Nationwide Insurance Company of America v. Jackson

Filing 27

ORDER AND OPINION: The defendant's motion to dismiss (ECF No. 12 ) is DENIED. Signed by Honorable Bruce Howe Hendricks on 8/29/2014.(prou, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
FLORENCE DIVISION
Nationwide Insurance Company of
America,

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)
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Plaintiff,
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v.
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Graham Jackson,
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Defendant.
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________________________________ )

Civil Action No.: 4:14-273-BHH
Order and Opinion

This matter is before the Court on the Defendant’s motion to dismiss. (ECF No. 12.)
Defendant asks the Court to exercise its discretion under the Declaratory Judgment Act to
dismiss the case for resolution in state court. The case is related to Jackson v. Nationwide,
Case No. 4:14-945.
DISCUSSION
The federal Declaratory Judgment Act grants courts discretion to decline jurisdiction,
even where it otherwise exists. See Wilton v. Seven Falls Co., 515 U.S. 277, 284-85
(1995). Exercising this discretion, “Courts have been reluctant to exercise jurisdiction over
declaratory judgment actions relating to state insurance issues.” Hyrne v. Allstate Ins. Co.,
2006 WL 1889179, at *1 (D.S.C. July 7, 2006). This discretion is specifically broader than
other related abstention doctrines, including Colorado River Water Conservation Dist. v.
United States, 424 U.S. 800 (1976). See Wilton, 515 U.S. at 286.
The Court was originally concerned that Wilton only applies where there is a pending
and related state court action. See Penn-Am. Ins. Co. v. Coffey, 368 F.3d 409, 412 (4th
Cir. 2004) (“When a related state court proceeding is pending . . . .”); Centennial Life Ins.
Co. v. Poston, 88 F.3d 255, 257 (4th Cir. 1996) (“[W]hen a related state proceeding is
underway . . . .”). “[A]t least where another suit involving the same parties and presenting

opportunities for ventilation of the same state law issues is pending in state court, a district
court might be indulging in ‘gratuitous interference,’ if it permitted the federal declaratory
action to proceed.” Wilton, 515 U.S. at 283 (citation omitted and emphasis added). But,
it appears that the Fourth Circuit has viewed the pendency of a state proceeding as only
one relevant consideration when exercising the Court’s discretion to remand a declaratory
judgment action. See Myles Lumber Co. v. CNA Fin. Corp., 233 F.3d 821, 824 (4th Cir.
2000) (“In contrast, the efficiency factor weighs heavily in favor of retaining jurisdiction.
First, we consider it significant that there is no state action pending.”) Specifically, Coffey
suggests that the pendency of a state court action affects whether or not the four
considerations, in Nautilus Insurance Co. v. Winchester Homes, 15 F.3d 371, 377 (4th
Cir.1994), should additionally be consulted. See Penn-Am. Ins. Co. v. Coffey, 368 F.3d at
412; see also Auto Owners Ins. Co. v. Pers. Touch Med Spa, LLC, 763 F. Supp. 2d 769,
774 (D.S.C. 2011). Regardless of the precise framework, the Court would evaluate whether
a discretionary remand is appropriate, notwithstanding the absence of any parallel state
action.
The Fourth Circuit has developed a two part analysis for determining whether a
district court should stay or dismiss a declaratory judgment action. First, a district court is
directed to consider whether the action:
(i) “‘will serve a useful purpose in clarifying and settling the
legal relations in issue,’” and (ii) “‘will terminate and afford
relief from the uncertainty, insecurity, and controversy giving
rise to the proceeding.’” Nautilus Ins. Co. v. Winchester
Homes, Inc., 15 F.3d 371, 375 (4th Cir.1994) (referencing
White v. National Union Fire Ins. Co., 913 F.2d 165 (4th
Cir.1990)) (citations omitted).

Continental Cas. Co. v. Fuscardo, 35 F.3d 963, 965 (4th Cir.1994).

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The relief sought by the plaintiff is not unusual since “[i]t is well established that a
declaration of parties' rights under an insurance policy is an appropriate use of the
declaratory judgment mechanism.” United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 494
(4th Cir.1998). Additionally, the action will serve a useful purpose in settling the disputed
rights under the policy between Nationwide and its insured. See Auto Owners Ins. Co. v.
Pers. Touch Med Spa, LLC, 763 F. Supp. 2d 769, 775 (D.S.C. 2011). Finally, this action
will provide relief by clarifying the uncertainty of whether coverage exists under the policy
for the claims alleged. Id.
If the analysis is contemplated to stop here under Coffey, for want of a state court
action, the Court would exercise jurisdiction. But, for certainty’s sake, the Court would
consider the second step of the prescribed analysis as well.
If the action satisfies the criteria of the first step above, which it does, the district
court should, according to Nautilus Insurance Co. v. Winchester Homes, 15 F.3d 371, 377
(4th Cir.1994) abrogated on other grounds by Wilton, 515 U.S. 277,1 also consider four
additional and non-exclusive factors:
(1) the strength of the state's interest in having the issues
raised in the federal declaratory action decided in state court;
(2) whether the issues raised in the federal action can be more
efficiently resolved in the pending state action; (3) whether the
federal action in unnecessary entanglement between the
federal and state systems due to overlapping issues of fact or
law; (4) whether the federal action is being used merely as a
device for “procedural fencing,” i.e., to provide another
forum in a race for res judicata. Nautilus, 15 F.3d at 377.

Continental Cas. Co. v. Fuscardo, 35 F.3d 963, 966 (4th Cir.1994). The Nautilus Court
emphasized the importance of considerations of comity and federalism to a district court's
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The factors articulated in Nautilus with regard to to a court's exercise of discretion in a
declaratory judgment action remain applicable. See Penn–America, 368 F.3d at 412.

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decision. It pointed out:
when a federal court is confronted with an insurer's request for
declaratory judgment on coverage issues during the pendency
of related litigation in the state courts, its discretion must be
guided not only by the criteria outlined in Quarles, which focus
on the general utility of the declaratory relief sought, but also
by the same considerations of federalism, efficiency, and
comity that traditionally inform a federal court's discretionary
decision whether to abstain from exercising jurisdiction over
state law claims in the face of parallel litigation in the state
courts.

Nautilus, 15 F.3d at 376.
So, although not dispositive under Wilton, the lack of any pending state action is
plainly significant. See Penn-Am. Ins. Co. v. Coffey, 368 F.3d 409, 412 (4th Cir. 2004) (“To
determine whether to proceed with a federal declaratory judgment action when a parallel
state action is pending, we have focused on four factors for guiding the analysis . . . .”
(emphasis added).) And, in this case, not only is there no parallel state action, there
actually exists a companion federal case. See Jackson v. Nationwide Insurance Company
of America, C.A. No. 4:14-CV-945. So, none of the efficiency issues are present that
traditionally weigh in favor of remand or the danger of unnecessary entanglement. Chief
Judge Terry Wooten, of this District, has agreed that the State lacks a particularly strong
interest when there is no pending state court action dealing with coverage. Auto-Owners
Ins. Co., 763 F. Supp. 2d at 775.
The plaintiff contends that it plans to make novel argument related to controlling
South Carolina case law, in Peagler v. USAA Ins. Co., 628 S.E.2d 475, 478 (S.C. 2006),
over which the State has great interest and expertise. And, while the undersigned would
always and readily defer to the State’s own adjudication and interpretation of its laws to the
enthusiasm of this Court not to have to, the efficiency and comity elements are so lacking
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in the absence of a pending state action that remand seems a step too far on the facts and
legal claims present in this case. The Court is competent to interpret state law, even
considering the potential of some novelty on the margins here.
The Court, therefore, would not dismiss the matter.
CONCLUSION
Based on the foregoing, the defendant’s motion to dismiss (ECF No. 12) is DENIED.
IT IS SO ORDERED.
s/Bruce Howe Hendricks
United States District Judge
August 29, 2014
Greenville, South Carolina

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