Geovera Specialty Ins. Co. v. Cantin

• Decision Date: 03 May 2019
• Docket Number: CIVIL ACTION NO: 18-8608 SECTION: "J"(4)
• Parties: GEOVERA SPECIALTY INSURANCE COMPANY v. STEPHEN CANTIN, ET AL.
• Court: U.S. District Court — Eastern District of Louisiana

GEOVERA SPECIALTY INSURANCE COMPANY v. STEPHEN CANTIN, ET AL.

CIVIL ACTION NO: 18-8608 SECTION: "J"(4)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA

May 3, 2019

ORDER AND REASONS

Before the Court is a Motion to Dismiss Under Rule 12(b)(6) or Stay on Grounds of Abstention (Rec. Doc. 11) filed by defendant, the City of Kenner ("Kenner Defendant"). Also before the Court is a Motion to Dismiss Declaratory Judgment Action (Rec. Doc. 12) filed by defendant, Sondra Cantin, the natural tutrix of the minor, R.C. ("Cantin Defendants"). Plaintiff, GeoVera Specialty Insurance Company ("Plaintiff"), opposes both motions (Rec. Doc. 13). Cantin Defendants filed a reply (Rec. Doc. 17). Having considered the motions and legal memoranda, the record, and the applicable law, the Court finds that the motions should be GRANTED.

FACTS AND PROCEDURAL HISTORY

This litigation arises out of a fire that occurred on February 19, 2018 at the abandoned Kenner High School owned by Kenner Defendant. Plaintiff alleges that news reports indicate that Stephen and Sondra Cantin's minor son, R.C., and other minors intentionally started a fire that demolished the interior of the first and second floors of the high school. The Kenner Police Department subsequently charged R.C. with simple arson in violation of La. R.S. 14:52. Kenner Defendant contends that the cost to restore the building will exceed $475,000.

Prior to the fire, Plaintiff issued a homeowners' policy numbered FL00001131 with a policy period of September 9, 2017 to September 9, 2018 to Stephen Cantin and Sondra Cantin as the named insureds. Following the fire incident, the Cantins' insurance agent notified Plaintiff of Kenner Defendant's damages claim on June 11, 2018. On June 12, 2018, Plaintiff issued a reservation of rights letter to the Cantins through their attorney, advising that information discovered during the investigation indicated that the fire was caused by arson and that certain limitations and exclusions may apply to exclude coverage for the loss.

After additional investigation, on September 13, 2018, Plaintiff filed the instant declaratory judgment action in this Court to determine an actual case and controversy between the parties regarding their respective rights and obligations under the Cantins' homeowners' policy. Plaintiff seeks a judgment declaring that it has no duty to provide coverage and no duty to defend or indemnify the Cantins under their homeowners' policy with respect to the claims asserted by Kenner Defendant against the Cantins.

Three weeks after Plaintiff filed the instant declaratory judgment action, Kenner Defendant filed suit in the 24^th Judicial District Court for the Parish of Jefferson against the Cantins and Plaintiff, the other minors involved in the fire, and several insurers of the other minor defendants. The insurers, including Plaintiff, are joined in the state suit under the Louisiana Direct Action Statute. The state courtpetition asserts that the insurers are liable in solido for all damages sustained by Kenner Defendant. Both Kenner Defendant and Cantin Defendants filed motions asking this Court to exercise its discretion to dismiss Plaintiff's declaratory judgment action due to the pendency of the state court suit.

LEGAL STANDARD

The Declaratory Judgment Act provides, in relevant part: "In a case of actual controversy within its jurisdiction ... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201(a). In Wilton v. Seven Falls Co., 515 U.S. 277 (1995), the United States Supreme Court made clear that, because the Declaratory Judgment Act is "'an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant,'" the district court has "unique and substantial discretion in deciding whether to declare the rights of litigants." Id. at 287-88. Even when a declaratory judgment action is justiciable and within the Court's authority to decide, the Court must still determine whether to exercise its discretion to decide or dismiss the action. Sherwin-Williams Co. v. Holmes Cnty., 343 F.3d 383, 387 (5th Cir. 2003) (citing Orix Credit All., Inc. v. Wolfe, 212 F.3d 891, 895 (5th Cir. 2000)).

The United States Court of Appeals for the Fifth Circuit has identified a three-step inquiry for determining whether to decide or dismiss a complaint for declaratory relief. Orix, 212 F.3d at 895; see also Sherwin-Williams Co., 343 F.3d at 387. The first step requires a determination of whether the declaratory judgment action isjusticiable. Id. (citing Rowan Cos. v. Griffin, 876 F.2d 26, 27-28 (5th Cir. 1989)). "Second, if it has jurisdiction, then the district court must resolve whether it has the 'authority' to grant declaratory relief in the case presented." Orix, 212 F.3d at 895 (citing Travelers Ins. Co. v. La. Farm Bureau Fed'n, Inc., 996 F.2d 774, 776 (5th Cir. 1993)). "Third, the court has to determine how to exercise its broad discretion to decide or dismiss a declaratory judgment action." Id. (citing Travelers, 996 F.2d at 778). At issue in the present case is the third step of this inquiry.

The Fifth Circuit employs the Brillhart standard when a district court is considering whether to abstain from exercising jurisdiction over an action solely for declaratory relief. Woodward v. Sentry Select Ins. Co., No. 03-2481, 2004 WL 834634, at *2 (E.D. La. Apr. 16, 2004) (Berrigan, J.) (citing Black Sea Inv., Ltd. v. United Heritage Corp., 204 F.3d 647, 6452 (5th Cir. 2000)). Under the Brillhart standard, a federal court has discretion to stay or dismiss a declaratory judgment action where there is a pending state court suit between the same parties that presents the same issues, and where that state court suit could adequately settle the dispute. Id. (citing Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 495 (1942)). The district court has "no compulsion to exercise [its] jurisdiction," and the court has discretion to grant a motion to dismiss the declaratory judgment action. See Brillhart, 316 U.S. at 495.

In determining whether to abstain under Brillhart, the district court "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." Id. The district court must lookto three broad categories of factors: (1) the proper allocation of decision-making between state courts and federal courts; (2) fairness and improper forum shopping; and (3) efficiency. Sherwin-Williams Co. v. Holmes Cnty., 343 F.3d 383, 390-91 (5th Cir. 2003). To evaluate each of these broad categories, the Fifth Circuit uses the seven Trejo factors:

(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.

St. Paul Ins. Co. v. Trejo, 39 F.3d 585, 590-91 (5th Cir. 1994); Sherwin-Williams, 343 F.3d at 390.

PARTIES' ARGUMENTS AND DISCUSSION

I. First Factor: Pending State Action

The first Trejo factor requires the Court to consider whether there is a pending state action in which all of the matters in controversy may be fully litigated. If the declaratory judgment action filed in the federal court "raises only issues of state law and a state case involving the same state law issues is pending, generally the statecourt should decide the case and the federal court should exercise its discretion to dismiss the federal suit." Sherwin-Williams, 343 F.3d at 390-91.

Cantin Defendants argue that (1) the pending state court action contains the same parties as the federal declaratory judgment action in regard to the question of coverage under the policy at issue, (2) Kenner Defendant and Cantin Defendants are parties to both actions, and (3) Plaintiff has been sued in the state action under the Louisiana Direct Action Statute. (Rec. Doc. 12-1 at 6). Accordingly, Kenner Defendant and Cantin Defendants assert that there is a state court action that can and will adjudicate the issues raised in the declaratory judgment action. (Rec. Docs. 12-1 at 7 and 11-2 at 3). Cantin Defendants emphasize that dismissal of the instant action is even more compelling because there are parties present in the state court litigation who are not present in the federal declaratory judgment action; namely, the other minors involved in the fire. (Rec. Doc. 12-1 at 7).

Plaintiff argues in opposition that the state court action was not filed at the time Plaintiff filed this declaratory judgment action and the two cases are not parallel simply because they involve the same general subject matter and the validity of an obligation. (Rec. Doc. 13 at 5). Plaintiff emphasizes that while the state court may resolve the issue of the Cantins' liability to Kenner Defendant, it will not determine whether Plaintiff must defend the Cantins against the claims asserted. (Rec. Doc. 13 at 6). Plaintiff notes that the other minors and insurers thereof are not necessary parties to this declaratory judgment action to determine coverage and duty-to-defendissues between Kenner Defendant, Cantin Defendants, and Plaintiff. (Rec. Doc....