STATE NATIONAL INSURANCE CO., INC. v. LANDIS et al
Filing
18
ORDER AS FOLLOWS: 1. THE COMPLAINT IS DISMISSED WITHOUT PREJUDICE; AND 2. THE CLERK OF COURT IS DIRECTED TO MARK THIS MATTER AS CLOSED, ETC. SIGNED BY HONORABLE EDWARD G. SMITH ON 1/15/2015. 1/15/2015 ENTERED AND COPIES E-MAILED.(lbs, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRlCT OF PENNSYLVANIA
STATE NATIONAL INSURANCE CO.,
INC.,
Plaintiff,
CIVIL ACTION NO. 14-607
v.
DALE LANDIS and JOHN LANDIS, as
Administrators and Persons Representing
the ESTATE OF CHARLES L. LANDIS,
DUSTON LEWIS, VINCENT
MASTNDREA, JUNE JOHNSON,
KEVIN JOHNSON, WILLIAM
JOHNSON, and J & B HOTEL, INC.,
Defendants.
MEMORANDUM OPINION
January 15, 2015
Smith, J.
This case is of a common variety: an insurance company seeks a declaration that it O\ves
neither a duty to defend nor a duty to indemnify a business entity and certain individuals in an
underlying state court action. Before any proceedings of substance on the merits have taken
place, the court sua sponte raises the question of whether the court should decline to exercise
jurisdiction under the Declaratory Judgment Act ("DJA"), 28 U.S.C. §§ 2201-2202. In response,
the parties agree that this case raises purely
state~law
issues, although they disagree about the
impact of the state court action on the instant matter. While these observations, standing alone,
help frame the mechanism of resolution, they do not exhaust it. For what ultimately is required
is a synthesis of these observations, among others, within the context of understanding the scope
of federal power. Undertaking such a synthesis, the court applies recent Third Circuit precedent
to conclude that the court should indeed decline to exercise jurisdiction over this matter and
dismiss the complaint.
I.
ALLEGATIONS AND PROCEDURAL HISTORY
On January 27, 2014, the plaintiff, State National Insurance Co., Inc., filed a complaint
against the defendants, Dale Landis and John Landis, as administrators and persons representing
the estate of Charles L. Landis, Duston Lewis, Vincent Mastandrea, June Johnson, Kevin
Johnson, William Johnson, and J & B Hotel, Inc., in which it advances a single claim for
declaratory relief in connection with an action currently pending in the Court of Common Pleas
of Lancaster County. Compl. at iii! 16, 25-27, Doc. No. 1. That action, commenced on October
4, 2012, and docketed at CI-12-14795, involves allegations that the defendant, Duston Lewis
("Lewis"), struck, and eventually ran over, Charles Landis ("Landis") with his car \Vhile
intoxicated. Id. at Ex. A, Am. Compl. After receiving treatment at Lancaster General Hospital,
Landis died on January 5, 2012. Id. The controlling complaint in state court asserts various state
statutory and common law claims against Le\vis, the corporation operating the establishment at
which Lewis consumed alcoholic beverages, namely J & B Hotel, Inc., and numerous purported
agents of that corporation, including Vincent Mastandrea, Kevin Johnson, William Johnson, and
June Johnson, and seeks compensation for Landis's death. Id.
As is common in the insurance industry, the plaintiff filed the instant complaint in federal
court for the sole purpose of obtaining a declaration pursuant to the DJA that it does not owe a
duty to either defend or indemnify the defendants, Vincent Mastandrea, Kevin Johnson, William
Johnson, June Johnson, and J & B Hotel, Inc., in the underlying state court litigation under an
insurance policy issued to J & B Hotel, Inc. for the policy period of May 2, 2011, to May 2,
2012. Compl. at iii! 15, 20, 25-27. More specifically, the plaintiff contends that it owes no such
2
duties because the allegations surrounding the state court action fall squarely within the confines
of two policy exclusions, namely a liquor liability exclusion and an assault and battery exclusion.
Id.
at~~2!-23.
After the plaintiff effectuated service, 1 the defendants, Vincent Mastandrea, Kevin
Johnson, William Johnson, and J & B Hotel, Inc. (the "Hotel Defendants"), filed an answer to
the complaint on February 26, 2014. Answer of the Defs. Vincent Mastandrea, Kevin Johnson,
William Johnson, and J & B Hotel, Inc., Doc. No. 4. The defendants, Dale Landis and John
Landis, as administrators and persons representing the estate of Charles L. Landis (the "Estate
Defendants"), filed an ans\ver to the complaint shortly thereafter.
Answer and Affirmative
Defenses of Defs. Dale Landis and John Landis as Adm' rs and Perss. Representing the Estate of
Charles L. Landis to Compl. for Declaratory J., Doc. No. 5. Chief Judge Petrese B. Tucker
transferred this matter from the Honorable La\Vrence F. Stengel to the undersigned on May 2,
2014. Order, Doc. No. 7.
On June 27, 2014, and after conducting a review of the complaint, the court issued an
order to show cause inviting the parties to brief the question of whether the court should decline
to exercise jurisdiction over this matter given both the discretionary nature of the DJA and the
recent holding of Reifer v. Westport Ins. Corp., 751 F.3d 129 (3d Cir, 2014). Order to Show
Cause, Doc. No. 9. The court set a briefing schedule and scheduled oral argument to occur in
conjunction with the initial pretrial conference on August 12, 2014. Id.
The plaintiff filed its response on July 9, 2014, in which it argues that the court should
exercise jurisdiction over this matter in part because the underlying state court action does not
1
After examining the proofs of service, it unfortunately appears that June Johnson died several years before the
commencement of the instant action. Proofs of Service, Doc. No. 3. Consequently, no attorney has entered an
appearance on her behalf. It like\vise appears that counsel has not entered an appearance on behalf of Lewis.
Despite being served, Le'>'<·is has filed neither a counseled nor a pro se response to the complaint. The court need not
comment on the implications of such a failure given the ultimate decision rendered.
3
constitute a parallel state proceeding. Pl.'s Resp. to June 27, 2014; Order to Show Cause ("PL 's
Resp.") at 4-5, Doc. No. 10. Employing substantially similar reasoning, both sets of defendants
filed responses on July 24, 2014, in v·.rhich they separately request that the court decline to
exercise jurisdiction over this case. Answer of the Defs. Vincent Mastandrea, Kevin Johnson,
William Johnson, and J & B Hotel, Inc. to Rule to Show Cause ("Answer of Hotel Defendants"),
Doc. No. 11; Defs.' Br. in Opp'n to PL's Resp. to Order to Show Cause ("Answer of Estate
Defendants"), Doc. No. 12. Though the response of the Estate Defendants covers more ground
in breadth and depth than that of the Hotel Defendants, neither response directly challenges the
plaintiffs characterization of the underlying state court action as something other than a parallel
proceeding. Answer of Hotel Defendants at 2-4; Answer of Estate Defendants at 7-9.
The court held oral argument on August 12, 2014, and the jurisdictional issue is ripe for
disposition.
II.
A.
DISCUSSION
Governing Analytical Framelvork
1.
Background
The DJA provides that a jurisdictionally-competent federal court "may declare the rights
and other legal relations of any interested party seeking such declaration." 28 U.S.C. § 220l(a)
(emphasis added). Through the vehicle of establishing a remedy, Congress textually carved out a
sphere of discretion into an otherwise "virtually unflagging obligation of the federal courts to
exercise the jurisdiction given them." 2 Colo. River Water Conservation Dist. v. United States,
2
The plaintiff invokes the diversity statute, 28 U.S.C. § 1332, as the basis for subject-matter jurisdiction. Compl. at
3. The plaintiff is a citizen of Texas. See Easy Corner, Inc. v. State Nat'/ Ins. Co., No. 14-1053, 2014 WL
5510319, at *l n.l (E.D. Pa. Nov. 3, 2014). To establish complete diversity, the complaint attempts to make out that
the defendants are citizens of Pennsylvania by alleging their addresses and residences. Comp!. at ~fi 5-12. The
amount in controversy exceeds $75,000. Id. at~ 13. Although the complaint does not lend itselfto a definitive
conclusion that subject-matter jurisdiction is proper because allegations of residency are insufficient to establish
citizenship, the court proceeds to the DJA analysis, as a non-merits ground for dismissal that is properly raised sua
~
4
424 U.S. 800, 817 (1976) (citations omitted). In other \VOrds, the "statute's textual commitment
to discretion" vests federal courts with "unique and substantial discretion in deciding whether to
declare the rights of litigants." Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995) (citations
omitted). While "the Supreme Court has ... framed DJA discretion in broad terms," it has also
made the point that a court's exercise of that discretion "is bounded and reviewable." Reifer, 751
F.3d at 139-40. Determining the precise boundaries ofDJA discretion, then, has been a lively
topic of judicial inquiry for, at minimum, the last seventy years.
Although undergirded by the common theme that a court's exercise of DJA discretion
must be "sound and reasoned," the controlling standard to be applied has evolved over time and
has recently cuhninated into a rebuttable presumption analysis informed by a multi-factor
balance test.
See id. at 139-40, 146 (observing this theme, but taking it through various
rhetorical iterations). Beginning with Brillhart v. Excess Ins. Co. ofAm., 316 U.S. 491 (1942), a
case involving pending state garnishment proceedings, the Supreme Court described the district
court's duty under the circumstances presented as an ascertainment of "whether the questions in
controversy ben.veen the parties to the federal suit, and which are not foreclosed W1der the
applicable substantive law, can better be settled in the proceeding pending in the state court." Id.
at 495. The Court described this duty against the theoretical backdrop of avoiding "[g]ratuitous
interference \Vith the orderly and comprehensive disposition of a state court litigation." Id. In
implementing this duty, the Court instructed that lower courts may be required to survey "the
scope of the pending state court proceeding and the nature of defenses open there," including
"whether the claims of all parties in interest can satisfactorily be adjudicated in that proceeding,
sponte, given the fact that it is "hardly novel for a federal court to choose among threshold grounds for denying
audience to a case on the merits." Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 585 (1999); see Reifer v.
Westport Ins. Corp., 751 F.3d 129, 146 n.22 (3d Cir. 2014) (recognizing that district courts may raise this issue sua
sponte); see also Krasnov v. Dinan, 465 F.2d 1298, 1300 (3d Cir. 1972) (stating that allegations of residency are
insufficient to establish citizenship for purposes of diversity (citation omitted)).
5
whether necessary parties have been joined, whether such parties are amenable to process in that
proceeding, etc." Id.
The Court cautioned, however, that its holding could not be read to
foreclose the possibility that a court may be required to consider additional, or possibly wholly
different, factors in the exercise of its DJA discretion in other cases. See id. (noting that the
holding was not an attempt to comprehensively enumerate the factors bearing on a court's
exercise ofDJA discretion).
Approximately fifty years later, the Court confirmed the vitality of "the Brillhart standard
to the Brillhart facts" in Wilton v. Seven Falls Co., 515 U.S. 277 (1995), and, in doing so, drew
out the essence ofDJA discretion in rather capacious tenns. Id. at 286; see Reifer, 751 F.3d at
139 (stating that the Supreme Court has generally "framed DJA discretion in broad tenns"
(citation omitted)). After analyzing the facts of Brillhart and the development of abstention
post-Brillhart, the Court reaffinned that "[d]istinct features of the Declaratory Judgment Act ...
justify a standard vesting district courts with greater discretion in declaratory judgment actions
than" in actions potentially amenable to abstention. 3 Wilton, 515 U.S. at 286. The propriety of
declaratory relief in any given case, the Court went on, is to be "informed by the teachings and
experience concerning the functions and extent of federal judicial power." Id. at 287 (internal
3
Although the court has seen Brillhart and Wilton characterized as creating an abstention doctrine, neither Brillhart
nor Wilton explicitly classified it as such. See United States v. Com. of Pa.. Dep 't of Envtl. Res., 923 F.2d 1071,
I 074 (3d Cir. 1991) (stating that "[w]e have previously made clear that a dismissal appropriate under the broader
standard of the Declaratory Judgment Act should be effected \Vithout resort to the more limited doctrine of
abstention" (citation omitted)); see, e.g., Med. Assurance Co. v. Hellman, 610 F.3d 371, 378 (7th Cir. 2010) (noting
that the use ofthe phrase "abstention" to describe the workings of Brillhart and Wilton is "not entirely accurate").
Instead, these two cases drew the concept of discretion from the OJA itself. See Brillhart, 316 U.S. at 494 (citing to
the "Federal Declaratory Judgments Act" (citation omitted)); Wilton, 515 U.S. at 286 (highlighting the word "may"
in the text of the OJA (citations omitted)). The modem day concept of abstention, on the other hand, tends to refer
to a creature of judge-made law. See, e.g., Hellman, 610 F.3d at 378 (stating that the term "abstention" generally
"refers to a group of judicially-created doctrines"). This distinction is important, and in part may explain the
disparity in the scope of discretion given to courts under the DJA as opposed to under abstention doctrines, because
it is arguably more palatable for Congress, as the jurisdiction-creating entity, to qualify a court's exercise of the
jurisdiction properly before it. See City of Milwaukee v. Illinois & Michigan, 451 U.S. 304, 313 (1981) (observing
that "[vv]e have always recognized that federal common la\v is subject to the paramount authority of Congress"
(internal quotation marks and citation omitted)).
6
quotation marks and citation omitted). And again, "[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." Id. at 288. Against this broad
language, and as with Brillhart, the Court was careful to limit its holding, leaving for another day
a delineation of the "outer boundaries of [DJA] discretion in other cases, for example, cases
raising issues of federal law or cases in which there are no parallel state proceedings." Id. at 290.
Reifer
2.
That day arrived, albeit not at the Court, when the Third Circuit decided Reifer v.
Westport Ins. Corp., 751F.3d129 (3d Cir. 2014), and clarified the contours ofDJA discretion by
providing district courts with a uniform and comprehensive approach to resolving questions of
jurisdiction when litigants request the remedy of a declaratory judgment. 4 See id. at 137, 146
(stating the court's intent to "clarify this area of the law" and provide "a uniform approach" for
addressing this issue). Reifer picked up where Brillhart and Wilton left off in terms of framing
the issue presented as one that required the court to address the "outer boundar[y] of a district
court's discretion under the DJA, specifically \Vhether a district court may decline jurisdiction
over a declaratory judgment action when there are no parallel state proceedings." Id. at 137
(internal quotation marks and citation omitted). The court tackled this question, and through it
reaffirmed the Supreme Court's teachings as to the core cases of DJA discretion-namely cases
involving the presence of parallel state proceedings--by establishing a frame\\'Ork, comprised of
two, interlocking parts, for trial courts to apply to core and outer boundary cases alike. See id. at
143 (breaking down its analysis into a resolution of t\\'O issues: "(1) the effect on a district
As in Reifer itsel~ the instant case does not require the court to opine on the standard to be applied when a court is
facing a "mixed claim" for relief, or a claim requesting both declaratory and coercive relief. See id. at 135 n.5.
4
7
court's DJA discretion of the absence of pending parallel state proceedings, and (2) assuming the
district court maintains discretion in such circumstances, the scope of that discretion").
The first part of the analysis takes the form of a rebuttable presumption scheme, with the
presence or absence of parallel state proceedings serving as the fulcrum. See, e.g., 1100 Adams
St. Condo. Ass'n, Inc. v. Mt. Hawley Ins. Co., No. 14-2203 SDW, 2014 WL 5285466, at *7
(D.N.J. Oct. 15, 2014) (suggesting that the presence of a parallel state action triggers a
"presumption" against jurisdiction); Owen v. Hartford Ins. Co., No. 14-924 RBK/JS, 2014 WL
2737842, at *7 (D.N.J. June 17, 2014) (citation omitted) (same). As stated in pure form:
[T]he absence of pending parallel state proceedings militates significantly in favor
of exercising jurisdiction, although it alone does not require such an exercise. In
this circumstance, as part of exercising sound and reasoned discretion, district
courts declining jurisdiction should be rigorous in ensuring themselves that the
lack of pending parallel state proceedings is outweighed by opposing factors. This
same rationale applies when state proceedings do exist. The existence of pending
parallel state proceedings militates significantly in favor of declining jurisdiction,
although it alone does not require doing so. In this circumstance, as part of
exercising sound and reasoned discretion, district courts exercising jurisdiction
should be rigorous in ensuring themselves that the existence of pending parallel
state proceedings is outweighed by opposing factors.
Reifer, 751 F.3d at 144-45. In other words, the absence of pending parallel state proceedings
creates a rebuttable presumption in favor of jurisdiction unless good reasons exist for overriding
this presumption.
In converse, the presence of pending parallel state proceedings creates a
rebuttable presumption against jurisdiction unless, again, good reasons exist for overriding this
presumption.
The second part of the Reifer analysis, in turn, is devoted to guiding a court's discretion
in determining whether to override the applicable presumption. See id. at 145-47 (laying out
factors to guide a district court's discretion when considering whether the presumption should be
given dispositive weight (footnotes and citations omitted)). This part of the analysis takes the
form of a multi-factor balance test, the application of which "should be articulated in a record
8
sufficient to enable" effective appellate review.
Id. at 147.
In addition to considering the
Brillhart standard (articulated above), courts should begin this part of the analysis by considering
the following factors, to the extent relevant:
(1) the likelihood that a federal court declaration will resolve the uncertainty of
obligation which gave rise to the contro\'ersy;
(2) the convenience of the parties;
(3) the public interest in settlement of the uncertainty of obligation;
(4) the availability and relative convenience of other remedies;
(5) a general policy of restraint when the same issues are pending in a state court;
(6) avoidance of duplicative litigation;
(7) prevention of the use of the declaratory action as a method of procedural
fencing or as a means to provide another forum in a race for res judicata; and
(8) (in the insurance context), an inherent conflict of interest between an insurer's
duty to defend in a state court and its attempt to characterize that suit in federal
court as falling ffithin the scope of a policy exclusion.
Id. at 146.
As the circumstances dictate, courts may also be required to consult additional
guideposts, such as whether federal interests would be served by hearing the matter in federal
court5 and whether a state forum is better suited to deal with any state-law issues. 6
3.
Parallel State Proceedings
Of critical importance to the Reifer analysis, then, is a determination of whether an
underlying state court action constitutes a "parallel state proceeding" capable of triggering a
rebuttable presumption against jurisdiction. See id. at 144 (agreeing with other circuit courts that
5
The Third Circuit in State Auto Ins. Cos. v. Summy, 234 F.3d 131 (2000) observed a "limiting factor" to DJA
discretion: district courts do "not have open-ended discretion to decline jurisdiction over a declaratory judgment
action when the issues include[] federal statutory interpretation, the government's choice ofa federal forum, an issue
of sovereign immunity, or inadequacy of the state proceeding." Id. at 134 (citation omitted). Reifer confinned that,
to the extent applicable, courts should continue to consider this factor. See Reifer, 751 F .3d at 146 n.23 (citation
omitted).
6
Not only did Summy recognize a "limiting factor" to DJA discretion when federal interests are in the mix, but it
also recognized a some\vhat analogous principle \Vhen uniquely state interests are ripe to be vindicated: cowts
should exercise restraint "in exercising jurisdiction over declaratory judgment actions when the state law involved is
close or unsettled." 234 F.3d at 135 (footnote and citation omitted). Sun1my also suggested that the exercise of
restraint is amplified when "the state law is firmly established." Id. at 136. The Third Circuit later interpreted
Summy to stand for the unitary proposition that "federal courts should hesitate to entertain a declaratory judgment
action where the action is restricted to issues of state law." At!. /o;/ut. Ins. Co. v. Gula, 84 F. App'x 173, 174 (3d Cir.
2003) (citation omitted). Again, Reifer confirmed that, to the extent applicable, courts should continue to consider
this guidance as \Veil. See Reifer, 751 F.3d at 147.
9
"the existence or non-existence of pending parallel state proceedings" deserves "increased
emphasis" (citations omitted)). Although the text of the DJA does not answer this question, both
Brillhart and Wilton provide some initial insight. In Brillhart, the Court classified the pending
state garnishment proceeding as a proceeding "pending in a state court in which all the matters in
controversy betv.reen the parties could be fully adjudicated." 7 Brillhart v. Excess Ins. Co. ofA1n.,
316 U.S. 491, 495 (1942) (emphasis added). In determining whether the issues presented in the
federal suit "can better be settled in the proceeding pending in the state court," the Court
emphasized that the district court should have considered whether some aspect of state
procedural or substantive law foreclosed the ability to vet those issues in the state proceeding.
See id. at 495-96 (observing that the district court "did not consider whether, under applicable
local law, the claims sought to be adjudicated by the respondent in this suit for a declaratory
judgment had either been foreclosed by Missouri law or could adequately be tested in the
garnishment proceeding pending in the Missouri state court").
In a similar vein, Wilton
characterized the pending state court action as "parallel proceedings, presenting opportunity for
ventilation of the same state law issues." Wilton v. Seven Falls Co., 515 U.S. 277, 290 (1995)
(emphasis added).
Taken together, Brillhart and Wilton, \\-ith their focus on potentiality as
opposed to present circumstance, appear to give the term "parallel state proceedings" a broad
sweep, presumably to ensure that federalism concerns are not trumped by a race to the
courthouse.
The Third Circuit has also suggested such a broad sweep. In Atlantic Mutual Insurance
Co. v. Gula, 84 F. App'x 173 (3d Cir. 2003), the court reviewed a district court's declination of
jurisdiction over a declaratory judgment action filed by an insurance company, an action in
which the company sought a declaration of non-coverage with respect to claims presented in
7
The Third Circuit referenced this quotation in Reifer. 751 F.3d at 137 n.9.
10
underlying state tort actions. See id. at 174. The insurance company argued that the district
court had erred, in part, because the related state court action did not "expressly deal with the
issue of coverage" that was raised in the federal action. Id. at 175. The court disagreed that this
asymmetry counseled in favor of retaining jurisdiction because "even if the coverage issue is not
currently pending, it will as a matter of logic necessarily arise before the matter is concluded in
state court." Id. Although the court admittedly did not wTite this language in direct response to
the question of whether the underlying state tort action constituted a "parallel state proceeding,"
the court did write this language in concluding that the first Summy factor had been met, namely
"[a] general policy of restraint when the same issues are pending in state court." Id. at 174·75
(emphasis added) (citation omitted).
Read in tandem, Gula squares nicely with Brillhart and Wilton in understanding a
"parallel state proceeding" for purposes of DJA discretion as a currently-engaged state court
action that is competent as a matter of state procedural and substantive law to allov>' full
adjudication of all matters raised in the federal action. As Brillhart itself stated, courts "may
have to consider whether the claims of all parties in interest can satisfactorily be adjudicated in
that proceeding, whether necessary parties have been joined, \\rhether such parties are amenable
to process in that proceeding, etc." Brillhart v. Excess Ins. Co. ofAm., 316 U.S. 491, 495 (1942).
In making this detennination, courts will have to consult applicable state law. 8 See id. at 495.97
(asserting that the district court should have consulted Missouri law to answer the above
8
This analysis may, in part, resemble that which a court is required to undertake when determining \Vhether a
pending state proceeding "provides an adequate opportunity to raise federal challenges" under Younger abstention.
Gonzalez v. Waterfront Com1n 'n of1V.Y Harbor, 755 F.3d 176, 181 (3d Cir. 2014) (citation omitted). In making this
determination, courts are to "consider whether state law raises procedural barriers to the presentation of the federal
challenges." Id. at 184 (citations omitted). So too here, except the court is to focus the inquiry on the claims raised
in the federal action, regardless of whether they arise under federal or state law. See Brillhart, 316 U.S. at 495
(stating that a court "should ascertain 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" (emphasis added)).
11
questions).
Viewed in this way, Gula's import might best be viewed as a statement that
garnishment proceedings typically provide an adequate opportunity under Pennsylvania law to
test coverage issues surrounding underlying tort actions that are likely to be raised in federal
declaratory judgment actions.
See Scottsdale Ins. Co. v. Broadd11s, No. 08-3241, 2009 VIL
349697, at *5 (E.D. Pa. Feb. 11, 2009) (effectively reading Gula for this proposition).
B.
Analvsis
Situated within the context of the above discussion, a proper analysis of this case may
begin, but cannot end, with considering the parties' respective positions. For the most part, the
parties hit the main talking points. \Vbile the plaintiff places great stock in the fact that the
underlying Lancaster County action does not, in its view,iconstitute a parallel proceeding, both
sets of defendants point to the nature of the decisional law to explain \Vhy this fact does not
necessarily mandate the retention of jurisdiction. Pl.'s Resp. at 3-5; Answer of Hotel Defendants
at 2-3; Answer of Estate Defendants at 8-11. All parties suggest that a ruling in their favor best
serves the interests of judicial economy and party convenience. Pl. 's Resp. at 5; Answer of
Hotel Defendants at 3-4; Answer of Estate Defendants at 10-11. The parties' analyses do not,
however, manage to explain how these points fit together to come to any sort of principled
conclusion as to how the court is to exercise DJA discretion. A full appreciation of Reifer, on the
other hand, provides the tools necessary to understand how these points do fit together and,
further, what a principled conclusion entails.
In coming to that conclusion, the court must first determine \Vhether the underlying action
currently pending in Lancaster County constitutes a parallel proceeding. As best as the court can
discern, the plaintiff argues that the underlying state action does not constitute a parallel
proceeding because the coverage issues have not been raised in state court and certain defendants
12
in this action have opposed the plaintiffs request to intervene in the state court action. Pl.'s
Resp. at 4·5. There is no indication that either set of defendants disagrees with this proposition.
Answer of Hotel Defendants at 2·4; Answer of Estate Defendants at 8·10.
The court,
unfortunately, must respectfully disagree.
As seen above, the operative inquiry is whether Pennsylvania law renders the Lancaster
County action procedurally and substantively competent to adjudicate the coverage issues raised
in the instant action. As Gula suggests, the answer to this question is that it does. 9 To conclude
that the Lancaster County action is not a parallel proceeding for the reasoning advanced by the
plaintiff would stand to eviscerate Brillhart and Wilton's undeniable focus on the potentiality of
the state action. See, e.g., 1100 Adan1s St. Condo. Ass'n, Inc. v. Mt. Hawley Ins. Co., No. 14·
2203 SDW, 2014 WL 5285466, at '5 (D.N.J. Oct. 15, 2014) (stating that "the state court action
and the declaratory judgment action need not be strictly parallel (i.e., presenting identical claims
and involving identical parties) in order for a district court to find that abstention under the DJA
is warranted" (citation omitted)); Owen v. Hartford Ins. Co., No. 14-924 RBK/JS, 2014 WL
2737842, at *6 (D.N.J. June 17, 2014) (stating that "even where a coverage issue is not yet
pending in an underlying litigation, and an insurance carrier is not presently a party there,
9
Under Pennsylvania Ja\v, "garnishment, or attachment execution as it was formerly kno,Nn, is a viable remedy for a
judgment creditor to collect its judgment from the judgment debtor's insurer." Bianco v. Concepts JOO, Jnc., 436
A.2d 206, 208 (Pa. Super. 198 l ). With respect to the Pennsylvania Rules of Civil Procedure, "[t]he defendant
insurer is a garnishee \Vithin the meaning of Rule 3101(b) defining a garnishee." Hebns v. Chandler, 223 A.2d 30,
31 (Pa. 1966). In other \vords, "[w]here a defendant, insured under a policy of liability insurance, has been found
liable to a plaintiff for damages arising from a covered loss, the contract of insurance operates to create a debt in the
amount of the judgment, owed by the insurer to the insured. Thus, the insurer both owes a debt to the defendant and
has property of the defendant in his possession which is subject to attachment/garnishment by the plaintiff." Brown
v. Candelora, 708 A.2d 104, 107 (Pa Super. 1998) (citations omitted). Substantively, when an insurer is brought
into court in this manner, it retains "every right of defense that it \Vould have had to a common-la\v action brought
by the assured directly on the policy." First Nat. Bankv. Maikranz, 44 Pa. Super. 225, 227 (1910). The
Pennsylvania Rules of Civil Procedure provide the procedural vehicles for testing coverage issues in the
garnishment proceedings. See, e.g., Pa.R.C.P. No. 3111 (service); Pa.R.C.P. No. 3142 (preliminary objections);
Pa.R.C.P. No. 3145 (further procedures). Quite poignantly, the Superior Court has analogized a garnishment
proceeding as "much like a declaratory judgment action." Freestone v. New England Log Homes, Inc., 819 A.2d
550, 553 (Pa. Super. 2003).
13
abstention is appropriate where the coverage issue \Vill as a matter of logic necessarily arise at
some point in the state proceeding" (internal quotation marks and citation omitted)). As those
cases teach, it is the potentiality of the state court proceeding, rather than its present composition,
that allo,vs the court to avoid "[g]ratuitous interference with the orderly and comprehensive
disposition of a state court litigation." Brillhart, 316 U.S. at 495. Because the Lancaster County
action has the potential to encompass the issues currently raised in this action, it is a parallel
proceeding and the court, therefore, employs the applicable Reifer presumption in favor of
declining jurisdiction. 10
Turning to the second part of the Reifer analysis, the court finds that the rebuttable
presumption against jurisdiction is conclusive because there are no conntervailing factors present
capable of overriding it. At this point, the plaintiff is left to argue that the court should exercise
jurisdiction because "[i]t is beyond reasonable dispute that [a] federal court declaration will
resolve the uncertainty of obligation which gave rise to the controversy, that there is a public
interest in settlement of the llllcertainty of obligation and that there will be no meaningful
inconvenience to the parties if the declaratory judgment action is heard in federal court." Pl.'s
Resp. at 5. Even assuming these statements to be true, the court finds that they are not enough to
rebut the presumption against jurisdiction. For one thing, they must be weighed against the fact
that the coverage issues are restricted to state law. 11 For another, the force of these factors, in the
10
The same result \vould occur even if the court did not employ a rebuttable presumption against jurisdiction and
instead conducted a comprehensive balancing test, placing an increased emphasis on the presence or absence of
parallel state proceedings. See Reifer, 751 F.3d at 144 (3d Cir. 2014) (agreeing that although parallel state
proceedings are only but one factor to be considered, they deserve "increased emphasis" (citations omitted)).
11
Both sets of defendants have argued that the coverage issues may present novel or unsettled questions of state la\V,
Answer of Hotel Defendants at 2-3; Answer of Estate Defendants at 8-9. Although the court does not, because it
need not, rely on this characterization of the coverage issues to ultimately decide this case, this argument, assuming
it true, would call for heightened restraint on behalf of the court. See State Auto Ins. Cos. v. Summy, 234 F.3d 131,
135 (3d Cir. 2000) (opining that "district courts should give serious consideration to the fact that they do not
establish state law, but are limited to predicting it. This is especially important in insurance coverage cases, although
\Ve do not mean to confine its relevance to that category").
14
form presented by the plaintiff, does not approach the type of force necessary to overcome the
controlling presumption. 12 The plaintiff points to no other factor that would warrant such an
override and the court can locate none. The controlling presumption thus stands and the court
declines jurisdiction.
III.
CONCLUSION
Contrary to the parties' arguments, this case does not require the court to reach the outer
boundaries of DJA discretion. Rather, this case presents classic circumstances for employing
sound and reasoned discretion to decline jurisdiction and lends credence to the notion that "[t]he
desire of insurance companies and their insureds to receive declarations in federal court on
matters of purely state law has no special call on the federal forum." State Auto Ins. Cos. v.
Summy, 234 F.3d 131, 136 (3d Cir. 2000).
Accordingly, the court declines to exercise
jurisdiction under the DJA and dismisses this matter without prejudice.
An appropriate order follows.
EDWARD G. SMITH, J.
12
In Reifer, the court's ultimate holding turned on the fact that the "lack of pending parallel state proceedings was
out\veighed by another relevant consideration, namely, the nature of the state law issue raised." Reifer, 751 F.3d at
148. The court found that "Reifer's argument implicate[d] the policies underlying Pennsylvania's rules governing
attorney conduct, which are promulgated by the Pennsylvania Supreme Court" and, therefore, that argument -v.·as
"best decided in the Pennsylvania court system because it directly raise[d] a matter peculiarly within the purview of
that state's highest court." Id. at 149 (footnote and citations omitted). This type of showing, specific as it is and
narrowly tailored to implement fundamental concerns underlying DJA discretion, seems a far cry from stating in
conclusory terms that concerns of judicial economy and party convenience \vould best be served by exercising
jurisdiction.
15
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
STATE NATIONAL INSURANCE CO.,
INC.,
Plaintiff,
CIVIL ACTION NO. 14-607
v.
DALE LANDIS and JOHN LANDIS, as
Administrators and Persons Representing
the ESTATE OF CHARLES L. LANDIS,
DUSTON LEWIS, VINCENT
MASTNDREA, JUNE JOHNSON,
KEVIN JOHNSON, WILLIAM
JOHNSON, and J & B HOTEL, INC.,
Defendants.
ORDER
AND NOW, this 15th day of January, 2015, the court having issued an order to show
cause on June 27, 2014, in which the court sua sponte raised the issue of declining jurisdiction
over this insurance coverage matter under the Declaratory Judgment Act, 28 U.S.C. §§ 2201M
2202, and invited the parties to brief this issue (Doc. No. 9); and the court having considered the
parties' responses to the order to show cause laying out their respective positions (Doc. Nos. lOM
12); and the court having heard argument on this jurisdictional issue on August 12, 2014;
accordingly, for the reasons set forth in the accompanying memorandum opinion and in the
sound and reasoned exercise of the court's discretion, it is hereby ORDERED as follows:
1.
The complaint (Doc. No. I) is DISMISSED WITHOUT PREJUDICE; and
2.
The clerk of court is DIRECTED to mark this matter as CLOSED.
7
EDWARD G. SMITH, J.
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