Great American Insurance Company of New York v. Day et al

Filing 13

MEMORANDUM OPINION. Signed by Judge Alexander Williams, Jr on 05/14/2013. (bas, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
SOUTHERN DIVISION

GREAT AMERICAN INSURANCE
COMPANY OF NEW YORK,
Plaintiff,
v.

Civil Action No. 8:13-cv-00231-AW

KATHRYN DAY et al.,
Defendants.

MEMORANDUM OPINION
Pending before the Court is Defendants’ Motion to Dismiss. The Court has reviewed the
record and deems a hearing necessary. For the following reasons, the Court GRANTS
Defendants’ Motion to Dismiss.
I.

FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Great American Company of New York (Plaintiff) brings this action against the

following Defendants: (1) Kathryn Day; (2) Julie Allison; and (3) Case Marine Contracting, LLC
(Case Marine). In 2005, Case Marine started performing work on Day and Allison’s Chesapeake
Bay property. Day and Allison believed that Case Marine performed the work improperly and
negligently. Eventually, Day and Allison brought separate suits against Case Marine in the
Circuit Court for Anne Arundel County. Case Marine failed to appear and, in February 2011,
judgments against it were entered in both lawsuits.

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In March 2012, Day and Allison sent Plaintiff a letter contending that Plaintiff was
obligated to satisfy their judgments against Case Marine pursuant to insurance policies. Plaintiff
responded by saying that the policies did not require it to satisfy the judgments.
In August 2012, Plaintiff filed a declaratory judgment action in the District of Maryland
before Judge Chasanow. In this action, Plaintiff sought a judgment declaring that the policies do
not obligate it to satisfy Day and Allison’s judgments against Case Marine. Although summonses
were issued in this action, the record reflects that service of process was never completed and
that Plaintiff voluntarily dismissed the suit in December 2012.
In late August 2012, Day and Allison filed motions to implead Plaintiff as an indemnitor
in the state court lawsuits. These motions were granted in late September/early October 2012.
Plaintiff filed motions to dismiss or, alternatively, to quash in the state court actions. These
motions were granted in part and denied in part, with the result that service was quashed and
summonses reissued. Although Plaintiff has represented that service of process had not been
completed at the time it filed its Opposition, public record indicates that service of process was
effected in both Day and Allison’s actions in mid-April 2013.
On January 23, 2013, Plaintiff filed its Complaint for Declaratory Judgment (Complaint).
As with the voluntarily dismissed action before Judge Chasanow, Plaintiff generally seeks a
judgment declaring that it is not liable for Day and Allison’s state court judgments against Case
Marine. Defendants Day and Allison moved to dismiss on February 7, 2013. Doc. No. 7.1 Day
and Allison argue that the Court should decline to exercise jurisdiction because of the pendency
of the state court actions and the fact that Plaintiff has already been impleaded in them. For these
essential reasons, Day and Allison suggest that this action amounts to forum shopping.

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Although a summons was issued as to Case Marine and there still appears to be a small amount of time
within which to effect service, Plaintiff has not filed a return of service as to Case Marine.

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II.

ANALYSIS
“‘[A] federal court may properly exercise jurisdiction in a declaratory judgment

proceeding when three essentials are met: (1) the complaint alleges an actual controversy
between the parties of sufficient immediacy and reality to warrant issuance of a declaratory
judgment; (2) the court possesses an independent basis for jurisdiction over the parties (e.g.,
federal question or diversity jurisdiction); and (3) the court does not abuse its discretion in its
exercise of jurisdiction.’” Senior Execs. Ass’n v. United States, Civil Action No. 8:12–cv–
02297–AW, 2013 WL 1316333, at *21 (D. Md. Mar. 27, 2013) (quoting Volvo Const. Equip. N.
Am., Inc. v. CLM Equip. Co., Inc., 386 F.3d 581, 592 (4th Cir. 2004) (citations omitted)). To
determine whether to proceed with a federal declaratory judgment action when a parallel state
court action is pending, the Fourth Circuit has focused on four factors: “(1) whether the state has
a strong interest in having the issues decided in its courts; (2) whether the state court could
resolve the issues more efficiently than the federal court; (3) whether the presence of overlapping
issues of fact or law might create unnecessary entanglement between the state and federal court;
and (4) whether the federal action is mere procedural fencing in the sense that the action is
merely the product of forum shopping. Great Am. Ins. Co. v. Gross, 468 F.3d 199, 211 (4th Cir.
2006). “This less demanding standard reflects the distinct features of the Declaratory Judgment
Act and the greater discretion afforded federal courts in declaratory judgment actions.” See
AMEX Assur. Co. v. Giordano, Civil Action No. AW–12–cv–2640, 2013 WL 656358, at *9 (D.
Md. Feb. 21, 2013) (citation omitted).
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Whether the state has a strong interest in having the issues decided in its courts
This factor does not favor Day and Allison. Both this Court and the state courts at issue

are in the state of Maryland. Furthermore, were the action to remain in this Court, Maryland law

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would presumably apply to the interpretation of the contract. Therefore, the Court proceeds to
look at the other factors.
2.

Whether the state court could resolve the issues more efficiently than the federal court
This factor supports declining to exercise declaratory judgment jurisdiction. Judgment

has already been entered in Day and Allison’s favor in state court and Plaintiff has already been
impleaded into the same actions. Presumably, the state court judges that entered judgment in Day
and Allison’s favor against Case Marine have developed some understanding of the case. For
instance, Case Marine’s actions and/or omissions in the state court cases may inform the
interpretation of certain terms of the contract and, hence, whether Plaintiff is liable for
indemnification. Furthermore, although this Court has ample experience in contract, tort, and
insurance law, it may be the case that the state court judges tend to hear such indemnification
disputes with more regularity. Accordingly, factor (2) weighs in favor of Day and Allison.
3.

Whether the presence of overlapping issues of fact or law might create unnecessary
entanglement between the state and federal court
This factor strongly supports declining to exercise jurisdiction. The third factor is

implicated where “issues of law and fact sought to be adjudicated in the federal action are
already being litigated by the same parties in the related state court action.” Great Am., 468 F.3d
at 212. Here, the same questions that Plaintiff asks the Court to resolve and pending before state
court judges, and the same parties are involved in those suits. Furthermore, the state courts
exercised jurisdiction over these issues before this Court. Whereas Day and Allison’s motions for
impleader were granted in late September/early October 2012 in the state court actions, Plaintiff
failed to file the instant dispute until January 2013. Accordingly, factor (3) strongly favors the
declination of jurisdiction.

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4.

Whether the federal action is mere procedural fencing in the sense that the action is
merely the product of forum shopping
Although the Court cannot conclude that Plaintiff filed this case in bad faith, factor (4)

still favors Day and Allison. As stated, whereas Day and Allison’s motions for impleader were
granted in late September/early October 2012, Plaintiff filed the instant dispute in January 2013.
Granted, Plaintiff suggests that the filing of the case did not amount to forum shopping because it
filed the August 2012 action before Judge Chasanow before Day and Allison filed their lateAugust 2012 motions for interpleader. Plaintiff further suggests that the fact that service was
quashed in state court gave it good reason to file the instant actions. However, the record reflects
that Day and Allison never received notice of the action before Judge Chasanow. Furthermore,
even though service in the state court actions was quashed, the record reflects that it was quashed
due to a basic technical defect that was readily curable. Thus, without imputing an improper
motive to Plaintiff, the filing of this action at least raises the specter of forum shopping. Besides,
notwithstanding Plaintiff’s motive in filing this action, declining to exercise jurisdiction
promotes comity given that Plaintiff had been impleaded into the state court actions before the
start of this case.
III.

CONCLUSION
For the foregoing reasons, the Court GRANTS Day and Allison’s Motion to Dismiss.

The only remaining Defendant is Case Marine. Assuming that an independent basis for
jurisdiction exists over any dispute between Plaintiff and Case Marine, Plaintiff has not
adequately alleged or shown that there is an “actual controversy” between it and Case Marine, let
alone that there is one of sufficient immediacy and reality to warrant the issuance of a
declaratory judgment. Furthermore, given the dismissal of Day and Allison, essential parties to

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the three-way dispute, exercising jurisdiction would constitute an abuse of discretion.
Accordingly, the Court cannot properly exercise declaratory judgment jurisdiction over any
dispute between Plaintiff and Case Marine. Consequently, the Court dismisses the entire action.
A separate Order follows.
May 14, 2013
Date

/s/
Alexander Williams, Jr.
United States District Judge

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