Atain Specialty Insurance Company v. Bourgeois et al

Filing 17

AMENDED ORDER AND REASONS: IT IS ORDERED that Defendants' Motions to Dismiss, R. Docs. 12 , 13 , 14 , are hereby GRANTED.Signed by Judge Eldon E. Fallon on 4/14/2016.(my)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
ATAIN SPECIALTY INSURANCE

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VERSUS
GAYLE BOURGEOIS, ET AL.

CIVIL ACTION
NO. 15-6803
SECTION "L" (3)

AMENDED ORDER & REASONS
Defendants Patty Stone, the City of New Orleans, and Arts Center Enterprises – New
Orleans, LLC, have each filed Motions to Dismiss the present action. R. Docs. 12, 13, 14.
Having reviewed the briefs and the applicable law, the Court now issues this Order and Reasons.
I. BACKGROUND
This case arises out of an accident that occurred at the Mahalia Jackson Theater on May
30, 2015. R. Doc. 1 at 3. Defendant Stone attended the theater to view the dance recital of her
granddaughter. R. Doc. 1 at 3. Stone left her seat during intermission, and when she attempted
to return she found the theater to be completely dark. R. Doc. 1 at 3–4. According to Stone, she
fell on her way back to her seat, broke her left ankle, and sprained her right ankle. R. Doc. 1 at
4. Stone subsequently filed a lawsuit seeking damages for her ankle injuries in Civil District
Court for the Parish of Orleans, Civ. A. No. 2015-6012, on July 8, 2015. R. Doc. 1-2 at 1. Stone
asserted several theories of liability against Arts Center Enterprises – New Orleans, LLC (“ACENO”) and the City of New Orleans, including failure to warn, failure to provide adequate
lighting, and other acts of negligence. R. Doc. 1-2 at 2–3. The case was later removed to federal
court on the basis of diversity jurisdiction, and then remanded due to the addition of a nondiverse Defendant, the City of New Orleans. R. Doc. 1 at 4 n. 1. Atain Specialty Insurance
(“Atain”) was added to the state court lawsuit on January 20, 2016, on the grounds that Gayle
Bourgeois/Gayle McDonald Dance Studio (“GMDS”) is a “named insured” of Atain, and that
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ACE-NO and the City of New Orleans are “additional insureds” under the policy. R. Doc. 9-7 at
4.
Atain seeks a declaratory judgment that it has no obligation to defend or to indemnify
Defendants City of New Orleans and ACE-NO against any claims asserted by Defendants Patty
Stone and GMDS. R. Doc. 1 at 1. Plaintiff also seeks declaratory judgment that it has no
obligation to defend Defendants Stone and Bourgeois against any claims that may be brought
against them by ACE-NO. R. Doc. 1 at 1. Plaintiff invokes this Court’s diversity jurisdiction
pursuant to 28 U.S.C. § 1332. R. Doc. 1 at 3.
A case concerning the instant matter is also pending in state court. As of now, all parties
to the federal action are also parties to the state action.

Notably, both Stone and ACE-NO

signaled to Atain that Atain had an interest in the state court action before Atain filed the present
federal court case. On October 8, 2015, ACE-NO sent a letter to GMDS/Atain requesting
defense and indemnity in relation to the state court case. R. Doc. 9-3. On November 23, 2015,
ACE-NO again wrote to Atain and GMDS, asking that Atain tender defense and indemnity for
ACE-NO, because ACE-NO was an additional insured under the insurance policy issued to
GMDS. R. Doc. 9-6 at 1. ACE-NO also stated that it considered Atain liable for GMDS’s
alleged wrongs. R. Doc. 9-6 at 2–3. Twenty-two days after receiving Stone’s letter, Atain filed
the instant action seeking a judicial declaration that Atain “has no obligation to defend or
indemnify ACE-NO,” and that “Atain has no obligation to defend or indemnify GMDS.” R.
Doc. 1 at 1.
II. PRESENT MOTIONS
A. Defendants’ Motions to Dismiss (R. Docs. 12, 13, 14)
Defendants move to dismiss or stay the federal action, on the grounds that the Court
should employ Brillhart abstention and use its discretion to allow Atain’s indemnity question to
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be decided in state court. R. Docs. 12-1 at 3, 13-1 at 1–2, 14-1 at 4. 1 Defendants cite the Fifth
Circuit’s Trejo factors, and argue that the following factors weigh in favor of abstention.
Defendants aver that the first Trejo factor, the existence of a pending state court action in
which all of the matters in controversy may be litigated, weighs in favor of abstention.
Defendants contend that Atain’s insurance coverage question is at issue in the state court action.
Defendants further argue that the issue of coverage will be adjudicated as to all parties in the
state court action. R. Docs. 12-1 at 5–6, 14-1 at 5–6.
Defendants characterize the second, third, and fourth Trejo factors as equitable factors of
forum selection, and take the position that all three weigh in favor of abstention. R. Docs. 12-1
at 4–6, 14-1 at 6–7. According to Defendants, the second factor is implicated because Atain
filed the federal suit in anticipation of a state lawsuit. R. Docs. 12-1 at 6, 14-1 at 6. The
Defendants suggest that the third factor of forum shopping is implicated, because the federal suit
was filed mere days after the state court action was remanded to state court. R. Doc. 12-1 a 6,
14-1 at 6. Regarding the fourth factor, Defendants aver that they will suffer equitable prejudice
due to the different timetables posed by the federal suit and the state suit.
Defendants emphasize judicial efficiency in their discussion of the fifth and six factors.
R. Doc. 12-1 at 5. Defendants concede that the convenience of the forum is neutral in terms of
judicial efficiency, because both this Court and the state court are located in New Orleans. R.
Docs. 12-1 at 6, 14-1 at 7. In contrast, Defendants contend that the sixth factor is very weighty.
Defendants argue that retention of the federal suit will not serve the purposes of judicial
economy, because it would cost extensive time and money to prosecute two cases regarding the
same issue. R. Doc. 12-1 at 7; 14-1 at 7.

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Defendant City of New Orleans provides little analysis of its own, and respectfully joins Defendant Stone’s Motion
to Dismiss. R. Doc. 13-1 at 1.

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B. Atain’s Opposition (R. Doc. 15)
Atain timely responds. R. Doc. 15. Atain agrees with Movants that the Trejo factors
control this motion, but Atain avers that the factors instead point towards this Court’s retention
of the present case.
Atain argues that the first Trejo factor weighs against abstention because the state court
and federal court actions concern different matters. Atain contends that the state court action
primarily concerns a tort dispute, and that the federal court action concerns questions of contract.
R. Doc. 15 at 5–6. Atain also takes the position that “the contract-based claims at the crux of the
instant lawsuit are not at issue in the State Court Lawsuit.” R. Doc. 15 at 5. Atain supports this
argument by stating that “ACE-NO has not even made a claim against GMDS or Atain in the
State Court lawsuit.” R. Doc. 15 at 5.
Atain avers that the second Trejo factor is also in Atain’s favor. Atain claims that it did
not file in anticipation of a lawsuit, because Stone never communicated an intention to file
against Atain in state court. Atain concedes that ACE-NO requested defense and indemnity in
the state court lawsuit prior to the filing of Atain’s declaratory judgment action. R. Doc. 15 at 5.
But Atain argues that this “general threat of litigation . . . is simply insufficient” to prove that
Atain filed the federal court case in anticipation of being brought into the state court action.
Atain addresses the third, fourth, and sixth Trejo factors, and finds that each of these also
points towards retention of the instant lawsuit. R. Doc. 15 at 6–8. Atain takes the position that
the third Trejo factor weighs against abstention, because if Atain wanted to forum shop “it could
have filed this matter in Michigan.”

Atain contends that the fourth Trejo factor supports

retention, because no party “will be prejudiced” by the resolution of the insurance coverage
question in federal court. R. Doc. 15 at 7. Regarding the sixth Trejo factor, Atain argues that the
instant suit will serve the interests of judicial economy, because the present suit may be settled
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on the basis of summary judgment. R. Doc. 15 at 7–8.
III. LAW AND ANALYSIS
A. Brillhart Abstention
In Brillhart v. Excess Insurance Company of America, the Supreme Court held that a
district court entertaining a declaratory action “should ascertain whether the questions in
controversy between the parties to the federal suit . . . can be better settled in the state court.”
316 U.S. 491, 495 (1942). The doctrine of Brillhart abstention is based on this simple axiom,
and the Fifth Circuit later fleshed out this principle by holding that a district court considering a
declaratory judgment action “must engage in a three-step inquiry.” Orix Credit Alliance, Inc. v.
Wolfe, 212 F.3d 891, 895 (5th Cir. 2000). The “district court must determine: (1) whether the
declaratory judgment action is justiciable; (2) whether the court has the authority to grant the
declaratory relief; and (3) whether to exercise its discretion to decide or dismiss the action.”
Sherwin-Williams Co. v. Holmes Cnty., 343 F.3d 383, 387 (5th Cir. 2003). The third step is the
only issue in controversy between the parties.
B. Discussion of the Trejo Factors
At its heart, Brillhart abstention concerns whether a federal suit “can be better settled in
the state court.” See Brillhart, 316 U.S. at 495. The Trejo factors provide the Fifth Circuit’s
framework for determining whether a case would be “better settled” elsewhere. Id. The Fifth
Circuit employs seven nonexclusive factors for this purpose. 2 See Trejo, 39 F.3d 585, 585 (5th
Cir. 1994). These factors are:
1) Whether there is a pending state action in which all of the
matters in controversy may be fully litigated, 2) whether the
plaintiff filed suit in anticipation of a lawsuit filed by the
defendant, 3) whether the plaintiff engaged in forum shopping
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Trejo was decided before the Supreme Court’s most recent case on Brillhart abstention, Wilton v. Seven
Falls Co., 515 U.S. 277, 282–83 (1995). The Fifth Circuit continues to employ the Trejo factors in the wake of
Wilton.

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in bringing the suit, 4) whether possible inequities in allowing
the declaratory plaintiff to gain precedence in time or to change
forums exist, 5) whether the federal court is a convenient
forum for the parties and witnesses, . . . 6) whether retaining
the lawsuit in federal court would serve the purposes of judicial
economy, and . . . [7)] whether the federal court is being called
on to construe a state judicial decree . . . .
Trejo, 39 F.3d at 590–91 (internal citations omitted). The Court addresses each Trejo factor in
turn, with an eye towards where this case would be best settled.
The Court finds that the first factor leans towards abstention, because there is a parallel
“pending state action in which all of the matters in controversy may be fully litigated.” Trejo, 39
F.3d at 590. “[T]he presence or absence of a pending parallel state proceeding is an important
factor.” Sherwin-Williams, 343 F.3d at 394. Atain concedes that the parties to the action are the
same, but Atain denies that the scope of coverage is at issue in the trial currently pending before
the state court. R. Doc. 15 at 4–5. The Court finds the latter assertion, at best, misleading.
Atain is correct that neither ACE-NO nor GMDS has filed suit against Atain in the state court
action. However, the face of the state court and federal court complaints indicate that the
questions in controversy overlap.
In the state court complaint, Stone alleges that:
At all material times, Atain had issued and outstanding a policy of
liability insurance wherein GMDS was a named insured, together
with its agents, servants and employees, rendering attain solitarily
(sic) liable with GMDS. On information and belief, ACENO and
the City of News Orleans are additional insureds on said policy.
R. Doc. 9-7 at 4. Stone’s state court allegation raises two legal questions in the preceding
paragraph regarding Atain: (1) whether Atain is liable to GMDS as a named insured; and (2)
whether ACE-NO and the City of New Orleans are additional insureds on the GMDS policy.
Turning to Atain’s federal declaratory action, Atain asks this Court to issue “a judicial
declaration that Atain has no obligation to defend or indemnify ACE-NO or the City of New
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Orleans from any claims asserted by Stone . . . [and] a judicial declaration that Atain has no
obligation to defend or indemnify GMDS in relation to claims made against them by ACE-NO.”
R. Doc. 1 at 1. Atain then points to the insurance policy at issue, and claims that: (1) Atain is not
liable to GMDS as a named insured because of the contract’s “Contractual Liability Exclusion;”
and (2) that Atain is not liable to ACE-NO and the City of New Orleans because they do not
qualify as additional insureds under the policy. R. Doc. 1 at 7–15.
After comparing the federal and state court complaints, the Court finds that the state court
will address the questions presented in Atain’s declaratory action. Simply put, both cases call for
a court to determine whether: (1) GMDS is covered as a named insured, and (2) if ACE-NO and
the City of New Orleans qualify as additional insureds. Under these circumstances, the first
Trejo factor weighs in favor of abstention.
The Court finds that the second Trejo factor weighs in favor of abstention, because
Atain’s suit was filed in anticipation of litigation. See Trejo, 39 F.3d at 591–92. A district court
analyzing the second Trejo factor must consider the timing of the filing of the federal action
carefully, because the plaintiff seeking a declaratory judgment may merely be “assert[ing] its
rights under the declaratory judgment statute and diversity jurisdiction.” Sherwin-Williams, 343
F.3d at 398 (quoting United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 494 (4th Cir. 1998)).
And “to the extent the federal suit was filed in anticipation of a separate state determination of
the scope of the insurance provisions, [seeking clarification of an insurance policy] is a
permissible purpose under the DJA.” Ironshore Specialty Ins. Co. v. Tractor Supply Co., 624
Fed. Appx. 159, 167 (5th Cir. 2015). However, the timing of the instant action shows that Atain
clearly filed in anticipation of litigation. Atain’s declaratory judgment suit was filed days after
the state court action was remanded to state court, R. Doc. 12-1 at 5, and the facts indicate that
Atain was on notice that a party to the state court action, ACE-NO, considered Atain liable. R.
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Doc. 14-1 at 6. Therefore, the second factor suggests this Court should abstain.
The third Trejo factor of discouraging forum shopping weighs mildly against abstention.
The Fifth Circuit has held that the behavior of insurance providers such as Atain does not
necessarily constitute forum shopping. See Sherwin-Williams, 343 F.3d at 398 (“[W]e know of
no authority for the proposition that an insurer is barred from invoking diversity jurisdiction to
bring a declaratory judgment action against an insured on an issue of coverage.”) (internal
citations omitted); see also Ironshore, 624 Fed. Appx. at 167 (holding that the district court
properly found no indication that the plaintiff-insurer was forum shopping when the plaintiffinsurer brought a declaratory judgment action in federal court). However, as noted supra, Atain
filed the instant action days after the state court case was remanded to state court. This behavior
suggests that Atain intended to forum shop, and Trejo commands that this behavior should be
discouraged. Atain’s argument that Atain could have forum shopped in Michigan is beside the
point; even in-state forum shopping raises a cognizable threat to the federal and state judiciaries.
After weighing these arguments, the Court finds that the context of Atain’s filing suggests forum
shopping, even if Atain’s filing is procedurally valid.
The fourth Trejo factor, potential inequities due to precedence in time or forum, weighs
towards abstention. See Trejo, 39 F.3d at 591. Atain appears to be attempting to gain an
advantage regarding the scope of the insurance policy’s coverage by racing to judgment in
federal court. Atain concedes that it intends to file a summary judgment motion soon after this
Court disposes of the instant Motions to Dismiss. R. Doc. 15 at 8-9. This Court's finding
regarding the scope of Atain’s coverage will be preclusive on the issue in state court, and Atain’s
“first to the finish line” strategic behavior is contrary to the values of fairness underlying
Brillhart abstention doctrine. See Sherwin-Williams 343 F.3d at 397. However, the Court finds
no potential for inequity beyond temporal concerns. Therefore, this factor weighs somewhat
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lightly towards abstention.
The sixth3 Trejo factor, whether retaining the lawsuit would serve the purposes of judicial
economy, also suggests that the Court should abstain. Piecemeal litigation does not serve the
interests of the judiciary. But this federal action is in its nascent stages, so the economy interest
in preserving this federal action is slight. See Ford v. Monsour, Civ. A. No. 11-1232, 2011 WL
4808173, at *6 (W.D. La. Oct. 2011) (finding that the economy interest in preventing piecemeal
litigation outweighed the economy interest in preserving a federal action when the parties had
merely served Requests for Admissions, Interrogatories, and Requests for Production of
Documents). Atain’s judicial economy argument is premature. It would be inappropriate for the
Court to take Atain at its word that this declaratory action will be resolved on a motion for
summary judgment. No principle of law suggests that the interpretation of an insurance contract
may not present questions of fact appropriate for trial. See, e.g., State Farm Fire & Cas. Co. v.
Lezina, Civ. A. No. 15-1417, 2016 WL 909516 (E.D. La. Mar. 10, 2016). For these reasons, the
sixth Trejo factor also supports abstention.
Upon review of the Trejo factors, the Court finds that the first, second, third, fourth, and
sixth Trejo factors call for this Court’s abstention. The fifth and seventh factors are either
neutral or irrelevant. Due to the one-sided outcome of the Court’s balancing, the Court finds
dismissal to be more appropriate than a stay of the present action.

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The Court’s opinion does not discuss the fifth and seventh Trejo factors in detail, as they are clearly
neutral on these facts.

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IV.

CONCLUSION
For the foregoing reasons, IT IS ORDERED that Defendants’ Motions to Dismiss, R.

Docs. 12, 13, 14, are hereby GRANTED.
New Orleans, Louisiana, this 14th day of April, 2016.
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UNITED STATES DISTRICT JUDGE

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