Travelers Casualty and Surety Company et al

Filing 28

ORDER granting 4 Motion to Dismiss for Lack of Jurisdiction; denying 24 Motion for Leave to File Amended Complaint; case is dismissed without prejudice. Signed by Judge Charles C. Lovell on 3/22/2013. (MKB)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
HELENA DIVISION
*******
TRAVELERS CASUALTY AND
SURETY COMPANY, UNITED
STATES FIDELITY AND GUARANTY
COMPANY, and ST. PAUL FIRE AND
MARINE INSURANCE COMPANY,
Plaintiffs,

CV 12-104-H-CCL

ORDER

-vTHE ROMAN CATHOLIC BISHOP
OF HELENA,
Defendant.
*******
Before the Court is Defendant’s Motion to Dismiss this case (ECF No. 4).
The Roman Catholic Bishop of Helena, Montana (the “Bishop”) urges the Court to
abstain from adjudicating this declaratory judgment action regarding insurance
coverage because an earlier-filed state court action raises similar or identical

issues.1
Plaintiffs are three Travelers Insurance Companies: Travelers Casualty and
Surety Company, United States Fidelity and Guaranty Company, and St. Paul Fire
and Marine Insurance Company (collectively, the “Travelers”). Travelers
presents this case pursuant to the Declaratory Judgment Act (the “Act”), 28 U.S.C.
§ 2201(a). In the Complaint, Travelers seeks a declaration that it is not obligated
to defend or indemnify the Bishop in pending state litigation. Travelers also
asserts that any coverage that might have existed was forfeited by the Bishop by
his failure to give timely notice of the underlying actions to Travelers. The instant
complaint states that Travelers and three other insurers are providing a defense to
the Bishop in the pending state litigation. (ECF No. 1, ¶ 45.) Therefore, Travelers
seeks a declaration of no coverage and that it may discontinue the defense it is
currently providing to the Bishop in state court.
1

The Court notes that a similar motion was also brought by the Bishop, and was granted
by the district court, in a related case in the District of Montana. See The Catholic Mutual Relief
Society of America v. The Roman Catholic Bishop of Helena, Montana, CV 12-189-M-DLC
(“CMRSA”). On February 27, 2013, the district court dismissed CMSRA on the same grounds as
are now asserted by the Bishop in this case.
2

Pursuant to the Act, the Court’s acceptance of any declaratory judgment
action is not obligatory.2
There are three underlying state court cases related to this declaratory
judgment action. The first is Whalen, et al. v. Diocese of Helena, et al., BDV
2011-925 (First Judicial District Court, Lewis and Clark County), which is
brought by 235 plaintiffs against the Bishop, for injuries they allegedly received
by individuals for whom the Bishop was responsible from the 1930s through the
1970s. The second action is Doe, et al. v. Diocese of Helena, and Ursuline Sisters
of the Western Province, et al., ADV 2011-936 (First Judicial District Court,
Lewis and Clark County), which is brought by 89 plaintiffs against the Roman
Catholic Bishop of the Diocese of Helena and the Ursuline Sisters, for similar
injuries as alleged in Whalen.

2

“[A]ny 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) (emphasis added). See Public Serv. Comm’n of Utah v. Wycoff Co., 344
U.S. 237, 250, 73 S.Ct. 236, 243-44, 97 L.Ed. 291 (1952); see also Government Employees
Insurance Company v. Dizol, 133 F.3d 1220, 1223 (9th Cir. 1998) (holding district court not
required to address sua sponte its discretion to accept or deny jurisdiction under the Act when
issue not raised by parties).
3

Most significant, however, is the third related action because it is a
seemingly parallel state action that was filed before the instant action: Whalen, et
al. v. Catholic Mutual Relief Society of America, et al., DDV 2012-976 (First
Judicial District Court, Lewis and Clark County) (the “State Court Coverage
Action,” sometimes referred to as “Whalen II”).3 In this state court case, the
Whalen plaintiffs claim they are third-party beneficiaries of the Bishop’s policies
of insurance and have vested rights in policy benefits. These plaintiffs have
requested that, pursuant to the Montana Declaratory Judgment Act, § 27-8-202,
the state court determine the scope and extent of coverage under all policies issued
by the Diocese’s insurers.
3

The named defendants in Whalen II are The Catholic Mutual Relief Society of
America, Fireman’s Fund Insurance Comopany, Great American Insurance Company, Reliance
Insurance Company; American Home Assurance Company, St. Paul’s Insurance, The Travelers
Indemnity Company, Montana Insurance Guarantee Association, General Insurance Company of
America, First National Insurance Company, CNA Insurance Company, Standard Insurance
Company, One Beacon Insurance Group, Ltd., The Diocese of Montana a/k/a The Roman
Catholic Diocese of Helena, Ursuline Sisters of The Western Province, and John Does, 1-20.
Two of these defendants, St. Paul’s Insurance and The Travelers Indemnity Company, are among
The Travelers companies. John Does 1-20 “are other and additional insurers who insured
Defendants Diocese and Ursulines in Montana and who issued policies of liability insurance to
Defendants Diocese and/or Ursulines. (ECF No. 5-1 at 7, ¶ 7.) The presence of the Montana
Insurance Guaranty Association renders the State Coverage Action non-removable.
4

It is in this state/federal litigation context that the Bishop argues the claims
in the instant declaratory judgment action involve the same issues and questions of
Montana law as are being presented in the State Court Coverage Action/Whalen II.
The Bishop asserts that this court should decline to take jurisdiction over this case
because (1) the same issues will be decided in both this case and the state case, (2)
this court may be required to determine Montana law in this case, (3) piecemeal
litigation in two courts could result in inconsistent determinations, and (4) this
case was filed only in response to the state court case. The Bishop asserts that this
case meets all requisite criteria for dismissal of the case.
Under the Wilton/Brillhart Doctrine, courts may dismiss a declaratory
judgment action even though its claims meet all jurisdictional requirements.
Wilton v. Seven Falls Co., 515 U.S. 277, 282, 115 S.Ct. 2137 (1995) (citing
Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494, 62 S.Ct. 1173, 86 L.Ed.
1620 (1942)). It is considered generally to be “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
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parties.” Brillhart, 316 U.S. at 495. Indeed, a presumption is raised in favor of
declining jurisdiction when a parallel state court action is pending. Gov’t Emps.
Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir. 1998) (en banc).
When considering whether to abstain in a declaratory judgment action, a
court should “balance concerns of judicial administration, comity, and fairness to
the litigants.” Principal Life Ins. Co. v. Robinson, 394 F.3d 665, 672 (9th Cir.
205) (internal citations omitted). Further, factors that should be given
consideration are (1) avoiding “needless determination of state law issues”; (2)
discouraging “forum shopping”; and (3) avoiding “duplicative litigation.” R.R. St.
& Co. v. Transp. Ins. Co., 656 F.3d 966, 975 (9th Cir. 2011). When diversity is
the only basis for jurisdiction, a determination that these factors favoring
abstention should “weigh heavily in favor of dismissing the action.” Central
United Life Ins. Co. v. Estate of Gleason, No. CV 11-31-H-DWM, 2011 WL
6258448, at *2. The lack of a compelling federal interest by itself supports
abstention. R.R. St. & Co., 656 F.3d at 975.
In this case, the insurance coverage issues present questions of state, not
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federal, law. The claims are based on the diversity jurisdiction of the parties.
Some of the claims may eventually require determinations of novel questions of
state law. See, e.g., CMRSA, CV 12-189-M-DLC, slip op. at 5-6.
Travelers asserts two non-declaratory judgment claims, one for reformation
of contract and one for breach of contract. The question arises whether these two
claims are dependent or independent of the declaratory claims. The answer to that
question may determine whether the Court should decline or accept jurisdiction
over the matter. The reformation of contract claim is dependent upon Travelers’
claim that the policy was never issued. Likewise, the breach of contract claim
would be moot should the Court find that the policy was never issued. Therefore
the Count III reformation and Count IV breach of contract claims are closely
related to and dependent upon the declaratory judgment claims. Moreover, they
are declaratory in nature themselves. In each instance, a declaration is sought: a
declaration by the Court that the 1971-73 U.S. Fidelity policy affords no liability
coverage (ECF No. 1, ¶ 72) and a declaration that the Bishop failed to provide
timely notice under the terms of the policy thereby excusing performance by
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Travelers.
Travelers disagrees with the court’s determination that the state action is a
parallel proceeding. However, a parallel proceeding does not require that
precisely the same issues and parties be present in both the state and federal cases.
It is sufficient if the parallel cases depend upon the same factual circumstances
(i.e., the underlying tort claims). See American Nat. Fire Ins. Co. v. Hungerford,
53 F.3d 1012 (9th Cir. 1995) (citing Allstate Ins. Co. v. Mercier, 913 F.2d 273 (6th
Cir. 1990)), overrul’d on other grounds by Gv’t Employees Ins. Co. v. Dizol, 133
F.3d 1220 (9th Cir. 1998). This definition in state and federal declaratory
judgment actions, in the context of multiple insurance carriers and multiple
claimants, carries with it the obvious benefit of avoiding inconsistent or
contradictory treatment of claims submitted by similarly situated plaintiffs.
Further, the Bishop asserts that he will cross-claim against its insurance companies
in the State Coverage Action to resolve all coverage issues arising in both Whalen
and Doe.
Moreover, issues of Montana law will necessarily be addressed by the State
8

Coverage Action. As the Bishop points out, such issues may include “(a) whether
an insurance company may deny coverage for sexual abuse injuries committed by
employees under the guise of whether the supervising church ‘expected or
intended’ the injuries; (b) which policies are triggered by the claims of abuse; and
(c) how many times each policy must respond to each claim of abuse.” (ECF No.
22 at 12.) It is clear that there will be significant overlap in the coverage issues
affecting the insurers and the Whalen and Doe plaintiffs alike.
This Court concludes accepting jurisdiction in this case would result in the
unnecessary determination of state law issues and duplication of judicial effort
contrary to the interests of comity and federalism.
Travelers next seeks to amend its complaint to add a claim arising from its
recent discovery of a 1994 settlement agreement that allegedly released St. Paul
Fire and Marine Insurance Company from any obligation to indemnify the Diocese
for future sexual abuse claims and allegedly promised that the Diocese would pay
the costs of any future claims. (ECF No. 25 at 2.) Although framed as a nondeclaratory judgment claim (for breach of contract), this, too, is another dependent
9

claim that would first require determinations of state law which can be raised in
the state proceeding. The court remains convinced that abstention is appropriate.
Accordingly,
IT IS HEREBY ORDERED:
1. That the motion to amend the complaint (ECF No. 24) filed by Travelers
is DENIED,
2. That the motion to dismiss (ECF No. 4) filed by the Bishop is
GRANTED, and
3. That this case is DISMISSED without prejudice.
Done and Dated this 22nd day of March, 2013.

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