Liberty Mutual Fire Insurance Company v. Bohms et al
Filing
27
OPINION ; signed by Judge Robert Holmes Bell (Judge Robert Holmes Bell, kcb)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
LIBERTY MUTUAL FIRE INSURANCE
COMPANY,
Plaintiff,
File No.: 1:10-cv-1158
v.
HON. ROBERT HOLMES BELL
A. ERIC BOHMS, et al.,
Defendants.
__________________________________/
OPINION
This declaratory judgment action is the latest round in a long running dispute
heretofore litigated in Florida state courts. It is currently before this Court on three motions:
Plaintiff Liberty Mutual’s Motion to Dismiss certain counts of Defendant Kathleen Cudnik’s
counterclaim, Cudnik’s Motion to Dismiss the entire action, and Liberty Mutual’s
subsequent Motion to Strike Cudnik’s Motion to Dismiss. (Dkt. No. 10, Pl.’s Mot. to
Dismiss; Dkt No. 19, Def.’s Mot. to Dismiss; Dkt. No. 25, Mot. to Strike.)
I. Background
In September, 2003, Defendant Cudnik’s decedent was a passenger in a single car
accident in Florida. He died of injuries sustained in that accident less than one week later.
The car was a 1998 Ford Mustang being driven by Defendant Jacob Bohms. The car was
not, however, owned by Jacob Bohms. Neither was it owned by Defendant A. Eric Bohms
(Jacob’s father) or Defendant Ellie Bohms (Jacob’s mother). The car was owned by the
mother (Marianne Pluchino) of one of Jacob’s friends (Dustin Reeves). Nonetheless, Jacob
made a claim for coverage under an insurance policy issued by Plaintiff Liberty Mutual to
A. Eric Bohms. After an investigation, Jacob’s claim was timely denied based on Liberty
Mutual’s determination that Jacob was not insured under the policy and that he was not
driving a “covered auto” as defined by the policy. The policy, the determination, and the
denial are the subjects of the present litigation, but they are not the subjects of the present
motions.
Litigation began in September 2005 in Florida state courts when Defendant Cudnik
(then, as now, acting as administratrix of her decedent’s estate) filed suit against Jacob,
Marianne Pluchino (the Mustang’s owner), Dustin Reeves (Pluchino’s son, who apparently
gave Jacob leave to use the Mustang), and Safeco Insurance Company (the Mustang’s
insurer). During the course of that litigation, Safeco inquired of Liberty Mutual whether
Liberty Mutual would provide coverage. Liberty Mutual, having previously denied Jacob’s
request for coverage, declined again, stating the same reasons as it had for the original
denial. The lawsuit ended with an $800,000 consent judgment on behalf of the estate.
On September 22, 2010, Defendant Cudnik had Liberty Mutual served with a Civil
Remedy Notice of Insurer Violation form. Civil Remedy Notice of Insurer Violation forms
satisfy a very particular function under Florida statute – they serve as notice to an insurance
company of a potential litigant’s forthcoming bad faith suit. The statute requires, as a
prerequisite for filing a bad faith lawsuit, that the insurance company be given sixty days’
2
written notice before it can be subject to that lawsuit. See Fla. Stat. § 624.155(3)(a).
Presumably, this period is intended to give the insurer a chance to remedy the alleged bad
faith action or inaction. Liberty Mutual, in response, sent Cudnik’s counsel a letter stating
that it stood by its original denial of coverage but reserved the right to investigate further.
On the fifty-ninth day of the sixty day notice period, Liberty Mutual filed this lawsuit
seeking a declaration of the parties’ respective rights and obligations under the Liberty
Mutual policy.
Defendant Cudnik timely answered Liberty Mutual’s complaint and countersued for
breach of contract, bad faith, fraudulent misrepresentation, and breach of fiduciary duties
– the claims that Defendant Cudnik otherwise would have brought in Florida state court.
(Dkt. No. 8.) All other defendants – members of the Bohms family – defaulted. Liberty
Mutual filed a motion to dismiss Counts II-IV of the Cudnik’s counterclaim (all of her
claims other than breach of contract) under Federal Rule of Civil Procedure 12(b)(6). (Dkt.
No. 10.) Liberty Mutual then answered the counterclaim. (Dkt. No. 11.) Nearly two
months later, Cudnik moved to dismiss the entire action, purportedly also under Rule
12(b)(6). (Dkt. No. 19.) Liberty Mutual has since moved to strike Cudnik’s motion as
impermissible under the Federal Rules of Civil Procedure. (Dkt. No. 25.) All three of these
motions (the two motions to dismiss and the motion to strike) are currently before the Court.
II. Liberty Mutual’s Motion to Strike (Dkt. No. 25)
Liberty Mutual states two reasons why this Court should strike Cudnik’s 12(b)(6)
3
motion: (1) the motion is untimely under the Federal Rules and (2) the motion is defective
because it asks for relief not afforded under Rule 12(b)(6). (Br. in Supp. of Mot. to Strike
at iii.) Cudnik has not responded to this motion. Liberty Mutual does not note the source
of this Court’s authority to strike motions, and, indeed, the Federal Rules of Civil Procedure
contain no provision permitting this Court to do so. See Searcy v. Social Sec. Admin., No.
91-4181, 1992 U.S. App. LEXIS 3805, at *5 (10th Cir. Mar. 2, 1992) (“[T]here is no
provision in the Federal Rules of Civil Procedure for motions to strike motions and
memoranda.”). However, this Court and others have recognized the authority to strike
motions to be inherent in the federal courts. See, e.g., American Civil Liberties Union of Ky.
v. McCreary Cnty., 607 F.3d 439, 451 (6th Cir. 2010) (“[B]ased on the district court’s power
to manage its own docket, the court had ample discretion to strike Defendants’ late renewed
motion for summary judgment.”).
Nonetheless, this Court finds neither of Liberty Mutual’s proposed reasons for
striking the motion to be compelling. Liberty Mutual first notes that Cudnik’s motion is
untimely. Liberty Mutual is correct. A motion under Rule 12(b)(6) “must be made before
pleading if responsive pleading is allowed.” Fed. R. Civ. P. 12(b). Cudnik filed her answer
to Liberty Mutual’s complaint on December 30, 2010. (Dkt. No. 8.) This constituted a
responsive pleading. Fed. R. Civ. P. 7(a). She did not file her motion until March 11, 2011.
(Dkt. No. 19.) It was thus untimely. The remedy, however, is not striking the motion from
the record. The remedy, long utilized by this Court and recognized by the Sixth Circuit
4
Court of Appeals,1 is for the Court to treat the motion it would as one filed under Rule 12(c).
That is the remedy the Court will utilize here, and the motion will not be stricken on the
basis of untimeliness.
Neither will the motion be stricken because it requests relief not provided for under
Rule 12(b)(6) (or Rule 12(c)), as Liberty Mutual next requests. (Mot. to Strike at 2.)
Assuming for the moment that Liberty Mutual is correct, striking the motion is – again – not
the appropriate remedy.
The remedy is consideration of the motion followed by
recharacterization or simple denial of the relief requested. Liberty Mutual’s Motion to Strike
will be denied.
III. Cudnik’s Motion to Dismiss (Dkt. No. 19)
A.)
Legal Standard
As noted above, since Cudnik’s motion to dismiss was filed after her answer, it will
be treated as one under Federal Rule of Civil Procedure 12(c) rather than under 12(b)(6).
Fortunately, the standard of review for motions under 12(c) is the same as it is for motions
under 12(b)(6). Kottmyer v. Maas, 436 F.3d 684, 689 (6th Cir. 2006); EEOC v. J.H. Routh
Packing Co., 246 F.3d 850, 851 (6th Cir. 2001). However, according to Rule 12(d), if, in
a motion under 12(c), matters outside the pleadings are presented to and not excluded by the
Court, the Court must treat the motion as one for summary judgment under Rule 56(a).
Here, matters outside the pleadings are central to Cudnik’s arguments, and the Court will not
1
and recognized by Liberty Mutual (See Br. in Supp. of Mot. to Strike at 3.)
5
exclude them. Max Arnold & Sons, LLC v. W.L. Hailey & Co., Inc., 452 F. 3d 494, 503 (6th
Cir. 2006) (“Rule 12(c) requires only one action by the district court for the conversion to
a summary judgment motion to occur: failure to exclude presented outside evidence.”).
The legal standard for summary judgment under Rule 56 is well defined, see Fed. R.
Civ. P. 56(a), but the matter presented by Cudnik’s motion does not lend itself to resolution
under the standard summary judgment analysis. Rather, Liberty Mutual has requested a
declaratory judgment under 28 U.S.C. § 2201, and Cudnik is asking the Court to refrain
from exercising its declaratory judgment jurisdiction.2
2
The Court notes that under remarkably similar facts, another judge in this district
recently dismissed a declaratory judgment action for failure to satisfy the statute’s (and the
Constitution’s) case-or-controversy requirement:
State Farm[’s] response to Carter’s qualified threat of litigation is somewhat
atypical. More commonly, Carter would decide whether or not to sue State
Farm in Florida, and, if she elected to do so, State Farm at that time would ask
the Florida court (federal or state) to apply Michigan rather than Florida law.
Instead, State Farm seeks to short-circuit that customary and proper way of
proceeding – resolving both the choice-of-law and merits questions in a single
action – by settling the choice-of-law question in advance. If Carter ever
asserts actual claims against State Farm in a Florida court, that court can
decide which State’s law applies to each claim, and what rights and
obligations obtain under the applicable substantive law. Cf. Sankyo [Corp. v.
Nakamura Trading Corp., 139 F. App’x 648, 653 (6th Cir. 2005)] (the more
sensible approach is that “once an actual claim is asserted, courts decide
whether the parties must arbitrate.”). Like Sankyo’s declaratory-judgment
action, State Farm’s unusual and premature invocation of federal declaratory
jurisdiction is not countenanced, and is in fact precluded, by our
Constitution’s case-or-controversy requirement.
State Farm Mut. Auto. Ins. Co. v. Carter, Case No. 1:08-cv-404, 2008 U.S. Dist. LEXIS
108050, at *49-50 (W.D. Mich. Oct. 28, 2008). Because Cudnik conceded the existence of
a case-or-controversy in her pro se answer (Ans. ¶ 6), because the parties have not briefed
(continued...)
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The Declaratory Judgment Act provides: “[i]n 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. “[T]he
declaratory judgment statute is an enabling Act, which confers a discretion on the courts
rather than an absolute right upon the litigant.” Green v. Mansour, 474 U.S. 64, 72 (1985)
(internal quotation marks omitted). The discretion as to whether to proceed is invested in
the district court. Manley, Bennett, McDonald & Co. v. St. Paul Fire & Marine Ins. Co., 791
F.2d 460, 462 (6th Cir. 1986) (“Under the Declaratory Judgment Act, the grant of
declaratory judgment is discretionary with the trial court.” (internal citation omitted)). “The
propriety of issuing a declaratory judgment may depend upon equitable considerations and
is also informed by the teachings and experience concerning the functions and extent of
federal judicial power.” Id. (internal citations and quotation marks omitted). Indeed, “it is
clear that a district court’s grant or denial of declaratory relief must be predicated on an
exercise of its discretion after full inquiry into all relevant considerations.” Allstate Ins. Co.
v. Green, 825 F.2d 1061, 1065 (6th Cir. 1987).
Although all relevant considerations are in play, the Court generally focuses on five
2
(...continued)
the issue, and because the Court will in any case decline to exercise its declaratory judgment
jurisdiction, the Court does not find it necessary to here sua sponte consider whether this
action satisfies the case-or-controversy requirement.
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factors to determine whether a case is appropriate for declaratory judgment:
(1)
(2)
(3)
(4)
(5)
whether the judgment would settle the controversy;
whether the declaratory judgment action would serve a useful purpose
in clarifying the legal relations at issue;
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”;
whether the use of a declaratory action would increase the friction
between our federal and state courts and improperly encroach on state
jurisdiction; and
whether there is an alternative remedy that is better or more effective.
Bituminous Cas. Corp. v. J & L Lumber Co., 373 F.3d 807, 813 (6th Cir. 2004) (quoting
Scottsdale Ins. Co. v. Roumph, 211 F.3d 964, 968 (6th Cir. 2000)). These factors will
accordingly guide the Court’s discretion here.
B.)
Application
1.)
Whether declaratory judgment would settle the controversy
The first factor to be considered is whether declaratory judgment would settle the
controversy. Cudnik argues that it would not – even after a declaratory judgment, a court
would be left to determine whether Liberty Mutual acted in bad faith and breached its
fiduciary duties. (Dkt. No. 19, Def.’s 12(b)(6) Br. 4.) Liberty Mutual argues that these
extra-contractual remedies are not available under Michigan law and that even if they were,
the Court would be able to rule on Cudnik’s claims, thus settling the controversy. (Dkt. No.
26, Pl.’s Resp. 6.)
The latter argument by Liberty Mutual – that the Court has the power to settle the
controversy – is inapposite. This first Bituminous factor does not ask whether the Court
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could, if properly vested with jurisdiction, issue a judgment which would settle the
controversy. The Court undoubtedly could. The question posed by Bituminous is whether
the declaratory judgment would settle the controversy. See 373 F.3d at 814. Here, it would
not. In a declaratory judgment action, this Court would declare the parties’ rights and
obligations, if any, under the terms of the insurance policy, just as Liberty Mutual requests
in its complaint. (Compl. ¶ 1.) But the controversy is larger than just the rights and
obligations under the policy. The declaratory judgment would not settle the questions of
whether Liberty Mutual acted in bad faith, or whether Liberty Mutual made fraudulent
misrepresentations, or whether Liberty Mutual breached its fiduciary duties.
If Liberty Mutual is correct that its policy covers neither Jacob nor the Mustang, and
Liberty Mutual owes Cudnik no obligations under the policy, then Liberty Mutual’s denial
would almost certainly not have been in bad faith, its representations almost certainly not
fraudulent, and its fiduciary duties almost certainly not have been breached. But even that
would require the Court to make determinations (if fairly straightforward ones) under
Florida law,3 and the declaratory judgment would not have settled the controversy.
3
What constitutes bad faith under Florida law? Can an insurer be liable for bad faith
due to an inadequate investigation, even if its ultimate determination was correct? Can an
insurer be liable for a bad faith interpretation of its own policy, even if a good faith
interpretation leads to the same conclusion? Did either happen here?
What constitutes fraudulent misrepresentation under Florida law? Can an insurer be
liable for fraudulent misrepresentation, when it promises to pay benefits under a policy
without any intention of doing so? Did this happen here? What damages are owed for such
misrepresentations if the plain terms of the policy would not entitle an insured to benefits
(continued...)
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If, on the other hand, Cudnik prevails on the merits, the situation becomes much more
complicated. Either this Court or another court would be left to determine if Liberty Mutual
breached its obligations, and, if so, whether and what damages are owed to Cudnik under
the policy. Either this Court or another would be required to delve into the underlying
litigation and determine whether Liberty Mutual owed damages under the policy to any other
party, either named or unnamed in the present suit (e.g., to Jacob Bohms’s indemnifier, if
any, in that action). Either this Court or another would be left to determine whether Cudnik
could pursue extra-contractual remedies against Liberty Mutual. The declaratory judgment
would be only the starting point for the controversy to come.
In short, even if Liberty Mutual is able to secure a complete victory in its declaratory
judgment action, the declaratory judgment action would not settle the controversy. If
Cudnik prevails in the declaratory judgment action, the declaratory judgment would certainly
not settle the controversy, and the litigation could well drag on for years. The Court will not
3
(...continued)
even absent the misrepresentation?
What constitutes a breach of fiduciary duties under Florida law? Can fiduciary duties
arise without a fiduciary’s knowledge? Did this happen here? To what extent do fiduciary
duties require an insurer to investigate the claims of an uncooperative insured?
To each of these questions, there is almost certainly an answer under Florida law.
None of them would be resolved by a declaratory judgment. Deciding that none of them
apply because extra-contractual remedies are not available would likewise require the Court
to make determinations under Florida law, Michigan law, or both, and the declaratory
judgment would not have settled the controversy.
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at this stage forecast which party will succeed on the merits.4 The Court finds that this factor
weighs strongly against the exercise of declaratory judgment jurisdiction.
2.)
Whether declaratory judgment action would serve a useful purpose in
clarifying the legal relations at issue
The parties agree that declaration of the parties’ rights and obligations under the
policy would serve a useful purpose in clarifying the legal relations at issue. (Def.’s 12(b)(6)
Br. 5; Pl.’s Resp. 7.) The Court concurs. This factor weighs in favor of exercising
declaratory judgment jurisdiction.
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”
The third factor is 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. As noted
above, Cudnik wished to pursue Florida state-law claims against Liberty Mutual but was
required by Florida law to give Liberty Mutual sixty days’ written notice before initiating
her action. She gave such notice, and in the accompanying letter, her counsel indicated a
willingness to discuss settlement options and implied a right to civil remedies. (Dkt. No. 10,
Pl.’s Mot. to Dismiss, Ex. 4, Letter at 1.) On the fifty-ninth day of the sixty day notice
period, Liberty Mutual brought the present declaratory judgment action in this Court. Upon
4
Neither does the Court believe that it is appropriate at this stage to decide which
state’s law governs the policy or whether extra-contractual remedies are available. Although
those legal questions are separable from the factual ones in this case (such as whether or not
the Bohms’s New Yorker was being repaired at the time of the accident), they should be
resolved by the same court.
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consideration, the Court finds that this factor weighs strongly against the exercise of
declaratory judgment jurisdiction.
The factor is generally employed when there is a parallel state court action, but this
is not exclusively the case. In Aetna Cas. & Sur. Co. v. Ind-Com Elec. Co., 139 F.3d 419
(4th Cir. 1998), the Fourth Circuit found that the insurer “was using the declaratory relief
mechanism to engage in procedural fencing and forum shopping,” id. at 424, even in the
absence of a pending state court action where, as here, “there are bona fide reasons for the
lack of [such] action,” id. at 423. There, the injured third-party was prevented from
pursuing a state court action because state law required the party to first resort to
administrative remedies. Id. Here, the injured third-party – Cudnik – is (or was, when this
declaratory judgment action commenced) prevented from pursuing a state court action
because state law required her to first grant the insurer sixty days’ written notice. It appears
to the Court that the sole reason that this matter is before it rather than before a court in
Florida is that Liberty Mutual was able to take advantage of that time period to win a race
to the courthouse. As in Ind-Com Electric Co., the insurer is “using the declaratory relief
mechanism to engage in procedural fencing and forum shopping.” Id. at 424.
Liberty Mutual’s arguments to the contrary are not persuasive. Liberty Mutual first
argues that “there is nothing particularly strategic—or unusual—about an insurer using the
declaratory judgment remedy to resolve questions of insurance coverage.” (Pl.’s Resp. 8.)
That is certainly true. What is unusual, and strategic, is waiting for an injured third party to
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announce its clear preference for, and intention to file in, another court before an insurer
requests the declaratory judgment. Liberty Mutual further argues that it did not “forum
shop” because it had legitimate reasons for filing in Michigan. (Id.) It appears that Liberty
Mutual is correct – there are legitimate reasons for filing in this state. But that is not the
concern of this Bituminous factor. There are often legitimate reasons for filing in several
fora. The concern is not that the case may be filed in an illegitimate forum – our civil
procedure provides other remedies for that failing; the concern is that the declaratory
judgment action not be used to allow the “natural defendant” to preempt the “natural
plaintiff’s” choice of forum and that the action not be used to force the natural plaintiff to
race to the courthouse rather than come to the negotiation table. See Casualty Indem. Exch.
v. High Croft Enters., Inc., 714 F. Supp. 1190, 1193 (S.D. Fla. 1989) (“[T]he declaratory
remedy is not a tactical device whereby a party who would be a defendant in a coercive
action may choose to be a plaintiff if he can beat the other party to the courthouse.”); Dunn
Computer Corp. v. Loudcloud, Inc., 133 F. Supp. 2d 823, 830 (E.D. Va. 2001) (“Simply put,
district courts should not exercise their discretionary declaratory judgment jurisdiction in
ways that encourage races to the courthouse and discourage settlement.”). Allowing the
declaratory judgment here would run counter to both of those goals.
Finally, Liberty Mutual argues that it is not engaging in procedural fencing because
Cudnik is free to make her arguments before this Court. Again, Liberty Mutual is correct
but off-point. Cudnik could make her arguments before this Court. The issue, however, is
13
that Liberty Mutual’s declaratory judgment action deprives her of the opportunity to make
her arguments before a Florida court – at least without risking contrary judgments – because
it could file a declaratory judgment action here before she could file a claim for damages
there. The Court finds in this case a clear use of the declaratory judgment action for
procedural fencing and a race for res judicata, and this factor weighs strongly against the
exercise of jurisdiction.
4.)
Whether the use of a declaratory action would increase friction between
federal and state courts and improperly encroach on state jurisdiction
The Court also finds that the fourth factor, whether the use of the declaratory action
would increase the friction between federal and state courts and improperly encroach on
state jurisdiction, weighs against the exercise of declaratory judgment jurisdiction. The
Sixth Circuit has weighed three sub-factors in the consideration of this factor:
(1)
(2)
(3)
whether the underlying factual issues are important to an informed
resolution of the case;
whether the state trial court is in a better position to evaluate those
factual issues than is the federal court; and
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.
Bituminous, 373 F.3d at 814-15. The first two factors admittedly apply more directly where
parallel state court proceedings are ongoing, but to the extent they apply here, they weigh
in favor of declining jurisdiction.
In many cases, declaring the rights and obligations of parties under an insurance
14
policy is simply a matter of a close reading of the policy and the application of that policy
to stipulated facts. That does not appear to be the case here. Here, it appears that resolving
the rights and obligations of the parties, as requested by Liberty Mutual, would require a
court to make factual determinations regarding the status of the Bohms’ New Yorker at the
time of the accident, the status of the Mustang as a temporary substitute auto under the
policy, Jacob Bohms’ status as a member of his fathers’ household, and possibly the
agreements made among the various players – both parties to this suit and non-parties.
Factual issues are important to an informed resolution of this case.
Further, it appears that a court sitting in Florida would be better situated to evaluate
those factual issues. Cudnik has expressed a desire to bring this matter before the Florida
state court which oversaw the underlying litigation. That court would be familiar with the
factual nuances of this case and would recognize the relevant actors far more readily than
would this Court, entering the matter seven years after the facts giving rise to litigation. A
court sitting in Florida would be more convenient for potential witnesses and whatever
evidence remains from the underlying litigation. See Geico Gen. Ins. Co. v. Gilliard, Case
No.: 8:07-cv-1019-T-24-EAJ, 2007 U.S. Dist. LEXIS 66653, at *8 (M.D. Fla. Sept. 10,
2007) (“[I]t is . . . in the interest of judicial economy to allow the remaining issues to be
adjudicated by the state court, which is already well-versed in the case’s intricacies.”).
Finally, with respect to the third Bituminous sub-factor, the Court notes that whatever
reasons the State of Florida had for adopting a notice requirement as a prerequisite for a bad
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faith claim, among them was almost certainly not a desire to transfer the adjudication of
Florida bad faith claims to federal district courts in other states. Determinations of whether
an insurance company engages in bad faith under Florida law are best left to Florida courts.
Id. “A declaratory judgment is not a mechanism to furnish a new choice of tribunals or to
draw into federal courts the adjudication of causes properly cognizable by the courts of the
states,” Casualty Indem. Exch., 714 F. Supp. at 1193, and friction between federal and state
courts is increased when parties attempt to use it as such.
5.)
Whether there is an alternative remedy that is better or more effective
The final Bituminous factor, whether there is an alternative remedy that is better or
more effective, also weighs against exercising jurisdiction. Although Liberty Mutual is
correct that this Court could grant the relief it requests, the ability of a court to grant relief
is not the only consideration the Sixth Circuit weighs when determining whether an
alternative remedy would be “better or more effective.” In Bituminous itself, the Circuit
Court noted that the relevant state court provided a procedure for the declaration of rights
and, “[g]iven that the issues presented involve questions of state law only, the state court is
also in a superior position to resolve the case.” 373 F.3d at 816 (citing Allstate Ins. Co. v.
Mercier, 913 F.2d 273, 278-279 (6th Cir. 1990)). The Circuit Court “question[ed] 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.” Id. at 816-17 (quoting American Home Assur. Co. v. Evans,
16
791 F.2d 61, 63 (6th Cir. 1986)). On that basis, the Circuit Court determined that a better
or more effective remedy than a federal declaratory judgment was available; namely, a state
declaratory judgment.
The same is true here. A Florida state court would be in a better position to determine
whether the policy is governed by its law or those of the State of Michigan and to determine
whether extra-contractual remedies apply. A Michigan state court would likewise be in a
better position to determine which state’s law governed the policy and whether extracontractual remedies apply. Thus, although this Court may be able to grant the requested
relief, better remedies are available, and this factor weighs against exercising jurisdiction.
C.)
Cudnik’s Motion to Dismiss, as recharacterized, will be granted
As in Bituminous, this Court finds that four of the five Bituminous factors indicate
that a federal declaratory judgment would be inappropriate in this case. Notably unlike
Bituminous, the Court here finds that Liberty Mutual did file this action for the purpose of
procedural fencing and to win a race for res judicata. The Court also finds that a declaratory
judgment would not settle the matter and that state courts are better positioned to resolve the
matter. This Court will decline to exercise its declaratory judgment jurisdiction, and Liberty
Mutual’s action will be dismissed.5
5
The Supreme Court has noted that, when a district court declines the exercise of
declaratory judgment jurisdiction to allow parties to pursue other remedies, a stay will often
be preferable to dismissal as that would allow the federal action to proceed even if a state
case is time-barred. Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995). However, in this
(continued...)
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III. Cudnik’s Counterclaims and Liberty Mutual’s Motion to Dismiss (Dkt. No. 10)
Liberty Mutual moves to dismiss (Dkt. No. 10) Counts II, III, and IV of Cudnik’s
counterclaim (Dkt. No. 8), asserting that the counts fail to state a claim upon which relief
can be granted. Liberty Mutual asserts that these claims should be dismissed because they
seek extra-contractual relief which is not permitted under Michigan law. (Pl.’s Mot. to
Dismiss at iv.) Cudnik initially opposed the motion, arguing that Florida law applies. (Dkt.
No. 16, Def.’s Resp.) As discussed in great detail above, Cudnik later moved this Court to
dismiss Liberty Mutual’s action. (Dkt. No. 19.) Also as indicated above, the Court will
grant Cudnik’s latter request.
Cudnik’s clear intent in moving to dismiss Liberty Mutual’s action was to have the
opportunity to litigate her claims against Liberty Mutual (the precise claims Liberty Mutual
wishes dismissed) in Florida state court without the interference of this Court. She would
be depriving herself of that opportunity if her counterclaims here were to go forward.
Accordingly, the Court will additionally construe her Motion to Dismiss (Dkt. No. 19) as
a motion for voluntary dismissal under Federal Rule of Civil Procedure 41. Liberty Mutual
has had an opportunity to be heard on the matter and has asked the Court to consider the
merits of the counterclaims. For the same reasons that the Court declines to address the
5
(...continued)
case, it appears that Cudnik is unconcerned about a time-bar, as she is the one to move for
dismissal. Liberty Mutual can hardly be supposed to be concerned that Cudnik’s state action
against it may be time-barred. Thus, the matter will be dismissed.
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merits of Liberty Mutual’s declaratory judgment action, the Court will decline to address the
merits of the counterclaims. Cudnik’s counterclaims will be dismissed without prejudice.
Liberty Mutual’s motion to dismiss Counts II-IV of the counterclaim will be dismissed as
moot.
IV. Conclusion
For the reasons given above, Liberty Mutual’s Motion to Strike will be denied;
Cudnik’s Motion to Dismiss, as recharacterized, will be granted; this action, along with the
counterclaim, will be dismissed; and Liberty Mutual’s Motion to Dismiss Counts II-IV of
Cudnik’s counterclaim will be dismissed as moot. An order consistent with this opinion will
be entered.
Dated: July 29, 2011
/s/ Robert Holmes Bell
ROBERT HOLMES BELL
UNITED STATES DISTRICT JUDGE
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