Summary
In Essex Ins. Co. v. Grefer, 2002 WL 1585604 (E.D.La. July 15, 2002), an insurer filed a declaratory judgment action against its insureds, seeking a determination of its obligation under the insurance policy to defend and indemnify its insureds in a pending state court action.
Summary of this case from American Sec. Ins. Co. v. PenwrightOpinion
CIVIL ACTION NO: 02-0798
July 15, 2002
ORDER AND REASONS
Before the Court is defendants' motion to dismiss, or alternatively, to stay plaintiff's declaratory judgment action on the basis of abstention. For the following reasons, the Court orders this action stayed.
I. Background
This is a declaratory judgment action in which Essex Insurance Company seeks a determination of its obligation to defend and indemnify defendants, Joseph Grefer, Camile Grefer, Rose Marie Grefer Haase, and Henry Grefer in lawsuits in Louisiana state court under certain general liability insurance policies that Essex issued to the Grefers. The lawsuits arose out of the contamination of land the Grefers own in Harvey, Louisiana. Between the 1950's and the early 1990's, the Grefers leased the land to companies that, among other things, cleaned oilfield pipes for oil and gas exploration and production companies. The pipe cleaning operations left radioactive contaminants on the land.
In 1997, the Grefers sued the oilfield pipe cleaning companies in Louisiana state court in Orleans Parish to recover property damages as a result of the radioactive contamination. On May 22, 2001, the Grefers obtained a favorable ruling in the case and were awarded $56 million to restore the property, $145,000.00 in additional compensatory damages, and $1 billion in punitive damages. Class action plaintiffs then sued the Grefers in two state court actions in Orleans Parish alleging damages resulting from exposure to the Grefers' contaminated land. The Grefers notified Essex and a number of their other insurers of the lawsuits and sought a defense and indemnification from them. Essex denied that it had any such obligations, and two other insurers agreed to provide a defense with a reservation of rights.
In September 2001, the Grefers sued the insurer of one of the oilfield pipe cleaning companies in state court in Jefferson Parish seeking coverage for the judgment they obtained in Orleans Parish. The Grefers live in Jefferson Parish, and Joseph Grefer is a retired judge who served on the state bench in Jefferson Parish. Essex thereafter filed this declaratory judgment action to obtain a determination of its obligations under the general liability policies it issued to the Grefers for the period from 1995 to 1999. On May 8, 2002, the Grefers amended their Jefferson Parish lawsuit to include coverage claims against Essex and the other insurance companies they had asked to defend and indemnify them against the Orleans Parish class action lawsuits. The Grefers now seek to have this Court abstain in Essex's declaratory judgment action in favor of the proceedings in state court.
II. Discussion
A district court possesses "broad discretion to grant (or decline to grant) declaratory judgment." Wilton v. Seven Falls Co., 515 U.S. 277, 281, 115 S.Ct. 2137, 2140 (1995); Travelers Ins. Co. v. Louisiana Farm Bureau Fed'n, Inc., 996 F.2d 774, 778 (5th Cir. 1993). The Declaratory Judgment Act provides that "any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such a declaration." 28 U.S.C. § 2201(a). Although the district court's discretion is broad, it is not without limits. For example, the court may not dismiss a request for declaratory judgment relief on the basis of "whim or personal disinclination." Travelers, 996 F.2d at 778 (citing Rowan Cos., Inc. v. Griffin, 876 F.2d 26, 28-29 (5th Cir. 1989)). To exercise its discretion, the Fifth Circuit requires the district court to balance on the record the purposes of the Declaratory Judgment Act and the factors relevant to the abstention doctrine. See id.
The Court finds as a preliminary matter that declaratory relief could be available in this case. Essex filed its complaint for declaratory relief before the Grefers sued Essex, and thus this is not a case in which the declaratory defendant first raised the issue in state court against the declaratory plaintiff. The Court is not, therefore required to abstain pursuant to the factors outlined in Travelers, 996 F.2d at 776 (court may not consider the merits of a declaratory judgment action when (1) 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).
In discussing the district court's discretion to abstain from entertaining a declaratory judgment action, the Supreme Court in Wilton described the court's task as follows:
[I]n deciding whether to enter a stay, a district court should examine the scope of the pending state court proceeding and the nature of defenses open there. This inquiry, in turn, entails consideration of whether the claims of all parties in interest can satisfactorily be adjudicated in that proceeding, whether necessary parties have been joined, whether such parties are amendable to process in that proceeding.
515 U.S. at 283, 115 S.Ct. at 22.41 (internal citations omitted)
When another suit "involving the same parties and presenting opportunity for ventilation of the same state law issues is pending in state court," a court's consideration of the declaratory judgment action may constitute "gratuitous interference." Id.
Before the Supreme Court decided Wilton, the Fifth Circuit in Travelers adopted an abstention analysis similar to that used in Wilton. The Fifth Circuit found the following factors to be relevant to the Court's determination of the abstention issue:
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 a 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 exist,
5. whether the federal court is a convenient forum for the parties and witnesses, and
6. whether retaining the lawsuit in federal court would serve the purpose of judicial economy. 996 F.2d at 778.
Many district courts continue to consider the Travelers factors when they decide abstention issues. See, e.g., WTA Marine, L.L.C. v. Antin-Quealy, Inc., 1999 WL 486882 (E.D. La. 1999); St. Paul Reinsurance Co. v. Iberic International, Inc., 1999 WL 639681 (E.D. La. 1999); Scottsdale Insurance Co. v. Bayou Land and Marine, 1999 WL 777714 (E.D. La. 1999); Westport Ins. Corp. v. Warner, 2001 WL 1012238 (E.D. La. 2001). Further, the Fifth Circuit does not appear to have abandoned the Travelers factors. See, e.g., Agora Syndicate, Inc. v. Robinson Janitorial Specialists, Inc., 149 F.3d 371, 373 (5th Cir. 1998); Orix Credit Alliance v. Wolfe, 212 F.3d 891, 895 (5th Cir. 2000). Accordingly, the Court will consider both the Wilton and Travelers factors, using the Travelers rubric.
First, all of the issues in the declaratory judgment action can be resolved in the pending state court proceeding that the Grefers filed against their insurers and the insurers of the pipe cleaning company. That action involves the very same coverage dispute that is at issue here. Moreover, the state court can deal comprehensively with the coverage issues because the Jefferson Parish action involves all of the Grefers' property insurers and 14 years of coverage. This declaratory judgment action, on the other hand, involves only one insurer and four years of coverage. To allow parallel proceedings in two courts under these circumstances invites inconsistent policy interpretations and piecemeal litigation. Further, all of the issues involved in Essex's declaratory judgment action are state law issues, which are particularly suited for resolution by the state court.
Further, since Essex had already denied the Grefers' request for a defense and indemnification when it filed suit, it appears that Essex filed this action in anticipation of being sued by the Grefers. Essex essentially concedes that it expected to be sued by the Grefers in state court, albeit through a third-party demand in the class action suits in Orleans Parish. See Pl.'s Brief in Opp. to Mot. to Dismiss at 4-5. As to who is guilty of forum shopping, the Court has little doubt that both sides were engaging in strategic behavior when they chose where to sue. On this score, they deserve each other.
Ultimately, this Court grants a stay because the state court can comprehensively resolve all of the state law coverage issues in a forum that is just as convenient as this one. Litigation in one forum will prevent an unnecessary duplication of judicial effort and prevent inconsistent policy interpretations.
The Supreme Court has noted that "where the basis for declining to proceed is the pendency of a state proceeding, a stay will often be the preferable course, because it assures that the federal action can proceed without risk of a time bar if the state case, for any reason, fails to resolve the matter in controversy." Wilton, 515 U.S. at 288 n. 2, 115 S.Ct. 2143 n. 2; see also Melancon v. Union Carbide Corp., 1998 WL 122610, *7 (E.D. La. 1998); Scottsdale, 1999 WL 777714 at *7. Accordingly, the Court finds that a stay, rather than dismissal, is the appropriate method for exercising its discretion to abstain in this case.
III. Conclusion
For the reasons set forth above, this case is STAYED pending resolution of Grefer v. Travelers Insurance Company in the 24th Judicial District Court for the Parish of Jefferson, State of Louisiana, No. 572-152, Division "G."