Progressive Hawaii Insurance Corporation v. Cureton et al (TV2)
Filing
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MEMORANDUM OPINION. Signed by District Judge Travis R McDonough on 9/10/18. (KFB, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE
PROGRESSIVE HAWAII INSURANCE
CORPORATION,
Plaintiff,
v.
GERALD D. CURETON, et al.,
Defendants.
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Case No. 3:17-cv-508
Judge Travis R. McDonough
Magistrate Judge Debra C. Poplin
MEMORANDUM OPINION
Before the Court are: (1) Defendant Gerald D. Cureton’s motion for an extension of time
to answer Plaintiff’s complaint (Doc. 38); (2) Plaintiff’s motion for default judgment against
Defendant Arminda Carter (Doc. 44); (3) Plaintiff’s motion for default judgment against
Defendant Ryan Carter (Doc. 45); (4) Plaintiff’s motion for default judgment against Defendant
Temple Baptist Church of Powell, Inc. (“Temple Baptist”) (Doc. 46); (5) Temple Baptist’s
motion to set aside the entry of default (Doc. 49); and (6) Temple Baptist’s motion for leave to
answer Plaintiff’s complaint (Doc. 53). For the reasons stated hereafter, the Court DECLINES
to exercise jurisdiction over this declaratory judgment action, and the pending motions (Docs.
38, 44, 45, 46, 49, 53) are hereby DISMISSED AS MOOT.
I.
FACTUAL BACKGROUND
In November 2017, Plaintiff Progressive Hawaii Insurance Corporation filed a complaint
for declaratory judgment to determine Plaintiff’s obligations, if any, under policies of automobile
insurance that Plaintiff issued to Defendant Gerald D. Cureton, as named insured for a 2003
Dodge Ram pickup truck and a 2010 Honda Pilot (the “Progressive Tennessee Auto Policy”).
(Doc. 1, at 2.) On August 3, 2018, Plaintiff filed an amended complaint. (Doc. 59.) The instant
dispute concerns Cureton’s demand that Plaintiff provide him with liability insurance coverage
for a motor vehicle collision involving Defendant Arminda Carter that occurred in September
2016, while Cureton was driving a different vehicle—a 1994 GMC commercial dump truck.1
(Id. at 4–5.) The collision involving Cureton and Carter is the subject of a civil tort action
currently pending in Anderson County Circuit Court.2 (Id. at 4.) Under the terms of its policy,
Plaintiff asserts that it owes no contractual duty of indemnity or defense for the motor-vehicle
collision and the litigation in the underlying state-court action and seeks a declaratory judgment
to that effect. (Id. at 7–8.) Specifically, Plaintiff argues it does not owe any contractual duty to
Cureton because: (1) the 1994 GMC commercial dump truck and Hurst trailer were being used
for commercial purposes at the time of the collision and do not meet the definition of “auto” or
“trailer” under the terms and conditions of the Progressive Tennessee Auto Policy; (2) the 1994
GMC commercial dump truck, Hurst trailer, and CASE skid steer operated by Cureton at the
time of the motor-vehicle collision were available for his regular use and, therefore, excluded
from liability insurance coverage under the Progressive Tennessee Auto Policy; and (3) Gerald
1
According to Plaintiff’s amended complaint, in August 1999, Cureton purchased the 1994
GMC commercial dump truck, along with a Hurst trailer, and a CASE skid steer “for the use,
control, benefit and ownership” of Temple Baptist, where he served as a church member and
volunteer. (Doc. 59, at 2.) Based on Cureton’s relationship with Temple Baptist, this vehicle
and equipment were also available for his regular use. (Id.) During the relevant time period, the
vehicle and equipment were covered by a Business Auto Policy issued by Brotherhood Mutual
Insurance Company, which specifically identified the 1994 GMC as a listed insured vehicle and
Gerald D. Cureton as an insured driver. (Id. at 3.)
2
In the underlying state-court action, Arminda Carter and Ryan Carter “allege in their [a]mended
[c]omplaint that Gerald Cureton was negligent and negligent per se in causing the collision and
the plaintiffs’ bodily injuries, loss of consortium and damages and that John Cureton, Daryl
Fersner d/b/a Fersner Plumbing Co. and [Temple Baptist] are vicariously liable . . . .” (Id. at 4.)
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D. Cureton failed to comply with his contractual duty to notify Progressive after the motor
vehicle collision on September 2, 2016. (See Doc. 59, at 6–7.)
II.
FEDERAL JURISDICTION3
It is well established that “district 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); see also Green v. Mansour, 474 U.S. 64, 72 (1985) (describing that the Declaratory
Judgment Act “confers a discretion on the courts rather than an absolute right upon the litigant”).
In short, the Court is “under no compulsion” to exercise jurisdiction under the Declaratory
Judgment Act. Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494 (1942).
Courts within the Sixth Circuit consider five factors in deciding whether to exercise
discretion to grant declaratory relief:
(1) whether the declaratory action would settle the controversy;
(2) whether the declaratory action would serve a useful purpose in clarifying the
legal relations in issue;
(3) whether the declaratory remedy is being used merely for the purpose of
“procedural fencing” or “to provide an arena for a race for res judicata”;
(4) whether the use of a declaratory action would increase friction between our
federal and state courts and improperly encroach upon state jurisdiction; and
(5) whether there is an alternative remedy which is better or more effective.
3
On July 31, 2018, the Court ordered Plaintiff to file an amended complaint and provide the
Court with allegations from which it is able to substantiate that Plaintiff is of diverse citizenship
from each defendant. (Doc. 58.) Plaintiff filed its amended complaint on August 3, 2018 (Doc.
59), and the Court is now satisfied that it has subject-matter jurisdiction pursuant to 28 U.S.C. §
1332.
3
Grand Trunk W. R.R. Co. v. Consol. Rail Corp., 746 F.2d 323, 326 (6th Cir. 1984) (citation
omitted). However, the Sixth Circuit has never assigned weight to the individual factors,
advising instead “that the ‘relative weight’ of the factors depends heavily on the ‘underlying
considerations of efficiency, fairness, and federalism,’ which vary depending on the
circumstances of each case.” W. World Ins. Co. v. Hoey, 773 F.3d 755, 759 (6th Cir. 2014).
A. Settlement of the Controversy & Clarification of the Legal Relations at Issue
The first and second Grank Trunk factors “are closely linked and are often considered in
connection with one another.” Cincinnati Ins. Co. v. Herman Grant Co., No. 1:16-CV-369, 2017
WL 2963460, at *2 (E.D. Tenn. July 11, 2017). The first factor is whether the declaratory action
would settle the controversy. As discussed in Scottsdale Insurance Co. v. Flowers, 513 F.3d 546
(6th Cir. 2008), “two lines of precedent seem to have developed in [Sixth Circuit] jurisprudence
regarding consideration of this first factor in the context of an insurance company’s suit to
determine its policy liability.” Id. at 555. One line of precedent has concluded “that a
declaratory relief action can settle the insurance coverage controversy not being addressed in
state court, even though it will not help resolve the underlying state court action.” Id.
Conversely, the second line of precedent has concluded that, “while such declaratory actions
might clarify the legal relationship between the insurer and the insured, they do not settle the
ultimate controversy between the parties which is ongoing in state court.” Id. The Flowers court
ultimately adhered to the first line of precedent, finding that the district court’s declaratory
judgment did settle the controversy before the parties—whether the insurance policy at issue
covered defendant as an insured. Id. at 556. However, the court also noted that “the contrary
results in these cases might also be explained by their different factual scenarios,” such as
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whether issuing declaratory relief turned on factual issues being litigated in state court and
whether the plaintiff is also a party to the state action. Id. at 555.
At first glance, it appears this Court’s judgment would settle the controversy because the
only issue is whether Plaintiff’s insurance policy covers the vehicle driven by Cureton when the
accident occurred. See Flowers, 513 F.3d at 556. Moreover, this issue could not be considered
in the state-court action because, as Plaintiff points out, it is not a party to that action. See id.
However, as Brotherhood Mutual and Cureton point out in their respective briefs, Cureton’s
access to the equipment is, at least in part, relevant to whether Plaintiff has a contractual duty to
defend or indemnify Cureton. (See Doc. 59, at 6–7 (arguing that “the 1994 GMC commercial
dump truck, Hurst trailer and CASE skid steer operated by Gerald D. Cureton at the time of the
motor vehicle collision on September 2, 2016 were available for his regular use and, therefore,
those vehicles were excluded from liability insurance coverage otherwise provided under Part 1 Liability to Others in the Progressive Tennessee Auto Policy”).) In the tort action pending in
Anderson County Circuit Court, Temple Baptist’s answer asserted that Cureton owned the
equipment, and denied that it owned the equipment, maintained it, gave permission to Cureton to
use it, or gave Cureton access to it. (See Doc. 67-2.) In his answer in the underlying tort action,
Cureton admitted that Temple owned the equipment, kept and maintained it, gave him
permission to use it, and gave him access to it. (See Doc. 67-3.) Thus, the state court must
decide these ownership and access issues to determine the direct and vicarious liability of various
defendants in the underlying state-court action.
In Bituminous Casualty Corp. v. J & L Lumber Co., 373 F.3d 807 (6th Cir. 2004), the
Sixth Circuit held that where three courts had to address an identical issue,
[t]he declaratory judgment action in federal court could serve no useful purpose.
The federal court could either reach the same conclusion as the state court, in
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which case the declaration would have been unnecessary and the federal litigation
a waste of judicial resources, or the federal court could disagree with the state
court, resulting in inconsistent judgments.
Id. at 813–14. Here, three courts would also be required to consider the ownership status of, and
Cureton’s access to, the equipment. In addition to the state-court tort action and the declaratory
judgment action before this Court, there is also a declaratory judgment pending in state court
regarding the amount of insurance coverage available under the insurance policy—covering only
“owned autos”—issued by Brotherhood Mutual to Temple Baptist. (See Doc. 67-1.)
Accordingly, the first factor weighs against exercising jurisdiction.
The second factor in the Grand Trunk analysis is closely related to the first factor,4 and
“it is almost always the case that if a declaratory judgment will settle the controversy, then it will
clarify the legal relations in issue.” Id. at 557. While the parties to this case may have other
tortious or contractual relationships to clarify in state court, the Court’s primary concern in
considering the second factor “is with the ability of the federal declaratory judgment to resolve,
once and finally, the question of the insurance indemnity obligation of the insurer.” Id.
In the instant case, if the Court issues a declaratory judgment, it will clarify the legal relations at
issue—namely, the contractual duties of indemnification, if any, owed by Plaintiff with respect
to the motor vehicle collision. However, as detailed above, it is not apparent that this Court’s
determination of the legal relationships between Plaintiff and Defendants “will not confuse the
state court’s analysis” of any liability issues. Id. at 558. Specifically, if this Court were to find
that a certain Defendant owned or had access to the equipment to determine the scope of
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Like the first factor in this analysis, there is a split in Sixth Circuit precedent “concerning
whether the district court’s decision must only clarify the legal relations presented in the
declaratory judgment action or whether it must also clarify the legal relations in the underlying
state action.” Flowers, 513 F.3d at 557.
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insurance coverage, it could also affect the determination of certain parties’ liability in the
underlying action. Thus, the second factor, too, appears to weigh against exercising jurisdiction.
B. Procedural Fencing and Res Judicata
With respect to the third factor, the Court is “reluctant to impute an improper motive to a
plaintiff where there is no evidence of such in the record.” Id. at 558. District courts should not
deny jurisdiction to plaintiffs who have not “done any more than choose the jurisdiction of
federal rather than state court, a choice given by Congress.” State Farm Fire & Cas. Co. v.
Odom, 799 F.2d 247, 250 n.1 (6th Cir. 1986). Although Cureton notes that “the filing of this
action in federal court gives rise to the appearance that Plaintiff seeks to make an ‘end run’
around the state court system” (Doc. 65, at 7), no Defendant has pointed to any actual evidence
of improper motive on behalf of Plaintiff. (See Docs. 65–67.) Accordingly, this factor weighs,
at least slightly, in favor of exercising jurisdiction.
C. Federalism Concerns
The fourth factor considers whether the use of a declaratory action would increase
friction between our federal and state courts and improperly encroach upon state jurisdiction.
The United States Supreme Court has cautioned that “where another suit involving the same
parties and presenting opportunity for ventilation of the same state law issues is pending in state
court, a district court might be indulging in ‘[g]ratuitous interference,’ if it permitted the federal
declaratory action to proceed.” Wilton, 515 U.S. at 283. However, “the mere existence of a state
court proceeding is not determinative of improper federal encroachment upon state court
jurisdiction.” Allstate Ins. Co. v. Green, 825 F.2d 1061, 1067 (6th Cir. 1987). The Sixth Circuit
considers three sub-factors in determining whether the exercise of jurisdiction would increase
friction between federal and state courts:
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(1) whether the underlying factual issues are important to an informed resolution
of the case;
(2) whether the state trial court is in a better position to evaluate those factual
issues than is the federal court; and
(3) whether there is a close nexus between the underlying factual and legal issues
and state law and/or public policy, or whether federal common or statutory
law dictates a resolution of the declaratory judgment action.
Bituminous, 373 F.3d at 814–15 (citing Scottsdale Ins. Co. v. Roumph, 211 F.3d 964, 968 (6th
Cir. 2000)). The first sub-factor considers whether a district court’s resolution of this action is
predicated on a state court’s resolution of factual issues. “In the context of actions seeking a
declaration of the scope of insurance coverage, [Sixth Circuit cases] have recognized that such
questions can sometimes be resolved as a matter of law and do not require factual findings by a
state court.” Flowers, 513 F.3d at 560. Brotherhood Mutual argues that, to issue declaratory
relief, this Court will need “to make factual findings regarding the ownership, use, and access to
the equipment, all of which are fact questions that are also at issue and will be determined in the
underlying tort action.” (Doc. 67, at 6.) Similarly, Gerald Cureton argues that “ownership of the
truck, trailer, and [CASE] skid steer is at issue in the underlying state tort action, state
declaratory judgment action, and the present declaratory judgment action.” (Doc. 65, at 5.) As
explained above, the Court agrees with Brotherhood Mutual and Cureton. Thus, this sub-factor
weighs against the exercise of jurisdiction.
The second sub-factor focuses on whether the federal or state court is in a better position
to resolve the issues in the declaratory action. Generally, state courts are in a better position to
evaluate questions of state law. See Travelers Indem. Co. v. Bowling Green Prof’l Assocs., PLC,
495 F.3d 266, 272 (6th Cir. 2007) (“[T]he district court held that the state court would not be in a
significantly better position to evaluate the terms or exclusions in the insurance contracts because
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both forums would apply Kentucky state law. However because Kentucky law is controlling, we
conclude that Kentucky courts are in the better position to apply and interpret its law on these
issues.”); Bituminous, 373 F.3d at 815–16 (“Where as here, there are two potential unresolved
questions of state law concerning state regulated insurance contracts, this consideration weighs
against exercising jurisdiction.”); Omaha Prop. & Cas. Ins. Co. v. Johnson, 923 F.2d 446, 448
(6th Cir. 1991) (“The states regulate insurance companies for the protection of their residents,
and state courts are best situated to identify and enforce the public policies that form the
foundation of such regulation.” (citation omitted)). However, “[t]his consideration appears to
have less force when the state law is clear and when the state court is not considering the issues.”
Flowers, 513 F.3d at 560. The issue presented by this declaratory judgment action does not
appear to be novel or involve unsettled state law. Thus, this factor does not clearly weigh against
exercising jurisdiction.
The final sub-factor focuses on whether the issue in the federal action implicates
important state policies and is more appropriately considered in state court. “[I]ssues of
insurance contract interpretation are questions of state law with which the . . . state courts are
more familiar and, therefore, better able to resolve.” Travelers, 495 F.3d at 273 (internal
quotations and citation omitted). However, there are cases where, although the resolution of a
declaratory judgment action seeking a determination of the scope of an insurance policy is
governed by state contract law, “no state law or policy would be frustrated by the district court’s
exercise of jurisdiction . . . .” Northland Ins. Co. v. Stewart Title Guar. Co., 327 F.3d 448, 454
(6th Cir. 2003). Interpretation of Tennessee insurance contracts is guided by state public policy.
See, e.g., Purkey v. Am. Home Assur. Co., 173 S.W.3d 703, 705 (Tenn. 2005). Therefore,
Tennessee courts are in a better position to resolve the insurance policy interpretation in this
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case. See Flowers, 513 F.3d at 561. Accordingly, this sub-factor weighs against exercising
jurisdiction.
D. Alternative Remedy
The final factor to consider is the availability of alternative remedies. A district court
should “deny declaratory relief if an alternative remedy is better or more effective.” Grand
Trunk, 746 F.2d at 326. One alternative remedy available under Tennessee law is to seek a
declaratory judgment in state court. See Tenn. Code Ann. § 29-14-102. Additionally, Plaintiff
could file an indemnity action at the conclusion of the state-court action. Sixth Circuit precedent
is split “regarding whether the possibility of seeking a declaratory judgment or an indemnity
action in state court counsels against the district court exercising jurisdiction.” Flowers, 513
F.3d at 562. “[R]ather than applying a general rule, [the Court’s] inquiry on this factor must be
fact specific, involving consideration of the whole package of options available to the federal
declaratory plaintiff.” Id.
In this case, Plaintiff could have filed a declaratory action in the Tennessee courts. In
many ways, this alternative would have been better. As Brotherhood Mutual points out, because
Plaintiff has chosen to file this separate federal action, it “will not participate in discovery in the
state tort action and presumably will demand to depose these and other witnesses separately . . .
resulting in needless and cumulative discovery.” (Doc. 67, at 6.) The Tennessee courts might
also have been able to combine the two actions so that all issues could be resolved by the same
judge. See Flowers, 513 F.3d at 562. The remedy of an indemnity action would also be a viable
option here because Plaintiff has presented no evidence that it is unable to join the underlying
action. See id. Thus, the final factor weighs against exercising jurisdiction over this declaratory
judgment action.
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E. Balancing the Factors
In Hoey, the Sixth Circuit explained its reluctance to assign weights to the Grand Trunk
factors when considered in the abstract:
[T]he factors are not, of course, always equal. For example, a relatively efficient
declaratory judgment (factors 1, 2, and 5) could very well be inappropriate if
hearing the case would be unfair (factor 3) or would offend the bundle of
principles we generally label “federalism” (factor 4). The relative weight of the
underlying considerations of efficiency, fairness, and federalism will depend on
facts of the case. The essential question is always whether a district court has
taken a good look at the issue and engaged in a reasoned analysis of whether
issuing a declaration would be useful and fair.
773 F.3d at 759 (internal citations omitted). In this case, an evaluation of the Grand Trunk
factors leads to concerns about whether exercising jurisdiction over this declaratory judgment
action would be inefficient and raise federalism concerns. Accordingly, the Court will decline to
exercise jurisdiction.
III.
CONCLUSION
For the reasons set forth above, the Court DECLINES to exercise jurisdiction over this
declaratory judgment action. Accordingly, this action will be DISMISSED WITHOUT
PREJUDICE.
SO ORDERED.
/s/ Travis R. McDonough
TRAVIS R. MCDONOUGH
UNITED STATES DISTRICT JUDGE
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