Commercial Union Ins. v. CANNELTON INDUSTRIES

• Decision Date: 03 August 1993
• Docket Number: No. 2:92-CV-111,2:92-CV-162.,2:92-CV-111
• Citation: 828 F. Supp. 504
• Parties: COMMERCIAL UNION INSURANCE CO., Plaintiff, v. CANNELTON INDUSTRIES, INC., a West Virginia Corporation, Defendant. ST. PAUL SURPLUS LINES INSURANCE COMPANY and St. Paul Fire and Marine Insurance Company, Plaintiffs, v. CANNELTON INDUSTRIES, INC., and Algoma Steel Corporation, Limited, Defendants.
• Court: U.S. District Court — Western District of Michigan

828 F. Supp. 504

COMMERCIAL UNION INSURANCE CO., Plaintiff, v. CANNELTON INDUSTRIES, INC., a West Virginia Corporation, Defendant.

ST. PAUL SURPLUS LINES INSURANCE COMPANY and St. Paul Fire and Marine Insurance Company, Plaintiffs, v. CANNELTON INDUSTRIES, INC., and Algoma Steel Corporation, Limited, Defendants.

Nos. 2:92-CV-111, 2:92-CV-162.

United States District Court, W.D. Michigan, N.D.

August 3, 1993.

Carole D. Bos, Kevin J. O'Dowd, Buchanan & Bos, Grand Rapids, MI, for Commercial Union Ins. Co. in No. 92-CV-111.

Frederick J. Dindoffer, Bodman, Longley & Dahling, Detroit, MI, Gale Reddie Lea, Jackson & Kelly, Charleston, WV, for Cannelton Industries, Inc. in No. 92-CV-111.

Stephen M. Kelley, Elizabeth Anne Downey, Kitch, Saurbier, Drutchas, Wagner & Kenney, Detroit, MI, for St. Paul Surplus Lines Ins. Co. in No. 92-CV-162.

Frederick J. Dindoffer, Bodman, Longley & Dahling, Detroit, MI, Gale Reddie Lea, Jackson & Kelly, Charleston, WV, for Cannelton Industries, Inc. in No. 92-CV-162.

Frederick J. Dindoffer, Lisa M. Panourgias, Bodman, Longley & Dahling, Detroit, MI, for Algoma Steel Corp. Ltd., in No. 92-CV-162.

Frederick J. Dindoffer, Barnett Jay Colvin, Bodman, Longley & Dahling, Detroit, MI, for Algoma Steel, Inc. in No. 92-CV-162.

OPINION

QUIST, District Judge.

These cases involve disputes over coverage of insurance policies issued, in the first case by plaintiff Commercial Union Insurance Company (Commercial Union) and in the second case by plaintiffs St. Paul Surplus Lines Insurance Company and St. Paul Fire and Marine Insurance Company (collectively, St. Paul), to defendants Cannelton Industries, Inc. (Cannelton) and Algoma Steel Corporation, Limited (Algoma). Plaintiffs filed declaratory judgment actions in this Court to determine whether they were liable for clean-up costs on property located in Sault Ste. Marie, Michigan. Cannelton moved to dismiss both actions for lack of personal jurisdiction and its motions were denied. Now Cannelton seeks discretionary dismissal or stay of the actions. St. Paul has moved for consolidation of the two declaratory judgment actions.

Background Information

Cannelton owns approximately 75 acres of land in Sault Ste. Marie, Michigan along the St. Mary's River, comprised of the former site of Northwestern Leather Tannery (Northwestern). Cannelton Coal Company acquired the property in 1964 and became Cannelton Industries, Inc. in 1971.

At issue in the coverage dispute is whether plaintiffs are liable for the costs of clean-up of toxic materials on the Sault Ste. Marie site. The materials were deposited on the site prior to the time Cannelton owned the property. The Michigan Department of Natural Resources ("MDNR") tested soil samples from the site in the late 1970's and found high levels of cyanide, chromium, lead, manganese, arsenic, cadmium, and copper. After a series of fires at the site in the 1980's, the EPA added the site to the National Priorities List pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act. ("CERCLA"), 42 U.S.C. § 9601 et seq. In 1988 the EPA notified Cannelton that it was a Potentially Responsible Party with respect to environmental contamination on the site and asked it to present a proposal for implementing a Remedial Investigation/Feasibility Study. The EPA issued an Administrative Order by Consent in August 1991, pursuant to § 106 of CERCLA, which Cannelton executed on August 26, 1991. Eleven months later, on July 9, 1992, the EPA released its proposed plan for site clean-up and remediation.

Commercial Union filed a declaratory judgment action in this Court on May 15, 1992, seeking a ruling that it was not liable to Cannelton for costs associated with clean-up of its Sault Ste. Marie property. On July 1, 1992, Cannelton instituted a declaratory judgment action against fifty-seven of its insurance carriers, including St. Paul, in state court in West Virginia. St. Paul filed its declaratory judgment action in this Court on July 13, 1993. St. Paul, and all but one of the responding defendants in the West Virginia action, have also filed a motion in West Virginia seeking to dismiss on grounds of forum non conveniens. The motion to dismiss is still pending in West Virginia and no further actions have been taken in that proceeding.

Issues Presented

Cannelton urges this Court to dismiss plaintiffs' declaratory judgment actions or, alternatively, to stay the actions pending the outcome of the parallel state court action in West Virginia. St. Paul and Commercial Union have responded in opposition to Cannelton's motion, claiming that it is appropriate for this Court to hear these actions.

Discussion

The Declaratory Judgment Act gives federal courts discretion over whether they will hear particular cases brought under the Act. It provides: "In a case of actual controversy within its jurisdiction ... any court of the United States ... may declare the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C. § 2201 (emphasis added).

In Brillhart v. Excess Ins. Co., 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942), the Supreme Court held that a district court is under no compulsion to exercise its jurisdiction under the Declaratory Judgment Act. 316 U.S. at 494, 62 S.Ct. at 1175. The Court sketched the analysis a district court should make in exercising its discretion:

Where a district court is presented with a claim such as was made here, it should ascertain whether the questions in controversy between the parties to the federal suit, and which are not foreclosed under the applicable substantive law, can better be settled in the proceeding pending in the state court. This may entail inquiry into the scope of the pending state court proceeding and the nature of defenses open there. The federal court may have to consider 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 amenable to process in that proceeding, etc.

Id. at 495, 62 S.Ct. at 1176.

St. Paul argues that this Court must also apply the factors of Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). In Colorado River, the Court held that a federal district court can refuse to exercise its jurisdiction in "exceptional circumstances." 424 U.S. at 813, 96 S.Ct. at 1244. Colorado River was decided after Brillhart and did not involve discretionary jurisdiction under the Declaratory Judgment Act. In Insurance Co. of the State of Pennsylvania v. Syntex Corp., 964 F.2d 829, 834 (8th Cir.1992), the Eighth Circuit held that Colorado River and Brillhart must be read together.¹ However, the majority of cases hold that "in declaratory judgment actions Congress has afforded the federal courts a freedom not present in ordinary diversity suits to consider the state interest in having state courts determine questions of state law." Mitcheson v. Harris, 955 F.2d 235, 238 (4th Cir.1992) (citing Terra Nova Ins. Co. v. 900 Bar, Inc., 887 F.2d 1213, 1222 (3rd Cir.1989)). See also, Mission Ins. Co. v. Puritan Fashions Corp., 706 F.2d 599, 601 n. 1 (5th Cir.1983); 40235 Washington Street Corp. v. Lusardi, 976 F.2d 587 (9th Cir.1992); Sinclair Oil Corp. v. Amoco Production Co., 982 F.2d 437 (10th Cir.1992). I could not find that the Sixth Circuit has ever addressed the issue of whether Colorado River modifies Brillhart.

After Colorado River was decided, the Sixth Circuit expanded further on the elements to consider in determining whether to entertain a declaratory judgment action. In Allstate Ins. Co. v. Mercier, 913 F.2d 273, 277 (6th Cir.1990), the court stated:

The two principal criteria guiding the policy in favor of rendering declaratory judgments are (1) when the judgment will serve a useful purpose in clarifying and settling the legal relations in issue, and (2) when it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding.

Mercier relied upon Brillhart but did not mention Colorado River. Mercier delineated five factors to consider when determining whether a declaratory ruling is appropriate:

(1) whether the declaratory action would settle the controversy;

(2) whether the declaratory action would serve a useful purpose in clarifying the legal relations in issue;

(3) whether the declaratory remedy is being used merely for the purpose of "procedural fencing" or "to provide an arena for a race for res judicata;"

(4) whether the use of a declaratory action would increase friction between our federal and state courts and improperly encroach upon state jurisdiction; and

(5) whether there is an alternative remedy which is better or more effective.

Id.

The Mercier court reiterated that "there is no per se rule against a district court's entertaining a declaratory judgment action to determine an insurer's liability when a tort action is pending against its insured in a state court." Id. (citing Allstate Ins. Co. v. Green, 825 F.2d 1061, 1066 (6th Cir.1987)). Yet, it noted that "`declaratory judgment actions ... are seldom helpful in resolving an ongoing action in another court.'" Id. at 278 (quoting Manley, Bennett, McDonald & Co. v. St. Paul Fire & Marine Ins. Co., 791 F.2d 460, 463 (6th Cir.1986)). This Court will analyze Cannelton's motions under the factors set forth in Mercier.

Clarify Legal Relations/Settle the Controversy

In Mercier, where the related litigation that was pending in state court was an action against the insured in which the insurer was not a party, the court concluded that the first two factors could not be met. Id. at 279. It held that a declaratory judgment could not clarify and settle legal relations between the insurer and the insured because the policy exclusions at issue could only be applied after factual questions pending in the state action were resolved. Id. It...