QBE Insurance Corporation v. Green et al
Filing
33
MEMORANDUM OPINION & ORDER: 1. dft's motion 23 MOTION Requesting this Court to Abstain from Exercising Jurisdiction is GRANTED; 2. all claims are DISMISSED WITH PREJUDICE, each party bearing its own costs and atty's fees; 3. the clerk shall STRIKE THIS MATTER FROM THE ACTIVE DOCKET; 4. the order is FINAL AND APPEALABLE and THERE IS NO JUST CAUSE FOR DELAY. Signed by Judge Joseph M. Hood on 12/23/2014.(LC)cc: COR, D,JC
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION at LEXINGTON
QBE INSURANCE CORPORATION,
)
)
)
)
)
)
)
)
)
)
Plaintiff,
v.
LARRY GREEN and
CLAUDIA GREEN,
Defendants.
Civil Case No.
5:14-cv-300-JMH
MEMORANDUM OPINION
AND ORDER
***
This matter is before the Court upon the motion of the
defendants, Larry and Claudia Green, requesting this Court to
abstain
from
Plaintiff
exercising
filed
a
jurisdiction
memorandum
in
in
this
opposition,
case.
[DE
[DE
30],
23].
and
Defendants filed a reply. [DE 31]. Fully briefed, this matter is
ripe for a decision.
I. Background
This
declaratory
judgment
action
stems
from
a
complaint
brought by A.H. in state court on June 3, 2014 against the
Heritage
Place
Condominium
Association.
A.H.
alleged
damages
arising out of a dog bite she received while at the home of her
grandparents, Larry and Claudia Green, who own a condo in the
Heritage Place complex. On theories of negligence and strict
liability, the complaint claims Heritage Place “harbored the dog
and/or permitted it to remain on” property that Heritage Place
owned. [DE 1-2 at ¶ 3]. Heritage Place subsequently filed a
third-party
complaint
against
the
Greens
in
state
court,
alleging the Greens owned the dog as well as the property where
the
dog
bite
occurred
and
were,
thus,
liable
for
damages
resulting from the dog bite. [DE 1-3 at ¶ 8, 9, 13].
Heritage Place holds a policy of insurance issued by QBE
Insurance Corporation. On July 23, 2014, QBE filed the instant
action with this Court seeking a declaratory judgment on its
duty under the policy to cover the Greens for the underlying
state
court
responsible
claim.
for
the
QBE’s
complaint
Greens’
alleges
insurance
that
coverage
it
for
is
not
several
reasons, one of which is because the alleged injury occurred in
an area owned by the Greens and not subject to coverage under
the policy. [DE 1].
As of the date of this Order, QBE is not a party in the
state court action. However, there is a pending motion before
that court by A.H. for permission to amend her complaint and add
QBE as a defendant, alleging that QBE is obligated to indemnify
the Greens and asserting violations of Kentucky’s Unfair Claims
Settlement Practices Act. [DE 23-2].
The
Greens
ask
this
Court
to
abstain
from
exercising
jurisdiction, arguing that the state court is the better forum
to resolve this matter under Grand Trunk Western Railroad Co. v.
Consolidated Rail Corp., 746 F.2d 323 (6th Cir. 1984) (setting
2
forth
five
factors
to
guide
district
courts
in
determining
whether to exercise their discretion to entertain a declaratory
judgment action). QBE contends that this is the proper forum
according to the Grand Trunk factors. For the reasons stated
herein, the Court will grant Defendants’ motion and abstain from
exercising jurisdiction.
II. Analysis
The Declaratory Judgment Act states in relevant part:
In
a
case
of
actual
controversy
within
its
jurisdiction . . . any court of the United States,
upon the filing of an appropriate pleading, 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.
jurisdiction
discretion.
§
2201(a).
under
Whether
this
a
district
court
statute,
however,
is
exercises
within
its
Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995)
(noting that Congress, through the Act, “created an opportunity,
rather than a duty, to grant a new form of relief to qualifying
litigants”). District courts should consider the following five
factors
in
deciding
whether
to
exercise
jurisdiction
over
declaratory judgment action:
(1) whether the declaratory action would settle the
controversy;
(2) whether the declaratory action would serve a
useful purpose in clarifying the legal relations in
issue;
3
a
(3) whether the declaratory remedy is being used
merely for the purpose of “procedural fencing” or “to
provide an arena for res judicata;”
(4) whether the use of a 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.
Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 554 (6th Cir.
2008) (quoting Grand Trunk, 746 F.2d at 326). Applying these
factors to the instant case, the Court concludes that exercising
jurisdiction in this instance is not proper.
A. Settlement of the Controversy
The
parties’
arguments
illustrate
the
split
within
the
Sixth Circuit as to how this factor is applied. Compare Flowers,
513
F.3d
at
556
(finding
the
first
factor
relates
to
the
settlement of the immediate controversy between the parties in
federal
Prof'l
court),
Associates,
(finding
would
with
the
settle
first
the
Travelers
PLC,
495
factor
Indem.
F.3d
asks
controversy
in
Co.
v.
Bowling
266,
272
(6th
whether
the
court’s
the
underlying
Cir.
Green
2007)
decision
state
court
litigation); see also State Auto Ins. Co. v. Kennedy Homes, LLC,
No. CIV.A. 09-178-DLB, 2011 WL 65880, at *3 (E.D. Ky. Jan. 10,
2011) (discussing the split within the Sixth Circuit).
In
Flowers,
the
Sixth
Circuit
reconciled
the
competing
lines of cases by noting their factual distinctions. Namely, the
4
court explained that a declaratory judgment action in federal
court would not settle the controversy where the controversy
rested on questions already being considered in state court.
Flowers, 513 F.3d at 554-56; see also Bituminous Cas. Corp. v. J
& L Lumber Co., 373 F.3d 807, 813 (6th Cir. 2004) (looking to
settlement
of
the
ultimate
analysis).
Furthermore,
controversy
settlement
of
in
the
the
first
controversy
factor
often
depends on the parties to the action. Where the federal court
plaintiff
is
not
a
party
in
state
court
and
the
issue
of
insurance coverage is not before that court, the federal action
could sufficiently settle the controversy between the parties.
Flowers, 513 F.3d at 556 (citing Northland Ins. Co. v. Stewart
Title Guar. Co., 327 F.3d 448 (6th Cir. 2003)). On the other
hand, where the state court plaintiff is not a party in federal
court, a declaratory judgment would not settle the controversy
because the federal court’s judgment would not be binding as to
the state court plaintiff and could not be used as a basis for a
determination that the matter is res judicata in state court.
Id. (citing Bituminous, 373 F.3d at 808-13).
In the instant matter, a ruling by this Court on the issue
of insurance coverage would necessarily include a finding on
whether the alleged injury occurred on a portion of property
classified as a common area or as property owned by the Greens.
Ownership of the property where the dog bite occurred is also a
5
question before the state court. Thus, a declaration by this
Court could subject the parties to inconsistent findings. In
addition,
the
state
court
plaintiff
is
not
a
party
to
this
action and therefore, this Court’s judgment would not bind her
and
could
not
determination
action
be
used
that
before
in
the
this
state
matter
Court
is
would
court
res
as
the
basis
judicata.
not
In
settle
the
for
sum,
a
the
ultimate
controversy between the parties. See also State Auto Ins. Co.,
2011
WL
65880,
at
*3
(concluding,
original purpose of the
after
Grand Trunk
analyzing
at
the
factors, that the first
factor relates to the ultimate controversy); Nautilus Ins. Co.
v. Grayco Rentals, Inc., No. CIV.A.10-133-ART, 2011 WL 839549,
at
*2
relates
(E.D.
to
Ky.
Mar.
7,
2011)
the
settlement
of
(concluding
the
the
ultimate
first
factor
controversy).
Accordingly, this factor weighs against exercising jurisdiction.
B. Clarification of the Legal Relations at Issue
The second factor “looks to whether the declaratory action
will resolve at least one of the legal relations at issue.”
State Auto Ins. Co., 2011 WL 65880, at *3; Flowers, 513 F.3d at
557 (noting as to the second factor, “we focus only on whether a
federal
declaratory
judgment
will
clarify
the
legal
relationships presented to the district court.”). In that vein,
this factor tips in favor of exercising jurisdiction because the
6
Court’s
determination
would
clarify
the
legal
relationship
between QBE and the Greens.
C. Race for Res Judicata
“The third factor is meant to preclude jurisdiction for
declaratory plaintiffs who file their suits mere days or weeks
before the coercive suits filed by a natural plaintiff and who
seem to have done so for the purpose of acquiring a favorable
forum.” Flowers, 513 F.3d at 558 (quoting AmSouth Bank v. Dale,
386
F.3d
763,
788
(6th
Cir.2004))
(internal
quotation
marks
omitted). “[W]hen the plaintiff has filed his claim after the
state court litigation has begun, we have generally given the
plaintiff
the
benefit
of
the
doubt
that
no
improper
motive
fueled the filing of [the] action.” Id. (internal quotations
marks and citations omitted). Here, there is no evidence that
QBE is attempting to create a race to judgment by bringing this
declaratory judgment action. This matter was brought two months
after the state court action, at which time QBE and the question
of insurance coverage were not before the state court.
Conceding that there is no evidence of improper motive on
the part of QBE, the Greens argue that, where no evidence of
procedural fencing is found, this factor is neutral. However,
the cases differ here too. Where no improper motive is found,
this factor is treated as neutral in some cases, Travelers, 495
F.3d at 272, and weighted in others, Flowers, 513 F.3d at 563.
7
Regardless, the Court finds that this factor, at least, does not
weigh against exercising jurisdiction.
D. Increased Friction Between Federal and State Courts
To
determine
whether
the
exercise
of
jurisdiction
would
increase friction between federal and state courts, the Sixth
Circuit has identified three sub-factors for a district court to
consider:
(1)
whether
the
underlying
factual
issues
important to an informed resolution of the case;
are
(2) whether the state trial court is in a better
position to evaluate those factual issues than is the
federal court; and
(3) 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.
Flowers, 513 F.3d at 560 (quoting Scottsdale Ins. Co. v. Roumph,
211 F.3d 964, 968 (6th Cir. 2000)).
First,
helpful
to
factual
an
issues
informed
before
resolution
the
of
state
this
court
case.
may
The
prove
Greens
concede this sub-factor, noting that the question before the
Court is on the interpretation of an insurance contract and a
matter of law. See Flowers, 513 F.3d at 560 (citing Northland,
327 F.3d at 454) (holding that where issues can be resolved as a
matter of law without factual findings from state court there is
no
friction
between
state
and
8
federal
court).
However,
the
classification of the property on which the dog bite occurred—
whether it is a common area or one reserved for the Greens’
exclusive
use—is
a
mixed
question
of
law
and
fact.
It
also
involves issues before the state court and is a question that
must be answered by this Court to determine insurance coverage.
Accordingly, there are potential factual questions before the
state court that could be important to the resolution of this
case. This sub-factor weighs against exercising jurisdiction.
Second, the state court is in a better position to evaluate
these factual issues than the federal court. The Sixth Circuit
has found that “issues of insurance contract interpretation are
questions of state law with which the Kentucky state courts are
more familiar and, therefore, better able to resolve.” Flowers,
513 F.3d at 561 (collecting cases). However, the Sixth Circuit
has also held that when an insurance company and the issue of
insurance coverage are not before the state court, the federal
court’s exercise of jurisdiction “would not offend principles of
comity.” Northland, 327 F.3d at 454.
Notably, Northland does not stand for the proposition that
when an insurance company is not yet before the state court, the
federal
court
is
the
only
appropriate
forum,
only
that
the
federal court is not an inappropriate forum. Here, QBE is not
currently a party to the state court action, but that is an
available alternative to QBE. See infra, Part II.E. Furthermore,
9
given the overlapping issues before this Court and the state
court and that insurance contract interpretation is generally a
matter of state law with which state courts are familiar, the
state court is in a slightly better position to resolve the
factual issues than this Court. This sub-factor weighs against
exercising jurisdiction.
Third, “[t]he final sub-factor focuses on whether the issue
in the federal action implicates important state policies and
is,
thus,
more
appropriately
considered
in
state
court.”
Flowers, 513 F.3d at 561. The Sixth Circuit has consistently
held that “[i]nterpretation of Kentucky insurance contracts are
guided
by
state
public
policy.”
Id.
(collecting
cases).
The
instant matter concerns only the interpretation of an insurance
contract
and
thus,
this
sub-factor
weighs
against
exercising
jurisdiction.
In sum, all three sub-factors weigh against this Court’s
exercise of jurisdiction in the instant matter. The Court finds
that
the
between
exercise
federal
and
of
jurisdiction
state
courts
would
and
increase
this
friction
weighs
against
exercising jurisdiction.
E. Availability of Alternative Remedy
This factor not only asks whether there is an alternative
remedy, but whether it is better or more effective. Grand Trunk,
746
F.2d
at
326.
As
stated
10
previously,
the
state
court
plaintiff’s motion to amend her complaint is still pending in
that court and, depending on the court’s ruling, QBE may be
added as a defendant in that action. This would provide one
alternative remedy, because QBE would be a party in state court
and
the
issues
Regardless,
of
Kentucky
insurance
law
coverage
provides
for
before
a
that
similar
court.
declaratory
judgment action to plaintiffs like QBE, see KRS § 418.040, and
QBE may also file an indemnity action at the conclusion of the
state court proceedings.
Although other courts have found that alternatives such as
these
in
state
court
are
not
necessarily
better
or
more
effective, see Northland, 327 F.3d at 454, the Court finds that
in the instant matter the opposite is true. The same question is
before this Court and the state court: whether the dog bite
occurred on property the Greens owned or whether it occurred on
a common area. If this Court retains jurisdiction, there is a
risk that the state and federal courts will come to opposite
conclusions on that question. This result would not be helpful
to any party, and it follows that an alternative adjudication in
state court would be better and more effective. Therefore, this
factor weighs against exercising jurisdiction.
III. Conclusion
Given that three of the five
Grand Trunk
factors weigh
against this Court exercising jurisdiction in the instant matter
11
and considering the issues discussed herein, the Court will not
exercise jurisdiction of this declaratory judgment action.
Accordingly, IT IS ORDERED:
(1)
that
Defendant’s
Motion
Requesting
This
Court
to
Abstain From Exercising Jurisdiction, [DE 23], is GRANTED;
(2)
that
PREJUDICE,
all
each
claims
party
in
this
bearing
action
his
or
are
its
DISMISSED
own
WITH
costs
and
FROM
THE
attorneys’ fees associated with this action;
(3)
that
the
Clerk
shall
STRIKE
THIS
MATTER
ACTIVE DOCKET;
(4) that this Order is FINAL AND APPEALABLE and THERE IS NO
JUST CAUSE FOR DELAY.
This the 23rd day of December, 2014.
12
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