Grange Mutual Casualty Company v. Indian Summer Carpet Mills Inc et al

Filing 26

MEMORANDUM OPINION AND ORDER re 25 Consent MOTION to Enter Declaratory Relief in Favor of Plaintiff filed by Grange Mutual Casualty Company. Plaintiff Grange Mutual Casualty Company is HEREBY ORDERED to replead its complaint in a manner tha t substantiates the amount-in-controversy component by a preponderance of the evidence. Grange is further HEREBY ORDERED to brief the Court on the following issues set out herein. The deadline for Grange to replead and file its brief is no later than December 18, 2017. Any ruling on the Consent Motion is RESERVED pending the Court's consideration of Grange's repleader and briefing efforts. Signed by Judge Virginia Emerson Hopkins on 11/17/2017. (JLC)

FILED
2017 Nov-17 PM 04:18
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
MIDDLE DIVISION
GRANGE MUTUAL CASUALTY
COMPANY,

)
)
)
Plaintiff,
)
)
v.
) Case No.: 4:17-CV-1263-VEH
)
INDIAN SUMMER CARPET
)
MILLS, INC.; THE WATER
)
WORKS AND SEWER BOARD OF )
THE CITY OF GADSDEN; and
)
THE WATER WORKS AND
)
SEWER BOARD OF THE TOWN )
OF CENTRE,
)
)
Defendants.
)

MEMORANDUM OPINION AND ORDER
I.

Introduction
Plaintiff Grange Mutual Casualty Company (“Grange”) initiated this insurance

coverage dispute on July 27, 2017, pursuant to the Declaratory Judgment Act (the
“Act”), 28 U.S.C. § 2201(a). (Doc. 1). Grange seeks “[a] declaration that [it] has no
legal obligation to defend or indemnify Indian Summer for the claims asserted [in the
Underlying Gadsden and Centre Lawsuits].” (Id. at 19 ¶ 39(a)). The Act provides that
“[i]n any case of actual controversy within its jurisdiction . . . any court of the United
States . . . may declare the rights and other legal relations of any interested party

seeking such declaration, whether or not further relief is or could be sought.” 28
U.S.C. § 2201(a) (emphasis added). However, “[e]ven if there is a case or
controversy, ‘district courts possess discretion in determining whether and when to
entertain an action under the Declaratory Judgment Act, even when the suit otherwise
satisfies subject matter jurisdictional prerequisites.’” 3M Co. v. Avery Dennison
Corp., 673 F.3d 1372, 1376 (Fed. Cir. 2012) (quoting Wilton v. Seven Falls Co., 515
U.S. 277, 282, 115 S. Ct. 2137, 2140, 132 L. Ed. 2d 214 (1995)).
Pending before the Court is a Consent Motion To Enter Declaratory Relief in
Favor of Plaintiff (doc. 25) (the “Consent Motion”) filed by Grange and Defendant
Indian Summer Carpet Mills, Inc. (“Indian Summer”) on November 10, 2017. These
moving parties ask this Court to enter a consent order (id. at 3-4 ¶¶ 6-7) establishing
that Grange has no duty to defend or indemnify Indian Summer in two separate
underlying (and still pending) water pollution lawsuits–4:16-CV-1755-KOB (the
“Underlying Gadsden Lawsuit”) and 4:17-CV-1026-KOB (the “Underlying Centre
Lawsuit”). The proposed consent order (doc. 25-1) is attached to the Consent Motion.
Defendants Water Works and Sewer Board of the City of Gadsden and Water
Works and Sewer Board of the City of Centre are not parties to the Consent Motion
and are in default. (Doc. 23). Grange and Indian Summer indicate that “the proposed
order does not affect the rights of Gadsden or Centre (the plaintiffs in the Underlying
2

Lawsuits), against whom Grange will be seeking default judgments.” (Doc. 25 at 4
¶ 7).
For those reasons explained below, any ruling on the Consent Motion is
RESERVED pending Grange’s right to replead and otherwise address the Court’s
jurisdictional/discretionary concerns as set out below.
II.

Standards
A.

General Principles Governing Subject Matter Jurisdiction

Unlike state courts, federal tribunals are bodies of limited jurisdiction, meaning
that the grounds for the Court’s jurisdiction over the claims asserted by the plaintiff
must be present at the time the complaint is filed and must be obvious on the face of
the complaint. FED. R. CIV. P. 8(a). The law is clear that Grange, the party seeking to
invoke federal jurisdiction in this case, has the burden to demonstrate that the Court
has subject matter jurisdiction. See McNutt v. General Motors Acceptance Corp., 298
U.S. 178, 189, 56 S. Ct. 780, 785, 80 L. Ed. 1135 (1936) (“They are conditions which
must be met by the party who seeks the exercise of jurisdiction in his favor …. [and
a]s he is seeking relief subject to this supervision, it follows that he must carry
throughout the litigation the burden of showing that he is properly in court.”).
Further, “a federal court has an independent obligation to review its authority
to hear a case before it proceeds to the merits.” Mirage Resorts, Inc. v. Quiet Nacelle
3

Corp., 206 F.3d 1398, 1400-01 (11th Cir. 2000). Consequently, the Court cannot
ignore jurisdictional concerns even if the parties have none.
Relatedly, the parties can neither manufacture the existence nor waive a want
of subject matter jurisdiction. See, e.g., Am. Fire & Cas. Co. v. Finn, 341 U.S. 6,
17-18, 71 S. Ct. 534, 542, 95 L. Ed. 702 (1951) (“The jurisdiction of the federal
courts is carefully guarded against expansion by judicial interpretation or by prior
action or consent of the parties.”); Sosna v. Iowa, 419 U.S. 393, 398, 95 S. Ct. 553,
556-57, 42 L. Ed. 2d 532 (1975) (“While the parties may be permitted to waive
nonjurisdictional defects, they may not by stipulation invoke the judicial power of the
United States in litigation which does not present an actual ‘case or controversy,’ and
. . . we feel obliged to address the question of mootness [or ripeness] before reaching
the merits of appellant’s claim.”) (citation omitted); Jackson v. Seaboard Coast Line
R.R. Co., 678 F.2d 992, 1000 (11th Cir. 1982) (“The jurisdiction of a court over the
subject matter of a claim involves the court’s competency to consider a given type of
case[,] and cannot be waived or otherwise conferred upon the court by the parties.”)
(footnote omitted).
B.

Ripeness

The Eleventh Circuit has explained that the doctrine of ripeness–one subset of
Article III’s framework for confirming the presence of a constitutionally-sound case
4

or controversy–involves both constitutional and prudential considerations:
When determining if a claim is ripe for judicial review, we
consider both constitutional and prudential concerns. In some
circumstances, although a claim may satisfy constitutional requirements,
prudential concerns “counsel judicial restraint.” See Digital, 121 F.3d
at 589 (quoting Action Alliance of Senior Citizens v. Heckler, 789 F.2d
931, 940 n.12 (D.C. Cir. 1986)). Our inquiry focuses on whether the
claim presented is “of sufficient concreteness to evidence a ripeness for
review.” Id. Strict application of the ripeness doctrine prevents federal
courts from rendering impermissible advisory opinions and wasting
resources through review of potential or abstract disputes. See id.
Our ripeness inquiry requires a two part “determination of (1) the
fitness of the issues for judicial decision and (2) the hardship to the
parties of withholding court consideration.” Id. (citing Abbott Lab. v.
Gardner, 387 U.S. 136, 148-49, 87 S. Ct. 1507, 1515-16, 18 L. Ed. 2d
681 (1967)[, abrogated on other grounds by Califano v. Sanders, 430
U.S. 99, 105, 97 S. Ct. 980, 984, 51 L. Ed. 2d 192 (1977)]; Cheffer v.
Reno, 55 F.3d 1517, 1524 (11th Cir. 1995)). . . .
We have also recognized that the ripeness doctrine . . . protects
courts from abusing their role within the government and engaging in
speculative decision-making . . . .
Nat’l Advert. Co. v. City of Miami, 402 F.3d 1335, 1339 (11th Cir. 2005).
Further, if a claim is not ripe for review, the Eleventh Circuit has clarified that:
[T]he dismissal . . . [is one] without prejudice. Because the
general-access claim was not ripe for review, the district court did not
have subject matter jurisdiction over the claim. See Digital Properties,
Inc. v. City of Plantation, 121 F.3d 586, 591 (11th Cir. 1997) (“The
determination of ripeness ‘goes to whether the district court had subject
matter jurisdiction to hear the case.’” (citing Greenbriar, Ltd. v. City of
Alabaster, 881 F.2d 1570, 1573 n.7 (11th Cir. 1989))). Thus, the district
court could not have adjudicated the merits of the general-access claim
5

or dismissed that claim with prejudice. See Crotwell v. Hockman–Lewis
Ltd., 734 F.2d 767, 769 (11th Cir. 1984) (changing a dismissal “with
prejudice” to a dismissal “without prejudice” on the basis that “the court
lacked subject matter jurisdiction over the action” and hence “had no
power to render a judgment on the merits”).
Georgia Advocacy Office, Inc. v. Camp, 172 F.3d 1294, 1299 (11th Cir. 1999)
(emphasis added).
III.

Analysis
Grange asserts that subject matter jurisdiction pursuant to 28 U.S.C. § 1332

(only) exists in this declaratory judgment action. (Doc. 1 at 1 ¶ 7). The Court has
reviewed the sufficiency of Grange’s underlying diversity allegations. While Grange
explains in detail how § 1332’s citizenship prong is met (id. at 1-3 ¶¶ 1-5), Grange’s
jurisdictional allegation in support of the amount-in-controversy prong is limited to
one conclusory sentence: “The amount in controversy exceeds $75,000.” (Id. at 3
¶ 6).
“The fact that [Grange] seek[s] declaratory relief under 28 U.S.C. § 2201, does
not absolve [it] of the necessity of bringing themselves within a jurisdictional
statute.” Appling Cty. v. Mun. Elec. Auth. of Georgia, 621 F.2d 1301, 1303 (5th Cir.
1980).1 When a plaintiff is seeking declaratory relief under an insurance policy, the

1

In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the
Eleventh Circuit adopted as binding precedent all decisions of the former Fifth Circuit handed
down prior to October 1, 1981.
6

“jurisdiction is based on a claim for indeterminate damages . . . and the party seeking
to invoke federal jurisdiction bears the burden of proving by a preponderance of the
evidence that the claim on which it is basing jurisdiction meets the jurisdictional
minimum.” Federated Mut. Ins. Co. v. McKinnon Motors, LLC, 329 F.3d 805, 807
(11th Cir. 2003) (citing Tapscott v. MS Dealer Serv. Corp., 77 F.3d 1353, 1356–57
(11th Cir. 1996), abrogated on other grounds by Cohen v. Office Depot, Inc., 204
F.3d 1069, 1072-77 (11th Cir. 2000)).
Grange does not clarify in its complaint which declaratory claim(s) (i.e., the
duty to defend, the duty to indemnify, or both) it relies upon to exceed § 1332(a)’s
$75,000 threshold exclusive of interests and costs. 28 U.S.C. § 1332(a). Grange also
makes no attempt to quantify the value of its declaratory claims and/or the claims at
stake in the Underlying Gadsden and Centre Lawsuits.2
Additionally, as the Underlying Gadsden and Centre Lawsuits are both still
pending and Indian Summer’s liability in those cases (if any) is still uncertain, the
Court has questions about whether Grange’s declarative claim concerning indemnity

2

The Court acknowledges that Grange has attached several documents to its complaint.
(Docs. 1-1 to 1-10). However, it is Grange’s burden to explain–within the jurisdictional section
of its complaint–to what extent (if any) these exhibits substantiate the amount in controversy. See
FED. R. CIV. P. (8)(a)(1) (indicating that “a claim for relief must contain . . . a short and plain
statement of the grounds for the court's jurisdiction[.]”).
7

is ripe for adjudication.3 Compare Am. Fid. & Cas. Co. v. Pennsylvania Threshermen
& Farmers’ Mut. Cas. Ins. Co., 280 F.2d 453, 461 (5th Cir. 1960) (“The District
Court was careful to make his dismissal without prejudice to those further rights, and
it was well within its considered judicial discretion to decline to express legal
opinions on academic theoreticals which might never come to pass.”), and Allstate
Ins. Co. v. Employers Liab. Assur. Corp., 445 F.2d 1278, 1281 (5th Cir. 1971) (“We
have held that no action for declaratory relief will lie to establish an insurer’s liability
in a policy clause contest . . . until a judgment has been rendered against the insured
since, until such judgment comes into being, the liabilities are contingent and may
never materialize.” (citing Am. Fidelity, 280 F.2d at 461)), and Great N. Paper Co.
v. Babcock & Wilcox Co., 46 F.R.D. 67, 70 (N.D. Ga. 1968) (treating Am. Fidelity as
a constitutional dismissal and finding that dispute over indemnity “does not become
a relevant ‘case or controversy’ for judicial purposes until underlying liability is
established”), with Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270,
274, 61 S. Ct. 510, 512, 85 L. Ed. 826 (1941) (concluding that even though the
underlying action was still pending, “[i]t is clear that there is an actual controversy
between the petitioner [i.e., the insurer] and the insured”), and Edwards v. Sharkey,

3

Grange’s duty-to-defend declarative claim is ripe, but depending upon repleader and
briefing may or may not independently satisfy the amount in controversy.
8

747 F.2d 684, 686, 687 (11th Cir. 1984) (describing Am. Fidelity as a discretionary
dismissal, but alternatively indicating that “even if there was no ‘case or controversy’
before the district court because of the lack of a judgment against the insured, the
settlement of the tort actions provides the necessary establishment of the insured’s
liability”), and Alea London Ltd. v. Am. Home Servs., Inc., 638 F.3d 768, 775 n.10
(11th Cir. 2011) (rejecting ripeness challenge on the basis of Maryland Casualty
holding and distinguishing Am. Fidelity as an appeal “involv[ing] how liability for
unresolved claims should be apportioned between several insurance companies”), and
MacMillan-Bloedel, Inc. v. Firemen’s Ins. Co. of Newark, N.J., 558 F. Supp. 596,
599, 600 (S.D. Ala. 1983) (characterizing Am. Fidelity as a discretionary dismissal
and concluding that “[e]ven if the plaintiff had such standing, the court in the exercise
of discretion would decline to entertain the [indemnity] action at this time”), and
Employers Mut. Cas. Co. v. All Seasons Window & Door Mfg., Inc., 387 F. Supp. 2d
1205, 1210 (S.D. Ala. 2005) (“Based on Maryland Casualty, the consistent approach
of other circuits, and the absence of any contrary Eleventh Circuit precedent, the
Court concludes that the complaint presents an ‘actual controversy’ under the Act
despite the absence of a verdict or settlement against the plaintiff’s insureds.”); cf.
also Hartford Cas. Ins. Co. v. Merchants & Farmers Bank, 928 So. 2d 1006, 1013
(Ala. 2005) (agreeing that a duty-to-indemnify determination is “premature” because
9

“[w]hether there is a duty to indemnify under the policy will depend on the facts
adduced at the trial . . . .”).
Further, this Court has recently held in another coverage case (involving both
the duty to defend and the duty to indemnify) that it cannot retain jurisdiction over
an unripe indemnity claim. Instead, the Court must dismiss that claim without
prejudice for lack of subject matter jurisdiction–just as it would with any unripe claim
asserted outside of the insurance coverage context. See Penn-Star Ins. Co. v. Swords,
No. 4:17-CV-1041-VEH, 2017 WL 4180889, at *8-9 (N.D. Ala. Sept. 21, 2017)
(relying upon analysis in Canal Insurance Co. v. INA Trucking, LLC, No. 1:16-CV82-MHT-SRW, 2017 WL 1146984 (M.D. Ala. Mar. 10, 2017), to persuasively
support dismissal of unripe indemnity claim).4
IV.

Conclusion
Accordingly, Grange is HEREBY ORDERED to replead its complaint in a

manner that substantiates the amount-in-controversy component by a preponderance
of the evidence. Grange is further HEREBY ORDERED to brief the Court on the
following issues:5 (i) the reasons why it contends this Court should find that its

4

The parties in Swords agreed that the indemnity claim was not ripe. Swords, 2017 WL
4180889, at *7.
5

Grange must use pinpoint citations to all authorities included in its brief.
10

indemnity claim is both constitutionally and prudentially ripe; (ii) to what extent the
Court (because diversity has been invoked) must (or should) rely upon Alabama law
regarding “premature” indemnity claims to inform its determination concerning
constitutional and prudential ripeness;6 (iii) to what extent the Court may consider the
value of an unripe indemnity claim when evaluating whether the amount-incontroversy prong is met;7 (iv) to what extent the Court may consider the value of the
6

“‘Under the Erie doctrine, a federal court adjudicating state law claims applies the
substantive law of the state.’” Sphinx Intern., Inc. v. National Union Fire Ins. Co. of Pittsburgh,
Pa., 412 F.3d 1224, 1227 (11th Cir. 2005) (quoting Ungaro-Benages v. Dresdner Bank AG, 379
F.3d 1227, 1232 (11th Cir. 2004) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817,
82 L. Ed. 1188 (1938))). Moreover, the substantive law of the state governs the interpretation of
insurance contracts. Provau v. State Farm Mut. Ins. Co., 772 F.2d 817, 819 (11th Cir. 1985).
Hence, the insurance contract issues in this case are governed by Alabama law.
7

If Grange takes the position that this Court can consider the value of an unripe
indemnity claim when evaluating the amount in controversy, it must identify authority that
follows such an approach and also must address the reasoning utilized in the following cases that
hold differently in the context of an unripe bad-faith claim (arising under Florida law). Cf. Brown
v. Safeco Ins. Co. of Illinois, No. 6:13-CV-1982-ORL-31, 2014 WL 1478833, at *1 (M.D. Fla.
Apr. 14, 2014) (“[T]he Court abated Plaintiff’s bad faith claim as premature, and a non-ripe bad
faith claim has zero value with regard to the amount in controversy.”); Marquez v. State Farm
Mut. Auto. Ins. Co., No. 6:14-CV-241-ORL-36, 2014 WL 2968452, at *2 (M.D. Fla. June 30,
2014) (rejecting insurer’s argument that “the Brown decision was based upon the bad faith claim
being abated” and concluding instead that, “the value of Plaintiff's bad faith claim is not
contingent on that claim being dismissed or abated”) (emphasis in original); Wallace v. Geico
Gen. Ins. Co., No. 8:14-CV-1755-T-30AEP, 2014 WL 4540328, at *1 (M.D. Fla. Sept. 11, 2014)
(concluding that in the absence of “a final determination as to liability and damages” with respect
to the underlying claim, “this Court cannot determine that the value of the bad faith claim meets
the jurisdictional threshold of $75,000”); Warner v. Safeco Ins. Co. of Illinois, No.
8:14-CV-2652-T-36TGW, 2014 WL 12614501, at *2 (M.D. Fla. Dec. 15, 2014) (rejecting
“suggesti[on] that the allegations in the bad faith claim may be used to establish the amount in
controversy for the coverage claim”); Montanez v. Integon Indem. Corp., No.
6:15-CV-25-ORL-22KRS, 2015 WL 12839272, at *2 (M.D. Fla. Apr. 1, 2015) (“The Court
agrees with the authorities from within this District finding that a premature bad faith claim has
no present value for purposes of determining the amount of controversy.”); Berg v. Cigna Life
11

declarative claims in both the Underlying Gadsden and Centre Lawsuits collectively;8
and (v) to what extent the Court may discretionarily dismiss this coverage action on
judicial-resource grounds (and assuming that subject matter jurisdiction does exist)
in light of the fact that Grange and Indian Summer–by virtue of their agreement
concerning the absence of coverage–are no longer adverse parties and the remaining
Defendants in this action are in default and, as a consequence of their inactive status,
have taken no position regarding the merits of Grange’s declaratory relief.9
Ins. Co. of New York, No. 2:15-CV-270-FTM-38CM, 2015 WL 12843197, at *1 (M.D. Fla. May
6, 2015) (ordering plaintiff to show cause regarding subject matter jurisdiction given her reliance
upon “her non-ripe bad faith claim to meet the amount in controversy prong”).
8

As Judge Steele observed in All Seasons:

The plaintiff's general allegation that “the amount in controversy . . .
exceeds the sum of $75,000,” (Doc. 1, ¶ 8), does not cover these deficiencies. At
most, it serves as a representation that the cumulative value to the plaintiff of a
declaration absolving it of responsibility to pay verdicts or settlements in four
cases brought against All Seasons and/or WHS totals in excess of $75,000. It is
doubtful, however, that the plaintiff can add the value of such a declaration
vis-a-vis All Seasons to the value of such a declaration vis-a-vis WHS. It is
further unclear whether the plaintiff can add together the value of a declaration for
each of four underlying lawsuits, especially without a showing that such a
declaration would depend on the same considerations in each case.
All Seasons, 387 F. Supp. 2d at 1208 (footnote omitted). Judge Steele ultimately determined that
a discretionary dismissal of the indemnity-only coverage case in All Seasons was appropriate
based upon his understanding of the former Fifth Circuit’s holding in Am. Fidelity. Id. at 121112. However, Judge Steele “would have require[d] briefing on these and related jurisdictional
issues” had “th[e] case [otherwise] survive[d] the movants’ motion to dismiss.” Id. at 1208.
9

See Wilton, 515 U.S. at 290, 115 S. Ct. at 2144 (“We do not attempt at this time to
delineate the outer boundaries of that discretion in other cases, for example, cases raising issues
of federal law or cases in which there are no parallel state proceedings.”) (emphasis added); see
also Scottsdale Ins. Co. v. Detco Indus., Inc., 426 F.3d 994, 999 (8th Cir. 2005) (“We agree with
12

The deadline for Grange to replead and file its brief is no later than December
18, 2017. Any ruling on the Consent Motion is RESERVED pending the Court’s
consideration of Grange’s repleader and briefing efforts. If Grange fails to meet this
deadline and/or fails to adequately demonstrate the existence of subject matter
jurisdiction by a preponderance of the evidence, then this entire action will be
dismissed without prejudice pursuant to FED. R. CIV. P. 12(b)(1).
DONE and ORDERED this 17th day of November, 2017.

VIRGINIA EMERSON HOPKINS
United States District Judge

our sister circuits[, i.e., the Fourth, Sixth, and Tenth] that a federal district court is afforded
greater discretion in determining whether to exercise jurisdiction over a declaratory judgment
action than in other circumstances.”); id. (“We also agree that the district court’s discretion is
limited when no parallel proceedings are pending in state court, because in those circumstances
there are less-pressing interests of practicality and wise judicial administration.”). In Ameritas
Variable Life Ins. Co. v. Roach, 411 F.3d 1328 (11th Cir. 2005), the Eleventh Circuit adopted a
non-exhaustive list of abstention factors for a district court to consider when a parallel case is
pending in state court, id. at 1330-31, “in furtherance of the Supreme Court’s admonitions in
Brillhart [v. Excess Ins. Co. of America, 316 U.S. 491, 62 S. Ct. 1173, 86 L. Ed. 1620 (1942)]
and Wilton.” Ameritas, 411 F.3d at 1331. What remains less clear within the Eleventh Circuit is
the level of discretion and/or framework applicable when a parallel proceeding is absent from the
discretionary equation. Cf. Swords, 2017 WL 4180889, at *6 (“The Court does not need to
analyze the Ameritas factors because this [is] not a case of parallel litigation.”).
13