Liberty Surplus Insurance Corporation v. Wright et al

Filing 19

MEMORANDUM AND ORDER. (see order for details) IT IS HEREBY ORDERED that defendants' motion to dismiss or, in the alternative, to stay this action [# 12 ] is GRANTED, and this case is dismissed without prejudice. IT IS FURTHER ORDERED that plaintiff's motion to consolidate this case [# 18 ] with Fleming v. Wright, 4:12-CV-1478, is DENIED as moot. A separate order of dismissal is entered this same date. Signed by District Judge Catherine D. Perry on 12/12/2012. (CBL)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION

LIBERTY SURPLUS INSURANCE )
CORP.,
)
)
Plaintiff,
)
)
vs.
)
)
JOSEPH WRIGHT, et al.,
)
)
Defendants.
)

Case No. 4:12-CV-1036 CDP

MEMORANDUM AND ORDER
Pending before me are (1) defendants’ motion to dismiss or stay this
declaratory judgment action and (2) plaintiff’s motion to consolidate it with
Fleming v. Liberty Surplus Insurance Corp., 4:12-CV-1478. I have remanded
Fleming to the Missouri state court, and the issues in this case would be better
settled in that proceeding. Accordingly, I will dismiss this action without prejudice
and deny as moot plaintiff’s motion to consolidate.
I.

Background
On December 20, 2007, plaintiff Liberty Surplus Insurance Corp. issued a

one-year Commercial General Liability (CGL) policy to the City Museum.
(Compl., Ex. 1, p. 1.) During the period covered by the policy, defendant Steven
Fleming, an employee of the City Museum, was seriously injured when a

compressor exploded. His injuries were purportedly caused by defendant Joseph
Wright, Fleming’s supervisor at the City Museum. Fleming sued Wright for
negligence in Missouri state court.1
On June 11, 2012, while the state suit was pending, Liberty Surplus filed suit
in this court under the federal Declaratory Judgment Act, 28 U.S.C. § 2201(a).
The insurer asked the court for a determination that Wright was not an “insured”
under the CGL policy and, therefore, that it had no duty to defend or indemnify
Wright for any claims arising from the state-court negligence suit.
On August 6, 2012, the Missouri state court entered judgment in Fleming’s
negligence suit against Wright. The court found for Fleming and against Wright
and awarded Fleming $750,000. The day after the award was issued, Wright and
Fleming filed suit against Liberty Surplus in Missouri state court. Fleming v.
Liberty Surplus Ins. Co., 1222-CC09438 (Mo. Cir. Ct. filed Aug. 7, 2012). Wright
sued for breach of contract, arguing that he was an “insured” and Liberty Surplus
had breached its duty to defend and indemnify him. Fleming sued Liberty Surplus
to collect the judgment proceeds in an “equitable garnishment” action under Mo.
Rev. Stat. § 379.200.

1

Wright added the City Museum as a third-party defendant. The state court eventually
granted the City Museum’s motion for summary judgment and dismissed Wright’s claim against
it. Fleming v. Wright, 0922-CC08670 (Mo. Cir. Ct. filed July 31, 2009).

Liberty Surplus removed that case from state court, and Wright and Fleming
moved to remand. Because complete diversity is lacking, I am today remanding
the action to Missouri state court. Fleming v. Liberty Surplus Ins. Corp.,
4:12CV1036 CDP. Therefore, that case is once again pending in Missouri state
court. Because the only issue in this declaratory judgment action (the scope of
coverage of the CGL policy) would be better settled in the state court proceeding, I
will dismiss this case. Capitol Indem. Corp. v. Haverfield, 218 F.3d 872, 874 (8th
Cir. 2000).
II.

Discussion
When an action is brought under the Declaratory Judgment Act, the federal

courts have discretion whether to exercise jurisdiction or to abstain in favor of a
parallel state court proceeding. See Capitol Indem. Corp. v. Haverfield, 218 F.3d
872, 874 (8th Cir. 2000). The Eighth Circuit has instructed that a district court's
“key consideration” should be whether the issues disputed by the parties “can be
better settled by the state court in light of the scope and nature of the pending state
court proceeding.” Evanston Ins. Co. v. Johns, 530 F.3d 710, 713 (8th Cir. 2008)
(internal quotation marks omitted). A district court should decline to exercise
jurisdiction only in cases where the pending state court proceeding presents “the
same issues, not governed by federal law, between the same parties.” Royal Indem.
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Co. v. Apex Oil Co., 511 F.3d 788, 793 (8th Cir. 2008). If the issues and parties are
the same, the court must also evaluate:
“whether the claims of all parties in interest can satisfactorily be
adjudicated in that proceeding, whether necessary parties have been
joined, whether such parties are amenable to process in that proceeding.”
Id. (quoting Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 495 (1942)).
If the district court determines that the issues would be better settled in the
pending state court proceeding, it “must dismiss the federal action.” Johns, 530
F.3d at 713. To do otherwise would be “uneconomical as well as vexatious.” Id.
Plaintiff Liberty Surplus contends that, among other things, I should exercise
jurisdiction over this declaratory judgment action because it was filed before the
state-court contract/equitable garnishment action. The Eighth Circuit rejected this
argument in Haverfield. 218 F.3d at 875.
In that case, insurer Capitol Indemnity had issued a CGL policy to a married
couple doing business as a bar. After a bar patron was fatally shot, the deceased’s
parents sued the couple, claiming they had negligently caused the shooting death.
Shortly thereafter, Capitol Indemnity filed a declaratory judgment action in federal
court, asking the court to determine that the negligence claim was excluded from
coverage under the CGL policy.2 Five months later, the state court issued a

2

Like in this case, the Haverfield insurer was not party to the underlying negligence suit.
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judgment for the deceased’s parents and against the married couple. The parents
then filed a state-court petition against the husband and Capitol Indemnity to
collect insurance proceeds.
In the federal-court declaratory judgment action, Capitol Indemnity obtained
leave to add the parents as defendants. The parents then moved to dismiss or stay
the action, arguing the state court was the better forum for adjudicating the
coverage issues. The district court denied the motion because the federal action
was much further along in the litigation process. But the Eighth Circuit reversed,
finding the district court had abused its discretion in exercising jurisdiction over
the declaratory judgment action. It ultimately held that:
At the time the district court denied the [parents’] motion to dismiss or
stay the federal proceeding, a parallel state court action was pending that
presented the same issues between the same parties. Further, both actions
were governed solely by state law. Thus, the state court was in the better
position to adjudicate the matter, and permitting this federal action to
proceed was unnecessarily duplicative and uneconomical.
Id. at 875.
The issue in this case is identical. Like in Haverfield, the parties dispute the
scope of coverage of the CGL policy at issue, whose interpretation is governed by
state law. See id. (citing TNT Speed & Sport Cntr., Inc. v. Am. States Ins. Co., 114
F.3d 731, 732 (8th Cir. 1997)). The parties to this case – Liberty Surplus, Wright,
and Fleming – are the same parties litigating the state-court contract/equitable
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garnishment case.3 Liberty Surplus’ contention that Wright is not an insured under
the CGL policy can be satisfactorily adjudicated in the pending state-court
proceeding as a defense to each claim against it. See Glover v. State Farm Fire &
Cas. Co., 984 F.2d 259, 260 (8th Cir. 1993) (insurer may raise defenses it would
have against its own insured in action brought under Mo. Rev. Stat. § 379.200).
Moreover, the Haverfield declaratory judgment action was “nearly ready for
trial.” 218 F.3d at 876 (Loken, J., dissenting). The need to conserve judicial
resources and avoid duplicative action, already dispositive in Haverfield, is even
more pressing in this case, in which there have been no major actions. See also
Sentry Ins. v. Haines, 4:08-CV-00329 FJG, 2009 WL 702032 (W.D. Mo. Mar. 13,
2009), at *2 (dismissing declaratory judgment action on same judicial economy
grounds where insurer sought declaration that driver did not qualify as “insured”
under applicable policy and parallel state court proceeding was § 379.200 action).
III.

Conclusion
The parallel proceeding in Missouri state court presents “the same issues

between the same parties,” involves an application of state law only, and provides
an adequate opportunity for Liberty Surplus to present non-coverage as a defense.
3

Plaintiff Liberty Surplus protests that it is not “amenable to process” in the state of
Missouri, which it suggests is required. The actual consideration put forth by the Supreme Court
is whether Liberty Surplus is “amenable to process” in the state proceeding, Brillhart, 316 U.S.
at 495, not whether it receives service of process within the geographic confines of the state.
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The scope of coverage provided to Wright by the CGL policy, if any, is an issue
better settled by the Missouri state court, and the state court decision will fully
resolve all issues presented by this case. Therefore, I will not exercise jurisdiction
over this declaratory judgment action.
For the foregoing reasons,
IT IS HEREBY ORDERED that defendants’ motion to dismiss or, in the
alternative, to stay this action [#12] is GRANTED, and this case is dismissed
without prejudice.
IT IS FURTHER ORDERED that plaintiff’s motion to consolidate this
case [#18] with Fleming v. Wright, 4:12-CV-1478, is DENIED as moot.
A separate order of dismissal is entered this same date.

____________________________________
CATHERINE D. PERRY
UNITED STATES DISTRICT JUDGE
Dated this 12th day of December, 2012.

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