Miller Brewing Co. v. Ace U.S. Holdings, Inc.

Decision Date25 July 2005
Docket NumberNo. 04C1123.,04C1123.
Citation391 F.Supp.2d 735
PartiesMILLER BREWING COMPANY Plaintiff, v. ACE U.S. HOLDINGS, INC., ACE American Insurance Co., ACE INA Holdings, Inc., American International Specialty Lines Insurance Co., AIU Insurance Company, National Union Fire Insurance Company of Pittsburgh, PA, Hartford Fire Insurance Company, Hartford Accident and Indemnity Company, First State Underwriters Agency of New England Reinsurance Corporation, Twin City Fire Insurance Company, Lumbermens Mutual Casualty Company, ABC Insurance Company, DEF Insurance Company, GHI Insurance Company, JKL Insurance Company, MNO Insurance Company, PQR Insurance Company, STU Insurance Company, and XYZ Insurance Company, Defendants.
CourtU.S. District Court — Eastern District of Wisconsin

Jeffrey O. Davis, Natalie C. Giugno, Patrick S. Nolan, Quarles & Brady LLP, Milwaukee, WI, for Plaintiff.

John J. Rasmussen, Wendy Woolpert, Morison-Knox Holden Melendez & Prough LLP, Walnut Creek, CA, Michael D. Fischer, Sarah J. Friday, Stephen E. Kravit, Kravit Hovel Krawczyk & Leverson SC, Catherine R. Grogan, Michael J. Cohen, Meissner Tierney Fisher & Nichols SC, Milwaukee, WI, Mitchell A. Stearn, Nixon Peabody LLP, Washington, DC, Mitchell D. Rose, Bollinger Ruberry & Garvey, Chicago, IL, George A. Tsougarakis, Norman C. Kleinberg, Hughes Hubbard & Reed LLP, New York City, for Defendants.

DECISION AND ORDER

ADELMAN, District Judge.

Plaintiff Miller Brewing Company ("Miller") brought this action in Wisconsin state court naming as defendants some or all of its insurers, including several unnamed, alleging that defendants wrongly refused to defend lawsuits brought against it. Miller brought breach of contract and bad faith claims against some defendants and, pursuant to Wisconsin's declaratory judgment act, Wis. Stat. § 806.04, sought declaratory judgments that all defendants' policies provided coverage in the underlying lawsuits. Miller sought damages in an amount necessary to reimburse it for the cost of defending the suits, punitive damages and prejudgment interest. Pursuant to 28 U.S.C. §§ 1332(a) and 1441(a), defendants timely removed the action. Based on abstention doctrines and the doctrine of forum non-conveniens, defendants now ask me to refrain from exercising jurisdiction over the action and either dismiss or stay it. Defendants base their request on the fact that before Miller filed the present action, defendants brought an action against Miller in New York state court raising the same issues as Miller's suit.1

Before discussing defendants' motion, however, I will address the matter of the unnamed defendants. "[B]ecause the existence of diversity jurisdiction cannot be determined without knowledge of every defendant's place of citizenship, `John Doe' defendants are not permitted in federal diversity suits." Howell v. Tribune Entm't Co., 106 F.3d 215, 218 (7th Cir.1997). However, "naming a John Doe defendant will not defeat the named defendants' right to remove a diversity case if their citizenship is diverse from that of plaintiffs." Id. (citing 28 U.S.C. § 1441(a) ("For purposes of removal... the citizenship of defendants sued under fictitious names shall be disregarded.")). Thus, in the present case, diversity jurisdiction is proper despite the presence of John Doe defendants.

However, "[t]he use of fictitious names for parties ... is generally frowned upon." KFP v. Dane County, 110 F.3d 516, 519 (7th Cir.1997) (citing 2A James Wm. Moore, et al., Moore's Federal Practice 10.02 (2d ed.1995)). Thus, "district courts have discretion as to whether such claims [against unnamed defendants] may be sustained." Kennington v. Carter, 216 F.Supp.2d 856, 857 (S.D.Ind.2002); see also K.F.P., 110 F.3d at 519. In the present case, Miller gains no advantage by filing against unnamed defendants and will not be prejudiced if I dismiss them. Therefore, I will dismiss Miller's claims against the unnamed defendants and permit it to seek leave to amend the complaint if it identifies them.

I. FACTS

Plaintiffs in class action lawsuits in California (the Goodwin suit) and Ohio (the Eisenberg suit) named Miller, a manufacturer and seller of alcoholic beverages, as a defendant and alleged that it engaged in an illegal marketing scheme designed to induce underage individuals to consume alcoholic products. When Miller tendered the defense of these suits to defendants, the Hartford defendants denied coverage, AISLIC and Lumbermens agreed to defend Miller under a reservation of rights, and ACE and AIG did not respond. On the same day that they denied coverage, the Hartford defendants brought an action against Miller in New York state court.2 Miller removed the case but plaintiffs (the Hartford defendants) moved to remand, and the court remanded the case on the ground that it had been improperly removed. Miller then moved to dismiss, which motion is presently pending. Six days after the Hartford defendants filed suit in New York, Miller commenced the present action. Additional facts will be stated in the course of the decision.

II. DISCUSSION
A. Abstention Standard

A motion to dismiss or stay based on an abstention doctrine raises the question of whether a court should exercise subject matter jurisdiction. Thus, I will consider defendants' request for abstention under Fed.R.Civ.P. 12(b)(1). Beres v. Village of Huntley, 824 F.Supp. 763, 766 (N.D.Ill.1992). In reviewing a Rule 12(b)(1) motion, I look both to the allegations in the complaint and to other materials relating to the exercise of jurisdiction. In the present case, such materials include the filings in the New York action. I may consider such materials without converting the motion into one for summary judgment. English v. Cowell, 10 F.3d 434, 437 (7th Cir.1993). I take plaintiff's allegations as true and draw all reasonable inferences from them in the light most favorable to plaintiff. Beres, 824 F.Supp. at 766.

Under Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), where a concurrent state proceeding is pending, a district court may abstain from exercising jurisdiction if the circumstances are exceptional and if abstention would promote "`wise jurisdictional administration.'" Clark v. Lacy, 376 F.3d 682, 685 (7th Cir.2004) (quoting Colo. River, 424 U.S. at 818, 96 S.Ct. 1236). However, abstention from the exercise of federal jurisdiction is the exception, not the rule. Colo. River, 424 U.S. at 813, 96 S.Ct. 1236 (stating that "[t]he doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it") (quoting County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 79 S.Ct. 1060, 3 L.Ed.2d 1163 (1959) (internal quotations omitted)). Colorado River makes clear that district courts have a "virtually unflagging duty" to exercise federal jurisdiction when it exists. Id. at 817, 96 S.Ct. 1236.

However, for actions brought under the Federal Declaratory Judgment Act ("FDJA"), 28 U.S.C. § 2201(a), the Supreme Court has developed a separate abstention doctrine under which district courts may more easily abstain from exercising jurisdiction. The FDJA states in relevant part that: "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 declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201(a) (emphasis added). The Supreme Court has interpreted this language as granting district courts discretion as to whether to exercise jurisdiction under the statute. Wilton v. Seven Falls Co., 515 U.S. 277, 286-88, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995) (stating that "Brillhart [v. Excess Ins. Co. of Am., 316 U.S. 491, 495, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942)] makes clear that District Courts possess discretion in determining whether and when to entertain an action under the [Federal] Declaratory Judgment Act."). Thus, as construed by the Supreme Court, the FDJA essentially builds the abstention doctrine into the grant of jurisdiction. Steven Plitt & Joshua D. Rogers, Judicial Abstinence: Ninth Circuit Jurisdictional Celibacy for Claims Brought Under the Federal Declaratory Judgment Act, Seattle U.L.Rev. 751, 757 (2004) (citing Wilton, 515 U.S. at 282, 115 S.Ct. 2137).

When a federal district court is asked to exercise its discretion to accept jurisdiction under the FDJA at the same time that a parallel case is pending in state court, the question of whether the district court should accept or deny jurisdiction is generally analyzed under the standard set forth in Brillhart. Under such standard, courts must consider whether the controversy could be better settled in the state court proceeding, paying particular attention to the fact that it is ordinarily "uneconomical as well as vexatious for a federal court to proceed in a declaratory judgment suit when another suit is pending in a state court presenting the same issues, not governed by federal law, between the same parties." Brillhart, 316 U.S. at 495, 62 S.Ct. 1173. In Wilton, the Supreme Court confirmed that the Brillhart test, not the "exceptional circumstances" standard set forth in Colorado River, governs a district court's exercise of discretion in a FDJA action when a parallel lawsuit is pending in state court. In the present case, defendants argue that I should analyze the question of whether to exercise jurisdiction under the Brillhart standard, and Miller contends that I should apply the Colorado River standard.

For the reasons explained below, I conclude that Colorado River supplies the appropriate analytic framework. First, the Supreme Court has not applied the Brillhart abstention doctrine in cases not arising under the...

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