Canopius US Insurance Inc. v. Arbor Experts, L.L.C. et al
Filing
22
**THIS DOCUMENT REPLACES 21 , WHICH HAD INCORRECT PDF ATTACHED TO ENTRY*** Memorandum Opinion and Order granting 15 MOTION to Dismiss for Lack of Jurisdiction. A separate judgment will be entered. Signed by District Judge Tom S. Lee on 7/5/13 (LWE)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION
CANOPIUS INSURANCE INC.
VS.
PLAINTIFF
CIVIL ACTION NO. 3:13CV225TSL-JMR
ARBOR EXPERTS, LLC, GARRETT L.
EVANS, EMILY C. EVANS, MICHAEL
AUDIFFRED, KYMBLE AUDIFFRED
AND R. SCOTT BOOTH
DEFENDANTS
MEMORANDUM OPINION AND ORDER
This cause is before the court on the motion of defendant
Scott Booth to dismiss, or in the alternative, to stay
proceedings.
Plaintiff Canopius Insurance Inc. has responded
to
the motion and the court, having considered the memoranda of
authorities, together with attachments, submitted by the parties,
concludes that the motion should be granted.
On October 4, 2012, Scott Booth filed suit in the Circuit
Court of Smith County, Mississippi against Arbor Experts, LLC, and
its owners, Garrett L. Evans and Emily C. Evans, and against
Michael Audiffred and Kymble Audiffred, alleging claims for
negligence, gross negligence and intentional infliction of
emotional distress relating to a December 5, 2011 accident on the
Audiffreds’ property in which Booth was struck in the head with a
front-end loader owned by Arbor Experts and operated by Garrett
Evans.
At the time of the accident, Arbor Experts was insured
under a commercial general liability issued by Omega U.S.
Insurance, Inc., Canopius US’s predecessor in interest.
On
October 29, 2012, Canopius received notice of the lawsuit and
Canopius is currently providing a defense under reservation of
rights to Arbor Experts, Garrett Evans and Emily Evans in the
state court action.
On April 15, 2013, Canopius filed the present action against
all the parties in the Smith County action seeking a declaratory
judgment that its policy affords no coverage for Booth’s claims in
the state court case.
On May 20, 2012, within days of being
served with process herein, Booth filed an amended complaint in
the underlying action adding Canopius as a defendant and seeking a
declaratory judgment that there is coverage under the Canopius
policy for his injuries.
Soon thereafter, on May 30, he filed the
present motion to dismiss, in which he asserts that this court
should abstain from proceeding with this declaratory judgment
action in deference to the pending state court action.
In the
alternative, he asks the court to stay this action pending
resolution of the underlying action.
The Declaratory Judgment Act states:
“In 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”.
28 U.S.C. § 2201(a).
Unlike other
kinds of cases, over which the district courts have a “virtually
2
unflagging obligation” to exercise their jurisdiction
notwithstanding that there is a pending state court action
involving the very same issues, see Colorado River Water
Conservation Dist. v. United States, 424 U.S. 800, 817, 96 S. Ct.
1236, 47 L. Ed. 2d 483 (1976), the Declaratory Judgment Act “has
been understood to confer on federal courts unique and substantial
discretion in deciding whether to declare the rights of
litigants,” Wilton v. Seven Falls Co., 515 U.S. 277, 286, 115 S.
Ct. 2137, 132 L. Ed. 2d 214 (1995).
See also id. at 288 (stating
that “[i]n the declaratory judgment context, the normal principle
that federal courts should adjudicate claims within their
jurisdiction yields to considerations of practicality and wise
judicial administration”).
In Brillhart v. Excess Insurance
Company of America, the Supreme Court recognized district courts'
discretion to dismiss a declaratory judgment action when a
parallel suit not governed by federal law and presenting the same
issues is pending in state court, holding that it would be
“uneconomical as well as vexatious for a federal court to proceed
in a declaratory judgment suit where another suit is pending in a
state court presenting the same issues ... between the same
parties.”
316 U.S. 491, 495, 62 S. Ct. 1173, 86 L. Ed. 1620
(1942).
The ultimate issue in deciding how the court should exercise
its discretion is “whether the questions in controversy between
3
the parties to the federal suit ... can better be settled in the
proceeding pending in state court.”
Brillhart, 316 U.S. at 495.
As articulated by the Fifth Circuit, this decision involves three
inquiries: “(1) is it justiciable; (2) does the court have the
authority to grant such relief; and (3) should it exercise its
discretion to decide the action based on the factors stated in St.
Paul Insurance Co. v. Trejo, 39 F.3d 585 (5th Cir. 1994).”
AXA RE
Property & Casualty Ins. Co. v. Day, 162 Fed. Appx. 316, at 2
(Jan. 11, 2006) (citing Orix Credit Alliance, Inc. v. Wolfe, 212
F.3d 891 (5th Cir. 2000)).
In the case at bar, Booth concedes that this declaratory
action is justiciable.
However, he contends that the court lacks
authority to grant the relief requested and that, even if it has
such authority, the court should nevertheless exercise its
discretion to abstain from hearing the case.
The Fifth Circuit has held that district courts do not have
authority to consider the merits of a declaratory judgment
complaint when “(1) a declaratory defendant has previously filed a
cause of action in state court against the declaratory plaintiff;
(2) the state case involves the same issues as those involved in
the federal case; and (3) the district court is prohibited from
enjoining the state proceedings under the Anti-Injunction Act.”
Travelers Ins. Co. v. Louisiana Farm Bureau Fed’n, Inc., 996 F.2d
774, 776 (5th Cir. 1993) (citing Texas Employers’ Ins. Ass’n v.
4
Jackson, 862 F.2d 491, 506 (5th Cir. 1988)).
“[A]ll three
conditions must exist before a federal court is stripped of the
authority to consider the merits of a request for declaratory
relief....”
Cherokee Ins. Co. v. Babin ex rel. Rogers, No.
3:06cv00612-DPJ-JCS, 2007 WL 2381928, 2 (S.D. Miss. Aug. 17,
2007).
Here, they are not, as Booth’s complaint against Canopius
seeking a declaratory judgment of insurance coverage was filed
after Canopius filed the present action in this court.
The first
condition is that “[a]t the time suit was filed, the declaratory
defendant must have filed a state case involving the same issues
as those involved in the federal case.”
original).
Id. (emphasis in
See also Fireman's Fund Ins. Co. v. Hlavinka Equip.
Co., No. Civ. A. H-052515, 2005 WL 2792383 at *2 (S.D. Tex. Oct.
26, 2005) (“The most straight-forward interpretation of the phrase
[‘previously filed’] requires that the state court action be
commenced before the federal declaratory judgment action.”).
Booth suggests that this court should treat his cause of action
against Canopius as having been “previously filed” since, owing to
no fault of his, he was not even aware of Canopius or that there
was an insurance coverage dispute until he was served with
Canopius’s complaint in this cause.1
1
In the court’s opinion,
Booth argues:
Throughout settlement negotiations and the parallel
state court litigation, Canopius US Insurance, Inc. was
unknown to State Court Plaintiff. Had State Court
5
however, a federal court does not lack authority to consider a
declaratory judgment action if no state court action was pending
at the time the federal complaint for declaratory relief was
filed, regardless of the reason no state court action had been
filed.
Cf. Babin, 2007 WL 2381928, at 2 (observing that
“[a]lthough Defendants eventually filed complaints for declaratory
relief in state court, at the time this suit was filed, Cherokee
was not named in any state court action, and there was no state
court action for declaratory relief.”).
The question becomes whether the court should exercise its
discretion to decide the case or to instead abstain from deciding
the case.
This determination is made based on consideration of
the Trejo factors, which 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 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
Plaintiff known of the coverage disputes, he would have
named Canopius as a defendant in his initial state court
Complaint. Once it was brought to State Court
Plaintiff’s attention that Canopius was the insurer for
state court defendants and Canopius was seeking a
declaratory judgment in federal court, State Court
Plaintiff instituted proceedings to join Canopius in the
parallel state court action.
6
[7)] whether the federal court is being called on to
construe a state judicial decree involving the same
parties and entered by the court before whom the
parallel state suit between the same parties is pending.
Trejo, 39 F.3d at 590-91.
See AXA, 162 Fed. Appx. 316, 320, 2006
WL 133532, 3 (quoting Trejo).
These factors are designed to
address three fundamental considerations: (1) proper allocation of
decision-making between state and federal courts, (2) fairness,
and (3) efficiency.
Sherwin-Williams Co. v. Holmes County, 343
F.3d 383, 390 (5th Cir. 2003).
The first Trejo factor, whether there is a pending state
action in which all of the matters in controversy may be fully
litigated, concerns both efficiency and comity.
Regarding this
factor, the Fifth Circuit has held that “[i]f [a] federal
declaratory judgment action raises only issues of state law and a
state case involving the same state law issues is pending,
generally the state court should decide the case and the federal
court should exercise its discretion to dismiss the federal suit.”
Sherwin-Williams, 343 F.3d at 391.
Here, Booth has filed an
amended complaint against Canopius which is currently pending in
the underlying state court action and seeks a determination of
Canopius’s obligations under the policy, distinctly state law
issues.
Canopius thus concedes, as it must, that the first factor
weighs in favor of abstention.
7
The second, third and fourth Trejo factors – whether the
declaratory plaintiff filed suit in anticipation of a lawsuit by
the defendant; whether the plaintiff engaged in forum shopping in
bringing the suit; and whether possible inequities exist in
allowing the declaratory plaintiff to gain precedence in time or
to change forums – are focused on fairness, and specifically on
whether the federal declaratory judgment action is an “improper
and abusive” litigation practice that seeks to “us[e] the
declaratory judgment process to gain access to a federal forum on
improper or unfair grounds.”
Id.
The court in Sherwin-Williams
stressed that “[m]erely filing a declaratory judgment action in a
federal court with jurisdiction to hear it, in anticipation of
state court litigation, is not in itself improper anticipatory
litigation or otherwise abusive ‘forum shopping’”.
Williams, 343 F.3d at 391.
Sherwin-
Indeed, “[d]eclaratory judgments are
often ‘anticipatory,’ appropriately filed when there is an actual
controversy that has resulted in or created a likelihood of
litigation.
More than one venue may be proper, requiring the
plaintiff to select a forum.”
Id. at 391-92.
And “[d]eclaratory
judgment actions often involve the permissible selection of a
federal forum over an available state forum, based on the
anticipation that a state court suit will be filed.”
Id. at 398.
Fairness concerns are implicated only where the federal
declaratory judgment action constitutes impermissible “procedural
8
fencing” or forum manipulation, such as when the declaratory
judgment plaintiff engages in a race to res judicata by bringing
the declaratory judgment action before the declaratory defendant
is legally able to bring a state action, or when the selection of
the federal forum would result in a change in the applicable
substantive law.
Id. at 399.
In the court’s opinion, these Trejo
factors do not weigh in favor of abstention in the case at bar as
there is nothing to suggest that Canopius engaged in impermissible
forum shopping by filing this declaratory judgment suit.
Accordingly, these factors are neutral.
“The next two Trejo factors-whether the federal court is a
convenient forum for the parties and witnesses and whether
retaining the lawsuit would serve judicial economy-primarily
address efficiency considerations.”
Id. at 391.
Given that the
underlying state court action is pending in the same district in
which the federal courthouse is located, the state and federal
forums are of relatively equal convenience.
On the issue of judicial economy, the Fifth Circuit has held
that “[a] federal district court should avoid duplicative or
piecemeal litigation where possible. ...
Duplicative litigation
may ... raise federalism or comity concerns because of the
potential for inconsistent state and federal court judgments,
especially in cases involving state law issues.”
Williams, 343 F.3d at 391.
Sherwin-
Were this court to retain jurisdiction
9
over this lawsuit, the coverage issues that Canopius asks this
court to decide would be simultaneously litigated by the state and
federal courts.
This would not serve judicial economy.
As Judge Bramlette observed in Allstate Ins. Co. v. Yates,
“District courts routinely invoke the doctrine of
abstention in insurance coverage actions, which
necessarily turn on issues of state law.” Travelers
Indem. Co. v. Philips Elecs. N. Am. Corp., 2004 WL
193564 *2 (S.D.N.Y. Feb. 3, 2004). In Westfield Ins.
Corp. v. Mainstream Capital Corp., 366 F. Supp. 2d 519,
521 (E.D. Mich. 2005), the court stated:
Declining jurisdiction is always a sensible
option to consider in declaratory judgment
actions seeking an opinion on insurance
coverage impacting litigation pending in
another court, for although there is no per se
rule prohibiting such actions in federal court
... “[s]uch actions ... should normally be
filed, if at all, in the court that has
jurisdiction over the litigation giving rise
to the indemnity problem.”
Id. at 521 (quoting Bituminous Cas. Corp. v. J & L
Lumber Co ., Inc., 373 F.3d 807, 812 (6th Cir.
2004)(additional citation omitted)).
Civil Action No. 5:10–cv–190(DCB)(JMR), 2011 WL 2414706, S.D.
Miss. June 11, 2011).
Consideration of the Trejo factors leads
this court to the same result.
weigh in favor of abstention.
The factors are either neutral or
The court thus concludes that the
motion to dismiss should be granted.
Accordingly, it is ordered that Booth’s motion to dismiss is
granted.
A separate judgment will be entered in accordance with
10
Rule 58 of the Federal Rules of Civil Procedure.
SO ORDERED this 5th day of July, 2013.
/s/ Tom S. Lee
UNITED STATES DISTRICT JUDGE
11
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?