The Hanover Insurance Company v. JA Group, LLC et al

Filing 59

MEMORANDUM OPINION. Signed by Judge Royce C. Lamberth. (aej)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TEXAS
SAN ANTONiO DIVISION

FILED
SEP 2 7 2017
CLERK,

U.S. D!$TRIT

WESTERN

THE HANOVER INSURANCE COMPANY §

BY
DEPUTY

§

Plaintiff,

CLERK

DS1 OF TEXAS

§
§

v.

Civil No. SA-16-CV-609-RCL

§
§

JA GROUP, LLC, et al.

§
§

Defendants.

§

MEMORANDUM OPINION:
DENYING DEFENDANT J&J MAINTENANCE, INC.'S MOTION TO STRIKE;
GRANTING ALTERNATIVE MOTION FOR LEAVE TO FILE AMENDED ANSWER
The Court has before it Defendant J&J Maintenance, Inc.'s ("J&J") Motion to Strike

Plaintiffs First Amended Complaint Pursuant to Federal Rule of Civil Procedure 12(f) ("Motion
to Strike") and Alternative Motion for Leave to File Amended Answer ("Motion to Amend") (ECF

#43). Upon consideration of these motions and the responses and replies thereto, the Court will

DENY J&J's Motion to Strike, but will GRANT its Motion to Amend.

Background
Plaintiff The Hanover Insurance Company ("Hanover") commenced this suit in federal
court on June 24, 2016. (ECF #1). In its original complaint, Hanover sued various defendants,
among them J&J, for alleged breaches of indemnity agreements relating to the "House Creek
Bridge Project."

(See generally

id.).

Then, on July 22, 2016, J&J brought suit against Hanover

and another defendant, Time Insurance Agency ("Time"), in Texas state court. (ECF #43-1).
Because Time is a Texas corporation, the state-court action was not removable under 28 U.S.C.

§

1441 (b)(2). (ECF #43 -1, p.2, ¶5). In its state-court action, J&J sought a declaration that J&J had

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no obligation to indemnify Hanover for costs related to a different project, the "Lighting Fixtures

Project." (Id. p.2, ¶8).
On August 23, 2016, Hanover filed an amended complaint as of right in this Court.
(ECF #21). That amended complaint added claims against J&J and other defendants in relation to

the "Lighting Fixtures Project." (See generally id.). One month later, J&J filed its Motion to
Strike, arguing that the amended complaint is an improper attempt by Hanover to get the content

of J&J's non-removable state-court action into federal court and asking the Court to strike the
amended complaint on the basis of abstention doctrines. (ECF 43, p.3, ¶4-5). In the alternative,

J&J asked that this Court grant it leave to file an amended answer. (Id. p.1). These motions have
been fully briefed and the Court now considers them.

Discussion
I.

Abstention Is Inappropriate in this Case Because Neither the Colorado River
Doctrine Nor the Briliharl Doctrine Applies in this Case.
J&J asks this Court to strike Hanover's amended complaint pursuant to Federal Rule

of Civil Procedure 12(f). Under that rule, a "court may strike from a pleading an insufficient
defense or any redundant, immaterial, impertinent, or scandalous matter," But J&J does not argue
that Hanover's amended complaint should be stricken for any of those reasons. Instead, J&J argues

that this Court should abstain from hearing the additional claims that Hanover asserts related to
the Light Fixtures Project under the Brilihart abstention doctrine. (See Brilihart v. Excess Ins. Co.
ofAm., 316 U.S. 491,494 (1942); St. Paul Ins. Co.

v.

Trejo, 39 F.3d 585, 590-91 (5th Cir. 1994)).

So J&J's motion is not so much a motion to strike as it is a motion to abstain. Hanover does not

contest that this motion should be analyzed under abstention doctrines. But it argues that the

Colorado River abstention doctrine, rather than the Brillhart abstention doctrine should apply in
this case. (See Colorado River Conservation Dist.

v.

United States, 424 U.S. 800, 800 (1976);
2

Moses H. Cone Mem '1 Hosp.

v.

Mercury Constr. Corp., 460 U.S.

1, 16

(1983); Bank One, NA.

v.

Boyd, 288 F.3d 181, 185 (5th Cir. 2002)).

J&J and Hanover are both wrong. Neither Brilihart nor Colorado River abstention

applies to this case.

Brilihart abstention is clearly inapplicable to this case. "Brilihart is only applicable
when a district court is considering abstaining from exercising jurisdiction over a declaratory

judgment action." (New England Ins. Co.
Kelly mv., Inc.

v.

v.

Barnett, 561 F.3d 392, 397 (5th Cir. 2009) (quoting

Continental Common Corp., 315 F.3d 494, 497 n.4 (5th Cir. 2002))). Whether

a case is a declaratory judgment action can be difficult to tell when a civil action involves claims
for both declaratory and coercive relief, as this case does. The Fifth Circuit has noted that "courts

have approached the issue in four different ways." (Id. at 395).
First, some courts "determine whether the coercive claims can exist independently of

the requests for declaratory relief." (Id.). If they cannot exist independently, then, under this
approach, Brillhart abstention is the appropriate framework for analysis.
Second, some courts look to see whether "the coercive relief is dependent on the grant

of the declaratory relief." (Id). If it is, then the "heart of the action" is the declaratory relief and
Brillhart is the appropriate framework for analysis. (Id).
Third, some courts "require[] a per se application of Brillhart any time a request for

declaratory action is made, regardless of other facts and circumstances." (Id.).
Fourth, some courts have held that Brilihart is inapplicable "whenever an action

includes both declaratory and non-frivolous coercive claims for relief." (Id.)
The Fifth Circuit has stated, in no uncertain terms, that it "follows the fourth approach."

(Id). "[W]hen an action contains any claim for coercive relief, the Colorado River abstention

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doctrine [as opposed to the Brilihart abstention doctrine] is ordinarily applicable." (Id (emphasis
in original) (quoting Kelly, 315 F.3d at 497 n.4)). "Thus, it is well settled in this circuit that a
declaratory action that also seeks coercive relief is analyzed under the Colorado River standard."
(Id. at 396). The only "exceptions to application

of the Colorado River standard [are] if the claims

for coercive relief are frivolous or if the claims for coercive relief were added as a means of

defeating Brilihart." (Id at 395-96).
Here, count five of Hanover's amended complaint seeks declaratory judgment against

J&J and other defendants in relation to the Light Fixtures Project. (FCF #21, p.13, ¶40). And

count two of the amended complaint "requests coercive remedies for the breach of [the indemnity
agreement] in the form of damages, attorney's fees, and injunctive relief." (Southwind Aviation,
Inc.

v.

Bergen Aviation, Inc., 23 F.3d 948, 951 (5th Cir. 1994); ECF #21, p.12, ¶34). "Inclusion

of these coercive remedies indisputably removes this suit from the ambit of a declaratory judgment
action" unless one of the two exceptions applies. (Southwind, 23 F.3d at 951). But there is no
evidence that Hanover's claims for coercive relief are frivolous nor that they are asserted for the
sole purpose of defeating Brilihart. For these reasons, Hanover's amended complaint (and even

just the newly asserted claims) is not a declaratory judgment action and the Brillhart abstention
doctrine is inapplicable.
J&J points to several cases in which, they say, "courts have exercised discretion to
dismiss declaratory judgment 'claims' under Brilihart when there were other 'coercive' claims"
in the action. (ECF #46, p.3, ¶6). To the extent that J&J argues that this Court should do likewise,
the Court disagrees. Such an approach is contrary to clear Fifth Circuit precedent, which uses

entire actions, rather than individual claims, as the proper unit for these abstention analyses. (See

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Barnett, 561 F.3d at 397 ("our precedent states that when an action contains any claim for coercive
relief, Colorado River applies") (emphasis in original) (internal quotation omitted)).
Similarly, J&J argues that using the action, rather than the individual claim, as the unit

of analysis "would render Brilihart abstention meaningless because bringing a coercive claim
alongside a declaratory action would virtually ensure federal court jurisdiction." (ECF #46, p.3,
¶6). It is true that the scope of Brilihart abstention is narrowed by taking the action-by-action

rather than the claim-by-claim approach. However, the Fifth Circuit was clearly aware of this in
Barnètt, where it listed various alternative options and rejected them in turn before endorsing the
action-by-action approach. This Court will not question the Fifth Circuit's judgment on the matter.
Further, Brilihart is not meaningless because coercive claims can still be ignored if frivolous or if

they exist only to defeat Brilihart. For these reasons, the Court abides with clear Fifth Circuit
precedent and finds that Brilihart abstention is inapplicable to this case.
Because the Brilihart abstention doctrine is inapplicable to this case, if any abstention
doctrine were applicable, then it would be the Colorado River abstention doctrine. Colorado River

abstention may apply in circumstances where there is parallel state and federal litigation, there are
coercive claims in the federal court, and the exceptions mentioned above do not apply. (Colorado
River, 424 U.S. at 817; Trejo, 39 F.3d at 590; Barnett, 561 F.3d at 396). But even when all of

those conditions are met, courts typically only "abstain from a case that is part of parallel,
duplicative litigation

. . .

under 'exceptional' circumstances." (Kelly, 315 F.3d at 497 (quoting

Colorado River, 424 U.S. at 818)).
J&J concedes that,

if Colorado River abstention applied in this case, then

it would

"prevent abstention." (ECF #46, p.2, ¶4). J&J, however, argues that Colorado River abstention
would only apply if "J&J were seeking to dismiss this action in its entirety." (Id.). The court

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agrees. Colorado River abstention is most appropriately used to abstain from actions in their

entirety, not to abstain from individual claims. Thus, the use of Colorado River abstention to
strike/abstain from only those claims asserted in the amended complaint is improper. The analysis
should be action-by-action, not claim-by-claim. Therefore, the Colorado River abstention doctrine
is inapplicable.

Thus, J&J's motion to strike on the basis of abstention doctrines must fail on two
independently sufficient grounds.
First, because both the Colorado River and Brilihart abstention doctrines are

inapplicable, there is no basis for the Court to abstain from the claims asserted in the amended
complaint. The Court understands that parallel proceedings are an inefficient use of judicial
resources and a major pain for the parties. But the Court also recognizes its "virtually unflagging

obligation

. . .

to exercise the jurisdiction given" to it and will follow the "general rule [that] a

federal court may not abstain

. . .

simply because there are parallel proceedings in state court."

(Trejo, 39 F.3d at 589 (quoting Colorado River, 424 U.S. at 817)).
Second, even

if the Court is wrong and abstention doctrines may properly be used to

attack just the claims asserted in the amended complaint rather than the action as a whole, the

proper abstention doctrine to apply in this case would, for the reasons given above, be the Colorado
River abstention doctrine. J&J admits that it loses under this doctrine and did not even attempt to
rebut Hanover's application of the Colorado River factors in its reply.
(remarking that, if applicable, "the Colorado River doctrine

.

.

.

(ECF #46, p.2, ¶4

would apply to prevent

abstention."). Therefore, even if abstention doctrines were applicable to this motion, which they
are not, the Court would deny J&J's Motion to Strike.

For these reasons, the Court will DENY J&J's Motion to Strike.

II.

Hanover Has Not Opposed J&J's Motion for Leave to File an Amended Answer,
and the Court Sees No Reason to Deny Leave.
J&J asks that, in the event its motion to strike is denied (which it will be), the Court

grant it leave to file an amended answer. Hanover has not challenged this request. And the

Court, cognizant of Rule 15(a)(2)'s admonition that courts "should freely give leave [to amend]

when justice so requires," sees no reason not to grant leave. Therefore, the Court will GRANT

J&J's Motion to Amend.
A SEPARATE ORDER SHALL ISSUE.

SIGNED this

2-7 1

day of September, 2017.

C.
HONORABLE ROYCE LAMBERTH
UNITED STATES DISTRICT JUDGE

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