Empire Fire and Marine Insurance Company v. Scheibler et al

Filing 16

OPINION MEMORANDUM AND ORDER IT IS HEREBY ORDERED that Defendants' motions to dismiss, [Doc. No.s 11 and 14], are granted. IT IS FURTHER ORDERED that this matter is dismissed. 11 14 Signed by District Judge Henry Edward Autrey on 11/3/16. (CLA)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
EMPIRE FIRE AND MARINE
INSURANCE COMPANY,
Plaintiff,
v.
AMY SCHEIBLER, et al.,
Defendants.

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Case No. 4:16CV594 HEA

OPINION, MEMORANDUM AND ORDER
This matter is before the Court on Defendants' Motion to Dismiss, [Doc.
No.’s 11 and 14].1 For the reasons set forth below, the Motions are granted.
Facts and Background
On July 3, 2014, Defendants Scheibler and Jamerson were in an automobile
accident. Scheibler claims Jamerson was at fault for the accident and she sustained
injuries as a result of the accident.
Plaintiff has an Excess Insurance Policy in effect that potentially insured
Jamerson for the bodily injury damages allegedly sustained by Scheibler on July 3,
2014. Plaintiff has sent a denial of insurance coverage to Scheibler.

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Doc. No 9, although pending, has been rendered moot by the filing of the Amended Complaint and Defendant
Scheibler’s Motion to Dismiss and/or stay Plaintiff’s First Amended Complaint.

Scheibler and Jamerson entered into an agreement to arbitrate Scheibler’s
claims against Jamerson pursuant to RSMo § 537.065. The arbitration was held on
April 18, 2016. The arbitrator found in favor of Scheibler and against Jamerson.
The Arbitration Award was confirmed by the Circuit Court of Jackson County on
May 6, 2016.
Plaintiff filed this action on April 27, 2016 seeking a declaratory judgment
from this Court that its insurance policy contains valid and enforceable conditions
precedent to coverage; that certain conditions have been breached by Defendant
Jamerson, and that it is relieved of any obligation to defend or indemnify her for
any claims made or suits brought by Defendant Scheibler; and that Defendant
Jamerson and Defendant Scheibler’s actions have deprived Plaintiff of its rights
under Article I §§ 10, 14 and 22A of the Missouri Constitution.
Defendant Scheibler filed an equitable garnishment proceeding against
Plaintiff Empire and Defendant Jamerson on June 6, 2016 in the Circuit Court of
Jackson County, Missouri on June 6, 2016, Cause Number 1616-CV-13492.
Discussion
Under the Declaratory Judgment Act, a court “may declare the rights...of any
interested party seeking such declaration.” 28 U.S.C. § 2201(a) (emphasis added).
“[D]istrict courts possess discretion in determining whether and when to entertain
an action under the Declaratory Judgment Act, even when the suit otherwise
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satisfies subject matter jurisdictional prerequisites.” Wilton v. Seven Falls Co., 515
U.S. 277, 282 (1995). “The question for a district court 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. (quoting Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 495 (1942)). “If a
district court, in the sound exercise of its judgment, determines after a complaint is
filed that a declaratory judgment will serve no useful purpose, it cannot be
incumbent upon that court to proceed to the merits before staying or dismissing the
action.” Id. at 288.
The Eighth Circuit has instructed that a district court's “key consideration...is
‘to ascertain whether the issues in the controversy between the parties to the
federal action...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) (quoting Capitol Indem. Corp. v. Haverfied, 218
F.3d 872, 874 (8th Cir. 2000)). If the issues would be better settled in the state
court proceeding, “the district court must dismiss the federal action because ‘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, not governed by federal law, between the same parties.’ ” Capitol
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Indem., 218 F.3d at 874-75 (quoting Brillhart, 316 U.S. at 495)); see also Evanston
Ins. Co., 530 F.3d at 713.
This case is similar to Capitol Indemnity Corporation v. Haverfield. After
suit was filed against the insureds, Capitol Indemnity filed a declaratory judgment
action in federal court contending the claims against the insureds were excluded
from coverage. 218 F.3d at 873-74. While the declaratory judgment action was
pending, the state court entered judgment against the insureds, and the state court
plaintiffs filed a garnishment action against Capitol Indemnity. Id. at 874. The
Eighth Circuit determined the district court abused its discretion by failing to
dismiss or stay the declaratory judgment action. Id. at 875 (remanding the case to
the district court with instructions that the case be dismissed). The Eighth Circuit
noted the state and federal actions involved the same parties, the same issue, the
same insurance policies, and the same arguments. Id.
In considering the pending motion to dismiss, the Court has weighed several
factors. First, this proceeding and the state court proceeding are parallel. The same
issues are being litigated by the same parties in different forums. Scottsdale Ins.
Co. v. Detco Indus., Inc., 426 F.3d 994, 997 (8th Cir. 2005) (stating that suits are
parallel if “substantially the same parties litigate substantially the same issues in
different forums.”) (citation omitted). The same insurance policy is at stake, and
the parties are asserting the same arguments.
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Second, the garnishment action, although filed after this case commenced, is
further along. A review of the docket in Missouri Casenet confirms that the parties
have been notified of a case management conference scheduled for December 19,
2016. In this matter, the parties do not have to conduct their Rule 26 conference or
submit their proposed scheduling order until sometime after the Court’s ruling on
the pending Motions to Dismiss. Discovery has not commenced.
Third, there are no issues of federal law, and the controversy can be better
settled by the state court. Insurance contract interpretation is governed by state law.
Fourth, if this Court were to continue adjudicating this matter, there would
be a risk of conflicting outcomes. And, it is uneconomical for this Court to proceed
with this action, forcing the parties to litigate the same issues and make the same
arguments in two separate forums.
Finally, Plaintiff argues that since its declaratory judgment action was filed
before the garnishment action, its lawsuit should have priority and be allowed to
proceed. The first-to-file rule, however, is not absolute. See Cincinnati Ins. Co. v.
R&L Siding, Inc., Case No. 2:01-CV-4091-NKL (W.D. Mo. June 21, 2002)
(dismissing a declaratory judgment matter even though it had been pending longer
than the state court garnishment action and stating that “the Court does not believe
that the timing of [the declaratory judgment action] in comparison with the
[garnishment action] is of significant import”); see also Koch Engineering Co. v.
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Monsanto Co., 621 F. Supp. 1204, 1207 (E.D. Mo. 1985) (citation omitted)
(dismissing a declaratory judgment action in favor of later filed state court matter).
In the context of this matter and the status of the parallel state court action, the
Court is not compelled to strictly follow the first-to-file rule when determining
whether to exercise jurisdiction under the Declaratory Judgment Act. See e.g., HBE
Corp. v. Burrus, Case No. 4:09-CV-906, 2009 WL 3517532, at * 4 (E.D. Mo. Oct.
23, 2009) (citations omitted).
Based on all of these factors, the Court declines to exercise jurisdiction over
Plaintiff’s declaratory judgment action. Following a decision to abstain from
adjudicating a declaratory judgment action, this Court has discretion to dismiss or
stay the federal action. The state court action will in all likelihood completely
resolve the case, and Plaintiff has not set forth any argument as to any
circumstances under which further federal proceedings may prove necessary.
Based on the information and arguments before the Court, it is improbable that this
matter will return to federal court. Accordingly, the Court elects not to stay this
matter. The Court grants Defendants' motions to dismiss.
Conclusion
Based upon the foregoing analysis, the Court concludes that this matter is
more appropriately litigated in the Circuit Court for Jackson County, Missouri.
Accordingly,
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IT IS HEREBY ORDERED that Defendants' motions to dismiss, [Doc.
No.’s 11 and 14], are granted.
IT IS FURTHER ORDERED that this matter is dismissed.
Dated this 3rd day of November, 2016.

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HENRY EDWARD AUTREY
UNITED STATES DISTRICT JUDGE

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