Brit Uw Ltd. v. Hero

• Decision Date: 31 August 2018
• Docket Number: CIVIL ACTION NO. 18-3850 SECTION "B"(2)
• Parties: BRIT UW LIMITED v. GEORGE ALLEN HERO, ET AL.
• Court: U.S. District Court — Eastern District of Louisiana

BRIT UW LIMITED v. GEORGE ALLEN HERO, ET AL.

CIVIL ACTION NO. 18-3850 SECTION "B"(2)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA

August 31, 2018

ORDER AND REASONS

Before the Court is a motion, filed by Defendants George Allen Hero, Patrick Hero dba Numa C. Hero & Son, Ltd., and Numa C. Hero & Son, LLP, to dismiss or stay Plaintiff Brit UW Limited's complaint for declaratory relief. Rec. Doc. 8. Plaintiff filed an opposition thereto. Rec. Doc. 10. Defendants then sought, and were granted leave, to file a reply memorandum. Rec. Doc. 13. For the reasons discussed below,

IT IS ORDERED that Defendants' motion (Rec. Doc. 8) is GRANTED and Plaintiff's claim for declaratory relief is DISMISSED WITHOUT PREJUDICE.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

The facts concerning the controversy between these parties have been thoroughly discussed in a related Order and Reasons. See Numa C. Hero & Son, LLP v. Brit UW Ltd., No. 18-6470, Rec. Doc. 23 (E.D. La. Aug. 31, 2018). As concerns the instant motion, Plaintiff Brit UW Limited filed a complaint for declaratory judgment on April 11, 2018. See Rec. Doc. 1. Brit seeks a declaration that it "ha[s] no obligations under" a pair of insurance policies (referred to as 4S and 5S) "in connection with" a fire that destroyed a house in Belle Chasse, Louisiana. Id. ¶ 42. Brit argues that the property "is not a scheduled location entitled to coverage under" either insurance policy." Id. The Defendants are George Allen Hero, Patrick Hero dba Numa C. Hero & Son, Ltd., and Numa C. Hero & Son, LLP (Hero entities). Id. at 1.

On June 4, 2018, Numa C. Hero & Son, LLP (Hero LLP) filed a lawsuit in Louisiana state court against Brit and Erwin Insurance Agency.¹ Rec. Doc. 8-3. The state lawsuit asserts (1) a breach of contract claim against Brit for failing to pay a claim under the 4S policy for the fire that destroyed the house in Belle Chasse and, in the alternative, (2) a malpractice claim against Erwin for failing to procure proper fire insurance. Id. Also on June 4, 2018, the Hero entities filed the instant motion to stay or dismiss Brit's complaint for a declaratory judgment. See Rec. Doc. 8. Plaintiff opposes dismissal or a stay, arguing that the declaratory judgment it seeks would resolve issues distinct from those pending in the state lawsuit. Rec. Doc. 10.

LAW AND ANALYSIS

"When considering a declaratory judgment action, a district court must engage in a three-step inquiry." Orix Credit All. Inc.v. Wolfe, 212 F.3d 891, 895 (5th Cir. 2000). The "court must determine: (1) whether the declaratory action is justiciable; (2) whether the court has the authority to grant declaratory relief; and (3) whether to exercise its discretion to decide or dismiss the action." Sherwin-Williams Co. v. Holmes Cty., 343 F.3d 383, 387 (5th Cir. 2003).

Plaintiff's declaratory action is partially justiciable. Plaintiff seeks a declaration that there is no "coverage under [] either the 4S or 5S Policy." Rec. Doc. 1 ¶ 42. "A declaratory judgment action is ripe for adjudication only where an 'actual controversy' exists." Orix, 212 F.3d at 896. "[A]n actual controversy exists where a substantial controversy of sufficient immediacy and reality exists between parties having adverse legal interests." Id. (internal quotation marks and alteration omitted). The pending state lawsuit alleges that the Belle Chasse property was covered by the 4S policy, but it contains no substantive allegations about the 5S policy. See Rec. Doc. 8-3 ¶ 12; see also Rec. Doc. 1 ¶ 2 (Brit alleges that the Hero entities made "a claim . . . under the 4S Policy."); Rec. Doc. 10 at 4 (Brit explains that the Hero entities "appear to seek coverage solely under the 4S Policy's Commercial Property Coverage."). In their reply memorandum, the Hero entities further explain that their state lawsuit only encompasses the 4S Policy because the Belle Chasseproperty "is not scheduled or listed under Policy 5S." Rec. Doc. 13 at 9.

Brit's declaratory action is therefore justiciable with respect to the 4S policy, but not the 5S policy. The parties agree that the Hero entities have not made a claim under the 5S Policy and there are no other facts to suggest an immediate controversy between the parties regarding the 5S Policy. See Orix, 212 F.3d at 896-97 ("The threat of litigation" can form a ripe controversy when "specific and concrete," which requires the plaintiff in a declaratory action to show the anticipated litigation "is sufficiently likely to happen to justify judicial intervention."). Therefore, the claim for declaratory relief with respect to the 5S Policy is dismissed without prejudice for lack of subject matter jurisdiction. See id. at 898.

The Court must next determine whether it has authority to grant declaratory relief with respect to the 4S Policy. See Sherwin-Williams, 343 F.3d at 387. The Anti-Injunction Act prohibits a federal court from "grant[ing] an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments." 28 U.S.C. § 2283. "[W]hen a state lawsuit is pending, more often than not, issuing a declaratory judgment will be tantamount to issuing an injunction—providing the declaratory plaintiff an end run around therequirements of the Anti-Injunction Act." Travelers Ins. Co. v. La. Farm Bureau Fed'n, Inc., 996 F.2d 774, 776 (5th Cir. 1993). "Thus, as a general rule, [a] district 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." Id. Here, the state court lawsuit was filed after Plaintiff sought declaratory relief in this Court. Therefore, the Court has authority to grant declaratory relief with respect to the 4S Policy. See Colony Ins. Co. v. Ambling Mgmt. Co., 965 F. Supp. 2d 783, 789 (S.D. Miss. 2013) ("Since no cause of action was pending against [the plaintiff] in state court at the time its federal complaint for declaratory relief was filed, the court does not lack authority to consider [plaintiff's] declaratory judgment compliant."); Dresser, Inc. v. Lowery, 320 F. Supp. 2d 486, 493 (W.D. La. 2004) (same); see also Royal Ins. Co. of Am. v. Quinn-L Capital Corp., 3 F.3d 877, 886 (5th Cir. 1993) (explaining that "by filing a state suit after a federal action has been filed, the state plaintiff can be viewed as attempting to use the state courts to interfere with the jurisdiction of the federal courts").

Turning to the third step of the Orix analysis, "[a] district court may decline to decide '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.'" Sherwin-Williams, 343 F.3d at 392 (citing Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 495 (1942)). "The Fifth Circuit uses the Trejo factors to guide a district court's exercise of discretion to accept or decline jurisdiction over a declaratory judgment suit." Sherwin-Williams, 343 F.3d at 390 (referring to St. Paul Ins. Co. v. Trejo, 39 F.3d 585 (5th Cir. 1994)). The Trejo factors are:

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, . . .

6) whether retaining the lawsuit in federal court would serve the purposes of judicial economy, and, . . .

[7)] whether the federal court is being called on to construe a state judicial decree involving the same parties and entered by the court before whom the parallel state suit between the same parties is pending.

39 F.3d at 590-91. The Fifth Circuit has subsequently grouped these factors into three higher-level considerations.

These considerations are "the proper allocation of decision-making between state and federal courts," "fairness," and "efficiency." Sherwin-Williams, 343 F.3d at 390-91. With respect to the first consideration, "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" not to hear the declaratory judgment action. Id. The second consideration attempts to "distinguish between legitimate and improper reasons for forum selection." Id. at 391. The third consideration reflects the fact that "federal district court[s] should avoid duplicative or piecemeal litigation where possible." Id. The goal is to prevent "duplicative effort in state and federal courts" and minimize the risk of "inconsistent state and federal court judgments, especially in cases involving state law issues." Id.

Applying this framework to Brit's complaint for a declaratory judgment, it is clear that the Court should decline jurisdiction over Brit's claim regarding the 4S Policy. First, there is a sufficiently similar lawsuit pending in Louisiana state court and one questions of state law are at issue. See, e.g., Steadfast Ins. Co. v. Picke Constr. Corp., No. 10-3286, 2011 WL 1303144, at *3-5(E.D. La. Mar. 30, 2011); Landmark Am. Ins. Co. v. Cat & Dog, Inc., No. 09-7496, 2010 WL 3398890, at *2-4 (E.D. La. Aug. 24, 2010); see also Sherwin-Williams, 343 F.3d at 394 n.5. The state lawsuit alleges that Brit is contractually obligated, under the 4S Policy, to make payment on a claim for loss suffered from...