Nationwide Property & Casualty Insurance Company v. Buckley et al

Filing 24

ORDER denying 13 Motion to Dismiss; denying 13 Motion to Stay Case. Signed by District Judge Carlton W. Reeves on 11/21/2022. (DDM)

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IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION
NATIONWIDE PROPERTY &
CASUALTY INSURANCE CO.,
Plaintiff,
CAUSE NO. 3:22-CV-00403-CWR-LGI

v.
MIKELL BUCKLEY; NICOLE
DONALD; HUNTINGTON LUMBER
& SUPPLY COMPANY, INC.; JOHN
HUNTINGTON; ABC INDIVIDUALS
1-20; and XYZ ENTITIES 1-20,
Defendants.
ORDER

The Declaratory Judgment Act empowers federal courts to issue declaratory
judgments in any case in which the court has jurisdiction. Sometimes, though, a court’s
exercise of that authority threatens to interfere with pending litigation in state court. When
that happens, the federal court must decide whether to proceed in parallel or to stay the
federal proceedings while the state litigation concludes. That is the question presented in this
Motion to Abstain or Stay by Defendants Mikell Buckley and Nicole Donald. Docket No. 13.
In light of the high standard for abstention in the Fifth Circuit, and the lack of
“exceptional circumstances” presented, the Defendants’ motion is denied.
I.

Factual and Procedural History
On April 19, 2019, Defendants Mikell Buckley and Nicole Donald sued Huntington

Lumber and Supply Company, Inc. and John Huntington (together, “Huntington”) for

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breach of the warranty of habitability, breach of contract, and negligence in the Chancery
Court of Copiah County, Mississippi. Docket No. 2, Ex. D. The Complaint alleges that in May
2016, Buckley and Donald contracted to pay Huntington $388,642.00 to build their home by
October 31, 2017. Id. But apparently, Huntington never finished the job. Id. According to
Buckley and Donald, by the time they filed their Complaint, their home was still not
complete, even though they had paid Huntington approximately $534,000.00. Id.
On December 7, 2021, Chancellor Joseph Durr entered partial summary judgment on
some claims. Other claims remain live on the Chancery Court’s docket at the time of this
Order. Docket No. 13-1.
Enter Nationwide Property & Casualty Insurance Company (“Nationwide”).
Nationwide is Huntington’s insurer. As part of its insurance contract with Huntington,
Nationwide agreed to “pay those sums that the insured becomes legally obligated to pay as
damages because of ‘bodily injury’ or ‘property damage’ to which the insurance applies.”
Docket No. 1, Ex. A. More than that, though, Nationwide agreed to “defend the insured
against any ‘suit’ seeking [such] damages.” Id.
Instead of doing either of those things, Nationwide brought this federal action against
Buckley, Donald, Huntington, and various unnamed defendants, asking the court to, among
other things: (1) “[d]eclare that the terms and conditions of [its policies] relieve Nationwide”
of its duty to defend or indemnify Huntington against the state court claims; (2) “enjoin each
one of these Defendants from either initiating or prosecuting a suit or any other action”
against Nationwide; and (3) “[d]eclare [that] Huntington is not entitled to defense costs . . .
from Nationwide incurred in defense of the instant action for declaratory judgment.” Docket
No. 1 at 50-51.

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Shortly after Nationwide initiated this action, Buckley and Donald moved in state
court to amend their original complaint to add Nationwide as a defendant. Docket No. 13-1.
Chancellor Durr granted leave to amend, and Buckley and Donald served the amended
complaint on Nationwide the next day. Id. Just under two weeks later, Buckley and Donald
filed the instant motion to dismiss or stay the federal court action. Docket No. 13.
Buckley and Donald argue that it is “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, not governed by federal law, between the same parties.” Id. at 1
(citing Wilton v. Seven Falls Co., 515 U.S. 277 (1995) and Brillhart v. Excess Ins. Co. of Am., 316
U.S. 491 (1942)) (internal quotations omitted). “Under those circumstances,” they argue, the
Court should apply the Brillhart factors as identified by the Fifth Circuit in Sherwin-Williams
v. Holmes County, 343 F. 3d 383, 387 (5th Cir. 2003), and stay this federal declaratory judgment
action. Id.
Nationwide disagrees. It first argues that the court need not reach the abstention
analysis because no threat of “parallel litigation” exists. Docket No. 20 at 6. According to
Nationwide, at the time it filed this federal action, Nationwide was not a party in the
underlying state court action, and, in any event, the issues presented in this case are different
from those alleged in the state-court action. Id. at 5-6.
Next, Nationwide argues that, assuming parallel litigation, Buckley and Donald
misconstrue the standard for abstention in cases like this one. Id. at 4. Because its federal
Complaint seeks declaratory and injunctive relief, “the trial court must apply the standards
enunciated in Colorado River [Water Conservation District v. United States, 424 U.S. 800, 817
(1976)].” Id. at 14 (citing Black Sea Inv., LTD v. United Heritage Corp., 204 F.3d 647, 652 (5th Cir.

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2000)) (internal quotations omitted) (emphasis in original). Under that standard, abstention
“is not appropriate,” Nationwide argues. Id. at 16.
II.

Legal Standard
Under the Declaratory Judgment Act, federal courts “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. However, federal courts are “under no compulsion
to exercise [this] jurisdiction.” Brillhart, 316 U.S. at 494. And when the request for relief comes
to the court during the pendency of a state-court proceeding, the federal court must take care
not to trample on the state-court process. So, the fundamental question district courts must
consider when presented with a suit under the Declaratory Judgment Act is “whether the
questions in controversy between the parties to the federal suit, and which are not foreclosed
under the applicable substantive law, can better be settled in the proceeding pending in the
state court.” Id.
The standard changes when a party seeks a “coercive remedy” (e.g., damages or
injunctive relief) in addition to declaratory judgment. In those situations, the court’s
discretion is guided by the factors set forth in Colorado River, 424 U.S. at 817. See New England
Ins. Co. v. Barnett, 561 F.3d 392, 395-96 (5th Cir. 2009). The Colorado River factors include “(1)
assumption by either court of jurisdiction over a res; (2) the relative inconvenience of the
forums; (3) the avoidance of piecemeal litigation; (4) the order in which jurisdiction was
obtained by the concurrent forums; (5) whether and to what extent federal law provides the
rules of decision on the merits; and (6) the adequacy of the state proceedings in protecting
the rights of the party invoking federal jurisdiction.” Murphy v. Uncle Ben's, Inc., 168 F.3d 734,
737 (5th Cir. 1999).

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Application of Colorado River is only required where there is parallel litigation
occurring in the state and federal courts. Absent the threat of parallel or duplicative litigation,
the federal courts have an “unflagging obligation . . . to exercise the jurisdiction given to
them.” Colorado River, 424 U.S. at 818; see also Stewart v. Western Heritage, 438 F.3d 488, 491 n.3
(5th Cir. 2006) (“If the suits are not parallel, the federal court must exercise jurisdiction.”).
III.

Discussion
A.

Parallel Litigation

The Court must first determine if “parallel litigation” exists, such that abstention
might be warranted. In determining whether the proceedings are sufficiently parallel, we
look to see whether the actions involve “the same parties and the same issues.” Stewart, 438
F.3d at 491. But we do not insist upon absolute precision. RepublicBank Dallas, Nat. Ass’n v.
McIntosh, 828 F.2d 1120, 1121 (5th Cir. 1987)). It is enough that the parties and issues be
substantially the same. Id.; see also Kenner Acquisitions, LLC v. BellSouth Telecommunications,
Inc., No. 06-3927, 2007 WL 625833, at *2 (E.D. La. Feb. 26, 2007).
Nationwide argues that in deciding whether the state and federal claims are the same,
the Court should compare the claims as they existed at “the time of filing of this declaratory
action.” Docket No. 20 at 5. At that time, Nationwide argues, Buckley and Donald had
asserted no claim against it in their state-court action, even though “Nationwide was in fact
known to [them] as early as October 26, 2020.” Ibid. But Nationwide identifies no authority
to support such a stringent temporal restriction on which claims count for purposes of claim
comparison. To the contrary, the abstention cases this Court has reviewed are either silent on

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the question or appear to compare the claims at the time the motion to stay was filed in the
federal court. 1
Comparing the claims as they exist at the time the motion to stay was filed is the better
approach because it best comports with the purpose of the abstention doctrine. Based in
“principles of federalism, comity, and conservation of judicial resources,” Black Sea, 204 F.3d
at 650, abstention enables us to respect the competence of state courts and their processes. In
state court, as in federal court, litigation is a multi-step endeavor. Regardless of what issues
and parties were before the state court initially, the fluid nature of litigation allows for new
issues and parties to be added, which alters the nature of the action. The process of amending
a complaint contemplates that such an event might occur. Thus, there may come a time
during a state-court litigation when, through the process of amendment, the state action
begins to mirror a later-filed federal action, even though the two actions would have been
different in their original form. Respect for the competence of state courts requires that we
treat as valid a state court’s decision to allow a plaintiff to amend its complaint under that
state’s rules, regardless of whether that amendment came after the initiation of a federal
action. A rule that ignores the status of a state-court action after a federal action is filed
undermines each of the principles on which abstention is based.

See, e.g., PPG Industries, Inc. v. Continental Oil Co., 478 F.2d 674 (5th Cir. 1973) (comparing the
federal and state actions after the state action was amended in state court); New England Ins. Co. v.
Barnett, 561 F.3d 392, 397-98 (5th Cir. 2009) (finding that, in determining the nature of an action for
purposes of claim comparison, a counterclaim should be considered). In Colorado River itself, the
federal action was filed before the state action. 424 U.S. at 806. There, the Supreme Court allowed the
federal court to stay the federal action until the state action concluded. Under Nationwide’s temporal
theory, however, the federal court would not have been able to abstain because the federal action was
first in time and “no state action would have qualified as ‘parallel litigation’ under [this Circuit’s]
definition.” Docket No. 20 at 5.
1

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That Nationwide might ultimately become a party would not be foreign to
Nationwide under the state’s rules governing amendments, joinder, and interpleader. Miss.
R. Civ. P. 15 18, 19, 20, 22. In the normal course, these rules allow plaintiffs and defendants
to add new parties or claims to a lawsuit, when those parties or claims are factually related
to the underlying action. In Mississippi state court, as in federal court, these rules are timeconstrained so as to place potential defendants on notice that they may be liable up to a datecertain. This constraint serves the same purpose as a statute of limitations in allowing
potential defendants to plan their lives and business activities around the potential lawsuit.
The rule Nationwide urges would undermine the state’s joinder and interpleader
rules and thereby unduly interfere with state court procedure. It would allow potential
defendants to cut short a state-court process merely by filing a federal action seeking
declaratory and injunctive relief on a claim that the state-court plaintiff or defendant could
still timely raise in the pending state-court litigation. This creates perverse incentives for
enterprising potential defendants and robs state-court litigants of the full use of state-court
process. Each of these things raises federalism and comity concerns.
In this case, the state court allowed Buckley and Donald to amend their Complaint to
add Nationwide as a party and to assert new claims against Nationwide. This Court
presumes the validity of the state court’s decision, so will compare the claims in Nationwide’s
federal action against those in the state-court action, as they appear in the First Amended
Complaint.
Buckley’s and Donald’s First Amended Complaint (FAC) alleges the same state-law
breach of contract and tort law issues against Huntington as its original complaint. Docket
No. 13-2. The FAC goes further in joining Nationwide as a Defendant and arguing that under

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state law, Nationwide’s policies cover the Defendants’ liability on the state-court Plaintiffs’
substantive claims. Id. at 9-10. The FAC further alleges that the contract interpretation issues
presented in Nationwide’s federal declaratory judgment action would necessarily be
resolved by the state-court in the course of deciding the issues presented in the FAC. Id. These
claims are substantially the same as those presented in this federal declaratory judgment
action.
Since the claims in the state-court action and this federal action involve substantially
the same parties, the same nucleus of facts, and the same contractual relationships and
provisions, the Court finds the issues are sufficiently parallel to consider abstention in
furtherance of comity and conservation of judicial resources. This conclusion is supported by
the Fifth Circuit’s decision in African Methodist Episcopal Church v. Lucien, 756 F.3d 788 (5th
Cir. 2014). The causes of action in African Methodist Episcopal Church were not precisely the
same, but the Fifth Circuit found that the disposition of the state-court action would
“necessarily dispose of all claims asserted . . . in the federal action,” which made the Fifth
Circuit “comfortable that the [state-court action] and the federal action [were] sufficiently
parallel.” Id. The same result amounts here.
B.

The Colorado River Factors

Having found that the proceedings are sufficiently parallel, the court will proceed to
apply the Colorado River factors. Rather than applying these factors “mechanically,” the Court
must carefully balance each, “with the balance heavily weighted in favor of the exercise of
jurisdiction.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 16 (1983).

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1) Assumption by Either Court of Jurisdiction Over a Res
Neither court has jurisdiction over a res. Docket No. 20 at 16. “The absence of this
factor weighs against abstention.” Murphy v. Uncle Ben’s Inc., 168 F.3d 734, 738 (5th Cir. 1999).
2) The Relative Inconvenience of the Fora
The second factor is concerned with determining which court is better positioned
geographically to adjudicate the underlying dispute. When the state and federal courts are in
the same geographic location or in approximately the same location within the state, “the
inconvenience factor weighs against abstention.” Stewart, 438 F.3d at 492. Here, both suits are
pending in courts within the geographic coverage of the Southern District of Mississippi,
about 35 miles apart. Therefore, this factor weighs against abstention. Id.
3) Avoidance of Piecemeal Litigation
Under Fifth Circuit precedent, this factor is not concerned with the threat of
duplicative litigation, but rather with “the avoidance of piecemeal litigation, and the
concomitant danger of inconsistent rulings with respect to a piece of property.” Black Sea, 204
F.3d at 650–51 (emphasis in original). Where there is “no danger of inconsistent rulings
affecting property ownership,” this factor does not weigh in favor of abstention. Evanston,
844 F.2d at 1192. Here, the Court has already determined that no property ownership rights
are at issue. Thus, this factor weighs against abstention.
4) Order in Which Jurisdiction Was Obtained
This factor is not measured by “‘which complaint was filed first, but rather in terms
of how much progress has been made in the two actions.’” Black Sea, 204 F.3d at 651 (citing
Moses, 460 U.S. at 21). In this case, the state-court action was filed in 2019 and “is nearing
maturity and trial.” Docket No. 13-2 at 8. As recently as July 8, 2022, the parties” convened a

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mediation” to discuss the “substantial likelihood of settlement.” Docket No. 23 at 1. That the
mediation was “derailed” on account of disputes between the insurer and the insured does
not detract from the Chancellor’s obvious efforts to resolve the matter, even in light of the
COVID-19 pandemic. Id. On the other hand, though, the federal action before this Court is
still at the pleadings stage, and this Court has not yet entered any substantive rulings.
Despite the progress of the state-court action, the Fifth Circuit has instructed that “this
factor only favors abstention when the federal case has not proceeded past the filing of the
complaint.” Stewart, 438 F.3d at 493. This action has certainly proceeded beyond the filing of
the complaint. Therefore, the Court finds that this factor does not weigh in favor of
abstention.
5) Whether State or Federal Law Will Be Applied
Both the state and federal actions here involve only issues of state law. That would
ordinarily counsel in favor of having the issue adjudicated in state court. Under Fifth Circuit
precedent, however,
the absence of a federal-law issue does not counsel in favor of abstention. Our
task in cases such as this is not to find some substantial reason for the exercise
of federal jurisdiction by the district court; rather, the task is to ascertain
whether there exists ‘exceptional circumstances,’ the ‘clearest of justifications,’
that can suffice under Colorado River to justify the surrender of that jurisdiction.
Thus, the presence of state law issues weighs in favor or surrender only in rare
circumstances.
Black Sea, 204 F.3d at 651 (quotations omitted). This case presents no such circumstance. This
factor is therefore neutral.
6) Adequate Protection in State Court
There is no reason to believe that Nationwide will not receive adequate protection in
the state court or that the state court would not serve as an adequate forum for Nationwide.

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And Nationwide does not contend otherwise. But in weighing this factor, the Court is
mindful that it “can only be a neutral factor or one that weighs against, not for, abstention.”
Id. at 652. Thus, the Court finds that despite the availability of adequate protection for
Nationwide in the state-court action, this factor remains neutral.
Given that all the Colorado River factors are either neutral or weigh against abstention,
the Court declines to stay the federal court proceedings.
IV.

Conclusion
For the foregoing reasons, the defendants’ Motion to Abstain or Stay is denied. 2
SO ORDERED, this the 21st day of November, 2022.

s/ Carlton W. Reeves
UNITED STATES DISTRICT JUDGE

In their Reply Brief, Docket No. 23, Buckley and Donald remark that Nationwide simply
“ignore[ed]” the “stay” portion of their motion, while focusing on the abstention discussion. But
Buckley and Donald never briefed the stay issue as distinct from the abstention issue. So, the Court
does not reach that issue. If Buckley and Donald wish to seek a discretionary stay under the Court’s
inherent authority, it would need to show “genuine necessity.” Coastal (Bermuda) Ltd. v. E.W. Saybolt
& Co., 761 F.2d 198, 203 n. 6 (5th Cir. 1985). No such showing has been made in the current motion.
2

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