Myles Lumber Co. v. CNA Fin. Corp.

• Citation: 233 F.3d 821
• Decision Date: 30 October 2000
• Docket Number: No. 00-1318,00-1318
• Parties: (4th Cir. 2000) MYLES LUMBER COMPANY, Plaintiff-Appellee, v. CNA FINANCIAL CORPORATION; CONTINENTAL INSURANCE COMPANY, a non-resident insurance corporation; BOSTON OLD COLONY INSURANCE COMPANY, a non-resident insurance corporation, Defendants-Appellants. . Argued:
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

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233 F.3d 821 (4th Cir. 2000) MYLES LUMBER COMPANY, Plaintiff-Appellee,
v.
CNA FINANCIAL CORPORATION; CONTINENTAL INSURANCE COMPANY, a non-resident insurance corporation; BOSTON OLD COLONY INSURANCE COMPANY, a non-resident insurance corporation, Defendants-Appellants. No. 00-1318. UNITED STATES COURT OF APPEALS, FOR THE FOURTH CIRCUIT. Argued: October 30, 2000.
Decided: December 5, 2000.

Appeal from the United States District Court for the Northern District of West Virginia, at Elkins.

Robert Earl Maxwell, Senior District Judge. (CA-99-121-2)

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COUNSEL ARGUED: Amy Marie Smith, STEPTOE & JOHNSON, Clarksburg, West Virginia, for Appellants. Jodi K. Douglas, COOPER & PRESTON, Parsons, West Virginia, for Appellee. ON BRIEF: Daniel C. Cooper, STEPTOE & JOHNSON, Clarksburg, West Virginia, for Appellants. John W. Cooper, COOPER & PRESTON, Parsons, West Virginia, for Appellee.

Before WILKINS and KING, Circuit Judges, and Frank J. MAGILL, Senior Circuit Judge of the United States Court of Appeals for the Eighth Circuit, sitting by designation.

Vacated and remanded by published opinion. Judge Wilkins wrote the opinion, in which Judge King and Senior Judge Magill joined.

OPINION

WILKINS, Circuit Judge:

Myles Lumber Company (Myles Lumber) filed suit in state court against CNA Financial Corporation, Boston Old Colony Insurance Company, and Continental Insurance Company (collectively, "Boston Old Colony") seeking coverage under an insurance policy. Boston Old Colony removed the action to federal district court based on diversity jurisdiction. See 28 U.S.C.A.§ 1332 (West 1993 & Supp. 2000); 28 U.S.C.A. § 1441 (West 1994). The district court abstained from exercising jurisdiction and remanded. Boston Old Colony appeals. For the reasons set forth below, we vacate the order of the district court and remand for further proceedings.

I.

At all times relevant to this appeal, Boston Old Colony insured Myles Lumber under a commercial general liability insurance policy. Myles Lumber was sued in West Virginia state court by a group of individuals who contended that they were the rightful owners of property on which Myles Lumber had cut timber ("the Hyre lawsuit" or "the underlying action"). Boston Old Colony defended Myles Lumber in the underlying action under a full reservation of rights, believing that if the trees on the disputed property had not belonged to Myles Lumber, certain policy exceptions would apply which would preclude coverage.

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Myles Lumber lost the Hyre lawsuit and paid a judgment of over $300,000, plus related fees and costs.

Myles Lumber's request for insurance coverage was denied because Boston Old Colony believed that certain exclusions applied. Myles Lumber disputed this and filed a three-count complaint in West Virginia state court. In the first count, Myles Lumber sought a decla ration of its rights under the insurance contract as well as attorneys' fees and consequential damages incurred as a result of suing for coverage. See W. Va. Code Ann. §§ 55-13-1 to 55-13-16 (Michie 1994) (Uniform Declaratory Judgments Act). In the second count, Myles Lumber alleged breach of contract, and in the third count, it sought relief under the state Unfair Trade Practices Act, see W. Va. Code Ann. § 33-11-4(9)(a) (Michie 1996).

Boston Old Colony removed the action to federal district court based on diversity of citizenship, see 28 U.S.C.A. §§ 1332, 1441, and Myles Lumber moved to remand based on principles of abstention. The district court held a hearing at which it granted the remand motion. It noted that this court has established certain factors to be considered in deciding whether to abstain from hearing a declaratory judgment action, see Centennial Life Ins. Co. v. Poston, 88 F.3d 255, 257 (4th Cir. 1996), and concluded that consideration of those factors favored abstention. In particular, the district court noted that the case would require application of state law and emphasized its determination that the suit could be more efficiently resolved by the state court because the state court was already familiar with the facts of the underlying action.

Boston Old Colony appeals, arguing that the district court lacked authority to abstain. Boston Old Colony alternatively argues that even if the district court possessed discretion to abstain, it was an abuse of discretion to abstain here. We agree that the district court lacked authority to abstain from exercising jurisdiction over the claims for breach of contract and unfair trade practices because those claims plainly seek damages. We further conclude that even if the district court had discretion to abstain from exercising jurisdiction over the declaratory judgment claim, under these circumstances it would be an abuse of discretion to remand...