Chad Deabay & Deabay Outdoors, Inc. v. Phila. Indem. Ins. Co., Docket No. 1:15-cv-35-NT

• Decision Date: 01 July 2015
• Docket Number: Docket No. 1:15-cv-35-NT
• Court: U.S. District Court — District of Maine
• Parties: CHAD DEABAY and DEABAY OUTDOORS, INC. d/b/a OXBOW LODGE, Plaintiffs, v. PHILADELPHIA INDEMNITY INSURANCE COMPANY, Defendant.

CHAD DEABAY and DEABAY OUTDOORS, INC. d/b/a OXBOW LODGE, Plaintiffs, v. PHILADELPHIA INDEMNITY INSURANCE COMPANY, Defendant.

Docket No. 1:15-cv-35-NT

UNITED STATES DISTRICT COURT DISTRICT OF MAINE

July 1, 2015

ORDER ON DEFENDANT'S MOTIONS TO DISMISS PLAINTIFFS' COMPLAINT AND TO AMEND REPLY

This case arises out of a dispute between an insured party and an insurance company following the total fire loss of a hunting lodge. The Plaintiffs Chad Deabay and Deabay Outdoors, Inc. d/b/a Oxbow Lodge brought suit in this court alleging various claims based on Defendant Philadelphia Indemnity Insurance Company's failure to make payments expeditiously pursuant to its insurance contract with the Plaintiffs. The Defendant in turn has moved to dismiss this suit based on the fact that there is a separate action, involving the same set of facts, pending in Aroostook County Superior Court.¹

The Defendant has also moved to supplement its reply memorandum to include an April 28, 2015 order from the Superior Court. I GRANT the Defendant's motion to supplement and therefore consider the order (though consideration of this order does not change my ruling on the motion to dismiss).

As explained below, there are no factors present in this case that overcome the strong presumption in favor of the exercise of federal jurisdiction.² For this reason, I DENY the Defendant's motion to dismiss.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Chad Deabay is the sole shareholder of Deabay Outdoors, Inc., a Maine corporation that owns and operates a guided hunting business and sporting camp in Oxbow, Aroostook County, which includes the Oxbow Lodge. Pls.' Compl. ("Fed. Compl.") ¶¶ 2, 3, 9 (ECF No. 1); Def.'s Mot. to Dismiss ("Def.'s Mot.") 3 (ECF. No. 8). On or about December 14, 2013, a fire destroyed the Oxbow Lodge's main building, including the guest quarters. Pls.' Compl. ("Fed. Compl.") ¶¶ 2, 3, 9 (ECF No. 1); Def.'s Mot. to Dismiss ("Def.'s Mot.") 3 (ECF. No. 8). At the time of the fire, Deabay Outdoors was insured under a policy through Philadelphia Indemnity Insurance Company ("Philadelphia Insurance"), however, the parties disputed what expenses were covered under the policy provision for recouping "Extra Expenses"following a loss. Fed. Compl. ¶ 14; Pls.' Compl. for Declaratory J. ("State Compl.") 4-5 (ECF No. 8-1); Def.'s Mot. 3.

On August 14, 2014, Deabay Outdoors filed a declaratory judgment action in Aroostook County Superior Court seeking a determination of what is covered under the "Extra Expenses" provision. State Compl. 4-5. Philadelphia Insurance filed a counterclaim seeking a determination of whether Deabay Outdoors had complied with its obligations under the insurance agreement on the grounds that Deabay Outdoors has failed to assist in the insurance company's investigation of the fire. See Def.'s Answer and Countercl. (ECF No. 8-4). In late 2014, Deabay Outdoors asked the state court to narrow the scope of discovery, a request which was subsequently denied. Def.'s Mot. at 5-6; Pls.' Resp. in Opp'n ("Pls. Resp.") (ECF No. 10) at 3-4. On January 23, 2015, Chad Deabay and Deabay Outdoors filed suit in this court, asserting that Philadelphia Insurance had failed to make payments on Deabay Outdoors' insurance claims arising from the fire and thereby: (1) breached the insurance contract with the Plaintiffs (Count I); (2) violated the Unfair Claim Settlement Practices Act, 24-A M.R.S.A. §§ 2436, 2436-A (Count II); and (3) breached the covenant of good faith and fair dealing (Count III). Philadelphia Insurance has moved to dismiss all three claims.³

STANDARD OF REVIEW

I consider the Defendant's motion in light of this court's "inherent power to stay proceedings for prudential reasons." Microfinancial, Inc. v. Premier Holidays Int'l, Inc., 385 F.3d 72, 77 (1st Cir. 2004); see Curtis v. Citibank, N.A., 226 F.3d 133, 138 (2d Cir. 2000) (explaining that, in context of potential claim splitting, "[a]s part of its general power to administer its docket, a district court may stay or dismiss a suit that is duplicative of another federal court suit."). In doing so, I am not limited by the pleading or burden requirements of Rules 12(b)(1) or 12(b)(6). See Kilroy v. Mayhew, 841 F. Supp. 2d 414, 416-17 (D. Me. 2012); see also Christian Action Network v. Maine, 679 F. Supp. 2d 140, 143 n. 2 (D. Me. 2010). I also consider the whole record (including the parties' pleadings and the attached documents the authenticity of which are not in dispute) to determine whether it is appropriate to stay this case during the pendency of the state court proceedings. Kilroy, 841 F. Supp. 2d 416-17.⁴

DISCUSSION

The Defendant makes two arguments: (1) that dismissal is warranted because, by filing this case while a state action is pending on the same matter, the Plaintiffs are engaging in impermissible "claim splitting"; and (2) that this court should abstain from exercising jurisdiction as a prudential matter in light of the pending state courtaction. For the following reasons, neither argument carries the day.

I. Claim Splitting

The Defendant's allegations of impermissible "claim splitting" are inapposite to the facts at hand. "Claim splitting" is impermissible in situations "in which the plaintiff seeks 'to maintain two actions on the same subject in the same court, against the same defendant at the same time.'" Clayton v. District of Columbia, 36 F. Supp. 3d 91, 94 (D.D.C. 2014) (quoting Katz v. Gerardi, 655 F.3d 1212, 1217 (10th Cir. 2011)) (emphasis added). Dismissal may be appropriate when the plaintiff is trying to maintain two actions in federal court, because "[a]s between federal district courts . . . the general principle is to avoid duplicative litigation." Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976). By contrast, it is well established that "as between state and federal courts, the rule is that the pendency of an action in the state court is no bar to proceedings concerning the same matter in the Federal court having jurisdiction." Id. (internal quotation marks and citations omitted) (emphasis added). The "difference in general approach between state-federal concurrent jurisdiction and wholly federal concurrent jurisdiction stems from the virtually unflagging obligation of the federal courts to exercise the jurisdiction given them." Id.

The Defendant's reliance on the Tenth Circuit case Katz v. Gerardi is mistaken. See Kanciper v. Suffolk Cnty. Soc. for the Prevention of Cruelty to Animals, Inc., 722 F.3d 88, 92 (2d Cir. 2013) ("The District Court's reliance on Katz (and, indeed, on claim splitting generally) was erroneous, however, because the previously filed case in this litigation was not filed in the same [federal] district court but in a differentstate court.") (internal quotation marks and citations omitted); Klane ex rel. Klane v. Mayhew, Civil No. 1:12-cv-203-NT, 2013 WL 1245677, at *5 (D. Me. Mar. 26, 2013) (stating, in reviewing defendant's argument that plaintiff was impermissibly splitting his claims in situation involving state-federal concurrent proceedings, that "[t]he cases cited by the Defendant are not persuasive because they involve claims that were split within the same court."). Because the present case involves state-federal concurrent proceedings, the Defendant's "claim splitting" argument is unavailing.

II. Abstention

The Defendant also argues that this court should abstain from exercising jurisdiction under the doctrine of Colorado River abstention. Federal courts "have a virtually unflagging obligation to exercise the jurisdiction given them." Chico Serv. Station, Inc. v. Sol P.R. Ltd., 633 F.3d 20, 29 (1st Cir. 2011) (internal quotation marks and citations omitted). In Colorado River, the Supreme Court held that federal courts may abstain from exercising jurisdiction because of a concurrent, "parallel" state proceeding.⁵

Abstention is appropriate, however, only in rare circumstances. "The crux of the Colorado River doctrine is the presence of 'exceptional' circumstances displaying 'the clearest of justifications' for federal deference to the local forum in the interest of'wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.' " Nazario-Lugo v. Caribevision Holdings, Inc., 670 F.3d 109, 115 (1st Cir. 2012) (quoting Colorado River, 424 U.S. at 817-19). Mere "[d]uplication and inefficiency are not enough to support a federal court's decision to bow out of a case over which it has jurisdiction." Villa Marina Yacht Sales, Inc. v. Hatteras Yachts, 915 F.2d 7, 13 (1st Cir. 1990). Instead, to determine whether "exceptional circumstances" are present, courts in this circuit consider a non-exclusive list of factors, including:

(1) Whether either court has assumed jurisdiction over a res; (2) the [geographical] inconvenience of the federal forum; (3) the desirability of avoiding piecemeal litigation; (4) the order in which the forums obtained jurisdiction; (5) whether state or federal law controls; (6) the adequacy of the state forum to protect the parties' interests; (7) the vexatious or contrived nature of the federal claim; and (8) respect for the principles underlying removal jurisdiction.

Rio Grande Cmty. Health Ctr., Inc. v. Rullan, 397 F.3d 56, 71-72 (1st Cir. 2005) (quoting KPS & Associates, Inc. v. Designs by FMC, Inc., 318 F.3d 1, 10 (1st Cir. 2003)).

In considering these factors, I must keep in mind the "heavy presumption favoring the exercise of jurisdiction." Villa Marina Yacht Sales, 915 F.2d at 13; see also Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 16 (1983) (consideration of factors must be "heavily weighted in favor of the exercise of jurisdiction"); KPS & Associates, 318 F.3d at 10 (same). The abstention analysis is not a mechanical exercise, Moses H. Cone, 460 U.S. at 16, and the "weight to be given any given factor depends on the circumstances at hand." Nazario-Lugo, 670 F.3d at115....