United Financial Casualty Company v. Alario et al
Filing
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MEMORANDUM (Order to follow as separate docket entry)Signed by Honorable James M. Munley on 12/14/15. (sm)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
UNITED FINANCIAL CASUALTY
COMPANY,
Plaintiff
:
No. 3:15cv2237
:
:
(Judge Munley)
:
v.
:
:
FRANK ALARIO; STEPHANIE
:
GIORDANO; JOSEPH ALARIO; and :
CATHERINE LEAL and MAURISIO
:
LEAL, individually and as the
:
guardians of M.L., a minor,
:
Defendants
:
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
MEMORANDUM
Before the court is Plaintiff United Financial Casualty Company’s
(hereinafter “United Financial”) declaratory judgment complaint. United
Financial seeks a declaration that it is not obligated to defend or indemnify
Defendant Frank Alario for negligence arising from a dog bite incident on
Alario’s boat. After a review of this matter, we will decline to exercise
jurisdiction and dismiss the case sua sponte.
Background
On June 6, 2015, Defendants Frank Alario, Stephanie Giordano,
Joseph Alario, Catherine Leal and Maurisio Leal (collectively “defendants”)
boarded Defendant Frank Alario’s boat for a ride on Lake Wallenpaupack,
located in Pike County, Pennsylvania. (Doc. 1-2, Ex. A, Compl.
(hereinafter “Compl.”) ¶¶ 9-11). Defendants Catherine and Mauriso Leal’s
minor son, M.L., and Stephanie Giordano’s English Setter dog also
boarded the boat.1 (Id. ¶¶ 10-12). Once onboard, Giordano’s dog bit M.L.
on his face, causing M.L. to sustain facial injuries. (Id. ¶ 12).
United Financial insured Defendant Frank Alario’s boat and believes
M.L. may seek to access the policy’s $100,000 liability coverage,
contending one or more of the defendants’ negligent acts caused his
injuries. (Id. ¶¶ 8, 13). United Financial seeks a declaration that the dog
bite incident is excluded from coverage. (Id. ¶¶ 15, 18-25). Specifically,
M.L.’s injuries do not arise out of the ownership, maintenance or use of
the boat according to United Financial. (Id.)
United Financial filed the instant action for declaratory judgment
pursuant to Pennsylvania’s Declaratory Judgment Act, 42 PA. CONS. STAT.
ANN. § 7531 et seq., on September 28, 2015, in the Court of Common
Pleas of Pike County, Pennsylvania. (Doc. 1, Notice of Removal ¶ 1).
Defendants filed a timely notice of removal on November 20, 2015. (Doc.
1). On December 1, 2015, United Financial filed a motion to remand this
matter to state court (Doc. 3), and on December 3, 2015, the defendants
filed a motion to change venue (Doc. 8), bringing the case to its present
posture.
1
The court will refer to this minor individual only by his initials.
See Local Rule 5.2(d)(2); FEDERAL RULE OF CIVIL PROCEDURE 5.2.
2
Discussion
Generally, in diversity cases, we apply the law of Pennsylvania.
Chamberlain v. Giampapa, 210 F.3d 154, 158 (3d Cir. 2000) (citing Erie
R.R. v. Tompkins, 304 U.S. 64, 78 (1938)). However, “federal courts are
to apply state substantive law and federal procedural law.” Hanna v.
Plumer, 380 U.S. 460, 465 (1965). The instant case is before the court in
the form of a declaratory judgment action, and federal courts have
concluded that declaratory judgment actions are procedural rather than
substantive. See Fischer & Porter Co. v. Moorco Int’l Inc., 869 F. Supp.
323, 326 (E.D. Pa. 1994) (holding that “[c]ase law indicates that the
[Declaratory Judgment] Act is procedural in nature, and therefore federal
law, not state law, governs whether claims may be heard under it.”);
Farmers Alliance Mut. Ins. Co. v. Jones, 570 F.2d 1384, 1386 (10th Cir.
1978) (holding that the [Declaratory Judgment] Act involves procedural
remedies and not substantive rights . . . . The Act does not create
substantive rights for parties; it merely provides another procedure
whereby parties may obtain judicial relief.”). As a result, the court here
would apply substantive Pennsylvania law in interpreting the insurance
contract, but the procedural strictures of the Federal Declaratory
Judgment Act, 28 U.S.C. § 2201. Fischer & Porter, 869 F. Supp. at 326.
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Under the Declaratory Judgment Act, “[i]n a case of actual
controversy within its jurisdiction . . . any 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 also Reifer v. Westport Ins. Corp., 751
F.3d 129 (3d Cir. 2014). The United States Supreme Court has explained
that “[d]istrict courts possess discretion in determining whether and when
to entertain an action under the Declaratory Judgment Act, even when the
suit otherwise satisfies subject matter jurisdictional prerequisites.” Wilton
v. Seven Falls Co., 515 U.S. 277, 282 (1995).
The Supreme Court has emphasized that district courts are under
no compulsion to exercise this discretionary jurisdiction. Brillhart v.
Excess Ins. Co. of Am., 316 U.S. 491, 494-95 (1942). “Rather than being
subject to the ‘normal principle that federal courts should adjudicate
claims within their jurisdiction,’ district courts exercising DJA discretion are
governed by ‘considerations of practicality and wise judicial
administration.’” Reifer at 139 (quoting Wilton at 288). A court may sua
sponte exercise its discretion not to hear a declaratory judgment action.
Sate Auto Ins. Co. v. Summy, 234 F.3d 131, 136 (3d Cir. 2001).
Regarding the high volume of declaratory judgment actions filed by
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insurance companies and their insureds, the Third Circuit has warned 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.” Summy, 234 F.3d at 136. To this end, the
Third Circuit enumerated the following eight factors to guide district courts
in exercising its declaratory judgment action discretion:
(1) the likelihood that a federal court declaration will
resolve the uncertainty of obligation which gave rise to the
controversy;
(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 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 within the scope of a policy exclusion.
Reifer, 751 F.3d at 146.
Finally, the Third Circuit Court of Appeals has held that “the
existence or non-existence of pending parallel state proceedings is but
one factor for a district court to consider.” Id. at 144. The court did note,
however, that just as “the absence of pending parallel state proceedings
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militates significantly in favor of exercising jurisdiction,” so too does the
presence of pending state proceedings weigh heavily in favor of declining
jurisdiction. Id. The Third Circuit thus placed particular emphasis on
parallel state proceedings and directed the district courts to “be rigorous in
ensuring themselves that the existence [or absence] of parallel state
proceedings is outweighed by opposing factors.” Id. at 145. With these
precepts in mind, we address the eight Reifer factors in turn.
First we address whether a federal court declaration will resolve the
uncertainty of obligation giving rise to the controversy. Any declaration
that we provide would resolve the uncertainty of the obligation which may
arise in a potential state court negligence action. Only the potential state
court action, however, would resolve the underlying liability issue. The
risk of this court making findings of fact that may conflict with the eventual
findings of the state court adds to the uncertainty of the matter, militating
against the exercise of federal jurisdiction.
The next factor is the convenience of the parties. The parties have
not yet engaged in discovery and no other litigation in this matter has
occurred. With the exception of Defendant Joseph Alario, however, the
four remaining defendants all live thirty minutes closer to the Pike County
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Courthouse than the Federal Courthouse in Scranton.2 Thus, retaining
jurisdiction on this basis will impose inconvenience on these defendants.
The Third Circuit has instructed that we should next examine the
level of public interest in settlement of the uncertainty of the obligation.
The instant case does not involve pressing public interest. The case
involves specific facts related to an insurance company, an insured boat,
a dog, a minor child bitten by the dog, and the child’s parents. This factor,
thus, does not weigh in favor of maintaining jurisdiction.
The availability and relative convenience of other remedies does not
impact the court’s determination regarding whether to exercise jurisdiction.
The court will either decide the matter in federal court or remand the case
to state court.
Factors five and six are inapplicable because no other state court
proceedings are pending.
2
A google maps search demonstrates that Defendant Joseph
Alario’s residence in Danville, Pennsylvania is one hour and fifteen
minutes from the federal courthouse in Scranton and two hours from the
Pike County Courthouse. Defendant Frank Alario’s residence in Colts
Neck, NJ and Defendant Stephanie Giordano’s residence in Woodbridge,
NJ are two hours from the Pike County Courthouse and two and a half
hours from the federal courthouse in Scranton. Finally, Defendants
Catherine and Mauriso Leal’s residence in Holmdel, NJ is one hour and
forty-five minutes from the Pike County Courthouse and two hours and
fifteen minutes from the federal courthouse in Scranton. See GOOGLE
MAPS, https://www.google.com/maps (last accessed Dec. 11, 2015).
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The seventh factor directs courts to consider preventing “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.” Reifer, 751 F.3d at
140. The Third Circuit has noted that “[t]he object of the [the Federal
Declaratory Judgment Act] is to afford a new form of relief where needed,
not to furnish a new choice of tribunals or to draw into the federal courts
the adjudication of causes properly cognizable by courts of the states.”
Travelers Ins. Co. v. Davis, 490 F.2d 536, 543 (3d Cir. 1974) (internal
quotations omitted).
Plaintiffs are masters of their claims and may commence an action
in their chosen forum. Here, United Financial properly asserted their right
to file the underlying action in the Court of Common Pleas of Pike County,
Pennsylvania. The defendants, however, seek to manufacture a new
forum, one that is not United financial’s chosen forum, by removing this
matter to federal court. Accordingly, the seventh factor weighs in favor of
remand.
Finally, the eighth factor is inapplicable at this time because United
Financial’s duty to defend has not arisen. The court notes, however, that
United Financial has indicated M.L. will likely institute a state court
negligence action, and when this lawsuit is filed, United Financial’s duty to
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defend will arise, and the coverage issue will inevitably arise before the
matter is concluded in state court.
After reviewing all the Reifer factors, we find that they weigh in favor
using our discretion to decline hearing the instant matter.
Further, we are reluctant to exercise declaratory jurisdiction where
the sole issue neither presents any federal question nor promotes any
federal interest. United Financial seeks a declaration pursuant to state
law that it doesn’t owe coverage–that is indemnity or defense–under the
subject insurance policy. Any judgment we would issue would depend on
applying well-settled principles of Pennsylvania law to the same factual
occurrences that gave rise to the state-court suit. United Financial does
not seek the resolution of questions of federal statutory or constitutional
law that we might be peculiarly qualified to answer.
A state court can as easily answer these questions as we can, and
there is no need to resort to a federal forum to do so. See Summy, 234
F.3d at 136 (finding that “the 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”). As the Third Circuit Court
of Appeals has explained,
The state’s interest in resolving its own law must not be
given short shrift simply because one party or, indeed,
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both parties, perceive some advantage in the federal
forum. When state law is firmly established, there would
seem to be even less reason for the parties to resort to
the federal courts. Unusual circumstances may
occasionally justify such action, but declaratory
judgments in such cases should be rare.
Id.
Adding our opinion to those of the state court would make the matter
unnecessarily more complex. Further, the complaint indicates that
litigation is likely in state court. Having this court settle a matter of
contract interpretation would require an inquiry into the facts of that case,
and would represent an inefficient allocation of judicial resources.
Conclusion
Accordingly, our interest in comity and respect for the judgments of
state courts compel us to use our discretion to decline to exercise
jurisdiction in this case. Moreover, the matter before this court is one of
contract interpretation under state, rather than federal law. No unique
questions of federal law exist, and this court’s expertise is not necessary
for a just outcome in the case. The court will therefore sua sponte remand
this action to state court. An appropriate order follows.
Date: 12/14/2015
s/ James M. Munley
JUDGE JAMES M. MUNLEY
United States District Court
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