National Casualty Company et al v. Dequeen, Inc.
ORDER AND REASONS granting DeQueen's 9 Motion to Dismiss. It is ORDERED that the instant matter is DISMISSED WITHOUT PREJUDICE. Signed by Judge Carl Barbier on 11/12/2013. (Reference: 13-5611)(gec, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
NATIONAL CASUALTY CO. ET AL
NO: 13-5611 c/w
Applies to 13-5611
SECTION: "J" (4)
ORDER AND REASONS
Before the Court is Defendant DeQueen, Inc. ("DeQueen")'s
Motion to Dismiss (Rec. Doc. 9), Plaintiffs National Casualty
Company ("National") and American Alternative Insurance Corporation
Doc. 16), DeQueen's reply (Rec. Doc. 21), and Insurers' sur-reply
(Rec. Doc. 23). DeQueen's motion was set for hearing on November
memoranda of counsel, the record, and the applicable law, the
Court finds that DeQueen's motion should be GRANTED for reasons
set forth more fully below.
FACTS AND PROCEDURAL HISTORY
This matter arises out of a dispute over the Insurers'
denial of coverage. Insurers issued DeQueen a policy of insurance
identified captains to be on board the vessel at all times. At
some point, the F/V DEQUEEN sank, DeQueen filed a claim with
Insurers, and Insurers denied coverage because neither of the
captains listed in the Policy were aboard the vessel at the time
it sank. Just under a year later, Insurers filed an action in
this Court seeking a declaratory judgment that their denial of
coverage was proper. DeQueen seeks to dismiss Insurer's action in
the instant motion.
LEGAL STANDARD & DISCUSSION
In its motion to dismiss, DeQueen asks the Court to abstain
declaratory judgment. Plaintiff argues that abstention is not
warranted because the abstention analysis set out in Orix v.
Credit Alliance, Inc. v. Wolfe, 212 F.3d 891, 895 (5th Cir. 2000)
weighs in favor of this Court exercising its jurisdiction to
decide this controversy. Upon consideration of the three-step
analysis described in Orix, discussed in detail below, the Court
finds that abstention is warranted, thus DeQueen's motion to
dismiss must be granted.
The Declaratory Judgment Act provides, 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. § 2201(a). In Wilton v.
Seven Falls, the Supreme Court made it clear that, because the
Declaratory Judgment Act is “ ‘an enabling Act, which confers a
discretion on the courts rather than an absolute right upon the
litigants.” Wilton v. Seven Falls Co., 515 U.S. 277, 287-88
(1995). Even when a declaratory action is justiciable and within
the Court's authority to decide, the Court must still determine
whether to exercise its discretion to decide or dismiss the
action. Sherwin-Williams Co. v. Holmes County, 343 F.3d 383, 387
(5th Cir.2003)(citing Orix, 212 F.3d at 895.).
The Fifth Circuit has identified a three-step inquiry for
Sherwin–Williams Co., 343 F.3d at 387. The first step requires a
determination of whether the declaratory action is justiciable.
Cir.1989)). “Second, if it has jurisdiction, then the district
declaratory relief in the case presented. Orix, 212 F.3d at 895
(citing Travelers Ins. Co. v. La. Farm Bureau Fed'n, Inc., 996
F.2d 774, 776 (5th Cir.1993). “Third, the court has to determine
how to exercise its broad discretion to decide or dismiss a
Travelers, 996 F.2d at 778).
A federal court will not have subject matter jurisdiction
and “may not issue a declaratory judgment unless there exists an
‘actual controversy.’" Am. States Ins. Co. v. Bailey, 133 F.3d
363, 368 (5th Cir.1998). In this case, it is clear that there is
an actual controversy. DeQueen has made an actual demand for
coverage. Thus, the Insurers need not sit idly by and wait to be
sued regarding this denial because the purpose of the Declaratory
Judgment Act is "to afford one threatened with liability an early
adjudication without waiting until his adversary should see fit
vehicle also is intended to provide a means of settling an actual
controversy before it ripens into a violation of the civil or
criminal law, or a breach of a contractual duty." Id. Therefore,
this is a justiciable claim.
B. Authority to Grant Declaratory Judgment
A district court lacks authority to consider the merits of a
declaratory judgment action when: (1) the declaratory defendant
previously filed a cause of action in state court; (2) the state
case involved the same issues as those in the federal court; and
(3) the district court is prohibited from enjoining the state
proceedings under [the Anti-Injunction Act, 28 U.S.C. § 2283]."
Nat'l Cas. Co. v. Tom's Welding, Inc., No. 11-3101, 2012 WL
2064451 (E.D. La. June 7, 2012) (Africk, J.) (emphasis added).
"This [analysis] is essentially a determination of whether there
are competing state and federal proceedings, and whether the
district court is prohibited from intruding in the state action
under the Anti-Injunction Act." Allstate Texas Lloyds v. Sawyer,
No. 07-0360, 2007 WL 2471057 (N.D. Tex. Aug. 31, 2007); Royal
Ins. Co. of Am. v. Quinn-L Capital Corp., 3 F.3d 877, 883 (5th
Cir. 1993) (“[i]f an injunction would be barred by § 2283, this
should also bar the issuance of a declaratory judgment that would
have the same effect as enjoining a state court action.")
Treating the third prong of this analysis first, the Court
finds that the Anti-Injunction Act would bar this Court from
hearing this action. In Royal, the Fifth Circuit discussed the
declaratory judgment is filed in federal court before the state
court action is filed. Royal, 3 F.3d at 885 (emphasis added). It
was first noted that:
A circuit split exists on the question of whether the
Act has any application where the injunction is sought
before a state suit has been filed but is not issued
until after a state suit was filed. Three circuits have
adopted the rule that the Act does not apply where the
federal suit is filed first. Two circuits, on the other
hand, have held that the Act should be applied to the
case as it stands, regardless of the order in which the
actions were filed.
Id. at 884. Following an analysis of these two rules, the Fifth
Circuit held that "that the Act applies regardless of when the
federal and state suits were filed." Id. Therefore, even though
DeQueen filed in state court after the Insurers filed in federal
court, the Court must conduct its analysis according to the
current posture of the proceedings. Because there is a pending
applies to this suit.
The second element asks whether the state court and federal
court proceedings involve the same issues. Both proceedings in
this matter arise from the same incident – the sinking of the F/V
DEQUEEN and subsequent denial of coverage. The Insurers' federal
court proceeding narrows the issue to whether their denial of
coverage was proper. DeQueen's state court suit, though it is
styled as a breach of contract action, also includes tort claims
for alleged misrepresentations on the Policy documents.
the state court suit involves broader issues, it is likely that
these same issues would arise in the federal court action for
involve essentially the same claims.
Finally, the remaining prong asks whether there was a state
court proceeding filed prior to the federal action. Facially,
this prong is not met because at the time that Insurers filed
suit in federal court, there was no state court action pending.
Thus, the Court would have authority to hear the suit. But,
considering that the overall purpose of this step of the analysis
is to determine "whether there are competing state and federal
proceedings, and whether the district court is prohibited from
intruding in the state action under the Anti-Injunction Act," the
jurisdiction is difficult to reconcile with our prior conclusion
that the Anti-Injunction Act would bar this suit. Allstate Texas
Lloyds, 2007 WL 2471057. However, because the application of the
Trejo factors in the third step of the analysis will nonetheless
whether it has authority to hear this case. See American Sec.
Ins. Co. v. Penwright, 456 F.Supp.2d 753, 757 (E.D. La. Oct. 10,
2006) (Barbier, J.) (declining to extend jurisdiction even where
the state court action was filed second because the Trejo factor
weighed in favor of abstaining.)
C. Trejo Factors
The Court must now consider the seven factors identified in
St. Paul Insurance Company v. Trejo, 39 F.3d 585 (5th Cir. 1994).
1. Factors One and Seven
These factors ask the Court to determine whether there is a
pending state action in which all of the matters in controversy
may be fully litigated and whether the federal court is being
called on to construe a state judicial decree involving the same
parties and entered by the court before whom the parallel state
suit between the same parties is pending. Sherwin-Williams Co.,
343 F.3d at 388. The Court is not asked to construe a state
judicial decree; and, it has been held that factors one and seven
apply in a similar manner when the Court is "not being called on
to construe a state judicial decree involving the same parties,"
thus the Court will consolidate these two factors. Tom's Welding,
Inc., 2012 WL 2064451.
These factors weigh in favor of abstention. Insurers make
repeated reference to the fact that there is no state court
action pending, thus abstention is not merited. But, in light of
the Court's recent remand of DeQueen's action to state court, the
Insurers argument is no longer viable. (Rec. Doc. 30) Now, there
is a pending state court action arising from the same state law
Employers' Liab. Assur. Corp. v. Mitchell, 211 F.2d 441, 443 (5th
Cir. 1954) ("The respective dates of filing do not always furnish
circumstances at the time of the determination are such as to
make useless the further prosecution of the suit for declaratory
judgment."); Sherwin-Williams Co., 343 F.3d at 394 ("the presence
or absence of a pending parallel state proceeding is an important
factor"); Tom's Welding, Inc., 2012 WL 2064451 at *6 ("if the
federal declaratory judgment action raises only issues of state
law and a state case involving the same state law issues is
pending, generally the state court should decide the case and the
2. Factors Two, Three, and Four
Trejo factors two, three, and four ask whether the plaintiff
filed suit in anticipation of a lawsuit filed by the defendant,
whether the plaintiff engaged in forum shopping in bringing the
suit, and whether possible inequities in allowing the declaratory
plaintiff to gain precedence in time or to change forums exist.
Sherwin-Williams Co., 343 F.3d at 388.
These factors weight slightly against abstention as there is
advantage or to make it to the courthouse steps before DeQueen
could. In fact, as Insurers point out in their brief, they waited
until almost one year after the denial of coverage to file suit.
This fact distinguishes the instant matter from Tom's Welding
wherein the Court found it proper to abstain when the defendants
rushed to file a declaratory judgment action just days after the
denial of coverage.
Tom's Welding, Inc., 2012 WL 2064451 at *6.
3. Factor Five
Factor five asks whether federal court is a convenient forum
for the parties and witnesses, and the Court finds that this
factor is neutral. Sherwin-Williams Co., 343 F.3d at 388. DeQueen
repeatedly states that it is willing and able to litigate this
suit in federal court, and the two courts at issue are within one
mile of each other. Therefore, this factor does not add any
weight to either side of the analysis.
4. Factor Six
Factor six considers whether retaining the lawsuit would
serve the purposes of judicial economy. Sherwin-Williams Co., 343
F.3d at 388.
In this matter, retaining jurisdiction over the
judicial economy because the state court and this Court would
have to engage in simultaneous litigation on substantially the
same issues. And, because the state court action involves a nondiverse defendant,1 this Court cannot hear claims regarding that
party, thus we must defer to the state court. Therefore, because
"[a] federal district court must consider efficiency and 'avoid
duplicative or piecemeal litigation where possible,' this factor
weighs in favor of abstention. Tom's Welding, Inc., 2012 WL
2064451 at *6.
Reviewing the above-analyzed factors, factors one, six, and
seven weigh in favor of abstention, whereas factors two, three,
and four weigh against abstention. Factor five does not favor one
judicial economy and the existence of a pending state court
action outweigh the slight weight of the finding that Insurers
are not seeking a procedural advantage, this Court will exercise
its discretion to abstain. See Penwright, 456 F.Supp.2d at 757.
DeQueen's Motion to Dismiss (Rec. Doc. 9) is GRANTED.
For a more in-depth discussion of the non-diverse defendant's role in
this litigation, see this Court's Order and Reasons dated, November 12, 2013
(Rec. Doc. 30).
IT IS ORDERED that the instant matter is DISMISSED WITHOUT
New Orleans, Louisiana, this 12th day of November, 2013.
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE
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