Berkley National Insurance Company v. Orta-Gonzalez
Report and Recommendation of the U.S. Magistrate Judge re 15 Motion to Dismiss, filed by Francisco Albert Ferrer. Signed by Judge David B. Fannin. (ab1)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
BERKLEY NATIONAL INSURANCE
JUAN CARLOS ORTA-GONZALEZ,
FRANCISCO ALBERT FERRER,
REPORT AND RECOMMENDATION OF THE U.S. MAGISTRATE JUDGE
TO THE HONORABLE DAVID COUNTS, U.S. DISTRICT JUDGE:
BEFORE THE COURT is Defendant Francisco Albert Ferrer’s (“Defendant Ferrer”)
Motion to Dismiss for Insufficient Process and Service; for Lack of Subject Matter Jurisdiction;
for Failure to State a Claim; and for Failure to Join a Required Party (“Motion to Dismiss”).
(Doc. 15). This case was referred to the Magistrate Judge for a Report and Recommendation by
Order of Referral from the District Judge pursuant to 28 U.S.C. § 636 and Appendix C of the
Local Rules. After carefully considering the filings and applicable law, the undersigned
Magistrate Judge RECOMMENDS that Defendant Ferrer’s Motion to Dismiss be GRANTED
IN PART AND DENIED IN PART. (Doc. 15).
This case arises from an automobile accident on November 19, 2022, near Pecos, Texas.
(Doc. 5 at 3). Defendant Juan Carlos Orta-Gonzalez (“Defendant Orta-Gonzalez”), an employee
of WS Energy Services, LLC (“WS Energy”), was part of a multi-vehicle accident resulting in
the deaths of Defendant Ferrer’s wife and his wife’s two children. (Docs. 5 at 4; 15 at 2). When
the accident occurred, Defendant Orta-Gonzalez was driving a WS Energy owned 2020 Toyota
Tacoma (“work vehicle”). (Doc. 5 at 4). Plaintiff Berkley National Insurance Company
(“Plaintiff”) insured the work vehicle under Commercial Lines policy number ECA 3128671-16
(“Insurance Policy”), issued to WS Energy. (Doc. 5 at 1). WS Energy was the named insured
under the Insurance Policy. Id.
Plaintiff filed its Original Complaint in this Court on January 6, 2023, against Defendant
Orta-Gonzalez. (Doc. 1 at 1). On January 10, 2023, Defendant Ferrer filed suit against Defendant
Orta-Gonzalez and WS Energy in the 430th Judicial Court of Hidalgo County, Texas, bringing
negligence claims against Defendant Orta-Gonzalez and a vicarious liability claim against WS
Energy (“Underlying Action”). (Docs. 5 at 6; 15 at 10). More than a month later, on March 13,
2023, Plaintiff filed its First Amended Complaint (“Amended Complaint”), the active pleading,
adding Defendant Ferrer as a party to the action. (Doc. 5 at 1). Plaintiff seeks a declaratory
judgment on its duty to defend or indemnify Defendant Orta-Gonzalez under the Insurance
Policy issued to WS Energy (“Declaratory Action”). (Doc. 5 at 1).
On May 30, 2023, Defendant Ferrer filed this Motion to Dismiss in large part contending
that Plaintiff purposefully failed to join an indispensable party, WS Energy, to the Declaratory
Action, and contesting the ripeness of Plaintiff’s duty to indemnify. (Doc. 15 at 7–8). Plaintiff
responded to Ferrer’s Motion to Dismiss on June 13, 2023. (Doc. 19). The matter is thus ripe for
Plaintiff seeks a declaratory judgment relieving Plaintiff of any duty to defend or
indemnify Defendant Orta-Gonzalez in the Underlying Action. (Docs. 5 at 7; 19 at 13). Plaintiff
contends the Declaratory Action reaches only whether Defendant Orta-Gonzalez was a
permissive user of the work vehicle under the Insurance Policy, and therefore does not reach the
question of Defendant Orta-Gonzalez’s liability in the underlying lawsuit. (Doc. 19 at 14).
In the Motion to Dismiss, Defendant Ferrer raises multiple claims: (1) Plaintiff failed to
properly serve process to Defendant Ferrer; (2) Plaintiff failed to bear its burden in establishing
the Court’s subject matter jurisdiction; (3) Plaintiff failed to state a claim ripe for adjudication on
the merits; (4) Plaintiff failed to state a claim against Defendant Ferrer; and (5) Plaintiff failed to
join WS Energy, an allegedly required party. (Doc. 15). While the Court gives due consideration
to all of Defendant Ferrer’s claims, at the heart of Defendant Ferrer’s Motion to Dismiss is the
question of whether WS Energy constitutes a required party, and whether this Court has subject
matter jurisdiction over the Declaratory Action.
For the reasons explained below, the Court finds WS Energy not a required party to the
Declaratory Action but finds the issue of whether Plaintiff has a duty to indemnify unripe. Thus,
the undersigned RECOMMENDS that Defendant Ferrer’s Motion to Dismiss be DENIED IN
PART AND GRANTED IN PART. (Doc. 15).
A. Defendant’s Claim for Insufficient Process and Insufficient Service Should Be
a. Legal Standard
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(4) and Rule 12(b)(5)
turns on the legal sufficiency of the form of process and the service of process. Gartin v. Par
Pharm. Cos., 289 F. App’x 688, 691 (5th Cir. 2008); Quinn v. Miller, 470 F. App’x 321, 323
(5th Cir. 2012). The serving party carries the burden of showing service was proper if
challenged. Aetna Bus. Credit, Inc. v. Universal Decor & Interior Design, Inc., 635 F.2d 434,
435 (5th Cir. 1981). Federal District Courts lack personal jurisdiction over a defendant unless
served with proper service of process or waiver of that service. Dennis v. Eryngo Hills Apts., No.
22-CV-00682, 2023 WL 3855066, at *1.
Under Rule 4, there are two steps to complete service of process. Melendez v. Arnold, No.
1:21-cv-622, 2023 WL 3794528, at * 2 (W.D. Tex. May 3, 2023). “First, a plaintiff must present
a summons to the clerk for signature and seal; the clerk ‘must sign, seal, and issue it to the
plaintiff for service on the defendant.’” Id. (citing FED. R. CIV. P. 4(b)). Second, the plaintiff
must serve the summons and complaint “within the time allowed by Rule 4(m) and must furnish
the necessary copies to the person who makes service.” Id.; FED. R. CIV. P. 4(c)(1).
Under Rule 4(m), if a plaintiff fails to serve a defendant within 90 days of the filing of
the complaint, the Court may dismiss the action without prejudice or, on plaintiff’s showing of
good cause, extend time for service. Johnson v. Wormuth, No. 1:21-CV-00831, 2022 WL
2873479, at *3 (W.D. Tex. July 21, 2022). If good cause does not exist, the court may decide
whether to dismiss the case without prejudice or extend time for service. Thompson v. Brown, 91
F.3d 20, 21 (5th Cir. 1996).
First, Defendant Ferrer’s Motion to Dismiss alleges insufficient process under Rule
12(b)(4) because of an incorrect address on the initial summons. (Doc. 15 at 2). A Rule 12(b)(4)
motion challenges a plaintiff’s failure to comply with Rule 4(b), which governs the form of
process. Velasquez v. Singh, No. 16-CV-00063, 2017 WL 10181040, at *1 (W.D. Tex. Sept. 25,
2017). Rule 4(b) states: “If the summons is properly completed, the clerk must sign, seal, and
issue it to the plaintiff for service on the defendant.” FED. R. CIV. P. 4(b). A properly completed
summons must “be directed to the defendant.” Maverick Whiskey, LLC v. Brewery on Half Moon
Bay, Inc., No. 19-CV-00136, 2019 WL 5927591, at *2 (W.D. Tex. Nov. 12, 2019) (citing FED.
R. CIV. P. 4(a)(1)), R. & R. adopted, No. 19-CV-0136, 2020 WL 10056148 (W.D. Tex. Mar. 27,
2020). An incorrect address does not direct the summons to the defendant, and therefore results
in an improper summons. See Velasquez, 2017 WL 10181040, at *2.
The initial summons incorrectly listed the address of Defendant Ferrer’s mother rather
than Defendant Ferrer. (Docs. 8 at 3; 19 at 3). Learning of the mistake, Plaintiff updated the
summons to reflect Defendant Ferrer’s correct address. (Doc. 19 at 3). Plaintiff’s inclusion of the
correct address on the summons properly directed the summons to Defendant Ferrer in
accordance with Rules 4(a)(1) and 4(b). The corrected summons was therefore sufficient.
Second, Defendant Ferrer’s Motion to Dismiss alleges insufficiency in the service of
process, under Rule 12(b)(5), specifying that Defendant Ferrer “did not timely or appropriately
receive the complaint.” (Doc. 15 at 3); FED. R. CIV. P. 12(b)(5). To defeat a 12(b)(5) motion, the
burden falls on the plaintiff to demonstrate the defendant was served in accordance with Rule
4(m). See Valesquez, 2017 WL 10181040, at *2. Under Rule 4(m): “If a defendant is not served
within 90 days after the complaint is filed, the court…must dismiss the action without prejudice
against the defendant or order that service be made within a specified time.” FED. R. CIV. P.
Plaintiff filed an amended complaint naming Defendant Ferrer as a party to the action on
March 13, 2023. (Doc. 5). Under Rule 4(m), Plaintiff was required to execute summons on
Defendant no later than June 12, 2023. Plaintiff first attempted to serve Defendant Ferrer at an
incorrect address on March 29, 2023. (Docs. 15-2 at 2; 19 at 3). After obtaining the correct
address, Plaintiff “attempted to serve [Defendant] Ferrer five times,” using both a service
processer and certified mail. (Doc. 19 at 3). With Defendant Ferrer seemingly evading Plaintiff’s
attempts to serve process, Plaintiff engaged the local Texas constable to effectuate service on
June 12, 2023. Id.; (Doc. 19-5 at 2–3). Accordingly, Defendant Ferrer was served 90 days after
the Amended Complaint was filed, and therefore service of process was proper.
Therefore, the Court RECOMMENDS Defendant Ferrer’s Motion to Dismiss be
DENIED as to the claims for Insufficient Process and Insufficient Service of Process.
B. Defendant’s Claim for Failure to Join an Indispensable Party Should Be Denied
a. Legal Standard
Rule 12(b)(7) provides for dismissal of an action for “failure to join a party under Rule
19.” FED. R. CIV. P. 12(b)(7). Rule 19 “provides for the joinder of all parties whose presence is
required for the fair and complete resolution of the dispute at issue.” Broad. Music, Inc. v.
Armstrong, No. 13-CV-0032, 2013 WL 3874082, at *6 (W.D. Tex. July 24, 2013). To decide a
Rule 19 challenge, the court applies a two-step inquiry. Id. (quoting Hood ex rel. Mississippi v.
City of Memphis, 570 F.3d 625, 628 (5th Cir. 2009)). “First, the court determines whether an
absent party should be joined to the lawsuit under Rule 19(a).” Id. “The party advocating joinder
has the initial burden of demonstrating that an absent party is required.” Id. Second, “[i]f the
court determines that an absent party is required under Rule 19(a) but cannot be joined, the court
turns to Rule 19(b) to determine that ‘in equity and good conscience, the action should proceed
among the existing parties or should be dismissed.’” Id. (quoting FED. R. CIV. P. 19(b)). As with
a Rule 12(b)(6) motion, “the court accepts the allegations in the complaint as true.” Id.
Under Rule 12(b)(7), Defendant Ferrer moves to dismiss this action for failure to join WS
Energy, the named insured under the Insurance Policy and employer of Defendant OrtaGonzalez. (Doc. 15 at 10). Defendant Ferrer contends: (1) to proceed without WS Energy
“would impair or impede the absent party’s right and ability to protect its interest in the suit;” (2)
resolution of whether Defendant Orta-Gonzalez was a permissive user of the work vehicle under
the Insurance Policy also addresses whether Defendant Orta-Gonzalez was in the course and
scope of his employment; and (3) joinder of WS Energy would destroy this Court’s subject
matter jurisdiction. (Doc. 15 at 10–11). Plaintiff counters that the Declaratory Action seeks only
to resolve “the question of whether Defendant Orta-Gonzalez qualifies as an insured under the
[Insurance] Policy,” and therefore, “WS Energy is not a necessary or indispensable party.”
(Doc. 19 at 9).
As this Court sits in diversity, Rule 19 governs the required joinder of parties. Provident
Bank & Tr. Co. v. Patterson, 390 U.S. 102, 125 n.22 (1968). That said, the Court may look to
state law to determine the parties’ interests. Id. As described above, Rule 19 requires a two-step
inquiry. Hood ex rel. Miss. v. City of Memphis, 570 F.3d 625, 628 (5th Cir. 2009). First, the
Court must determine the necessity1 of the party to the litigation. FED. R. CIV. P. 19(a). Should
the Court find the party necessary, the Court must determine whether joinder will deprive the
Court of subject matter jurisdiction. Id. If joinder of the required party will destroy subject matter
jurisdiction, then the Court reaches step two of the inquiry: determining “whether [the necessary
party] is ‘indispensable,’ that is, whether litigation can be properly pursued without the absent
party.” Hood, 570 F.3d at 629 (citing HS Res., Inc v. Wingate, 327 F.3d 432, 439 (5th Cir.
2003)); FED. R. CIV. P. 19(b). Thus, the Court may not dismiss a case for merely failing to
include a required party under Rule 19(a); the absent party must also destroy subject matter
jurisdiction and be indispensable to the pending litigation under Rule 19(b). Santiago v.
Honeywell Int’l, Inc., 768 F. App’x 1000, 1005 (11th Cir. 2019) (citing Patterson, 390 U.S. at
WS Energy is not a required party to the litigation under Rule 19(a), and therefore the
1. Although Rule 19 uses the term “required party,” the Supreme Court held that “‘necessary party’ is a term of art
whose meaning parallels Rule 19(a)’s requirements. Orff v. United States, 545 U.S. 596, 602–03 (2005). Thus, the
Court uses the terms “required party” and “necessary party” interchangeably.
Court does not reach step two under Rule 19(b). Plaintiff’s Declaratory Action asks the Court
only to determine whether Defendant Orta-Gonzalez was a permissive user of the work vehicle
at the time of the accident. (Docs. 5 at 2;19 at 4). Plaintiff does not dispute coverage of named
insured, WS Energy. (Doc. 19 at 6). Since the Declaratory Action seeks only a judgment
regarding Plaintiff’s duties to Defendant Orta-Gonzalez, the absence of WS Energy does not
prevent the Court from providing relief. See Evanston Ins. Co. v. Kinsale Ins. Co., No. 7:17-CV327, 2018 WL 4103031, at *7 (S.D. Tex. July 12, 2018).
Further, Defendant Ferrer does not meet his burden in demonstrating that disposition of
this action would impair or imped Plaintiff’s interest. Defendant contends failure to join WS
Energy impairs or impedes WS Energy’s interest “by virtue of a vicarious liability finding and
course and scope of employment finding, subjecting parties to a substantial risk of incurring
double, multiple, or otherwise inconsistent obligations.” (Doc. 15 at 10). As mentioned above,
however, the Declaratory Action only reaches Plaintiff’s duties to Defendant Orta-Gonzalez
under the Insurance Policy. Regardless of whether the Court determines Plaintiff does or does
not have a duty to defend or indemnify Defendant Orta-Gonzalez, such a finding does not
determine Plaintiff’s duties to WS Energy in the Underlying Action. See Evanston, 2018 WL
4103031, at *8 (finding insured’s interest protected without joinder when insurer would still
provide insured’s defense). Moreover, even if the Declaratory Action and the Underlying Action
are substantially similar, “the Supreme Court has already held that concurrent ‘separate
litigations’ with ‘overlap[ping]’ claims is not enough to satisfy Rule 19(a).” Nat’l Cas. Co. v.
Gonzalez, 637 F. App’x 812, 815 (5th Cir. 2016); see also Old Republic Ins. Co. v. Admiral Ins.
Co., No. 15-3597, 2016 WL 10788990, at *3 (S.D. Tex. Aug. 8, 2016) (“There is no automatic
requirement that all named insureds on an insurance policy be joined to a declaratory judgment
action to construe that policy.”).
The Court thus does not find WS Energy a required party under Rule 19(a). Therefore,
the Court RECOMMENDS Defendant Ferrer’s Motion to Dismiss be DENIED as to the failure
to join an indispensable party.
C. Defendant’s Claim for Lack of Subject Matter Jurisdiction Should Be Denied
a. Legal Standard
Federal courts are courts of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co. of
Am., 511 U.S. 375, 377 (1994). Dismissal is proper under Rule 12(b)(1) “when the court lacks
the statutory or constitutional power to adjudicate the case.” Home Builders Ass’n of Miss., Inc.
v. City of Madison, 143 F.3d 1006, 1010 (5th Cir. 1998). In ruling on a Rule 12(b)(1) motion,
the Court “has the power to dismiss for lack of subject matter jurisdiction on any one of three
separate bases: (1) the complaint alone; (2) the complaint supplemented by undisputed facts
evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court’s
resolution of disputed facts.” Freeman v. United States, 556 F.3d 326, 334 (5th Cir. 2009). No
presumptive truthfulness attaches to a plaintiff’s allegations, and the existence of disputed
material facts will not preclude the trial court from evaluating for itself the merits of
jurisdictional claims. Williamson v. Tucker, 645 F.2d 404, 413 (5th Cir. 1981).
“A defendant may challenge ripeness through a Rule 12(b)(1) motion, arguing that the
lack of ripeness divests the court of subject matter jurisdiction.” Max Specialty Ins. Co. v.
Heydarian, No. 10-CV-319, 2011 WL 13235042, at *2 (W.D. Tex. Jan. 23, 2011) (citing FED. R.
CIV. P. 12(b)(1)). The plaintiff, as the party asserting jurisdiction, bears the burden of proof that
jurisdiction does exist. Macias v. Dep’t of Fam. Servs., No. 22-cv-01292-LY-SH, 2023 WL
3010198, at *3–4 (W.D. Tex. Apr. 19, 2023) (citing Ramming v. United States, 281 F.3d 158,
161 (5th Cir. 2001)). Dismissal of a case for lack of subject matter jurisdiction does not
constitute “a determination on the merits and does not prevent the plaintiff from pursuing a claim
in a court” with proper jurisdiction. Id. at *4 (quoting Mitchell v. Bailey, 982 F.3d 937, 944 (5th
Cir. 2020)). A court, therefore, dismisses a case under Rule 12(b)(1) without prejudice. Id.
As for Defendant Ferrer’s challenge under 12(b)(1) for lack of subject matter jurisdiction,
Defendant Ferrer contends: (1) the Court has neither federal question nor diversity jurisdiction
and (2) the claim is not ripe for adjudication. (Doc. 15 at 4–8). In both the Amended Complaint
and Response Brief, Plaintiff asserts subject matter jurisdiction only in diversity. (Docs. 5 at 3;
19 at 7–10). Plaintiff also asserts that Texas law finds a declaratory judgment denying a duty to
defend or indemnify ripe and justiciable (Doc. 19 at 10–14).
Subject Matter Jurisdiction
Before turning to the question of diversity jurisdiction, the Court agrees with Defendant
Ferrer that no federal question jurisdiction exists here. “A claim under the Declaratory Judgment
Act is insufficient to confer federal question jurisdiction under 28 U.S.C. § 1331.” Frye v.
Anadarko Petroleum Corp., 953 F.3d 285, 293 (5th Cir. 2019) (citing Skelly Oil Co. v. Phillips
Petroleum Co., 339 U.S. 667, 671 (1950)). In any event, Plaintiff asserted only diversity
jurisdiction in its Amended Complaint and concurred in its Response Motion that federal
question jurisdiction does not exist. (Docs. 5 at 3; 19 at 7–10). The Court now turns to the
question of whether this Court has diversity jurisdiction.
In the Motion to Dismiss, Defendant Ferrer alleges an absence of complete diversity
because “an indispensable party to this litigation, and the only link between the plaintiffs and
defendants—WS Energy—was not named.” (Doc. 15 at 7). In failing to join WS Energy,
Defendant Ferrer argues that Plaintiff “improperly created jurisdiction by omission.” (Id.). The
Court does not find WS Energy a required party to the Declaratory Action, as detailed above.
Therefore, Plaintiff’s failure to join WS Energy does not defeat diversity jurisdiction. Plaintiff
also met its burden in establishing complete diversity in that Plaintiff’s principal place of
business and state of incorporation is Iowa, and Defendant Orta-Gonzalez and Defendant Ferrer
both reside in Texas. (Docs. 5 at 2; 19 at 8). Accordingly, the Court RECOMMENDS
Defendant Ferrer’s Motion to Dismiss be DENIED as to the claims for lack of federal question
and diversity jurisdiction.
D. Defendant’s Claim that the Declaratory Judgment Lacks Ripeness Should Be
Denied in Part and Granted in Part
a. Legal Standard
In deciding whether to dismiss a declaratory judgment suit, “[a] federal district court
must determine: (1) whether the declaratory judgment action is justiciable; (2) whether the court
has authority to grant declaratory relief; and (3) whether to exercise its discretion or dismiss the
action.” Sherwin-Williams Co. v. Holmes Cnty., 343 F.3d 383, 397 (5th Cir. 2003) (citing Orix
Credit All., Inc. v. Wolfe, 212 F.3d 891, 895 (5th Cir. 2000)). A declaratory judgment action is
ripe and therefore justiciable if there is an “actual controversy” between the parties. Shields v.
Norton, 289 F.3d 832, 835 (5th Cir. 2002); see also 28 U.S.C. § 2201(a) (limiting the power to
issue a declaratory judgment to “a case of actual controversy within [a court’s] jurisdiction”). A
court lacks the authority to grant declaratory relief if: (1) the defendant in the declaratory
judgment action filed an action in state court against the plaintiff in the declaratory judgment
action; (2) the state case involves the same issues as the federal declaratory judgment action, and
(3) the court cannot enjoin the state proceedings due to the Anti-Injunction Act. AXA Re Prop. &
Cas. Ins. Co. v. Day, 162 F. App’x 316, 320 (5th Cir. 2006) (citing Travelers Ins. Co. v. La.
Farm Bureau Fed’n, Inc., 996 F.2d 774, 776 (5th Cir. 1993)). In deciding whether to exercise
discretion to decide or dismiss a declaratory judgment action, courts in the Fifth Circuit consider
seven nonexclusive factors set out in St. Paul Ins. Co. v. Trejo, 39 F. 3d 585 (5th Cir. 1994). See
Sherwin-Williams Co., 343 F.3d at 388; see also Ironshore Specialty Ins. Co. v. Tractor Supply
Co., 624 F. App’x 159, 164 (5th Cir. 2015).
As described above, a court considering dismissal of a declaratory judgment “must
engage in a three-step inquiry.” Ironshore Specialty Ins. Co. v. Tractor Supply Co., 624 F. App’x
159, 162 (5th Cir. 2015) (quoting Orix Credit All., Inc v. Wolfe, 212 F.3d 891, 895 (5th Cir.
2000)). The court must determine: (1) the justiciability of the declaratory judgment; (2) the
court’s authority to grant declaratory relief; and (3) the court’s discretion to dismiss the action.
Id. at 162 (citing Sherwin-Williams Co. v. Holmes Cnty., 343 F.3d 383, 387 (5th Cir. 2003)). The
Court addresses each part of the inquiry in turn below.
“A declaratory judgment action is ripe for adjudication only where an ‘actual
controversy’ exists.” Orix Credit All., 212 F.3d at 896 (5th Cir. 2000). Courts routinely find
actions for declaratory judgments deciding whether an insurer must defend and indemnify its
insured justiciable. Canal Ins. Co. v. XMEX Transp., LLC, 1 F. Supp. 3d 516, 523 (W.D. Tex.
2014); Falls Lake Nat’l Ins. Co. v. Rodriguez, No. 18-cv-66, 2018 WL 9877954, at *3 (W.D.
Tex. Aug. 4, 2018). Defendant Ferrer argues, however, that the question of Plaintiff’s duty to
indemnify is unripe. (Doc. 15 at 8).
As this Court sits in diversity, Texas state law governs the duty to defend and the duty to
Under Texas law, an insurer may have two responsibilities relating to coverage—
the duty to defend and the duty to indemnify. These two duties are distinct, and
the duty to defend is generally broader than the duty to indemnify. This is because
‘[a]n insurer must defend its insured if a plaintiff’s factual allegations potentially
support a covered claim, while the facts actually established in the underlying suit
determine whether the insurer must indemnify its insured.
Liberty Mut. Fire Ins. Co. v. Copart of Conn., Inc., 75 F.4th 522, 528 (5th Cir. 2023) (internal
citations omitted). As a result, to determine an insurer’s duty to defend, a court must look to the
factual allegations in the latest amended pleading. Northfield Ins. Co., 363 F.3d at 528. To
determine an insurer’s duty to indemnify, a court must look to the established facts in the
underlying cause of action. Id. at 528–29.
1. Duty to Defend
Under well-established Texas law, a court uses the “eight corners rule” to determine an
insurer’s duty to defend. State Farms Lloyds v. Richards, 966 F.3d 389, 393 (5th Cir. 2020). The
eight corners rule requires the court to look at the “four corners” of the plaintiff’s complaint and
the “four corners” of the insurance policy. Id. A duty to defend arises if the underlying pleading
alleges facts that potentially fall within the scope of coverage. Id. (citing Ooida Risk Retention
Grp., Inc. v. Williams, 579 F.3d 469, 472 (5th Cir. 2009)); Northfiled Ins. Co. v. Loving Home
Care, 363 F.3d 532, 538 (5th Cir. 2004). A declaratory judgment action to determine whether an
insurer has a duty to defend is justiciable before the conclusion of the underlying state action.
See, e.g., Ooida, 579 F.3d at 473 (finding resolution of the underlying action required for a duty
to indemnify but not a duty to defend); Northfield, 363 F.3d at 528–29 (contrasting the
justiciability of the duty to defend with the duty to indemnify). Accordingly, the Court finds
whether Plaintiff has a duty to defend Defendant Orta-Gonzalez ripe for adjudication.
2. Duty to Indemnify
Texas law, generally, considers a question on the duty to indemnify justiciable only after
the underlying lawsuit. Id. at 529 (citing Griffin, 955 S.W.2d 81, 84 (Tex. 1997)). The Supreme
Court of Texas created an exception to this rule in Griffin, holding “the duty to indemnify is
justiciable before the insured’s liability is determined in the [underlying] lawsuit when the
insurer has no duty to defend and the same reasons that negate the duty to defend likewise
negate any possibility the insurer will ever have a duty to indemnify.” Griffin, 955 S.W.2d at 84.
Liberal extensions of the Griffin exception spurred the Supreme Court of Texas to clarify that
“an insurer may have a duty to indemnify even though the duty to defend never arises.” Liberty
Mut. Fire Ins., 75 4th at 536 (citing Peachtree, 647 F.3d at 254). As the Griffin rule now stands,
“a lack of a duty to indemnify cannot be inferred from a lack of duty to defend, unless the
reasons that negate the duty to defend negate any possibility the insurer will ever have a duty to
indemnify.” Princeton Excess & Surplus Lines Ins. Co. v. A.H.D. Hous., Inc., 84 F.4th 274, 282,
286 (5th Cir. 2023) (citing Liberty Mut. Fire Ins., 75 4th at 535–36) (emphasis added).
Directing the Court’s attention to the Griffin exception, Plaintiff contends that “[b]ecause
Berkley National seeks a declaratory judgment [implicating] both its obligation to indemnify
[Defendant] Orta-Gonzalez and its duty to defend [Defendant] Orta-Gonzalez, the claims are
plainly ripe under longstanding Texas law.” (Doc. 19 at 12). Plaintiff asks the Court to find
Defendant Orta-Gonzalez did not qualify as an “insured” under the Insurance Policy because
Defendant Orta-Gonzalez violated WS Energy’s employment policies in using his work vehicle
while intoxicated for personal use. (Doc. 5 at 5, 7). If established as true, Plaintiff contends, it
has no duty to defend nor indemnify Defendant Orta-Gonzalez. (Doc. 5 at 7). Thus, Plaintiff
frames its contentions as issues of “coverage” rather than issues of “liability.” (Docs. 5 at 7; 19 at
The Court finds the Griffin exception does not apply. The Supreme Court of Texas
[Griffin’s] conclusion was grounded on the impossibility that the drive-by
shooting…could be transformed by proof of any conceivable set of facts into an
auto accident covered by the insurance policy. It was not based on the rationale
that if a duty to defend does not arise from the pleadings, no duty to indemnify
could arise from proof of the allegations in the petition.
Liberty Mut. Fire Ins., 75 4th at 536–37 (quoting D.R. Horton-Tex., Ltd. v. Markel Int’l
Ins. Co., 300 S.W.3d 740, 744–45 (Tex. 2009)) (emphasis added). Here, Plaintiff alleges no duty
to defend nor duty to indemnify because of Defendant Orta-Gonzalez’s non-permissive use of
the work vehicle. (Docs. 5 at 3–5). While non-permissive use of the vehicle may negate the duty
to defend, “evidence arising from or related to the Underlying [Action] may reveal” Plaintiff
permissibly used the vehicle. Liberty Mut. Fire Ins., 75 F.4th at 536. The Court does not find it
impossible Plaintiff will have a duty to indemnify Defendant Orta-Gonzalez. Id. at 537.2 As a
result, the Court finds the duty to indemnify nonjusticiable under the “limited circumstances”
provided in Griffin. See State Farm Mut. Auto. Ins. Co. v. Watkins, No. A-15-CA-143, 2015 WL
2364178, at *4 (W.D. Tex. May 14, 2015) (acknowledging on a motion to dismiss that the court
could accept jurisdiction under Griffin but declining to do so).
Accordingly, the Court RECOMMENDS Defendant Ferrer’s Motion to Dismiss be
GRANTED as to the claim for lack of ripeness of the duty to indemnify.
Authority to Grant Relief
The Court turns to the second Orix factor considering only Plaintiff’s duty to defend
Defendant Orta-Gonzalez. Under the second Orix factor, the Court must determine whether it
has the authority to grant declaratory relief. Falls Lake, 2018 WL 9877954, at *3. If three
2. Plaintiff attached the Insurance Policy, the Crash Report, and WS Energy’s employment policies for the Court to
review. (Doc. 5). Plaintiff asks the Court to consider Defendant Orta-Gonzalez’s “multiple personal stops” in
determining he was not a permissive user of the vehicle at the time of the accident. (Doc. 5 at 4). This is an issue of
fact best determined in the Underlying Action.
conditions are met, the Court lacks authority to grant relief: “(1) the declaratory defendant
previously filed a cause of action in state court; (2) the state case involved the same issues as
those in federal court;” and (3) the Anti-Injunction act prohibits the district court from enjoining
state court proceedings. Canal, 1 F. Supp. 3d at 523 (citing Sherwin-Williams Co. v. Holmes
Cnty., 343 F.3d 383, 388 n.1 (5th Cir. 2003)). The Anti-Injunction act does not apply in the
absence of a state court proceeding pending between the plaintiff and the declaratory judgment
defendants. Id. In this case, Plaintiff is not a party to the Underlying Action. Likewise, no
pending state court action between Plaintiff and any of the declaratory judgment defendants
exists. Thus, the three conditions are not met, and the Court therefore has authority to grant
Discretion to Dismiss the Action
Finding the first two Orix factors satisfied as to Plaintiff’s duty to defend, the Court now
turns to whether it should exercise its discretion under the Declaratory Judgment Act. Id. The
Fifth Circuit, in St. Paul Ins. Co. v. Trejo, created “seven nonexclusive factors” for district courts
to consider when determining whether to dismiss a declaratory judgment:
1) Whether there is a pending state action in which all of the matters in controversy may
be fully litigated
2) Whether the plaintiff filed suit in anticipation of the lawsuit filed by the defendant
3) Whether the plaintiff engaged in forum shopping in bringing the suit
4) Whether possible inequities in allowing the declaratory plaintiff to gain precedence in
time or to change forums exists
5) Whether the federal court is a convenient forum for the parties and witnesses
6) Whether retaining the lawsuit in federal court would serve the purposes of judicial
7) Whether the federal court is being called on to construe a state judicial decree
involving the same parties and entered by the court whom the parallel state suit being
the same parties is pending
Id. (citing St. Paul Ins. Co. v. Trejo, 39 F.3d 585, 590 (5th Cir. 1994)). Plaintiff and Defendant
Ferrer also direct the Court to consider the Brillhart factors. (Docs. 15 at 5; 19 at 13). The Fifth
Circuit clarified in Sherwin-Williams that the Trejo test embodies the three overarching
principles expressed in the Brillhart factors: federalism, fairness, and efficiency. Canal, 1 F.
Supp. 3d at 525 (citing Sherwin-Williams, 343 F.3d at 390–91). “Thus, the Court must apply the
Trejo factors and analyze them ‘in light of the overarching Brillhart principles’ to determine
whether to dismiss the case.” Id. (citing Sherwin-Williams, 343 F.3d at 401). The Court now
considers each of the Trejo factors with consideration of the Brillhart principles.
1. Is There a Pending State Action in Which All of The Matters in
Controversy May Be Fully Litigated?
The Court finds the first Trejo factor weighs against dismissal. This factor requires a
threshold inquiry into whether the Underlying Action and the Declaratory Action are “parallel.”
Canal, 1 F. Supp. 3d at 526 (citing Sherwin-Williams, 343 F.3d at 392–94). The Underlying
Action and the Declaratory Action are parallel when “they involve the same parties and the same
issues.” Falls Lake, 2018 WL 9877954, at *6 (citing Exxon Corp. v. St. Paul Fire & Marine Ins.
Co., 129 F.3d 781, 785 (5th Cir. 1997)).
In this case, the Underlying Action and the Declaratory Action are not parallel as neither
involve the same parties. Anticipating the Court’s response, Defendant Ferrer argues Plaintiff’s
absence in the Underlying Action “inconsequential.” (Doc. 15 at 5). The Court disagrees.
“Courts routinely apply [the same party] rule in insurance coverage disputes like [this] Case to
find that proceedings are not parallel when the federal declaratory plaintiff is not a party to the
state litigation.” Canal, 1. F. Supp. 3d at 526 (providing string cite). Moreover, even if the Court
accepted Defendant Ferrer’s argument, the issues in the Underlying Action and the Declaratory
Action are not parallel. The Declaratory Action seeks to determine Plaintiff’s duties under the
Insurance Policy—a matter not before the state court. See id. at 527; see also State Farms Lloyds
v. Weatherford Compounding Pharmacy, LLC, No.17-CA-638, 2017 WL 8896192, at *4–5
(W.D. Tex. Nov. 28, 2017), R. & R. accepted, No. 17-CA-638, 2018 WL 1905115 (W.D. Tex.
Feb. 15, 2018) (holding a district court’s determination of a duty to defend not before the state
court due to the eight corners rule). Given the importance of the presence or absence of
parallelism, the Court finds Trejo factor one supports retaining jurisdiction. See State Farm
Lloyds, 2017 WL 8896192, at *4.
2. Did the Plaintiff File Suit in Anticipation of the Lawsuit Filed by the
The Court finds the second Trejo factor weighs against dismissal. Under the second Trejo
factor, courts look to whether the plaintiff filed the declaratory judgment action anticipating the
defendant to sue. Id. at *6; Falls Lake, 2018 WL 9877954, at *7. Courts often consider whether
the filing of the underlying action predated the filing of the declaratory judgment. See Falls
Lake, 2018 WL 9877954, at *7; State Farm Lloyds, 2017 WL 8896192, at *5.
Plaintiff filed the Declaratory Action on January 6, 2023, but did not join Defendant
Ferrer as a party. (Doc. 19 at 12). Defendant Ferrer then filed the Underlying Action on January
19, 2023. (Id.). Once aware of the Underlying Action, Plaintiff filed its Amended Complaint on
March 13, 2023, joining Defendant Ferrer as a party to the Declaratory Action. (Doc. 5 at 1).
Thus, more than a month passed between the filing of the Underlying Action and Plaintiff’s
Amended Complaint, joining Defendant Ferrer. Defendant Ferrer even concedes in his Motion to
Dismiss that the Declaratory Action was “filed after the state court lawsuit.” (Doc. 15 at 6).
Moreover, neither Defendant in this suit has sued Plaintiff. See State Farm Lloyds, 2017 WL
8896192, at *5 (finding no suit against plaintiff to weigh against dismissal).
Supposing the Declaratory Action predated the Underlying Action, the Fifth Circuit
cautioned against literal interpretation of “‘anticipatory’ litigation.” Canal, 1 F. Supp. 3d at 527.
Federal declaratory judgment suits are routinely filed in anticipation of other
litigation. The courts use pejorative terms such as “forum shopping” or
“procedural fencing” to identify a narrower category of federal declaratory
judgment lawsuits filed for reasons found improper and abusive, other than
selecting a forum or anticipating related litigation. Merely filing a declaratory
judgment action in a federal court with jurisdiction to hear it, in anticipation of
state court litigation, is not itself improper anticipatory litigation or otherwise
abusive “forum shopping.”
Id. (citing Sherwin-Williams, 343 F.3d at 391). Considering the Fifth Circuit’s
advisement and Plaintiff’s filing of the Amended Complaint more than a month after Defendant
Ferrer filed the Underlying Action, the Court finds the second Trejo factor to support retaining
3. Did the Plaintiff Engaged in Forum Shopping in Bring the Suit?
The Court finds the third Trejo factor weighs against dismissal. Defendant Ferrer argues
that Plaintiff attempts to “recast” the issue of whether Defendant Orta-Gonzalez was operating in
the course and scope of his employment as an issue of coverage in the Declaratory Action, and
therefore encourages forum shopping. (Doc. 15 at 5 n.1). The Court disagrees with Defendant
Ferrer for three reasons. First, as described above, “[m]erely filing a declaratory judgment action
in a federal court with jurisdiction to hear it, … is not itself …abusive ‘forum shopping.’” Canal,
1 F. Supp. 3d at 528 (quoting Sherwin-Williams, 343 F.3d at 391); State Farm Lloyds, 2017 WL
8896192, at *5 (same). Second, as the Court sits in diversity, it must apply Texas Law. Thus,
Plaintiff lacks clear incentive to forum shop. See Falls Lake, 2018 WL 9877954, at *8. Third, as
detailed above, the Court finds the duty to indemnify nonjusticiable. Therefore, the Court will
only determine Plaintiff’s duty to defend, which requires application of the eight corners rule.
The eight corners rule does not require the Court to decide “extrinsic fact questions,” which
precludes the Court from deciding whether Defendant Orta-Gonzalez was within the scope of his
employment. See State Farms Lloyds, 2017 WL 8896192, at *5.3 For these reasons, the third
Trejo factor supports retaining jurisdiction.
4. Do Possible Inequities in Allowing the Declaratory Plaintiff to Gain
Precedence in Time or to Change Forum Exists?
The Court finds the fourth Trejo factor weighs against dismissal. Since the Court must
apply Texas state law, inequality will likely not result from allowing Plaintiffs to maintain the
Declaratory Action in federal court. Falls Lake, 2018 WL 9877954, at *8. Additionally, as
discussed under factor three, addressing only the duty to defend, and not the duty to indemnify,
prevents this Court from addressing any factual questions at issue in the Underlying Action. See
Canal, 1 F. Supp. 3d at 529–31 (finding where a declaratory judgment on the duty to defend and
an underlying action are not parallel, the interpretation of an insurance policy has no bearing on
the underlying action). Therefore, the fourth Trejo factor supports retaining jurisdiction.
5. Is the Federal Court a Convenient Forum for the Parties and
The Court finds the fifth Trejo factor neutral towards dismissal. Defendant Ferrer brought
the Underlying Action in Hildago County, Texas. (Doc. 5 at 7–9). Only Defendant OrtaGonzalez resides in Hildago County. (Doc. 2 at 9). Defendant Ferrer resides in Denton County,
and Defendant Ferrer’s counsel works in San Antonio, Texas. (Docs. 5 at 2; 15 at 16). Plaintiff’s
counsel works in Houston, Texas. (Doc. 5 at 9). Given the parties and their counsel are spread
across Texas, the Court finds the fifth Trejo factor, at best, neutral. See State Farm Lloyds, 2017
WL 8896192, at *6 (finding where parties in the underlying state action were spread across
3. Even if the Court finds the duty to indemnify justiciable, the Court still finds it unlikely Plaintiff engaged in
improper forum shopping. Courts in the Western District have found “obtaining [early] determination[s] as to
whether [an insurer] must defend and indemnify the Alleged insureds [to allow the insurer] to ‘minimize the danger
of avoidable loss and the unnecessary accrual of damages.’” Canal, 1 F. Supp. 3d at 529. Such determinations are
filed in accordance with the “purpose of declaratory judgment actions.” Id. (quoting Sherwin-Williams, 343 F.3d at
Texas and only the duty to defend at issue that the convenience of the federal forum was at best
6. Does Retaining the Lawsuit in Federal Court Serve the Purposes of
The Court finds the sixth Trejo factor neutral towards dismissal. Defendant Ferrer
contends that allowing both the Underlying Action and the Declaratory Action “to proceed is the
epitome of permitting duplicative litigation.” (Doc. 15 at 5). Plaintiff counters, arguing the
Underlying Action alleges “personal injury and wrongful death claims” whereas the Declaratory
Action only seeks to determine Plaintiff’s duty to defend or indemnify. (Doc. 19 at 13). Since
this Court finds the duty to indemnify unripe, the Declaratory Action will only determine
Plaintiff’s duty to defend Defendant Orta-Gonzalez in the Underlying Action. Allowing the state
court to decide issues of fact before this Court determines the duty to indemnify, reduces the
likelihood of duplicative litigation in state and federal court. Canal, 1 F. Supp. 3d. at 532–33. At
the same time, determining the duty to defend “does not relieve the state court of any of its
burden;” therefore, in retaining jurisdiction, the Court “neither serve[s] nor harm[s]” the
purposes of judicial economy. Id. For this reason, the Court finds the sixth Trejo factor neutral.
7. Is the Federal Court Being Called on to Construe a State Judicial
Decree Involving the Same Parties and Entered by the Court Whom
the Parallel State Suit Being the Same Parties Is Pending?
The Court finds the seventh Trejo factor weighs against dismissal. Plaintiff is not a party
to the Underlying Action. The Declaratory Action is not parallel to the Underlying Action. The
final Trejo factor, therefore, supports retaining jurisdiction.
The first, second, third, fourth, and seventh Trejo factors weigh against dismissal, and the
fifth and sixth Trejo factors are neutral. Accordingly, the Court finds the Trejo analysis strongly
favors retaining jurisdiction. The Court also finds retaining jurisdiction harmonious with the
RECOMMENDS Defendant Ferrer’s Motion to Dismiss be DENIED as to the Declaratory
Action for a Duty to Defend.
E. Defendant’s Claim for Failure to State a Claim Should Be Denied
a. Legal Standard
When a defendant moves to dismiss under Rule 12(b)(6), the trial court must assess
whether the complaint states a plausible claim for relief. See Raj v. La. State Univ., 714 F.3d
322, 329–30 (5th Cir. 2013) (citing Bass v. Stryker Corp., 669 F.3d 501, 506 (5th Cir. 2012)).
The court must first accept “all well-pleaded facts in the complaint as true and viewed in the
light most favorable to the plaintiff.” See id. (citing Bass, 669 F.3d at 506). “A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Whitley v. Hanna, 726 F.3d
631, 638 (5th Cir. 2013) cert. denied, 572 U.S. 1087, 134 S. Ct. 1935 (2014) (quoting Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009)).
On the other hand, if the Complaint offers merely “labels and conclusions” or “a
formulaic recitation of the elements of a cause of action,” dismissal is appropriate. Id. (quoting
Iqbal, 556 U.S. at 678). “Threadbare recitals of the elements of a cause of action, supported by
mere conclusory statements, do not suffice.” Gibson v. Tex. Dep’t of Ins., 700 F.3d 227, 233 (5th
Cir. 2012) (quoting Iqbal, 556 U.S. at 678)). The court should dismiss a complaint if the court
can only infer the “mere possibility of misconduct,” or if the plaintiff has only alleged that he is
entitled to relief rather than stating a claim that is “plausible on its face.” Iqbal, 556 U.S. at 678–
79 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
4. The Court’s discussion under Trejo factors one and seven demonstrate consideration of federalism. See Canal, 1
F. Supp. 3d at 533. The Court’s discussion under factors two, three, and four demonstrate consideration of fairness.
Id. The Court’s discussion under factors five and six demonstrate consideration of efficiency. Id.
Lastly, Defendant Ferrer moves to dismiss under Rule 12(b)(6) for failure to state a claim
related to him. (Doc. 15 at 9). While Plaintiff’s Declaratory Action may not state a claim
specifically against Defendant Ferrer, Fifth Circuit precedent requires his joinder. The Fifth
Circuit has long held that an “injured party, who is a plaintiff in state court litigation against an
insured party, has a ‘real and substantial, though not immediate’ interest in a determination of
whether the insurance company has a duty to [defend] or indemnify the insured, and … is a
proper party to a declaratory judgment action.” Atl. Cas. Ins. Co. v. Ramirez, 651 F. Supp. 2d
669, 673–74 (N.D. Tex. 2009) (citing Central Surety & Ins. Corp. v. Norris, 103 F.2d 116, 117
(5th Cir. 1939)). In fact, “the Fifth Circuit has gone so far as to hold that dismissal of a state
court plaintiff from a declaratory judgment action would be plain error.” Id. (citing Standard
Accident Ins. Co. v. Meadows, 125 F.2d 422, 424 (5th Cir. 1942)). Accordingly, the Court
RECOMMENDS that the Motion to Dismiss be DENIED as to failure to state a claim against
Based on the above reasoning, the Magistrate Judge concludes:
Plaintiff properly issued service and properly served Defendant Ferrer. Accordingly, the
undersigned RECOMMENDS that Defendant Ferrer’s Motion to Dismiss pursuant to Rules
12(b)(4) and 12(b)(5) be DISMISSED.
Defendant Ferrer did not meet his burden in proving WS Energy a required party to the
Declaratory Action. Accordingly, the undersigned RECOMMENDS that Defendant Ferrer’s
Motion to Dismiss pursuant to Rule 12(b)(7) be DISMISSED.
The Court finds the question of Plaintiff’s Duty to Indemnify Defendant Orta-Gonzalez
unripe. Accordingly, the undersigned RECOMMENDS that Defendant Ferrer’s Motion to
Dismiss pursuant to Rule 12(b)(1) be GRANTED.
The Court finds the question of Plaintiff’s Duty to Defend Defendant Orta-Gonzalz ripe for
adjudication. Accordingly, the undersigned RECOMMENDS that Defendant Ferrer’s
Motion to Dismiss pursuant to Rule 12(b)(1) be DISMISSED.
The Court finds Plaintiff properly stated a claim against Defendant Ferrer. Accordingly, the
undersigned RECOMMENDS that Defendant Ferrer’s Motion to Dismiss under Rule
12(b)(6) be DISMISSED.
It is so ORDERED.
SIGNED this 13th day of November, 2023.
DAVID B. FANNIN
UNITED STATES MAGISTRATE JUDGE
INSTRUCTIONS FOR SERVICE AND RIGHT TO APPEAL/OBJECT
In the event that a party has not been served by the Clerk with this Report and
Recommendation electronically, pursuant to the CM/ECF procedures of this District, the Clerk is
ORDERED to mail such party a copy of this Report and Recommendation by certified mail,
return receipt requested. Pursuant to 28 U.S.C. § 636(b), any party who desires to object to this
report must serve and file written objections within fourteen (14) days after being served with a
copy unless the time period is modified by the District Court. A party filing objections must
specifically identify those findings, conclusions, or recommendations to which objections are
being made; the District Court need not consider frivolous, conclusive, or general objections.
Such party shall file the objections with the Clerk of the Court and serve the objections on the
Magistrate Judge and on all other parties. A party’s failure to file such objections to the proposed
findings, conclusions, and recommendations contained in this report shall bar the party from a de
novo determination by the District Court. Additionally, a party’s failure to file written objections
to the proposed findings, conclusions, and recommendations contained in this report within
fourteen (14) days after being served with a copy shall bar that party, except upon grounds of
plain error, from attacking on appeal the unobjected-to proposed factual findings and legal
conclusions accepted by the District Court. Douglass v. United Services Auto. Ass’n, 79 F.3d
1415, 1428–29 (5th Cir. 1996).
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