Imperium Insurance Company v. Shelton et al

Filing 85

ORDER denying 66 Motion to Stay. Signed by District Judge Sharion Aycock on 4/27/2015. (geb)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF MISSISSIPPI
ABERDEEN DIVISION
IMPERIUM INSURANCE COMPANY

PLAINTIFF

V.

CAUSE NO.: 1:14-CV-00083-SA-DAS

JASON SHELTON, et al.

DEFENDANTS

ORDER
The Administratrix for the estate of Mamie Katherine Chism initiated suit in the Circuit
Court of Lee County, Mississippi against Shelton & Associates and Jason Shelton. Subsequently,
Imperium & Associates, P.A., the professional liability insurance carrier for Shelton &
Associates commenced this coverage dispute against the Administratrix, Shelton & Associates,
and Shelton. Imperium, Shelton & Associates, and Shelton have filed a Joint Motion to Stay
[66].1
In the underlying and ongoing state action, the Administratrix alleges that Shelton &
Associates and Shelton are liable for committing legal malpractice in their representation of
Chism’s estate during the litigation of a pharmaceutical products liability claim. In the present
action, Imperium seeks a declaration that it owes no duty to defend Shelton & Associates or
Shelton in the state action or indemnify them for liability that may accrue as a result of that
proceeding. Also in this case, Shelton & Associates and Shelton have filed counterclaims against
Imperium, seeking a declaration of coverage under the insurance policy as well as damages
under a variety of state law theories, including breach of contract, bad faith, negligence, gross
negligence, and promissory estoppel.

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This motion is unopposed. However, a nearly identical motion to stay, filed in the companion coverage case styled
Imperium Insurance Co. v. Shelton & Associates, P.A., 1:14-cv-00084-SA-DAS, is contested.

In support of this motion, the movants urge the Court to stay the present case until the
state court action is resolved, which they contend will alleviate scheduling concerns and the risk
that federal court discovery will prejudice the state court defendants in that action.
The Fifth Circuit has explained that one of two standards governs when the district court
considers whether to stay federal proceedings pending the resolution of a related civil action in
state court. New England Ins. Co. v. Barnett, 561 F.3d 392, 394 (5th Cir. 2009) (citation
omitted). When the federal case involves only claims for declaratory relief, the appropriateness
of a stay is evaluated under the discretionary Brillhart standard. Id. (citing Brillhart v. Excess Ins.
Co. of Am., 316 U.S. 491, 62 S. Ct. 1173, 86 L. Ed. 1620 (1942)). But when the federal suit
involves claims for both declaratory relief and other remedies, the Court will generally determine
whether to stay the action under the Colorado River abstention doctrine. Am. Guarantee & Liab.
Ins. Co. v. Anco Insulations, Inc., 408 F.3d 248, 251-52 (5th Cir. 2005) (citing Colorado River
Water Conservation Dist. v. United States, 424 U.S. 800, 817-19, 96 S. Ct. 1236, 1244, 47 L. Ed.
2d 483 (1976)). While declaratory relief is at issue in this case, the counter-claimants have
alleged damage claims, and thus the Court applies the Colorado River standard.2
Federal courts have a “virtually unflagging obligation . . . to exercise the jurisdiction
given them.” Stewart v. W. Heritage Ins. Co., 438 F.3d 488, 493 (5th Cir. 2006) (quoting
Colorado River, 424 U.S. at 814, 96 S. Ct. 1236). Thus, under Colorado River, this Court may
“decline to exercise or postpone the exercise of its jurisdiction” only as “an extraordinary and
narrow exception to the duty of a District Court to adjudicate a controversy properly before it.”
424 U.S. 800, 813, 96 S. Ct. 1236. “[O]nly the clearest of justifications” will permit the Court to

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When non-declaratory relief is asserted in addition to declaratory relief, the more relaxed Brillhart standard is
appropriate only if the “party’s request for [other] relief is either frivolous or is made solely to avoid application of
the Brillhart standard.” Am. Guarantee, 408 F.3d at 251 n.15 (quoting Black Sea Inv., Ltd. v. United Heritage Corp.,
204 F.3d 647, 649-50 (5th Cir. 2000)) (alteration in original). No party has asserted that the counterclaims here were
made for an improper purpose, and thus Brillhart is inapposite.

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abstain from jurisdiction. Id. at 819, 96 S. Ct. 1236. In determining whether such justifications
exist, the Supreme Court has supplied the following factors for consideration:
(1) the assumption by either court over a res; (2) the relative inconvenience of the
forums; (3) avoidance of piecemeal litigation; (4) the order in which jurisdiction
was obtained; (5) the extent to which federal law provides the rules of decision on
the merits; and (6) the adequacy of the state proceedings to protect the rights of
the party invoking federal jurisdiction.
Transocean Offshore USA, Inc. v. Catrette, 239 F. App’x 9, 12 (5th Cir. 2007) (citing Colorado
River, 424 U.S. at 818, 96 S. Ct. 1236).
However, in the absence of a state proceeding that is “parallel” to the federal action,
staying the case under Colorado River is never appropriate. Exxon Corp. v. St. Paul Fire &
Marine Ins. Co., 129 F.3d 781, 785 (5th Cir. 1997) (citing Hartford Acc & Indem. Co v. Costa
Lines Cargo Servs, Inc., 903 F.2d 352, 360 (5th Cir. 1990)) (The Fifth Circuit “has clearly held
that in order to consider the propriety of a stay pending disposition of state court actions, the
federal and state cases must be parallel . . . .”). Indeed, granting a motion to stay pursuant to
Colorado River in the absence of a parallel state suit constitutes an abuse of discretion. See
Transocean, 239 F. App’x at 12; Am. Guarantee, 408 F.3d at 251; see also Hampton v. Tunica
Cnty. Bd. of Sup’rs, 2009 WL 902043, at *5 (N.D. Miss. 2009).
For actions to be considered parallel, they must “involv[e] the same parties and the same
issues.” Hartford, 903 F.2d at 360. The Fifth Circuit has held that where “issues of coverage,
policy interpretation, and bad faith are being litigated” in the federal court, but not the state
court, the two proceedings are not parallel. Exxon, 129 F.3d at 786. That Court has further found
lawsuits not to be parallel even though the federal and state actions involved “the same
underlying episode and entail[ed] significant overlapping proof[.]” Hartford, 903 F.2d at 360;
Am. Guarantee, 408 F.3d at 251. Additionally, it has held that when the federal plaintiff is not a

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party to the state action, the proceedings are not parallel. See Am. Guarantee, 408 F.3d at 252;
Exxon, 129 F.3d at 786; Hartford, 903 F.3d at 360.
Here, the state action involves claims by the Administratrix for legal malpractice, arising
out of duties imposed by the attorney-client relationship. See Singleton v. Stegall, 580 So. 2d
1242, 1244 (Miss. 1991). The federal action, by contrast, involves claims and counterclaims
arising from an insurer-insured relationship and involves issues of coverage, policy
interpretation, and bad faith. See Exxon, 129 F.3d at 786. Although there may be overlapping
proof and questions, e.g., whether the state court defendants committed malpractice, the bases for
the respective causes of action are not the same. Further demonstrating the lack of parallelism,
the original plaintiff in this suit, Imperium, is not a party to the state action. See Canal Ins. Co. v.
XMEX Transport, LLC, 1 F. Supp. 3d 516, 526 (W.D. Tex. Mar. 4, 2014) (In insurance coverage
disputes, “[c]ourts routinely . . . find that proceedings are not parallel when the federal
declaratory plaintiff is not a party to the litigation.”); see also Am. Guarantee, 408 F.3d at 252;
Exxon, 129 F.3d at 785; Admiral Ins. Co. v. Little Big Inch Pipeline Co., Inc., 496 F. Supp. 2d at
787, 791 (W.D. Tex. 2007).
Because the issues and the parties in the Lee County Circuit Court action are different
from those in the present case, the Court finds that the two suits are not parallel and that a stay
would be inappropriate. Therefore, the Joint Motion for Stay [96] is DENIED.
SO ORDERED on this, the 27th day of April, 2015.

/s/ Sharion Aycock
UNITED STATES DISTRICT JUDGE

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