Andrews et al v. JP Morgan Chase Bank NA

Filing 42

ORDER signed by Judge Rudolph T Randa on 05/12/2010 denying 13 Motion to Dismiss; denying 32 Motion to Dismiss; granting 36 Motion to Amend/Correct. (cc: all counsel) (Koll, J)

UNITED STATES DISTRICT COURT E A S T E R N DISTRICT OF WISCONSIN

F R A N K J. ANDREWS, Jr. and D A V ID J. STROUD, P l a i n t if f s , C a s e No. 09-C-718 -vsJ P MORGAN CHASE BANK, N.A., Defendant.

D E C IS IO N AND ORDER

T h is action for a declaratory judgment relates to a previously-filed, ongoing case that a ro s e when the Wisconsin State Fair Park Board ("State Fair Park" or the "Board") d e m a n d e d payment under a letter of credit secured by Milwaukee Mile Holdings, LLC. M ilw a u k e e Mile Holdings, LLC v. State Fair Park, No. 09-CV-3386 (Wisconsin Circuit C o u rt, Dane County). The above-captioned defendant, J.P. Morgan Chase Bank ("Chase"), is s u e d the letter of credit. The above-captioned plaintiffs, Frank J. Andrews, Jr. ("Andrews") an d David J. Stroud ("Stroud") (collectively the "guarantors"), are Milwaukee Mile investors w h o guaranteed reimbursement to Chase if the Board demanded payment under the letter of c re d it. C h a se moves to dismiss this action in deference to the ongoing state court proceedings p u rs u a n t to Wilton v. Seven Falls Co., 515 U.S. 277 (1995) and Brillhart v. Excess Ins. Co.

o f America, 316 U.S. 491 (1942) ("Wilton/Brillhart"). For the reasons that follow, this m o tio n is denied. D istrict courts have "broad discretion" to abstain under Wilton/Brillhart. Nissan N o r th Am., Inc. v. Andrew Chevrolet, Inc., 589 F. Supp. 2d 1036, 1039 (E.D. Wis. 2008). " T h is is due, in part, to the permissive nature of the federal Declaratory Judgment Act, 28 U .S .C . § 2201(a), which provides that a federal district court `may declare the rights and o t h e r legal relations of any interested party' in a case falling within its jurisdiction." Id. (e m p h a s is in original). "In the declaratory judgment context, the normal principle that f e d era l courts should adjudicate claims within their jurisdiction yields to considerations of p ra c tic a lity and wise judicial administration." Wilton, 515 U.S. at 288. Ordinarily, it is c o n sid e re d "uneconomical" as well as "vexatious" for a federal court to proceed in a d e c la ra to ry judgment suit where a parallel state court proceeding is pending. Nissan North A m . at 1041-42 (E.D. Wis. 2008) (citing Royal Indemnity Co. v. Apex Oil Co., 511 F.3d 788, 7 9 3 (8th Cir. 2008)). Courts examine the following factors 1 to determine whether abstention is appropriate u n d er Wilton/Brillhart: (1) whether the declaratory suit presents a question distinct from the issue s presented in the state court proceeding; (2) whether the parties to the two actions are id e n tic a l; (3) whether going forward with the declaratory action will serve a useful purpose in clarifying the legal obligations and relationships among the parties or will merely amount

Chase argues for abstention under Wilton/Brillhart, but erroneously discusses the factors relevant to abstention u n d e r Colo. River Conservation Dist. v. United States, 524 U.S. 800 (1976). Colorado River does not apply because this i s an action for declaratory judgment. United Artists Theatre Circuit, Inc. v. F.C.C., 147 F. Supp. 2d 965, 977 (D. Ariz. 2000).

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to duplicative litigation; and (4) whether comparable relief is available to the plaintiff s e e k in g a declaratory judgment in another forum or at another time. Nationwide Ins. v. Z a v a lis, 52 F.3d 689, 692 (7th Cir. 1995). If the federal court action is being used merely f o r the purpose of "procedural fencing" or "to provide an arena for a race for res judicata," d ec larato ry judgment serves no useful purpose. NUCOR Corp. v. Aceros Y Maquilas de O c cid e n te , S.A. de C.V., 28 F.3d 572, 579 (7th Cir. 1994). C h a se argues that both actions seek the same ruling: that Chase should not have made p a ym e n t under the letter of credit. This is incorrect. In state court, Milwaukee Mile alleges claim s against State Fair Park for fraud, intentional misrepresentation, and breach of contract. C o m p la in t, D. 16-2. Accordingly, the ultimate issue in state court is whether State Fair Park is liable to Milwaukee Mile because State Fair Park wrongfully demanded payment pursuant to the letter of credit. By contrast, in the instant case, Andrews and Stroud, who guaranteed th e letter of credit and assumed their own contractual obligations as guarantors, request a d e c la ra tio n that they are not individually liable to Chase for the payments that Chase made to the Board pursuant to the letter of credit. Stated another way, Andrews and Stroud allege th a t they "are not liable to Chase for the payment it [i.e., Chase] made to the [State Fair Park] B o a rd under the Amendment to the Letter of Credit regardless of whether Chase was o b lig a te d to the Board to make that payment." First Amended Complaint, ¶ 20 (emphasis ad d ed ). If the Court proceeds to judgment and declares that Andrews and Stroud are (or are n o t) liable to Chase, such a ruling would not interfere with the state court litigation because th e guarantors' liability to Chase is not relevant to the state court litigation.

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M o re o v e r, the parties to this litigation aren't even involved in the state court litigation. C h a se was only a party in state court to the extent that Milwaukee Mile sought to enjoin C h a s e from making payment under the letter of credit. The circuit court dismissed Chase f ro m the lawsuit after it denied Milwaukee Mile's request for injunctive relief. Milwaukee M ile Holdings v. Wis. State Fair Park, No. 09 CV 3386 (Wis. Circuit Court, Dane County) (July 21, 2009 Order Granting Reconsideration and Denying Temporary Restraining Order) (D . 16-4). Milwaukee Mile's appeal was dismissed,2 and in the absence of an injunction or co u rt order, Chase paid the Board pursuant to the letter of credit. Meanwhile, the Court stayed briefing on Chase's motion to dismiss here in federal court while the circuit court c o n s i d e r e d State Fair Park's motion to dismiss on sovereign immunity grounds. After the c irc u it court denied the motion to dismiss, Chase sought to rejoin the state court litigation by f ilin g a third party complaint against Andrews and Stroud. The circuit court recently denied C h a se 's motion to intervene on judicial estoppel grounds. May 4, 2010 Decision and Order D e n yin g Motion to Intervene, D. 41. If the circuit court had allowed Chase to intervene and b rin g claims against Andrews and Stroud, the Court would have stayed this matter in d e f ere n c e to the state court litigation. As it stands, the federal lawsuit involves distinct issues a n d completely different parties. It is not duplicative of the state court litigation.

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Milwaukee Mile Holdings v. Wis. State Fair Park, 2009 AP 1913 (Ct. App. Aug. 19, 2009) (D. 16-6).

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N O W , THEREFORE, BASED ON THE FOREGOING, IT IS HEREBY O R D E R E D THAT: 1. 2. C h a s e ' s motion to dismiss [D. 13, 32] is DENIED; and P la in t if f s ' motion to amend their complaint [D. 36] is GRANTED. Plaintiffs'

first amended complaint [D. 30] is deemed filed as of the date of this order. D a te d at Milwaukee, Wisconsin, this 12th day of May, 2010. S O ORDERED,

s / Rudolph T. Randa HON. RUDOLPH T. RANDA U.S. District Judge

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