Greenwood Racing Inc. v. Am. Guarantee & Liab. Ins. Co.
| Decision Date | 20 October 2021 |
| Docket Number | CIVIL ACTION NO. 21-01682 |
| Citation | 568 F.Supp.3d 526 |
| Parties | GREENWOOD RACING INC., et al., Plaintiffs, v. AMERICAN GUARANTEE & LIABILITY INSURANCE CO. and Steadfast Insurance Co., Defendants. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Justin F. Lavella, Blank Rome LLP, Washington, DC, Michael A. Iannucci, Blank Rome LLP, Philadelphia, PA, for Plaintiffs.
Michael Menapace, Wiggin and Dana, New Haven, CT, Susan M. Kennedy, Wiggin & Dana LLP, Philadelphia, PA, for Defendant American Guarantee and Liability Insurance Company.
Greenwood Racing Inc. and its subsidiaries (collectively "Greenwood") asked a Pennsylvania state court to declare that their insurers, American Guarantee and Liability Insurance Company ("AGLIC") and Steadfast Insurance Company ("Steadfast"), are required to insure losses sustained by Greenwood as a result of the COVID-19 pandemic. The insurers removed the case to federal court and Greenwood moves to remand. The Court denies the Motion, particularly in light of recent guidance from the Third Circuit Court of Appeals.
Greenwood owns and operates a casino, racetrack and other gambling facilities in Pennsylvania and New Jersey. (Compl. ¶ 1, ECF No. 1-3.) The COVID-19 pandemic and subsequent government actions forced these establishments to close for several months. (Id. ¶¶ 161–64, 170.) Even when they reopened, government orders and the threat of the virus prevented a return to business as usual and Greenwood suffered substantial losses. (Id. ¶¶ 165–67, 171.)
Greenwood believes AGLIC is obligated to cover those losses under several provisions of its commercial property policies for the 2019–2020 and 2020–2021 policy periods. (Id. ¶¶ 69–90.) Specifically, it seeks reimbursement based on the policies’ "Property Damage," "Time Element," "Extra Expense," "Civil or Military Authority" and "Ingress/Egress" coverage, as well as their "Loss of Attraction" endorsements. (Id. ) It also asserts that its losses are covered by the environmental liability policy it purchased from Steadfast. (Id. ¶¶ 96–98.)
AGLIC denied coverage under every provision other than the "Loss of Attraction" endorsement in Greenwood's 2019-2020 commercial property policy. (Id. ¶ 257.) Steadfast likewise denied coverage. (Id. ¶ 267.)
Greenwood then sought a judgment in the Bucks County Court of Common Pleas declaring its rights under the policies. (Id. ¶¶ 273, 281.) The insurers removed the case to federal court and Greenwood moved to remand, arguing that the Court should decline to exercise its jurisdiction under either the Declaratory Judgment Act or Colorado River Water Conservation District v. United States , 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). (Pls.’ Mem. Law Supp. Mot. Remand at 1, ECF No. 2-1; Pls.’ Reply Mem. Law Further Supp. Mot. Remand at 9–10, ECF No. 19.) Following the Third Circuit Court of Appeals’ decision in DiAnoia's Eatery, LLC v. Motorists Mutual Insurance Co. , 10 F.4th 192 (3d Cir. 2021), the Court ordered supplemental briefing addressing the impact of that ruling on Greenwood's Motion. (ECF No. 23.)
The Declaratory Judgment Act provides that a court "may declare the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C. § 2201 (emphasis added). The Act is an exception to the general rule that federal courts must exercise the jurisdiction given to them. DiAnoia's Eatery , 10 F.4th 192. Even when a district court has subject matter jurisdiction over a declaratory judgment action, it may abstain from hearing it. Id.1
AGLIC and Steadfast initially argued the Court lacked discretion to remand the case under the Declaratory Judgment Act because the Complaint sought legal rather than declaratory relief. (Defs.’ Joint Mem. Law Opp'n Mot. Remand at 11, ECF No. 18.) They withdrew this argument, however, in response to the Third Circuit's decision in DiAnoia's Eatery . (Defs.’ Suppl. Mem. Law Opp'n Mot. Remand at 2 n.1, ECF No. 25.) There, the Third Circuit expressed skepticism that a case brought as a declaratory judgment action should ever be treated as "something other than a genuine declaratory judgment action for purposes of the DJA." DiAnoia's Eatery , 10 F.4th 192, 202. Like the plaintiffs in DiAnoia's , Greenwood seeks only declaratory relief. (Compl. ¶ 281.)
The Court's discretion is not unlimited, however. To begin, the "existence or non-existence of pending parallel state proceedings" will "militate[ ] significantly" either for or against exercising jurisdiction. Reifer , 751 F.3d at 144. Where there are no parallel state proceedings, "district courts declining jurisdiction should be rigorous in ensuring themselves that the lack of pending parallel state proceedings is outweighed by opposing factors." Id.
In Reifer v. Westport Insurance Corporation , 751 F.3d 129 (3rd Cir. 2014) the Third Circuit provided a non-exhaustive list of factors district courts should consider:
The Third Circuit has also instructed courts to be "particularly reluctant" to exercise jurisdiction over declaratory judgment actions where the "applicable state law is ‘uncertain or undetermined.’ " Id. at 141 ().
Recently, the Third Circuit revisited and clarified three of the Reifer factors. It explained that the first is not "a vehicle for considering the effect of a declaratory judgment on the development of state law." DiAnoia's Eatery , 10 F.4th at 205. It simply asks "whether a declaration would bring about a ‘complete termination of the controversy’ between the parties and thereby avoid duplicative, piecemeal litigation." Id. ). Similarly, "the fifth factor's ‘policy of restraint’ is applicable only when the ‘same issues’ are pending in state court between the same parties, not when the ‘same issues’ are merely the same legal questions pending in any state proceeding." Id. at 206.
With respect to the third factor, the Court of Appeals emphasized that courts must "squarely address the alleged novelty" of state law issues raised by the case. Id. at 207 (quoting Reifer , 751 F.3d at 149 ). It then distinguished between novel legal questions and novel applications of established legal rules. Id. at 208–09. Only novel legal questions weigh in favor of abstention because "[f]ederal and state courts are equally capable of applying settled state law to a difficult set of facts." Id. at 197 (quoting Reifer , 751 F.3d at 147 ) (alteration in original).
There are no parallel state proceedings between Greenwood and its insurers. This "militates significantly" in favor of retaining jurisdiction over Greenwood's declaratory judgment action. Reifer , 751 F.3d at 144. Abstention is therefore appropriate only if other factors demonstrate that federal court would be an inappropriate or impractical forum, despite the absence of parallel litigation. Id. Here, seven of the eight Reifer factors are clearly neutral or weigh against abstention. Greenwood recognizes as much; their supplemental briefing addresses only the third factor. (Pls.’ Suppl. Mem. Law Supp. Mot. Remand at 5–10, ECF No. 24.) The Court will nonetheless evaluate the other factors before considering the alleged novelty of the state law issues raised by Greenwood.
The first Reifer factor weighs against abstention because a declaratory judgment in this case "would bring about a complete termination of the parties’ disputes without piecemeal litigation." DiAnoia's Eatery , 10 F.4th at 206. Like the plaintiffs in DiAnoia's Eatery , Greenwood effectively conceded the first factor by asserting in their complaint that a declaratory judgment would "resolve" their coverage disputes with AGLIC and Steadfast. Compare id. with Compl. ¶ 3. Nor is there any indication that an "interested party ... has not been joined" or that a "predicate issue ... would undermine the usefulness of a judgment interpreting the parties’ obligations." DiAnoia's Eatery , 10 F.4th at 206.
The second factor, "the convenience of the parties" does not support abstention. Greenwood's subsidiary and co-plaintiff City Turf Club Op. Co. is based in Philadelphia. (Cmpl. ¶ 25.) Its other operations are all in the Philadelphia region. (Id. at ¶¶ 23–27.) It would not be inconvenient for the Plaintiffs to litigate in Philadelphia, and Philadelphia may be more convenient than Doylestown for the Illinois-based Defendants.
The fourth factor, "the availability and relative convenience of other remedies," weighs against abstention because Greenwood seeks only a declaratory judgment, a form of relief that Pennsylvania and federal courts "are equally able to grant." Kelly v. Maxum Specialty Ins. Grp. , 868 F.3d 274, 289 (3d Cir. 2017).
The fifth, sixth, seventh, and eighth factors do not support Greenwood's motion either. This case is the only litigation between Greenwood and the insurers; the same issues are not pending between the same parties in state court. DiAnoia's Eatery , 10 F.4th at 206. Consequently, there is no risk of...
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