Certain Underwriters At Lloyds, London v. Borden

Filing 31

MEMORANDUM OPINION: The court DENIES Borden's motion to dismiss amended complaint for lack of jurisdiction 18 . Parties have until on or before September 11, 2024 to file briefs on whether the court should abstain from exercising jurisdiction because of the ongoing state court litigation. Signed by Judge Corey L Maze on 9/3/2024. (LCB)

FILED
2024 Sep-03 PM 03:30
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ALABAMA
MIDDLE DIVISION
CERTAIN UNDERWRITERS
AT LLOYDS, LONDON
Plaintiff,
v.

Case No. 4:23-cv-1462-CLM

ROGER BORDEN d/b/a
MOUNTAIN LAKE HOME
BUILDERS,
Defendant.
MEMORANDUM OPINION
Certain Underwriters at Lloyds, London (“Lloyds”) asks this court
to declare that Lloyds had no duty to defend Roger Borden in a lawsuit
that Borden won in state court. (Doc. 16). Borden moves to dismiss for lack
of jurisdiction. (Doc. 18). As explained below, the court has jurisdiction
and thus DENIES Borden’s motion. But the court orders the parties to
brief whether this court should abstain from exercising its jurisdiction so
that the issue can instead be litigated in state court. See Borden v. Certain
Underwriters at Lloyd’s London, et al., Case No. 11-cv-2023-900500
(Calhoun Cnty. Cir. Ct. 2023).
BACKGROUND
A. The Ramsey lawsuit
This case stems from a disagreement about home construction.
Kelley Ramsey (not a party here) hired Roger Borden to build her home
for around $195,000. Ramsey claimed that Borden abandoned the job
before completion, thus leaving her with a defective, incomplete home. So
Ramsey sued Borden in state court. See Ramsey v. Borden, Case No. cv2020-900037 (Calhoun Cnty. Cir. Ct. 2023) (“Ramsey lawsuit”).

B. Borden’s defense
Lloyds insured Borden at the time of construction. Borden’s policy
required Lloyds to defend Borden in any “suit” that could result in Borden
being “legally obligated to pay as damages because of ‘bodily injury’ or
‘property damage’ . . . caused by an ‘occurrence’.” (Doc. 16, p. 44). Citing
this provision, Borden asked Lloyds to defend him in the Ramsey
litigation. Lloyds declined because, in Lloyds’ judgment, Ramsey’s claims
of faulty workmanship and abandonment did not constitute a covered
“occurrence.” So Borden defended the case without Lloyds and won a
defense verdict. According to Lloyds’ complaint, Borden incurred about
$115,000 in defense costs. (Doc. 16, p. 5).
C. Dual Lawsuits about Coverage
Both sides have filed lawsuits against each other to determine
whether Lloyds must reimburse Borden’s litigation costs.
1. Federal Dec Action: Lloyds filed first, asking this court to enter a
declaratory judgment that it was not required to defend Borden in the
Ramsey litigation. (Docs. 1, 16). Borden has moved the court to dismiss for
lack of jurisdiction. (Doc. 18). After briefing, Borden also raised the
notion—but did not file a formal motion or request—that the court should
abstain from exercising jurisdiction (if it exists) so that the state courts
could decide the issue as part of the lawsuit that Borden filed 11 days after
Lloyds filed this case.
2. State court litigation: Just after Lloyds filed this case, Borden
sued Lloyds and two other insurers (Hannover and Holloway Insurance),
seeking compensatory and punitive damages for failing to defend him in
the Ramsey litigation. See Borden v. Certain Underwriters at Lloyd’s
London, et al., Case No. 11-cv-2023-900500 (Calhoun Cnty. Cir. Ct. 2023).
The parties are in discovery in that case. See (Docs. 27-1, 29).

STANDARD OF REVIEW
When a claim is challenged for lack of subject matter jurisdiction
under Federal Rule of Civil Procedure 12(b)(1), the party bringing the
claim bears the burden of establishing proper subject matter jurisdiction.
Sweet Pea Marine, Ltd. v. APJ Marine, Inc., 411 F.3d 1242, 1247 (11th
Cir. 2005). And “[i]f the plaintiff fails to shoulder that burden, the case
must be dismissed.” Williams v. Poarch Band of Creek Indians, 839 F.3d
1312, 1314 (11th Cir. 2016) (citing In re Trusted Net Media Holdings, LLC,
550 F.3d 1035, 1042 (11th Cir. 2008)).
DISCUSSION
A. Subject matter jurisdiction
Borden argues that the court lacks subject matter jurisdiction for
two reasons: (1) the amount in controversy does not exceed $75,000, thus
precluding diversity jurisdiction, and (2) Lloyds seeks an advisory opinion,
rather than presenting an actual case or controversy. The court addresses
Borden’s arguments in the order he presented them.
1. Amount in controversy
The parties are completely diverse, so the only question is whether
the value of this case exceeds $75,000. See 28 U.S.C. § 1332.
In a declaratory judgment action about an insurer’s duty to defend,
“the amount in controversy is determined by the value of the total cost of
the defense[.]” Four Season Trucking Inc. v. Grange Mut. Cas. Co., No. 2312013, 2024 WL 1635692, at *2 (11th Cir. Apr. 16, 2024). In its complaint,
Lloyds pleads that Borden’s defense costs were “approximately $115,000.”
(Doc. 16, ¶23). And after Borden challenged the court’s jurisdiction, Lloyds
provided copies of Borden’s invoices that exceed $100,000. 1 (Doc. 27-1, pp.
17-75).

1 Because Borden moved to dismiss for lack of subject matter jurisdiction by mounting a factual
attack on the complaint (i.e., considering settlement offers outside the pleadings), the court can
consider matters outside the pleadings when ruling on the motion. Morrison v. Amway Corp.,
323 F.3d 920, 924 n.5 (11th Cir. 2003); Penn. Nat. Mut. Cas. Ins. v. Roberts Bros., 550 F. Supp.

Based on Lloyds’ pleading and evidence, Borden could recover more
than $75,000 from Lloyds if the court declares that Lloyds had a duty to
defend. That’s enough to satisfy the amount in controversy requirement,
and usually the inquiry would stop here.
But Borden points to a different number: The amount of
compensatory damages Borden seeks from Lloyds in his ongoing state
case against three insurance companies—i.e., Lloyds, Hannover, and
Holloway Insurance. Borden says that he does not seek more than $75,000
from Lloyds in the state case, and he offered to settle Lloyds’ portion of
the damages for $74,999 (Doc. 18, p. 4). Lloyds did not accept the $74,999
offer and instead filed this suit.
The court finds that Borden’s splitting of damages among parties
during negotiations does not affect federal jurisdiction. Again, “the
amount in controversy is determined by the value of the total cost of
the defense[.]” Four Season Trucking, 2024 WL 1635692, at *2 (emphasis
added). The value of the total cost here exceeds $75,000. Plus, it’s possible
that Borden could succeed only against Lloyds in the state court case, or
Borden could choose to drop the other insurers as defendants and seek to
recover only from Lloyds (perhaps forcing Lloyds to seek indemnity from
the others). In any case, the value of the case to Lloyds could exceed
$75,000, and that’s all that matters here.
2. Case or Advisory opinion
Next, Borden argues that Lloyds seeks an advisory opinion, rather
than resolution of a case or controversy.
1. The law: Article III limits federal court jurisdiction to the
consideration of “Cases” or “Controversies.” U.S. Const. art. III, § 2, cl. 1.
“Echoing the ‘case or controversy’ requirement of Article III, the
Declaratory Judgment Act ‘provides that a declaratory judgment may
only be issued in the case of an actual controversy.’” A&M Gerber
Chiropractic LLC v. GEICO Gen. Ins., 925 F.3d 1205, 1210 (11th Cir.
2019) (citations omitted). “In order to demonstrate that there is a case or
controversy that satisfies Article III’s standing requirement when a
2d 1295, 1304 (S.D. Ala. 2008) (citing Tanner v. State Farm Fire & Cas. Co., 874 So. 2d 1058,
1063-64 (Ala. 2003)).

plaintiff is seeking declaratory relief . . . the plaintiff must allege facts
from which it appears that there is a ‘substantial likelihood that he will
suffer injury in the future.’” Id. (citing Malowney v. Fed. Collection Deposit
Grp., 193 F.3d 1342, 1346 (11th Cir. 1999)). In the insurance coverage
context, actions for a declaratory judgment may be justiciable where there
has been “at least a threat of a claim or lawsuit.” Progressive Mountain
Ins. v. Middlebrooks, 805 F. App’x 731, 734 (11th Cir. 2020) (citing Atlanta
Gas Light Co. v. Aetna Cas. & Sur. Co., 68 F.3d 409, 415-16 (11th Cir.
1995)); see also Am. Ins. v. Evercare Co., 430 F. App’x 795, 798-99 (11th
Cir. 2011) (finding an active controversy where an insurance company
insurer denied coverage and the insured demanded it, despite that the
insured had not followed up its demand with a lawsuit).
2. Application: Borden has not only threatened a claim or lawsuit
over Lloyds’ refusal to defend, id., he demanded payment (doc. 20, p. 3),
then sued Lloyds in state court when Lloyds refused. So Lloyds has shown
that it could suffer an injury if a court finds that it had a duty to defend
Borden in the Ramsey litigation.
In short, Borden’s point that the state court could decide the same
issue doesn’t strip this court of jurisdiction; it proves Lloyds’ point that
there is an active controversy over its denial of coverage. Borden’s better
point is that this court doesn’t have to exercise its jurisdiction given the
state court litigation.
B. Abstention
The Declaratory Judgment Act is “an enabling Act, which confers a
discretion on courts rather than an absolute right upon the litigant.”
Ameritas Variable Life Ins. v. Roach, 411 F.3d 1328, 1330 (11th Cir. 2005)
(quoting Wilton v. Seven Falls Co., 515 U.S. 277, 287 (1995)). The
Supreme Court has found 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. (quoting
Brillhart v. Excess Ins. of Am., 316 U.S. 491, 495 (1942)).

After briefing closed on Borden’s motion to dismiss, Lloyds filed a
status report about the state court litigation. See (Doc. 27). In his response
to that report, Borden opined (but did not formally move) that this federal
court abstain from exercising its jurisdiction so that the denial of coverage
issue could play out in the state court litigation.
Borden may be right that abstention is preferable here. But the
parties have not fully briefed the issue. So the court orders the parties to
simultaneously file briefs about abstention, limited to 10 pages (doublespaced, 14-point font), by September 11, 2024. Among other things, the
briefs should address these factors announced by the Eleventh Circuit:
(1) the strength of the state’s interest in having the issues
raised in the federal declaratory action decided in the state
courts;
(2) whether the judgment in the federal declaratory action
would settle the controversy;
(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 case;
(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 action.
Ameritas Variable Life, 411 F.3d at 1330-31. Unless the court orders
otherwise after reviewing the briefs, the court will not accept responses or
reply briefs.
CONCLUSION
For the reasons stated within, the court DENIES Borden’s motion
to dismiss Certain Underwriters’ amended complaint for lack of
jurisdiction. (Doc. 18).
The parties have until on or before September 11, 2024, to file
briefs on whether the court should abstain from exercising jurisdiction
because of the ongoing state court litigation.
DONE and ORDERED on September 3, 2024.

_________________________________
COREY L. MAZE
UNITED STATES DISTRICT JUDGE