Esurance Insurance Company v. Maxie
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS [#5] AND DENYING PLAINTIFF'S MOTION FOR LEAVE TO FILE SUR-REPLY [#10]. Signed by District Judge Gershwin A. Drain. (TBan)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
Case No.: 17-12509
Honorable Gershwin A. Drain
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS [#5] AND
DENYING PLAINTIFF’S MOTION FOR LEAVE TO FILE SUR-REPLY
Plaintiff Esurance Insurance Company filed this declaratory judgment
action on August 2, 2017. Presently before the Court is Defendant Lamarr Maxie’s
Motion to Dismiss, filed on August 23, 2017. This matter is fully briefed1 and a
hearing was held on November 7, 2017. For the reasons that follow, the Court will
GRANT Defendant’s Motion to Dismiss.
Plaintiff filed a Motion for Leave to File Sur-Reply on October 27, 2017. The
Court will deny Plaintiff’s Motion for Leave to File Sur-Reply because Plaintiff
has not established good cause for granting its requested relief.
The instant dispute stems from Plaintiff’s issuance of a homeowners
insurance policy to Defendant, which insured his interest in residential premises
located at 7288 Canterbury Drive in Romulus, Michigan, as well as the personal
property contained therein. The property is secured by a mortgage and note in
favor of Seterus Inc. in the amount $260,000.00. Seterus Inc.’s interest in the
subject property is also insured under the standard mortgage clause of the subject
On April 14, 2016, a fire occurred at the Canterbury premises causing
damage to the home and the personal property therein. Defendant notified Plaintiff
of the fire and his intent to submit a claim under the subject policy for his losses.
He filed a “Sworn Statement in Proof of Loss” on June 2, 2016. Thereafter,
Plaintiff commenced an investigation into the circumstances of the fire. In the
interim, Plaintiff paid $9,275.48 in payments for Defendant’s additional living
expenses as a result of the fire.
Plaintiff asserts that its investigation uncovered facts which render the
subject policy void ab initio.
Plaintiff maintains that Defendant’s primary
residence was not the home on Canterbury Street on the date of the fire. Rather, an
individual by the name of Brian Glenn resided at the premises pursuant to a rental
agreement with Defendant. Plaintiff argues that it would not have issued the
subject policy of insurance had it known Defendant was not going to primarily
reside in the home.
Additionally, Plaintiff alleges that Defendant has intentionally and
fraudulently concealed and misrepresented material facts, as well as failed to
cooperate during its investigation of his claim.
Plaintiff ultimately denied Defendant’s claim arising from the April 14, 2016
fire based on the results of its investigation and Defendant’s purported
On December 19, 2016, Defendant filed a breach of contract action against
Plaintiff in the Wayne County Circuit Court. On January 20, 2017, Plaintiff filed
its Answer and Affirmative Defenses in the state court action.
affirmative defenses assert that the subject policy is void because Defendant failed
to comply with the policy’s terms and conditions, has intentionally concealed and
misrepresented material facts relative to the application for insurance as to his
primary residence, as well as relative to the loss and his claims and has failed to
cooperate. Plaintiff reserved the right to amend or supplement its answer at the
conclusion of discovery. Discovery has just been completed as of October 30,
2017, and the state court action is set to go to trial in March of 2018.
In the action before this Court, Plaintiff requests the Court declare that the
subject policy is void ab initio and that Defendant is precluded from recovering
any sums for loss and damage stemming from the April 14, 2016 fire. Plaintiff
also requests reimbursement for the $9,275.48 in payments made to Defendant.
Lastly, Plaintiff requests the Court declare that if it owes any liability to
Seturus Inc. under the subject policy, Plaintiff is then subrogated to the rights of
Seterus Inc. against any person responsible for the fire, including Brian Glenn and
Defendant, and/or that Plaintiff may be entitled to an assignment of the mortgage
LAW & ANALYSIS
Defendant asserts that this Court lacks jurisdiction over this matter, thus
Rule 12(b)(1) requires its dismissal, however Defendant’s argument is without
merit. The Declaratory Judgment Act “provides courts with discretion to fashion a
remedy in cases where federal jurisdiction already exists,” therefore this Court
must possess an independent basis for subject matter jurisdiction. One Beacon Ins.
Co. v. Chiusolo, 295 F. App’x 771, 775 (6th Cir. 2008).
Complaint sets forth the basis for this Court’s jurisdiction pursuant to 28 U.S.C. §
1332 because there is diversity of citizenship between the parties and the amount in
controversy exceeds $75,000.00.
While this Court may have jurisdiction to resolve Plaintiff’s claims,
jurisdiction under the Declaratory Judgment Act is discretionary rather than
mandatory. Wilton v. Seven Falls Co., 515 U.S. 277, 287 (1995). Although the
federal courts have a “virtually unflagging obligation . . . to exercise the
jurisdiction given them,” Colorado River Water Conservation Dist. v. United
States, 424 U.S. 800, 817 (1976), the exercise of jurisdiction under the Declaratory
Judgment Act, 28 U.S.C. § 2201(a), is not mandatory. See Brillhart v. Excess Ins.
Co. of Am., 316 U.S. 491, 494 (1942); see also Scottsdale Ins. Co. v. Roumph, 211
F.3d 964, 969 (6th Cir. 2000) (“By the Declaratory Judgment Act, Congress sought
to place a remedial arrow in the district court’s quiver; it created an opportunity,
rather than a duty, to grant a new form of relief to qualifying litigants.”)
Additionally, the Sixth Circuit Court of Appeals has held that “in insurance
coverage diversity cases[,] declaratory judgment actions seeking an advance
opinion on indemnity issues are seldom helpful in resolving an ongoing action in
another court.” Bituminous Cas. Corp. v. J & L Lumber Co., 373 F.3d 807, 812
(6th Cir. 2004). However, “[t]hat is not to say that there is a per se rule against
exercising jurisdiction in actions involving insurance coverage questions.” Id. at
Instead, several factors have been articulated by the Sixth Circuit Court of
Appeals to be considered by a district court when determining whether to exercise
jurisdiction under the declaratory judgment act: (1) whether the declaratory action
would settle the controversy; (2) whether the declaratory action 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 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.” Grand Trunk W. R. Co. v. Consolid. Rail Corp.,
746 F.2d 323, 326 (6th Cir. 1984); see also Bituminous Cas., 373 F.3d at 814-15.
As to the first factor, whether this action will settle the controversy between
the parties, Plaintiff argues that this declaratory judgment action will settle the
controversy before the Court concerning the issue of the scope of insurance
This circuit has developed competing authority on this factor.
Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 554 (6th Cir. 2008). Some cases
have found that this factors concerns whether the declaratory action will settle the
controversy without consideration of whether it will likewise resolve the
underlying state court action. Id. (citing West Am. Ins. Co. v. Prewitt, 208 F.
App’x 393, 396 (6th Cir. 2006); Northland Ins. Co. v. Stewart Title Guar. Co., 327
F.3d 448, 454 (6th Cir. 2003)).
Another line of cases have determined that “while such declaratory actions
might clarify the legal relationship between the insurer and the insured, they do not
settle the ultimate controversy between the parties which is ongoing in state court.”
Id. (citing Travelers Indem. Co. v. Bowling Green Prof’l Assoc., PLC, 495 F.3d
266, 272 (6th Cir. 2007)). Here, the differences in this circuit’s case law does not
impact the Court’s resolution of this factor because both theories will produce the
Namely, that this declaratory action will settle the controversy
between Plaintiff and Defendant in both this action and the underlying state court
action. This factor favors abstention.
“The second factor in the Grand Trunk analysis is closely related to the first
factor and is often considered in connection with it.” Scottsdale, 513 F.3d at 546.
“Indeed, it is almost always the case that if a declaratory judgment will settle the
controversy, then it will clarify the legal relations in issue.” Id. (citing Bituminous,
373 F.3d at 814).
Here, the declaratory judgment action will clarify the
relationship between Plaintiff and Defendant, which will also assist in clarifying
their legal relationship in the state court action. This factor favors abstention.
Plaintiff argues that it has not engaged in procedural fencing, or a res
judicata race, which is the concern with the third Grand Trunk factor. When a
plaintiff has filed a claim after the state court action was commenced, the Sixth
Circuit has “generally given the plaintiff ‘the benefit of the doubt that no improper
motive fueled the filing of [the] action.’” Scottsdale, 513 F.3d at 558 (quoting
Bituminous, 373 F.3d at 814).
As to the third factor, Defendant argues that Plaintiff has engaged in forum
shopping by filing the instant action after losing a discovery motion in the state
court. The Court tends to agree despite Sixth Circuit authority suggesting that a
plaintiff should be given the benefit of the doubt when he files a declaratory action
subsequent to the state court action. Here, there is no discernable reason why
Plaintiff did not bring its declaratory claims before the state court by either filing a
counter-claim in the state court action or by filing a separate action in the state
court and moving to consolidate it with the action that is currently pending.
such, it would appear that Plaintiff is engaging in procedural fencing and
attempting to obtain a decision from this Court that will be an “end run around the
authority of [the] state court to adjudicate” the issues already before it in the state
action. Omaha Prop. & Cas. Ins. Co. v. Johnson, 923 F.2d 446, 448 (6th Cir.
1991). This factor favors abstention.
The fourth factor also favors abstention. The United States Supreme Court
has cautioned that “where another suit involving the same parties and presenting
opportunity for ventilation of the same state law issues is pending in state court, a
district court might be indulging in ‘[g]ratuitous interference,’ if it permitted the
federal declaratory action to proceed.” Wilton v. Seven Falls Co., 515 U.S. 277,
283 (1995) (quoting Brillhart, 316 U.S. at 495). “[W]hether a federal court should
entertain such actions is a matter of discretion based on weighing considerations of
‘equity, comity and federalism,’ the uncertain effect of res judicata and the
tendency of such decision to ‘be a partial end run’ around the authority of state
courts to adjudicate claims falling within their jurisdiction.” Omaha Prop. & Cas.
Ins., 923 F.2d at 448 (quoting Green v. Mansour, 474 U.S. 64, 72-73 (1985)).
In this instance, resolution of the contractual issue requires interpretation of
state law, there are no federal questions alleged in Plaintiff’s Complaint. There is a
risk that a declaratory judgment by this Court may be decided differently than if
the coverage dispute issue were resolved by the state court. Exercising jurisdiction
over this matter under these circumstances “would come at the cost of increas[ing]
friction between our federal and state courts and improperly encroaching upon
Allstate Ins. Co. v. Mercier, 913 F.2d 273, 279 (6th Cir.
1990)(“The states regulate insurance companies for the protection of their
residents, and state courts are best situated to identify and enforce the public
policies that form the foundation of such regulation.”); see also Travelers, 495
F.3d at 272 (noting that where “resolution of the issue raised in federal court will
require making factual findings that might conflict with similar findings made by
the state court[,]” exercise of jurisdiction under the Declaratory Judgment “would
be inappropriate.”) This factor favors abstention.
Similarly, the fifth factor favors abstention. When state law provides an
avenue for the resolution of insurance coverage, the fifth factor favors declining
jurisdiction. See Scottsdale Ins. Co., 513 F.3d at 562. Here, Plaintiff “could have
presented its case to the same court that will decide the underlying tort action.”
Bituminous, 373 F.3d at 816. There is no authority for Plaintiff’s argument that it
cannot file suit in Wayne County Circuit Court against Defendant because he lives
in Georgia, thus the state court does not have personal jurisdiction over him. Such
an argument is wholly meritless.2
Personal jurisdiction in Michigan can exist on the basis of general personal
jurisdiction, MICH. COMP. LAWS §§ 600.701 and 600.711, or limited personal
jurisdiction, MICH. COMP. LAWS §§ 600.705 and 600.715. Here, the state court has
limited personal jurisdiction over the Defendant pursuant to subsections (3) and
(4). Specifically, the relevant statute states that:
The existence of the following relationships between an individual . . . and
the state shall constitute a sufficient basis of jurisdiction to enable a court of
record of this state to exercise limited personal jurisdiction over the
individual and to enable the court to render personal judgments against the
individual . . . arising out of an act which creates any of the following
(3) The ownership, use, or possession of real or tangible property situated
within the state.
(4) Contracting to insure a person, property, or risk located within this state
at the time of contracting.
At the hearing on this matter, Plaintiff also argued that it lacks the ability to
subpoena non-party witnesses who reside in Georgia if its claims are brought in the
state court. To the extent Plaintiff maintains that this Court has subpoena power to
command the appearance of non-party witnesses who reside in Georgia, such an
argument is without merit. See Fed. R. Civ. P. 45(c)(1).
MICH. COMP. LAWS § 600.705(3), (4).3
Moreover, Michigan allows insurers to
bring declaratory judgment actions in state court. Mich. Ct. R. 2.605; see also
Rose v. State Farm Mut. Auto. Ins. Co., 274 Mich. App. 291, 294, 732 N.W.2d
160, 162 (2006). As such, there is an alternative remedy that is more suitable to
the resolution of Plaintiff’s claims. Bituminous, 373 F.3d at 816-17 (“We question
the need for declaratory judgments in federal courts when the only question is one
of state law and when there is no suggestion that the state court is not in a position
to define its own law in a fair and impartial manner.”)
Accordingly, because the Grand Trunk factors favor abstention, the Court
will decline to exercise its jurisdiction under the Declaratory Judgment Act and
DISMISSES THIS ACTION WITHOUT PREJUDICE.
Defendant’s Motion to Dismiss [#5] is GRANTED.
Plaintiff’s Motion for Leave to File Sur-Reply [#10] is DENIED.
Dated: November 8, 2017
/s/Gershwin A. Drain
GERSHWIN A. DRAIN
United States District Judge
Additionally, Defendant may consent to the state court’s general personal
jurisdiction pursuant to MICH. COMP. LAWS § 600.701.
CERTIFICATE OF SERVICE
Copies of this Order were served upon attorneys of record on
November 8, 2017, by electronic and/or ordinary mail.
/s/ Tanya Bankston
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