Tchividjian et al v. Federal Insurance Company
Filing
22
MEMORANDUM OPINION. Signed by Senior Judge Norman K. Moon on April 24, 2018. (ca)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF VIRGINIA
4/24/2018
LYNCHBURG DIVISION
BASYLE TCHIVIDJIAN, ET AL.,
Plaintiffs,
v.
CASE NO. 6:17-cv-00095
MEMORANDUM OPINION
FEDERAL INSURANCE COMPANY,
Defendant.
JUDGE NORMAN K. MOON
Rickey Boyer, Sr., who is not a party to this lawsuit, sued Basyle Tchividjian
(“Tchividjian”) and Godly Response to Abuse in the Christian Environment, Inc. (“G.R.A.C.E.”)
for defamation in the Lynchburg Circuit Court. The instant action started when Tchividjian and
G.R.A.C.E. then sued Federal Insurance Company (“Federal”), also in the Lynchburg Circuit
Court. Tchividjian and G.R.A.C.E. are seeking a declaratory judgment that their insurance
contract with Federal requires Federal to defend and indemnify them in the underlying suits filed
by Boyer. Federal removed this case, and Tchividjian and G.R.A.C.E. now ask this Court to
remand it to state court.
This Court has diversity jurisdiction over the suit. See 28 U.S.C. § 1332(a); see also 28
U.S.C. § 2201(a) (granting a cause of action for declaratory judgments only “[i]n a case of actual
controversy within [the court’s] jurisdiction . . . .”). Federal is a citizen of both Indiana and New
Jersey, while the plaintiffs are citizens of Virginia and Florida. See Caterpillar Inc. v. Lewis,
519 U.S. 61, 68 (1996). In suits for declaratory relief, the amount in controversy is “measured
by the value of the object of the litigation.” Hunt v. Washington State Apple Advert. Comm’n,
432 U.S. 333, 347 (1977). In this case, the object of the litigation is the amount at issue in the
underlying lawsuits, which is well over $75,000.
While the Court has jurisdiction, Tchividjian and G.R.A.C.E. ask the Court to abstain
from exercising it. “District courts ordinarily have a strict duty to exercise the jurisdiction that is
conferred on them by Congress.” Myles Lumber Co. v. CNA Fin. Corp., 233 F.3d 821, 823 (4th
Cir. 2000). But this obligation “must . . . be qualified in a declaratory action.” Mitcheson v.
Harris, 955 F.2d 235, 237 (4th Cir. 1992). The Declaratory Judgment Act provides that “any
court of the United States . . . may declare the rights and other legal relations of any interested
party seeking such declaration . . . . .” 28 U.S.C. § 2201(a) (emphasis added). And so even when
a “District Court ha[s] jurisdiction of the suit under the Federal Declaratory Judgments Act, it
[i]s under no compulsion to exercise that jurisdiction.” Brillhart v. Excess Ins. Co. of Am., 316
U.S. 491, 494 (1942); Wilton v. Seven Falls Co., 515 U.S. 277, 287 (1995) (“We have repeatedly
characterized the Declaratory Judgment Act as ‘an enabling Act, which confers a discretion on
the courts rather than an absolute right upon the litigant.’”); VonRosenberg v. Lawrence, 781
F.3d 731, 735 (4th Cir. 2015) (“Brillhart /Wilton [abstention] . . . naturally flows from the broad
discretion afforded courts to entertain actions and award declaratory relief under the Declaratory
Judgment Act.” (emphasis in the original)). The discretionary decision to exercise jurisdiction in
this context is specially implicated when related suits are pending in state court. See Brillhart,
316 U.S. 491, 495 (1942) (“Ordinarily it would be uneconomical as well as vexatious for a
federal court to proceed in a declaratory judgment suit where another suit is pending in a state
court presenting the same issues, not governed by federal law, between the same parties.”).
But this discretion is not without bounds, so “the court must [decline to exercise its
jurisdiction] only for ‘good reason.’” Cont’l Cas. Co. v. Fuscardo, 35 F.3d 963, 965 (4th Cir.
1994). The Fourth Circuit has articulated four factors that bind a district court’s discretion:
(1) whether the state has a strong interest in having the issues decided in its
courts; (2) whether the state courts could resolve the issues more efficiently than
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the federal courts; (3) whether the presence of “overlapping issues of fact or law”
might create unnecessary “entanglement” between the state and federal courts;
and (4) whether the federal action is mere “procedural fencing,” in the sense that
the action is merely the product of forum-shopping.
United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 493–94 (4th Cir. 1998); see Great Am. Ins. Co.
v. Gross, 468 F.3d 199, 211 (4th Cir. 2006) (same). The Court now works through these factors.
I.
The first of these factors, whether the state has a strong interest in having the issues
decided in its courts, is inconclusive. Certainly “[t]here exists an interest in having the most
authoritative voice speak on the meaning of applicable law, and that voice belongs to the state
courts when state law controls the resolution of the case.” Mitcheson v. Harris, 955 F.2d 235,
237 (4th Cir. 1992). But “defer[ring] to the state court tort case in the circumstances before us
will not advance the State’s interests significantly because (1) the contractual coverage issue will
not be decided by the state tort case, and (2) [the insurer] is not a party to the state case.” PennAm. Ins. Co. v. Coffey, 368 F.3d 409, 414 (4th Cir. 2004).
Mitcheson and Coffey both arose under similar facts to the instant case; they involved
insurers bringing declaratory judgment actions in federal court to determine whether they were
required to defend and indemnify underlying state court actions. They also both came to
opposite conclusions on whether this factor favored the exercise of jurisdiction. The primary
difference between the cases is whether the issue of state law presented in the declaratory
judgment action was “difficult, complex, or unsettled.” Gross, 468 F.3d at 211. The Fourth
Circuit has repeatedly recognized that states have stronger interests in deciding cases when the
issue is novel or otherwise problematic. See, e.g., Centennial Life Ins. Co. v. Poston, 88 F.3d
255, 258 (4th Cir. 1996) (“For instance, although only state law is at issue, the relevant state law
is not problematic or difficult to apply, which weakens somewhat the state’s interest in having
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these issues decided in state court.”); Mitcheson, 955 F.2d at 240 (“The aforementioned interests
assume greater saliency where, as here, the issues of state law are close.”).
The issues presented by this suit concern the interpretation of the parties’ contract under
Virginia law. The underlying suits allege the plaintiffs in this suit defamed Boyer through the
publication of a blog post that alleged Boyer “crossed sexual boundaries.” Whether National is
required to defend the plaintiffs and indemnify them for any damages arising out of those
lawsuits turns on the terms of the parties’ contract. Specifically, the parties both point to
contractual language excluding coverage for claims “based upon,” “arising from,” or “in
consequence of” any actual or alleged sexual behavior.1
Many of these terms have been
definitively construed by the Supreme Court of Virginia, although not specifically in the sexual
abuse context. See, e.g., Doctors Co. v. Women’s Healthcare Assocs., Inc., 285 Va. 566, 574
(2013) (construing “arising” in an insurance contract).
Accordingly, while Virginia certainly has an interest in construing its own laws, in this
case that interest is “not particularly significant” because this Court “would be unlikely to break
new ground or be faced with novel issues of state interest.” United Capitol Ins. Co. v. Kapiloff,
155 F.3d 488, 494 (4th Cir. 1998). Instead, the Court will simply need to apply settled law to the
contract at issue in this case.
II.
The second factor, whether the state courts could resolve the issues more efficiently than
the federal courts, favors this Court’s exercise of jurisdiction. While “[t]here is no requirement
that a parallel proceeding be pending in state court before a federal court should decline to
1
National also relies on other defenses to coverage, including the “bodily injury” and
“statutory violation” exclusions. Tchividjian and G.R.A.C.E. do not argue there are any
“difficult, complex, or unsettled” questions of state law raised by these other exclusions, and so
the Court does not address them further at this point.
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exercise jurisdiction over a declaratory judgment action,” Aetna Cas. & Sur. Co. v. Ind-Com
Elec. Co., 139 F.3d 419, 423 (4th Cir. 1998), Brillhart abstention is centrally focused on cases
where “another suit is pending in a state court presenting the same issues [as in the declaratory
judgment action], not governed by federal law, between the same parties.” 316 U.S. at 495
(emphasis added). To that end, Brillhart directed courts to inquire “into the scope of the pending
state court proceeding” and ask “whether the claims of all parties in interest can satisfactorily be
adjudicated in that proceeding.” Id.
“This is not a case where many of the issues of law and fact sought to be adjudicated in
the federal action are already being litigated by the same parties in the related state court action.”
Great Am. Ins. Co. v. Gross, 468 F.3d 199, 212 (4th Cir. 2006). Instead, as in Gross, “the basic
issue sought to be resolved here involves insurance coverage, and [the insurance company] is not
even a party in any of the . . . state court actions, which involve distinct and more factually
complex issues.” Id. “Because [the insurer] is not a party in the state action and it is not clear
under Virginia rules that [the insurer] could intervene to have coverage issues decided within the
scope of the underlying tort case, dismissing the federal coverage case would not seem to
advance any cause of efficiency.” Coffey, 368 F.3d at 414; see also Lark v. Nationwide Ins. Co.
of Am., No. 7:13CV00395, 2013 WL 5918310, at *4 (W.D. Va. Oct. 31, 2013) (“Western
Heritage is not, and cannot be made, a party to the pending state tort suit. Under Virginia law,
‘an injured person must reduce his claim to judgment before bringing an action against the tortfeasor’s liability insurer.’” (quoting United Services Auto. Ass’n v. Nationwide Mut. Ins. Co., 218
Va. 861, 867 (Va. 1978))).2 Likewise, and as discussed more fully in the following section, the
2
National’s absence from the state suits further differentiates this case from Mitcheson,
where the Fourth Circuit noted that the insurer was providing the insured “with a defense under a
reservation of rights” after they were notified of the state claim. 955 F.2d at 236.
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state court actions will not reach the legal questions presented in this action. While those actions
will focus on the alleged defamation, they will not engage with the insurance coverage issue
presented in the declaratory judgment action. See Nautilus Ins. Co. v. Winchester Homes, Inc.,
15 F.3d 371, 376 n.4 (4th Cir. 1994) (“[T]he federal appellate courts have uniformly recognized
that the mere pendency of a related tort action against the insured in state court does not in and of
itself require a federal court to refuse an insurer’s request for declaratory relief on coverage
issues.”) (partial abrogation on other grounds recognized by Poston, 88 F.3d at 258).
Accordingly, the Court finds that the state court would be unable to resolve the issues
presented in this case more efficiently than the federal courts.
III.
For similar reasons, the Court finds the third factor, whether the presence of “overlapping
issues of fact or law” might create unnecessary “entanglement” between the state and federal
courts, also favors exercise of jurisdiction. The opportunity for entanglement here is minimal.
This is because the “[i]nsurance coverage issues are not directly raised in the pending state court
proceedings, which involve entirely separate and independent questions of liability.” Gross, 468
F.3d at 212. Under Virginia law, “it is a well-established principle, consistently applied in this
Commonwealth, that only the allegations in the complaint and the provisions of the insurance
policy are to be considered in deciding whether there is a duty on the part of the insurer to defend
and indemnify the insured.” AES Corp. v. Steadfast Ins. Co., 283 Va. 609, 616–17 (2012).3 And
so the Court “need only decide such coverage by comparing what [the state court plaintiff] has
alleged in the state court action with the language of the [insurer’s] insurance policy.” Coffey,
3
“This principle is commonly known as the ‘eight corners rule’ because the determination
is made by comparing the ‘four corners’ of the underlying complaint with the ‘four corners’ of
the policy, to determine whether the allegations in the underlying complaint come within the
coverage provided by the policy.” AES Corp., 283 Va. at 617.
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368 F.3d at 413. This legal question will not be addressed within either of the state court actions,
and this Court will not be drawn into the factual questions those cases will resolve.
Accordingly, the Court finds the exercise of jurisdiction in this case will not lead to
unnecessary entanglement. See Minnesota Lawyers Mut. Ins. Co. v. Antonelli, Terry, Stout &
Kraus, LLP, 355 F. App’x 698, 703–04 (4th Cir. 2009) (“While the conduct of Stout underlies
both the Florida suit and the declaratory judgment action, the Florida suit is an action involving
fraud, contract law, and possibly malpractice. In the declaratory judgment action, these issues
were not before the district court. The district court was only faced with a contractual coverage
issue.
Piecemeal litigation would therefore not result from the district court deciding the
coverage issue because the scope of coverage is not at issue in the state proceeding.”).4
IV.
There are no signs that the fourth factor, whether the federal action is mere “procedural
fencing,” is implicated here. See Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371, 377
(4th Cir. 1994). “This is not a case in which a party has raced to federal court in an effort to get
certain issues that are already pending before the state courts resolved first in a more favorable
forum, for the issues presented in this action are not the same as those raised in the pending . . .
state court actions.” Gross, 468 F.3d at 212. Additionally, the suit was originally filed (in state
court) by Tchividjian and G.R.A.C.E., belying any notion that National was “racing to the
4
Differences between Maryland law and Virginia law moot some of the entanglement
concerns raised by the Fourth Circuit in Mitcheson. Virginia law, as described above in note 3,
relies on the “eight corners rule” to compare the complaint and the insurance policy. However,
Maryland law, which was at issue in Mitcheson, also looks to extrinsic evidence, and thereby
wades into more factual disputes. See Aetna Cas. & Sur. Co. v. Cochran, 337 Md. 98, 112
(1995). The Eastern District of Virginia has recognized this distinction in its consideration of the
Kapiloff / Nautilus factors. See State Farm Fire & Cas. Co. v. Frank, No. 4:10CV99, 2011 WL
1883987, at *7 (E.D. Va. Apr. 20, 2011), report and recommendation adopted, 2011 WL
1883268 (E.D. Va. May 13, 2011).
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courthouse.” National removed the suit, as was its right. C.f. Coffey, 368 F.3d at 414 (“There is
a live and serious question of whether the assault and battery exclusion in the policy issued to
A.J.Z. applies, and the evidence in the record leads to the conclusion that Penn-America has
appropriately sought a declaratory judgment in federal court to clarify and settle the issue.”).
This factor does not favor abstention.
*
*
*
In sum, the Court finds there are no “good reasons,” Cont’l Cas. Co. v. Fuscardo, 35 F.3d
963, 965 (4th Cir. 1994), for the Court to decline to exercise jurisdiction here. While related, the
declaratory judgment action raises different issues and is between different parties than those
actions proceeding in the state courts. The plaintiffs’ motion to remand will be denied. An
appropriate order will issue. The Clerk of Court is directed to send this Opinion to the parties.
24th
Entered this _____ day of April, 2018.
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