CAMICO Mutual Insurance Company v. J.D. Rosen C.P.A., P.A. et al

Filing 46

MEMORANDUM AND ORDER finding as moot 42 Motion to Amend Complaint; and granting 25 26 Defendants' Motions to Dismiss. This action is dismissed accordingly. Signed by District Judge John W. Lungstrum on 09/01/2017. (ses)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

CAMICO MUTUAL INSURANCE
COMPANY,

)
)
)
Plaintiff,
)
)
v.
)
)
J.D. ROSEN C.P.A., P.A.;
)
JEFFREY D. ROSEN; and
)
JAMES MIRABILE, M.D.,
)
)
Defendants.
)
)
_______________________________________)

Case No. 17-2228-JWL

MEMORANDUM AND ORDER
This matter comes before the Court on defendants’ motions to dismiss (Doc. ##
25, 26). The Court agrees that it should, in its discretion, decline to exercise jurisdiction
in this declaratory judgment action. Accordingly, the Court grants the motions, and it
dismisses the action.1

I.

Background

Plaintiff CAMICO Mutual Insurance Company (“CAMICO”), a California
insurer, issued a professional liability insurance policy to J.D. Rosen C.P.A., P.A., an

1

After the present motions had been briefed, plaintiff moved to amend its
complaint. The proposed amendments would not affect the outcome of this motion;
accordingly, the motion to amend (Doc. # 42) is denied as moot.

accounting firm. In December 2016, the insured and its principal, Jeffrey Rosen
(collectively “Rosen”), notified CAMICO that a claim had been made against them by
James Mirabile. Dr. Mirabile, a physician, had been the subject of a Department of
Labor (DOL) investigation relating to two employee benefit plans, which resulted in the
entry of a consent judgment against Dr. Mirabile in this Court in December 2016.
CAMICO declined coverage for Dr. Mirabile’s claims against Rosen. On April 4, 2017,
CAMICO received a demand from Dr. Mirabile that included a draft petition for a
lawsuit against Rosen in the Circuit Court for Jackson County, Missouri, and CAMICO
again declined coverage.
On April 20, 2017, CAMICO filed the instant action against Rosen and Dr.
Mirabile (individually and as trustee of the two employee plans). CAMICO seeks a
declaratory judgment to the effect that Dr. Mirabile’s claims against Rosen are not
covered under the policy.
After CAMICO declined coverage, Dr. Mirabile and Rosen agreed to binding
arbitration of the claims and further entered into a non-execution agreement under
Missouri law to limit the exposure of Rosen’s assets. The arbitration was conducted on
May 12, 2017, in Missouri. On May 26, 2017, the arbitrator issued his decision, by
which he awarded damages to Mr. Mirabile in the total amount of $4,852,825. On June
27, 2017, the Jackson County Circuit Court issued an order and judgment confirming the
award against Rosen.
Dr. Mirabile and Rosen filed the instant motions to dismiss on July 10, 2017.
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Those motions anticipated the filing by Dr. Mirabile in the Missouri court a garnishment
action against Rosen and CAMICO under Missouri law, which action would be filed
once the requisite 30 days had passed since the confirmation of the arbitration award.
Rosen also stated that it intended to assert cross-claims against CAMICO in the Missouri
action. In their reply brief, filed on August 11, 2017, defendants confirmed that the
garnishment action against CAMICO had indeed been filed in the Missouri court.

II.

Analysis

In seeking dismissal, defendants argue that the Court should exercise its discretion
to decline jurisdiction over this declaratory judgment action in light of the action against
CAMICO in the Missouri state court, in which any issues concerning coverage under the
policy would be addressed. The federal Declaratory Judgment Act confers on district
courts “‘unique and substantial discretion’ in determining whether to declare the rights
of litigants when duplicative state proceedings exist.” See United States v. City of Las
Cruces, 289 F.3d 1170, 1179-80 (10th Cir. 2002) (quoting Wilton v. Seven Falls Co., 515
U.S. 277, 286-87 (1995)). In Brillhart v. Excess Insurance Co. of America, 316 U.S. 491
(1942), the Supreme Court set forth a few relevant factors as follows:
Where a district court is presented with a claim such as was made
here, it should ascertain whether the questions in controversy between the
parties to the federal suit, and which are not foreclosed under the
applicable substantive law, can better be settled in the proceeding pending
in the state court. This may entail inquiry into the scope of the pending
state court proceeding and the nature of defenses open there. The federal
court may have to consider whether the claims of all parties in interest can
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satisfactorily be adjudicated in that proceeding, whether necessary parties
have been joined, whether such parties are amenable to process in that
proceeding, etc.
See id. at 495; accord City of Las Cruces, 289 F.3d at 1186-87 (listing Brillhart factors).
The Tenth Circuit has adopted a list of five factors (the Mhoon factors) to be evaluated:
[1] whether a declaratory action would settle the controversy; [2] whether
it would serve a useful purpose in clarifying the legal relations at issue; [3]
whether the declaratory remedy is being used merely for the purpose of
procedural fencing or to provide an arena for a race to res judicata; [4]
whether use of declaratory action would increase friction between our
federal and state courts and improperly encroach upon state jurisdiction;
and [5] whether there is an alternative remedy which is better or more
effective.
City of Las Cruces, 289 F.3d at 1187 (brackets in original) (quoting State Farm Fire &
Cas. Co. v. Mhoon, 31 F.3d 979, 983 (10th Cir. 1994)). The parties agree that the Court
should consider the Brillhart and Mhoon factors in deciding defendants’ motions to
dismiss this case.
In opposing the motions, CAMICO argues that Brillhart recommends accepting
jurisdiction here because it is not subject to personal jurisdiction in the Missouri court.
CAMICO argues that it is not subject to specific jurisdiction in Missouri because it has
not had the requisite “minimum contacts” with that state to satisfy due process.2
CAMICO notes that it insured a Kansas resident (Rosen) who provided services for
another Kansas resident (Dr. Mirabile). CAMICO has failed to address, however, the

2

Because CAMICO has not argued that jurisdiction fails under the Missouri longarm statute or under the reasonableness prong of the due process analysis, the Court has
not addressed those requirements for jurisdiction.
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facts that its policy imposed on it a duty to defend and settle covered claims; that that
duty applied to claims made anywhere in the world; that Dr. Mirabile provided notice
that it intended to assert claims against the insured in a Missouri court; that Dr. Mirabile
won an arbitration award in Missouri; that the arbitration decision indicated that some
of the negligent acts took place in Missouri and harmed Missouri residents; and that Dr.
Mirabile subsequently obtained a judgment against the insured in a Missouri court. The
federal circuit courts appear to be unanimous in concluding that the minimum-contacts
standard is satisfied against an insurer with respect to coverage of legal claims asserted
in the forum state in such circumstances. See, e.g., TH Agriculture & Nutrition, LLC v.
Ace European Group Ltd., 488 F.3d 1282, 1291 (10th Cir. 2007); McGow v. McCurry,
412 F.3d 1207, 1215 (11th Cir. 2005); Ferrell v. West Bend Mutual Ins. Co., 393 F.3d
786, 791 (8th Cir. 2005); Payne v. Motorists’ Mutual Ins. Cos., 4 F.3d 452, 455-56 (6th
Cir. 1993); Farmers Ins. Exch. v. Portage La Prairie Mutual Ins. Co., 907 F.2d 911, 914
(9th Cir. 1990); Rossman v. State Farm Mutual Auto. Ins. Co., 832 F.2d 282, 286-87 (4th
Cir. 1987); Eli Lilly & Co. v. Home Ins. Co., 794 F.2d 710, 720-21 (D.C. Cir. 1986). In
the absence of contrary authority, this Court cannot presume that the Missouri state court
would reach a different conclusion. Thus, although the Court does not decide the issue
of the Missouri court’s jurisdiction over CAMICO, it does, for purposes of considering
the Brillhart factors, reject CAMICO’s argument that a lack of minimum contacts will
preclude the exercise of jurisdiction over it in the pending Missouri case.
The Court concludes that the relevant factors weigh in favor of allowing the state
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court to resolve all of the parties’ claims in one action under Missouri law. See MidContinent Cas. Co. v. Greater Midwest Builders, Ltd., 2011 WL 5597329 (D. Kan. Nov.
17, 2011) (weighing Mhoon factors to reach the same conclusion in a similar case), aff’d
sub nom Mid-Continent Cas. Co. v. Village at Deer Creek Homeowners Ass’n, Inc., 685
F.3d 977 (10th Cir. 2012) (district court acted within its discretion in declining
jurisdiction). The coverage issues raised in this action will necessarily be decided in the
action on the policy in the Missouri court, and the present action will not necessarily
dispose of defendants’ affirmative claims against CAMICO. CAMICO argues that
defendants could assert those claims as counterclaims in the present declaratory
judgment action, but it has not shown that defendants cannot pursue those claims in
Missouri. Thus, the present action does not eliminate the possibility of duplicative (and
potentially inconsistent) proceedings in different courts, which thus tilts the balance of
the Brillhart and Mhoon factors in defendants’ favor. See id.
CAMICO also argues that the policy must be interpreted in accordance with
Kansas law, not Missouri law, under either state’s choice-of-law principles. That fact
does not weigh in favor of accepting jurisdiction, however, as Dr. Mirabile’s
garnishment action is brought pursuant to Missouri statute, and either court can ably
apply Kansas law to interpret the policy.
Finally, CAMICO argues that the third Mhoon factor weighs in its favor because

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defendants have engaged in “procedural fencing” in this case.3 The Court does not
agree. Dr. Mirabile did not delay unreasonably after the DOL judgment in making his
demand on CAMICO and then in conducting an arbitration and obtaining a judgment in
a very short time period (and then waiting the required 30 days to bring the action
against CAMICO). To the contrary, any “racing” was done by CAMICO, who filed in
this Court shortly after receiving a draft complaint from Dr. Mirabile for an action in
Missouri state court.4
Thus, the Court concludes that the relevant factors weigh in defendants’ favor,
and the Court, in its discretion, declines to exercise jurisdiction over CAMICO’s
declaratory judgment action. The Court therefore grants the motions to dismiss this
action.

IT IS THEREFORE ORDERED BY THE COURT THAT defendants’ motions
to dismiss (Doc. ## 25, 26) are hereby granted, and this action is dismissed accordingly.

IT IS SO ORDERED.

3

Under this factor, the motives of all parties may be considered. See MidContinent, 685 F.3d at 984-85.
4

As explained in Mid-Continent, the “first-to-file” rule does not apply in this case
involving a suit in federal court and another in state court, and any considerations of
timing are best addressed under the fourth Mhoon factor. See Mid-Continent, 685 F.3d
at 985-86. The present action in this Court creates a risk of interference with the
Missouri court, in light of the claims that will be resolved in that court, and this factor
therefore weighs in favor of dismissal here.
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Dated this 1st day of September, 2017, in Kansas City, Kansas.
s/ John W. Lungstrum
John W. Lungstrum
United States District Judge

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