Opinion
CIVIL ACTION NO. 3:08cv637-MHT (WO).
March 31, 2009
OPINION AND ORDER
Plaintiff Travelers Indemnity Company filed this lawsuit under the Declaratory Judgment Act of 1984, 28 U.S.C. § 2201(a), seeking a declaratory judgment that it need not defend or indemnify the defendants (Plantation Oaks, a hunting resort in Macon County, Alabama, and its owners Hilda, Robert and Bo Pitman ("Plantation Oaks parties")) against the claims of certain third parties and that it does not owe any coverage for the claims of these third parties. Travelers Indemnity contends that the Plantation Oaks parties failed to notify Travelers Indemnity of these claims in a timely manner and that some claims are excluded from the terms of coverage.
Travelers Indemnity properly invoked this court's diversity-of-citizenship jurisdiction, as the parties are diverse and the amount in controversy exceeds $75,000. 28 U.S.C. § 1332. Before the court is a motion to dismiss filed by some of the defendants. The motion will be granted to the extent that the proceedings in this case will be stayed.
I. BACKGROUND A. Underlying litigation
In September 2004, Stephanie M. Fitzpatrick, Larry V. Glass, John Glass, Roy Kirk, and Willie Kirk ("Fitzpatrick parties") filed a lawsuit in state court against the Plantation Oaks parties. In October 2005, Willie Kirk Jr. ("Kirk") filed a separate lawsuit in state court against the same defendants. Both Kirk and the Fitzpatrick parties own property abutting Plantation Oaks, and, among many other things, allege that, beginning in 2003, the Plantation Oaks parties interfered with their access to their properties by improperly identifying certain roads as private roads, rerouting these roads, and engaging in other related acts. Kirk also alleges that the Plantation Oaks parties improperly removed timber from his property. Prior to the filing of these lawsuits, Travelers Indemnity's predecessor in business, Gulf Insurance Company, had issued several commercial liability-insurance policies to the Plantation Oaks parties.
Kirk's lawsuit settled and was dismissed. The Fitzpatrick parties were awarded summary judgment on their claim that certain roads were public roads; that judgment is currently on appeal. The related issue of damages has been stayed pending resolution of the appeal.
B. Parallel state proceedings
On August 1, 2008, the Plantation Oaks parties filed suit in state court against Travelers Indemnity and agent Rickey Elliott. This suit seeks damages for state-law breach of contract and bad faith against the insurance company and damages for negligence against Elliott for failing to forward information from the Plantation Oaks parties, regarding the Fitzpatrick and Kirk claims, to the insurance company. On August 25, the complaint was amended to add a count for a declaratory judgment that the Plantation Oaks parties timely notified Travelers Indemnity of the potential claims and that the insurance company has a duty to defend and indemnify the Plantation Oaks parties against the claims of Kirk and the Fitzpatrick parties.Kirk and the Fitzpatrick parties subsequently filed a motion to dismiss and an alternative motion to stay the proceeding until the underlying litigation is resolved.
C. Federal declaratory-judgment action
On August 7, Travelers Indemnity filed this federal-court lawsuit for a declaratory judgment that it does not owe coverage for the claims of Kirk and the Fitzpatrick parties, and that it has no duty to defend or indemnify the Plantation Oaks parties against such claims. The federal action does not assert any claims that are not in the state-court proceeding.II. ANALYSIS
A district court is "under no compulsion" to exercise its jurisdiction" under the Declaratory Judgment Act. Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 494 (1942); Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995). When a parallel state action is pending, a federal court's exercise of its discretion to hear a declaratory-judgment action should be guided by principles of federalism, comity, and efficiency. Ameritas Variable Life Ins. Co. v. Roach, 411 F.3d 1328, 1330-31 (11th Cir. 2005). "Gratuitous interference with the orderly and comprehensive disposition of a state court litigation should be avoided." Brillhart, 316 U.S. at 495. Generally, it is "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." Id.
The Eleventh Circuit Court of Appeals has enumerated a non-exhaustive list of "guideposts" to be considered by federal courts in determining whether to hear a declaratory-judgment action when parallel state-court proceedings are pending: (1) the state's interest in determining the matter; (2) whether the federal action would resolve the controversy; (3) whether the federal action would clarify the parties' legal relations; (4) whether the federal action is a form of "procedural fencing" being utilized "to provide an arena for a race for res judicata or to achieve a federal hearing in a case not otherwise removable"; (5) whether a judgment in the federal action would heighten tension between federal and state courts or otherwise encroach on state proceedings; (6) whether a superior alternative remedy exists; (7) whether underlying facts are important to informed resolution of the matter; (8) whether the state court is better situated to evaluate those facts; and (9) the nexus (if any) between the underlying issues and state law and policy, and whether federal common or statutory law requires resolution of the declaratory action. Id. at 1331 (adopting factors announced in Scottsdale Ins. Co. v. Roumph, 211 F.3d 964 (6th Cir. 2000), and Centennial Life Ins. Co. v. Poston, 88 F.3d 255 (4th Cir. 1996)).
As explained more fully below, after applying the Ameritas factors to this case, the court holds that it should decline to hear the case. For the sake of brevity and because the Ameritas factors overlap to some degree, the court groups related factors together in its analysis.
A. Relative effectiveness of a federal judgment
The second, third, and sixth Ameritas factors address the relative effectiveness of a judgment in the federal action. They address whether a federal judgment would resolve the controversy or lend clarity to the parties' legal relationship and whether a superior alternate remedy exists. In this case, although a federal judgment would lend clarity to the parties' legal relationship, a ruling would not necessarily settle the controversy. Travelers Indemnity's declaratory-judgment action does not capture the full set of issues pending in state court.
For example, if this court were to rule that Travelers Indemnity is obligated to cover and defend the Plantation Oaks parties, that would not resolve the Plantation Oaks parties' assertion in the parallel state suit that the insurance company acted in bad faith. See, e.g.,State Farm Fire Cas. Co. v. Slade, 747 So. 2d 293, 318 (Ala. 1999) (explaining that a claim of bad faith not only requires a contractual breach, but also requires a showing that the insurance company failed to properly investigate the claim). Likewise, because Elliott is not a party in this federal action, a ruling from this court would not answer whether Elliott is liable because he negligently failed to forward information from the Plantation Oaks parties to Travelers Indemnity. Because these issues are before the state court, but not this court, this court further concludes that the sixth factor, the presence of a more effective alternate remedy, also counsels against hearing the case. The better approach is for these issues to be determined together in one court, rather than allowing piecemeal, fractured litigation to emerge between the federal and state courts. Angora Enters., Inc. v. Condo. Ass'n of Lakeside Village, 796 F.2d 384. 389 (11th Cir. 1986) (highlighting the importance of "avoiding piecemeal litigation" in federal and state courts). On balance, then, the second, third, and sixth Ameritas factors counsel in favor of declining to exercise federal jurisdiction.
B. Whether the state court is in a better position to decide factual questions
The seventh and eighth Ameritas factors also counsel in favor of declining jurisdiction. Those factors urge district courts to consider "whether the underlying factual issues are important to an informed resolution of the case" and, if so, "whether the state trial court is in a better position to evaluate those factual issues than is the federal court." Ameritas, 411 F.3d at 1331. Travelers Indemnity alleges that it need not cover Plantation Oaks in part because Plantation Oaks did not immediately communicate to it that potential claims had arisen. Plantation Oaks contends that it did, in fact, attempt to inform Travelers Indemnity through Elliott. Resolving the factual questions of what was communicated to whom and when would be central to this court's resolution of this coverage issue. Because Elliott is already a party to the state-court proceeding, the state court is in a better position to resolve the factual dispute in a way that is binding on all. Further, it is certainly better for one court to make this factual determination, rather than for two courts to duplicate each other's efforts.
C. Whether the parties are engaging in procedural fencing
The fourth Ameritas factor, whether either party is engaging in procedural fencing, is a wash. The timing of the federal action is somewhat suspicious, as it was filed only after the Fitzpatrick parties had obtained a judgment against the Plantation Oaks parties, and less than a week after a parallel suit was filed in state court by the Plantation Oaks parties. However, counsel for Travelers Indemnity represent that they were not aware of the parallel state suit at the time they filed this action. Moreover, the Plantation Oaks parties' amendment adding a count for declaratory judgment against Travelers Indemnity in the parallel state proceeding is equally suspicious in timing; this count was added after the federal action was filed. Thus, the fourth factor is not a particularly useful guidepost in the instant case.
D. The relative interests of the state and federal courts in adjudicating the case
The remaining three factors (the first, fifth, and ninth) also counsel in favor of declining jurisdiction. These factors consider the relative interests of the state and federal courts in adjudicating the matter, as well as whether the federal court's exercise of jurisdiction could increase friction between state and federal courts.
It is plain that the state courts have a far stronger interest in adjudicating this matter and that exercising jurisdiction here, when identical state-court proceedings are already pending, could cause friction. This court would be interpreting insurance policies issued in Alabama to an Alabama business, an endeavor that primarily implicates Alabama, not federal, law. The State of Alabama has a significant interest in these coverage issues. See Lexington Ins. Co. v. Rolison, 434 F. Supp. 2d 1228, 1239 (S.D. Ala. 2006) (Steele, J.) (dismissing a federal action because Alabama had a substantial interest in a question of state law concerning whether an insurance contract issued to an Alabama business would cover a particular state-court judgment). The legal issues raised here are exclusively within the purview of Alabama state law and policy, and federal law does not "dictate[] a resolution of the declaratory judgment action," Ameritas, 411 F.3d at 1331, a fact that further weighs in favor of abstaining.See Sherwin-Williams Co. v. Holmes County, 343 F.3d 383, 390-91 (5th Cir. 2003) (finding that "if the federal declaratory judgment action raises only issues of state law and a state case involving the same state-law issues is pending, generally the state court should decide the case and the federal court should exercise its discretion to dismiss the federal suit"). A federal court without a strong interest in the matter, deciding exclusively state-law questions, could "increase the friction between . . . federal and state courts." Ameritas, 411 F.3d at 1331.
Further, proceeding with the federal action would result in a federal court and a state court simultaneously wrestling with overlapping questions of state law, with the likely possibility that one court would rule upon the merits before the other, potentially rendering the second court's efforts futile. "Exercise of federal jurisdiction in such a situation risks unnecessary commitment of scarce judicial resources, multiplicative expenditures of legal services, inconsistent rulings at numerous litigation junctures, and the appearance of disregard for the state trial court's authority and expertise in violation of basic norms of federal and state comity." United States Fidelity Guar. Co. v. Algernon-Blair, Inc., 705 F. Supp. 1507, 1514 (M.D. Ala. 1988) (Thompson, J.).
In sum, the Ameritas guideposts strongly favor declining jurisdiction over this declaratory-judgment action. Nevertheless, because a dismissal motion is pending in the parallel state-court action and, thus, because it is unclear whether the state-court action will remain pending, this court will await the state-court's action on the dismissal motion and, for now, stay this federal lawsuit rather than dismiss it. See Wilton, 515 U.S. at 286 (district courts "have substantial latitude in deciding whether to stay or to dismiss a declaratory judgment suit in light of pending state proceedings").
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Accordingly, it is ORDERED as follows:(1) The defendants' motion to dismiss (doc. no. 14) is granted to the extent that the proceedings in this case are stayed.
(2) The proceedings in this case are stayed.
(3) On or before June 30 and December 31 of this year and each year thereafter, the parties are to file a joint report regarding the status of the parallel state-court proceedings.
(4) The clerk of this court is to close this case administratively.
A copy of this checklist is available at the website for the USCA, 11th Circuit at www.ca11.uscourts.gov Effective on April 9, 2006, the new fee to file an appeal will increase from $255.00 to $455.00. CIVIL APPEALS JURISDICTION CHECKLIST1. Appealable Orders : Appeals from final orders pursuant to 28 U.S.C. § 1291: 28 U.S.C. § 158Pitney Bowes, Inc. v. Mestre 701 F.2d 1365 1368 28 U.S.C. § 636 In cases involving multiple parties or multiple claims, 54Williams v. Bishop 732 F.2d 885 885-86 Budinich v. Becton Dickinson Co. 486 U.S. 196 201 108 S.Ct. 1717 1721-22 100 L.Ed.2d 178LaChance v. Duffy's Draft House, Inc. 146 F.3d 832 837 Appeals pursuant to 28 U.S.C. § 1292(a): Appeals pursuant to 28 U.S.C. § 1292(b) and Fed.R.App.P. 5: 28 U.S.C. § 1292 Appeals pursuant to judicially created exceptions to the finality rule: Cohen v. Beneficial Indus. Loan Corp. 337 U.S. 541 546 93 L.Ed. 1528Atlantic Fed. Sav. Loan Ass'n v. Blythe Eastman Paine Webber, Inc. 890 F.2d 371 376 Gillespie v. United States Steel Corp. 379 U.S. 148 157 85 S.Ct. 308 312 13 L.Ed.2d 199 2. Time for Filing Rinaldo v. Corbett 256 F.3d 1276 1278 4 Fed.R.App.P. 4(a)(1): 3 THE NOTICE MUST BE RECEIVED AND FILED IN THE DISTRICT COURT NO LATER THAN THE LAST DAY OF THE APPEAL PERIOD — no additional days are provided for mailing. Fed.R.App.P. 4(a)(3): Fed.R.App.P. 4(a)(4): Fed.R.App.P. 4(a)(5) and 4(a)(6): Fed.R.App.P. 4(c): 28 U.S.C. § 1746 3. Format of the notice of appeal : See also 3pro se 4. Effect of a notice of appeal : 4
Courts of Appeals have jurisdiction conferred and strictly limited by statute: (a) Only final orders and judgments of district courts, or final orders of bankruptcy courts which have been appealed to and fully resolved by a district court under , generally are appealable. A final decision is one that "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." , , (11th Cir. 1983). A magistrate judge's report and recommendation is not final and appealable until judgment thereon is entered by a district court judge. (c). (b) a judgment as to fewer than all parties or all claims is not a final, appealable decision unless the district court has certified the judgment for immediate review under Fed.R.Civ.P. (b). , , (11th Cir. 1984). A judg ment which resolves all issues except matters, such as attorneys' fees and costs, that are collateral to the merits, is immediately appealable. , , , , , (1988); , , (11th Cir. 1998). (c) Appeals are permitted from orders "granting, continuing, modifying, refusing or dissolving injunctions or refusing to dissolve or modify injunctions . . ." and from "[i]nterlocutory decrees . . . determining the rights and liabilities of parties to admiralty cases in which appeals from final decrees are allowed." Interlocutory appeals from orders denying temporary restraining orders are not permitted. (d) The certification specified in (b) must be obtained before a petition for permission to appeal is filed in the Court of Appeals. The district court's denial of a motion for certification is not itself appealable. (e) Limited exceptions are discussed in cases including, but not limited to: , , , 69S.Ct. 1221, 1225-26, (1949); , , (11th Cir. 1989); , , , , , (1964). Rev.: 4/04 : The timely filing of a notice of appeal is mandatory and jurisdictional. , , (11th Cir. 2001). In civil cases, Fed.R.App.P. (a) and (c) set the following time limits: (a) A notice of appeal in compliance with the requirements set forth in Fed.R.App.P. must be filed in the district court within 30 days after the entry of the order or judgment appealed from. However, if the United States or an officer or agency thereof is a party, the notice of appeal must be filed in the district court within 60 days after such entry. Special filing provisions for inmates are discussed below. (b) "If one party timely files a notice of appeal, any other party may file a notice of appeal within 14 days after the date when the first notice was filed, or within the time otherwise prescribed by this Rule 4(a), whichever period ends later." (c) If any party makes a timely motion in the district court under the Federal Rules of Civil Procedure of a type specified in this rule, the time for appeal for all parties runs from the date of entry of the order disposing of the last such timely filed motion. (d) Under certain limited circumstances, the district court may extend the time to file a notice of appeal. Under Rule 4(a)(5), the time may be extended if a motion for an extension is filed within 30 days after expiration of the time otherwise provided to file a notice of appeal, upon a showing of excusable neglect or good cause. Under Rule 4(a)(6), the time may be extended if the district court finds upon motion that a party did not timely receive notice of the entry of the judgment or order, and that no party would be prejudiced by an extension. (e) If an inmate confined to an institution files a notice of appeal in either a civil case or a criminal case, the notice of appeal is timely if it is deposited in the institution's internal mail system on or before the last day for filing. Timely filing may be shown by a declaration in compliance with or a notarized statement, either of which must set forth the date of deposit and state that first-class postage has been prepaid. Form 1, Appendix of Forms to the Federal Rules of Appellate Procedure, is a suitable format. Fed.R.App.P. (c). A notice of appeal must be signed by the appellant. A district court loses jurisdiction (authority) to act after the filing of a timely notice of appeal, except for actions in aid of appellate jurisdiction or to rule on a timely motion of the type specified in Fed.R.App.P. (a)(4).