Mission Ins. Co. v. Puritan Fashions Corp.

• Decision Date: 06 June 1983
• Docket Number: No. 82-1339,82-1339
• Citation: 706 F.2d 599
• Parties: MISSION INSURANCE COMPANY, Plaintiff-Appellant, v. PURITAN FASHIONS CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 599

706 F.2d 599

MISSION INSURANCE COMPANY, Plaintiff-Appellant, v. PURITAN FASHIONS CORPORATION, Defendant-Appellee.

No. 82-1339.

United States Court of Appeals Fifth Circuit.

June 6, 1983.

Scott, Hulse, Marshall, Feuille, Finger & Thurmond, Howell Cobb, III, Schuyler B. Marshall, El Paso, Tex., Michael J. Izzo, Jr., Philadelphia, Pa., for plaintiff-appellant.

Harrel L. Davis, III, El Paso, Tex., Milton Herman, Goshen, N.Y., for defendant-appellee.

Appeal from the United States District Court for the Western District of Texas.

Before GEE, REAVLEY and HIGGINBOTHAM, Circuit Judges.

REAVLEY, Circuit Judge:

This declaratory judgment action was filed by Mission (the insurer), seeking construction of a policy issued to Puritan. The district court declined to exercise jurisdiction and dismissed the suit. Finding no reversible error in the decision below, we affirm.

The Facts

Mission (a California corporation) agreed to insure Puritan (a New York corporation) against certain property losses. Puritan manufactures and markets Calvin Klein jeans. Sun Apparel Co., located in El Paso, was a sewing contractor for Puritan, and its production was covered by the policy. Puritan became aware of large amounts of missing inventory in late 1980 and early 1981. An FBI investigation in both Texas and California resulted in the convictions of two California residents for transporting and receiving stolen goods. Puritan filed a proof of loss (of almost $900,000) with Mission for the theft of the jeans on December 15, 1981.

Puritan, concerned over a contractual limitations provision in the policy, requested an extension of the time allowed for suit by that provision. This request was granted on December 22, 1981. On February 5, 1982 Mission gave Puritan an extension of 30 days from the date Mission "provides a written statement of its position to Puritan." No such written statement was given however. Instead, on March 24, Mission's president orally rejected Puritan's claim, and this declaratory judgment suit was filed by Mission in federal court in Texas that same day. On April 16, Puritan filed suit in California state court, alleging that Mission breached the insurance contract, asking for declaratory judgment relief and damages for bad faith, fraud and unfair settlement practices. Puritan also joined several other defendants, alleging that they converted the missing jeans.

The district court, after hearing argument, reviewing affidavit and documentary evidence, dismissed the suit. The court stated:

Plaintiff caused Defendant to delay filing suit in California by representing that Plaintiff was considering the merits of the claim and by allowing an extension of the one year limitation period. But for these representations and implications, Defendant would have been the first to file an action presenting the same issues (plus a few more), and the forum for trial of the issues presented in this suit would have been in California.

Therefore, in the interests of judicial economy and for the convenience of the parties and the witnesses, the Court, in an exercise of its discretion, hereby dismisses the lawsuit.

Discussion

In determining whether the district court acted correctly it is important to consider the nature of a declaratory judgment. The Declaratory Judgment Act, 28 U.S.C. Sec. 2201, confers no jurisdiction but is a procedural device designed to provide a new remedy to the federal court arsenal. Aetna Life Ins. Co. of Hartford, Conn. v. Haworth, 300 U.S. 227, 239-240, 57 S.Ct. 461, 463-464, 81 L.Ed. 617 (1937). The district court, however, is not required to provide declaratory judgment relief, and it is a matter for the district court's sound discretion whether to decide a declaratory judgment action. Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942); Hollis v. Itawamba County Loans, 657 F.2d 746, 750 (5th Cir.1981). As was stated in Dresser Industries, Inc. v. Ins. Co. of North America, 358 F.Supp. 327, 330 (N.D.Tex.), aff'd, 475 F.2d 1402 (5th Cir.1973), the Declaratory Judgment Act "gives the court a choice, not a command." ¹

Of course, in exercising its discretion, the "district courts may not decline on the basis of whim or personal disinclination." Hollis, 657 F.2d at 750. The district court may, however, take into account a wide variety of factors. Our review of the district court's action is limited to whether it abused its discretion. Amerada Petroleum Corp. v. Marshall, 381 F.2d 661 (5th Cir.1967), cert. denied, 389 U.S. 1039, 88 S.Ct. 777, 19 L.Ed.2d 829 (1968); see Employers' Liability Assur. Corp. v. Mitchell, 211 F.2d 441 (5th Cir.), cert. denied, 347 U.S. 1014, 74 S.Ct. 869, 98 L.Ed. 1137 (1954). ²

The district court in dismissing considered the pendency of the parallel California litigation and the inequity of permitting Mission to gain precedence in time and forum by its conduct. The district court properly took this factor into account in dismissing the suit.

In Amerada Petroleum Corp. v. Marshall, the defendant had sued other parties in a district in which the plaintiff was not amenable to service of process. The defendant wrote a letter to the plaintiff stating that if the plaintiff did not submit voluntarily to jurisdiction, defendant would commence another suit in a district having jurisdiction. The plaintiff then filed a declaratory judgment action. We held:

There is sufficient evidence to support the judge's finding that the instant action was filed by Amerada as the immediate result of the letter inviting it to appear in the District of Columbia.... That Amerada's petition for declaratory judgment apparently was in anticipation of the New York suit is an equitable consideration which the district court was entitled to take into account.

381 F.2d at 663. ³

There is sufficient evidence here to support the district court's conclusion that Mission's action was in anticipation of Puritan's California suit. The documents show that Mission represented that in December, 1981, it was still investigating Puritan's claim. Correspondence further demonstrates that on December 22, 1981, the parties agreed that Puritan had "been granted an indefinite extension of the suit limitation period ... until such time as the company [Mission] provides a written statement of its position." On February 5, only one week before the contractual limitations period would have expired, Mission agreed to modify the agreement to provide that Puritan would have "30 days to commence suit from the time of receipt of Mission's written position statement." Instead, soon thereafter Mission orally rejected Puritan's claim and commenced suit on the same day. We think these facts alone would be enough to support a finding of anticipatory filing. Yet the district court also had before it affidavit testimony that Puritan had prepared New York pleadings and planned to file them on two occasions. While Mission disputes that Puritan ever informed it of this fact (something the district court apparently did not credit), there can really be no dispute that Mission expected Puritan to file suit if its claim was denied, and this suit was in anticipation of that expected action. The district court therefore acted within its discretion in considering the anticipatory nature of this suit.

The district court also dismissed "in the interests of judicial economy and for the convenience of the parties and the witnesses." The convenience of parties and witnesses has traditionally been considered in determining whether to hear a declaratory judgment action. Amerada, 381 F.2d at 663-64; E.F. Hutton & Co. v. Cook, 292 F.Supp. 409, 410 (S.D.Tex.1968). The classic formulation of these considerations, although in a forum non conveniens and not a declaratory judgment context, is contained in Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 843, 91 L.Ed. 1055 (1947):

An...