First Financial Ins. v. Crossroads Lounge
Decision Date | 21 May 2001 |
Docket Number | CIV. A. No. 5:00-1172. |
Citation | 140 F.Supp.2d 686 |
Parties | FIRST FINANCIAL INSURANCE COMPANY, Plaintiff, v. CROSSROADS LOUNGE, INC., a corporation and Monroe Scarbro, Defendants. |
Court | U.S. District Court — Southern District of West Virginia |
Pending before the Court is Defendant Monroe Scarbro's February 1, 2001 supplemented motion to dismiss. For the reasons discussed below, Defendant's motion is DENIED WITHOUT PREJUDICE.
This case presents but a slight twist on an old, but common, theme: "An insurer, anticipating a coercive suit, sought a declaration in federal court of nonliability on an insurance policy." Wilton v. Seven Falls Co., 515 U.S. 277, 282, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995) ( ). Like the district courts in Wilton and Brillhart, this Court has discretionary authority to entertain Plaintiff's declaratory judgment action. The issue here is whether, in light of Supreme Court and Fourth Circuit precedence, the Court should decline to exercise that authority.
In August 2000, Defendant Monroe Scarbro filed a complaint in the Circuit Court of Raleigh County, West Virginia. As amended, that complaint alleges that in December 1999, Scarbro was brutally beaten at the hands of certain patrons and employees of a bar owned by Defendant Crossroads Lounge, Inc. (Crossroads). See Scarbro v. Crossroads Lounge, Inc., No. 00-C-761-B (Raleigh County, W. Va. Aug. 16, 2000). Defendant Crossroads is insured under a commercial general liability insurance policy issued by Plaintiff. Plaintiff claims that certain clauses of that policy (an assault and battery exclusion and a liquor liability exclusion) exclude coverage for any damage that might have been suffered by Defendant Scarbro. Pursuant to the federal Declaratory Judgment Act (DJA), see 28 U.S.C. § 2201, Plaintiff filed the instant case on December 12, 2000, requesting that this Court declare that Plaintiff has neither a duty to defend Defendant Crossroads in the Raleigh County case nor a duty to pay any damages that might be awarded in the Raleigh County case to Defendant Scarbro against Defendant Crossroads. See also FED. R. CIV. P. 57 ( ). Defendant Scarbro moves this Court to exercise its discretion and to dismiss this case in favor of resolution of the issues in the state court.
The parties do not dispute that Plaintiff, from North Carolina, and Defendants, from West Virginia, are of completely diverse citizenship, or that the amount in controversy exceeds the statutory threshold, currently $75,000. See 28 U.S.C. § 1332(a)(1). Diversity jurisdiction over this action is thus proper under § 1332.
The Supreme Court has "often acknowledged that federal courts have a strict duty to exercise the jurisdiction that is conferred upon them by Congress." Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996) citing Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 821, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976) (). As the Quackenbush court also recognized, "[t]his duty is not, however, absolute." 517 U.S. at 716, 116 S.Ct. 1712 ( ). The Supreme Court has allowed, and in some exceptional circumstances required, federal courts to abstain from hearing cases otherwise properly before them where, for example, federal intervention would upset the carefully crafted balance between state and federal sovereignties. See, e.g., Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971) ( ); Railroad Comm'n of Tex. v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941) ( ); Colorado River, supra ( ); Burford v. Sun Oil Co., 319 U.S. 315, 334, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943) ().
The DJA gives rise to one such extraordinary circumstance. The Act provides that federal courts "may declare the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C.A. § 2201 (emphasis added).1 Thus, the authority of federal courts to entertain declaratory judgments, equitable in nature, is discretionary. See Wilton v. Seven Falls Co., 515 U.S. 277, 282, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995); Brillhart v. Excess Ins. Co., 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942); Quackenbush, 517 U.S. at 721, 116 S.Ct. 1712 ; Centennial Life Ins. Co. v. Poston, 88 F.3d 255, 257 (4th Cir.1996) ( ; Mitcheson v. Harris, 955 F.2d 235, 237 (4th Cir.1992); Aetna Cas. & Sur. Co. v. Quarles, 92 F.2d 321, 324 (4th Cir. 1937).
Federal courts are therefore afforded "`great latitude in determining whether to assert jurisdiction'" over such cases. United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 493 (4th Cir.1998) (quoting Aetna Cas. & Sur. Co. v. Ind-Com Elec. Co., 139 F.3d 419, 422 (4th Cir.1998)); see Wilton, 515 U.S. at 286-88, 115 S.Ct. 2137 ( ).
This qualification (represented by a district court's discretion to abstain from hearing a declaratory judgment) to the ordinary rule (that a district court has a duty to exercise jurisdiction conveyed) is itself circumscribed, if but loosely. Thus, for example, Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371, 375 (4th Cir. 1994); cf. Allstate Ins. Co. v. DiGiorgi, 991 F.Supp. 767, 768 (S.D.W.Va.1998) (Haden, C.J.) ( ); but cf. Poston, 88 F.3d at 257-58 ().2
In the Fourth Circuit, "district courts are not without guidance in exercising this discretion." Kapiloff, 155 F.3d at 493. First, in Quarles, supra, the court of appeals noted that a declaratory judgment should not be used "to try a controversy by piecemeal, or to try particular issues without settling the entire controversy, or to interfere with an action which has already been instituted." Quarles, 92 F.2d at 325. To that end, the Quarles court held that a district court should normally entertain a declaratory judgment action otherwise within its jurisdiction "(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." Id. (quoting BORCHARD, supra, at 107-09). These factors also further ensure that the parties meet the Constitution's "case or controversy" requirement.3 See U.S. CONST., art. III, § 2.
Second, in Mitcheson, the court considered a case where an insurer sought declaratory judgment while4 underlying litigation against the insured was pending in a state court. The Mitcheson court added to the Quarles factors the considerations of comity, efficiency, and federalism. 955 F.2d at 237-40. In such a case, the M...
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