Procedure] makes severance mandatory where a damages claim and
Rule 18, Ala. R. Civ. P., provides in relevant part:
(a) Joinder of Claims. A party asserting a claim to relief as an original claim,
counterclaim, cross-claim, or third-party claim, may join, either as independent or
as alternate claims, as many claims either legal or equitable, or both, as the party
has against an opposing party.
(c) Liability Insurance Coverage. In no event shall this or any other rule 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.
a liability coverage question are presented in the same jury action.’ ” (Id., quoting
Fox v. Hollar Co., 576 So. 2d 223, 225 (Ala. 1991) (emphasis in Charter Oak’s
brief)) (footnote added). The court, however, rejects this argument. Even if
G&R’s cross-claims against Charter Oak regarding coverage were severed under
Rule 18(c) from Lhoist’s original claims for liability that does not imply there is
not parallel state-court litigation nor otherwise counsels against abstention. See
Smith, 2011 WL 2175103, at *6 (rejecting insurer’s argument that abstention was
improper on the ground that the declaratory judgment action would serve “the
useful purpose of preventing the injection of insurance coverage into the liability
suit,” the district court recognized that Rules 18(c) and 42(b), Ala. R. Civ. P.,
would allow severance and separate trials on liability and coverage in the parallel
state action, thereby alleviating the potential prejudice raised by the insurer).
Based on the foregoing, the court finds that it is appropriate to abstain from
exercising jurisdiction over this declaratory judgment action . As such, Lhoist’s
motion to dismiss (Doc. 9), joined by G&R (Doc. 14), is due to be GRANTED.
G&R’s motion, included in its reply brief, to stay these proceeding as they relate to
Count Two of Charter Oak’s pleading (Doc. 30 at 4-6) is due to be deemed
MOOT. A separate Final Order will be entered.
DONE, this the 9th day of February, 2018.
JOHN E. OTT
Chief United States Magistrate Judge
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