Mid-Continent Casualty Company v. Classic Star Group, L.P. et al
Filing
28
MEMORANDUM OPINION and ORDER denying 19 MOTION for Judgment on the pleadings, 10 MOTION for Judgment on the pleadings. (Ordered by Judge John McBryde on 9/19/2012) (npk)
U.S. DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
FILED
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TE
FORT WORTH DIVISION
MID-CONTINENT CASUALTY
co. ,
CLERK, U.S. DISTRICT COURT
By
§
--nD=ep:::'u=ty----
§
Plaintiff,
SEP I 92012
§
§
VS.
§
NO. 4:12-CV-326-A
§
CLASSIC STAR GROUP, LP, ET AL,
§
§
Defendants.
§
MEMORANDUM OPINION
and
ORDER
Now pending before the court is the motion for jUdgment on
the pleadings, filed by defendant Classic Star Group, LP
("Classic Star").
Plaintiff, Mid-Continent Casualty Company
("Mid-Continent"), filed a response and accompanying brief.
Having considered Classic Star's motion and memorandum in
support, Mid-Continent's response and accompanying brief, and
applicable legal authorities, the court concludes that the motion
should be denied.
The court notes that Classic Star appears to have filed two
motions for jUdgment on the pleadings, the first on June 15, 2012
without an accompanying memorandum, and the second on June 22,
2012, accompanied by a memorandum that is nearly identical to the
first motion.
As the contents of the two motions do not differ
in any meaningfUl way, the court construes and addresses them as
one motion.
1.
Background
Mid-Continent initiated the above-captioned action on May
24, 2012, by filing its original complaint for declaratory relief
against multiple defendants:
Bharwani ("Bharwani");
(1) Classic star;
(2) Gulamali
(3) Jarobe, Inc. d/b/a DJ Supermart & Deli
and/or Dean's Car Wash ("Jarobe");
(4) Naveed Noorali ("Naveed
Noorali"); and (5) Ali Noorali ("Ali Noorali").
Claims against
Jarobe were subsequently dismissed on June 15, 2012; all other
defendants remain parties to the above-captioned action.
The following facts are alleged:
Mid-Continent's complaint in this action relates to a
pending state court action in the 96th District Court of Tarrant
County, Texas, cause number 096-258078-12, styled "Classic star
Group and Gulamali Bharwani v. Ali Noorali, Naveed Noorali,
Jarobe, Inc. d/b/a DJ Supermart & Deli, and/or Dean's Car Wash"
("underlying action").
Pl.' sAm. Compl. at 3,
~
7.
In the
underlying action, Classic star and Bharwani seek "unspecified
damages for the cost of clean-up and repair, actual damages,
consequential damages, and attorneys' fees" resulting from an
apparent petroleum leak at premises leased by Classic star to Ali
Noorali, who operated a business there.
Id. at ~ 8; Mot. at 1.
Mid-Continent, as the insurer of Ali Noorali, expended
"substantial sums remediating the site, and tendered a defense to
2
Ali Noorali" in the underlying suit.
6, , 14; Resp. at 1-2.
or Jarobe.
Am. Compl. at 3, ,
9, and
The policy does not insure Naveed Noorali
Am. Compl. at 3, ,
9.
Mid-Continent's complaint goes on to provide excerpts from
the insurance policy issued to Ali Noorali, regarding coverage
and application of the policy.
Id. at 3-5, "10-12.
Mid-
Continent claims, based on the policy, that it has no duty to
indemnify Ali Noorali in the underlying suit, and does not owe
the remaining parties a defense.
Id. at 6, , 14.
In its prayer for relief, Mid-Continent seeks a declaration
that the damages claimed in the underlying action "did not arise
from a confirmed release within the Policy period."
16.
Id. at 6, ,
Mid-Continent also "seeks determination that it has no duty
to indemnify" defendant Ali Noorali in the underlying suit under
the terms of the policy.
Id.
Finally, Mid-Continent "seeks a
declaration that it has no duty to defend or indemnify" Naveed
Noorali or Jarobe in the underlying suit "because Plaintiff does
not insure either Defendant."
Id. at , 17.
II.
Grounds of the Motion
Classic star characterizes Mid-Continent's complaint as an
"attempt to make an end run around the jurisdiction of a Texas
state court," and as a "classic, reactive declaratory judgment
action which federal courts routinely decline to entertain."
3
Def. 's Memo. at 1.
Classic star contends that the court should
"decline to decide this action, dismiss this action, and allow
events in state court to run their natural course."
Id.
III.
Analysis
A.
Legal Standard for Judgment on the Pleadings
A motion for jUdgment on the pleadings pursuant to Rule
12(c) of the Federal Rules of civil Procedure is appropriate in
cases in which "the material facts are not in dispute and a
judgment on the merits can be rendered by looking to the
substance of the pleadings and any judicially noticed facts."
Hebert Abstract Co. v. Touchstone Prop., 914 F.2d 74, 76 (5th
Cir. 1990).
Such motion is subject to the same standard as a
motion to dismiss pursuant to Rule 12(b) (6).
Inc., 528 F.3d 413, 418
(5th Cir. 2008).
Doe v. MySpace,
"The central issue is
whether, in the light most favorable to the plaintiff, the
complaint states a valid claim for relief."
Hughes v. Tobacco
Inst., Inc., 278 F.3d 417, 420 (5th Cir. 2002)
(citing st. Paul
Mercury Ins. Co. v. Williamson, 224 F.3d 425, 440 n.8 (5th Cir.
2000)) .
A complaint must contain "a short and plain statement of the
claim showing the pleader is entitled to relief," Fed. R. civ. P.
8(a) (2),
"in order to give the defendant fair notice of what the
claim is and the grounds upon which it rests." Bell Atl. Corp. v.
4
Twombly, 550 U.S. 544, 555
ellipsis omitted).
(2007)
(internal quotation marks and
Thus, while a court must accept all of the
factual allegations in the complaint as true, the facts pleaded
must allow the court to infer that the plaintiff's right to
relief is plausible.
(2009).
Ashcroft v. Iqbal, 556 U.S. 662, 679
To allege a plausible right to relief, the facts pleaded
must suggest liability, and" [d]etermining whether a complaint
states a plausible claim for relief . . .
[is] a context-specific
task that requires the reviewing court to draw on its judicial
experience and common sense."
Id. at 679.
B. Declaratory Judgment
The Declaratory Judgment Act, 28 U.S.C.
§
2201(a), provides
that" [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 relations
of any interested party seeking such declaration."
In
determining whether to adjudicate a declaratory jUdgment action,
courts consider (1) whether the matter is justiciable;
(2)
whether the court has the authority to grant such relief; and (3)
whether the court should exercise its discretion to decide the
action.
Oriz Credit Alliance, Inc. v. Wolfe, 212 F.3d 891, 895
(5th Cir. 2000).
Classic Star does not appear to challenge the first two
factors.
First, there is an actual, justiciable controversy, as
5
"Classic star has filed a claim against Mid-Continent's insured,
and Mid-Continent seeks a declaration that the insurance policy
does not require it to indemnify Noorali, the insured."
Memo. at 3.
Thus, the matter is justiciable.
Def. 's
See AXA Re Prop. &
Cas. Ins. Co. v. Day, 162 Fed. App'x 316, 319 (5th Cir. 2006)
("Whether the policy provides coverage presents a live
controversy.").
action.
Second, the court has the authority to hear the
Under the second Orix step, the court lacks the
authority to consider the merits of a declaratory judgment action
when:
(I) a declaratory defendant has previously filed a
cause of action in state court against the declaratory
plaintiff, (2) the state case involves the same issues
as those involved in the federal case, and (3) the
district court is prohibited from enjoining the state
proceedings under the Anti-Injunction Act.
Travelers Ins. Co. v. La. Farm Bureau Fed'n, 996 F.2d 774, 776
(5th Cir. 1993)
(emphasis in original).
First, although Classic
Star filed the underlying action that involves Mid-Continent's
insured, Mid-Continent was never joined as a defendant in that
action.
Next, from the pleadings, it appears that the underlying
action and the instant declaratory action involve some different
issues.
Finally, the instant action is not barred by the Anti-
Injunction Act, as Mid-Continent is not a party to the underlying
action and a decision by the court would not enjoin state
proceedings.
Thus, the remaining issue in this motion is the
6
third Orix factor, whether the court should exercise its broad
discretion to adjudicate the above-captioned action.
It is well-settled in the Fifth Circuit that a district
court has discretion over whether to entertain a declaratory
jUdgment action.
Travelers, 996 F.2d at 778.
Although "the
court's discretion is broad, it is not unfettered," id., and
there are several relevant factors a court must consider in
determining whether to decide or dismiss an action seeking
declaratory relief:
(1) whether there is a pending state action in which
all of the matters in controversy may be fully
litigatedj (2) whether the plaintiff filed suit in
anticipation of a lawsuit filed by the defendantj (3)
whether the plaintiff engaged in forum shopping in
bringing the suitj (4) whether possible inequities in
allowing the declaratory plaintiff to gain precedence
in time or to change forums existj (5) whether the
federal court is a convenient forum for the parties and
witnessesj (6) whether retaining the lawsuit in federal
court would serve the purposes of jUdicial economYj and
(7) whether the federal court is being called on to
construe a state judicial decree involving the same
parties and entered by the court before whom the
parallel state suit between the same parties is
pending.
Sherwin-Williams Co. v. Holmes Cnty., 343 F.3d 383, 388 (5th Cir.
2003)
(citing st. Paul Ins. Co. v. Trejo, 39 F.3d 585, 590-91
(5th Cir. 1994)).
A district court must "address and balance the
relevant principles and factors of the doctrine" when exercising
its discretion in determining whether to entertain a declaratory
judgment action.
Rowan Cos., Inc. v. Griffin, 876 F.2d 26, 30
(5th Cir. 1993).
7
Defendant also cites Brillhart v. Excess Insurance Company
of America, 316 U.S. 491 (1942), and Government Employees
Insurance Company v. Dizol, 133 F.3d 1220 (9th Cir. 1998) for
"three primary factors" the court should consider, all of which
are addressed in the list of factors followed by the Fifth
Circuit:
(1)
"avoiding a 'needless determination of state law
issues;"
(2)
"discouraging forum shopping;" and (3)
duplicative litigation."
"avoiding
DeL's Memo. at 4 (citing Brillhart,
316 U.S. 491 and Dizol, 133 F.3d at 1225).
In Sherwin-Williams,
the Fifth Circuit explained that it applies the Trejo factors "in
light of the overarching Brillhart principles" to guide a
district court in accepting or declining jurisdiction over a
declaratory jUdgment action.
Sherwin-Williams, 343 F.3d at 401.
Under the first Trejo factor, whether there is a pending
state action, the court "may decline to decide 'a declaratory
jUdgment where another suit is pending in the state court
presenting the same issues, not governed by federal law, between
the same parties."
Sherwin Williams, 343 F.3d at 392 (quoting
Brillhart, 316 U.S. at 495).
(5th Cir. 2006)
See also Day, 162 Fed. App'x at 320
(finding that because the declaratory plaintiff
was not a party to the state court action, no pending state court
action existed where all issues could be fully litigated).
Here,
the underlying action involves all the defendants and some of the
same facts and issues; however, Mid-Continent is not a party to
8
that litigation.
Classic star argues that Mid-Continent's claim
"is predicated on the same factual transaction, the same
Insurance Agreement, the same coverage language, and the same
Texas law at issue in the state court proceedings."
Memo. at 5.
However, Classic Star alleges no additional facts to show that
the issues in the instant action are central to the underlying
action.
Further, Mid-Continent contends that the underlying
action revolves around issues of negligence and breach of
contract between the parties in that action, not Mid-Continent's
rights and duties in such action.
Resp. Br. at 12.
In any
event, because Mid-Continent is not a party to the underlying
action, this factor weighs in favor of the court entertaining the
declaratory jUdgment action.
Regarding the second factor, whether Mid-Continent brought
this action in anticipation of litigation, Mid-Continent contends
that it "did not file the declaratory action in anticipation of
an action by Classic Star."
Resp. Br. at 8.
Even if Mid-
Continent anticipated that Classic Star would file a lawsuit
against it, a "proper purpose of section 2201(a) is to allow
potential defendants to resolve a dispute without waiting to be
sued.
"Sherwin-Williams, 343 F.3d at 397.
Further,
"[t]he mere fact that a declaratory judgment action is brought in
anticipation of other suits does not require dismissal of the
declaratory jUdgment action by the federal court."
9
Id.
Finally,
the Sherwin-Williams court explained that anticipatory litigation
may be deemed impermissible when it is filed before the defendant
is legally able to bring an action in state court.
n.7.
Id. at 397,
Such is not the case here, as Mid-Continent brought this
action after Classic Star had already brought the underlying
action, and there is nothing to indicate that Mid-Continent's
action was impermissibly anticipatory.
The third factor, whether Mid-continent engaged in forum
shopping, implicates many of the same fairness concerns as the
second factor, and improper forum shopping is generally found
where the federal action would change the applicable law.
See
Mission Ins. Co. v. Puritan Fashions Corp., 706 F.2d 599, 602 n.3
(5th Cir. 1983).
Classic Star claims that "Mid-Continent could
have filed a declaratory relief action in Tarrant County, where
such action could have been related to and coordinated with
Classic Star's pending state court action."
Memo. at 4.
However, the fact that a plaintiff chooses a federal forum for a
declaration of its rights "does not necessarily demonstrate
impermissible forum selection when the declaratory jUdgment outof-state plaintiff invokes diversity.
Rather, it states the
traditional justification for diversity jurisdiction, to protect
out-of-state defendants."
Sherwin-Williams, 343 F.3d at 399.
this case, Mid-Continent opted to avail itself of diversity
jurisdiction, and had the right to do so.
10
Further, filing the
In
action in a federal court does not change the applicable law, as
Texas substantive law applies in either forum.
Thus, Mid-
continent has not engaged in improper forum shopping, and this
factor weighs in favor of the court entertaining the action.
The fourth factor, whether inequities exist in allowing Midcontinent to gain precedence in time or to change forums, also
weighs in favor of the court entertaining the action.
Because
Mid-Continent is not a party to the underlying action, and there
is not a parallel state court proceeding involving an identical
issue, Mid-Continent does not gain precedence in time and does
not change any other previously selected forum for the
declaration it seeks.
The fifth factor, regarding the convenience of the federal
forum, weighs in favor of the court entertaining the action.
The
defendants are Texas residents and citizens, and the related
events are alleged to have taken place within the Northern
District of Texas.
Resp. Br. at 8.
The underlying action was
filed in Tarrant County, the same county in which the federal
courthouse for the Fort Worth Division of this court sits.
Thus,
there is no indication that the parties will be unnecessarily
inconvenienced by the federal forum.
The sixth factor, whether retaining the declaratory action
in this court would serve the purposes of jUdicial economy, is
perhaps the closest call, but still weighs in favor of the court
11
entertaining the action.
Classic star contends that Mid-
Continent's rights "necessarily will be addressed in Texas
District Court when that court decides whether Noorali is liable
to [Mid-Continent]."
Memo. at 5.
Even though the underlying
action may involve some of the same parties and issues,
Mid-Continent, as explained above, is not a party to the
underlying action, and cannot be certain that all the issues in
the instant action will be considered in the underlying action.
Similarly, the seventh factor, whether the court is being
called on to construe a state decree between the same parties,
weighs in favor of the court retaining the declaratory action
because there is no state decree involving Mid-Continent and
Classic Star, nor can there be, as Mid-Continent was not joined
in the underlying action.
The court concludes that Mid-Continent's complaint has
stated a valid claim for relief, and that the Trejo factors weigh
in favor of the court exercising its discretion to entertain MidContinent's declaratory action.
Accordingly, Classic Star is not
entitled to jUdgment on the pleadings, and its motion should be
denied.
12
Therefore,
The court ORDERS that defendant Classic Star's motion for
jUdgment on the pleadings be, and hereby is,
S?GNED September
~,
2012.
District
I
/
/
/
13
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?