Netherlands Ins. Co. v. Cockman

• Decision Date: 21 October 2004
• Docket Number: No. 1:03CV916.,1:03CV916.
• Citation: 342 F.Supp.2d 396
• Court: U.S. District Court — Middle District of North Carolina
• Parties: The NETHERLANDS INSURANCE COMPANY, Plaintiff, v. Billy Wayne COCKMAN, Amy Melissa Thompson, Carrie Thompson, Midland Delivery Service, Inc., and Travelers Indemnity Company, Defendants.

342 F.Supp.2d 396

The NETHERLANDS INSURANCE COMPANY, Plaintiff, v. Billy Wayne COCKMAN, Amy Melissa Thompson, Carrie Thompson, Midland Delivery Service, Inc., and Travelers Indemnity Company, Defendants.

No. 1:03CV916.

United States District Court, M.D. North Carolina.

October 21, 2004.

Jay Patrick Tobin, Young Moore and Henderson P.A., Raleigh, NC, for Plaintiff and Counter-Defendant.

Robert G. McIver, Hunter Higgins Miles Elam & Benjamin, PLLC, Greensboro, NC, for Defendants.

Joel G. Bowden, Law Office of Joel G. Bowden, Paul D. Coates, Pinto Coates Kyre & Brown, PLLC, Greensboro, NC, for Defendants and Counter-Defendant.

JUDGMENT

OSTEEN, District Judge.

On September 21, 2004, the United States Magistrate Judge's Recommendation was filed and notice was served on the parties pursuant to 28 U.S.C. § 636(b). No objections were received by the court within the time prescribed by the statute.

The court hereby adopts the Magistrate Judge's Recommendation.

IT IS HEREBY ORDERED AND ADJUDGED that this action be DISMISSED without prejudice to the parties to litigate in the pending state court action the insurance coverage issues. The Plaintiff's motion to dispense with mediation (docket no. 30-1) is MOOT.

RECOMMENDATION BY UNITED STATES MAGISTRATE JUDGE

DIXON, United States Magistrate Judge.

In this case an insurance company seeks a declaratory judgment regarding the company's obligation to provide UM coverage to its insured in a pending personal injury lawsuit filed in state court by the insured against an uninsured motorist. Pending before this court are motions for summary judgment filed by Plaintiff Netherlands Insurance Company [docket no. 18-1], which is the state court plaintiff's UM carrier, and Defendant Travelers Indemnity Company [docket no. 27-1], which is the alleged tortfeasor's insurance liability company.¹ Also pending is a motion to dispense with mediation filed by Plaintiff Netherlands Insurance Company [docket no. 30-1]. The parties have filed responsive pleadings and this matter is ripe for disposition. Since there has been no consent, I must deal with the motions by way of a recommendation. For the reasons stated herein, I recommend that the court decline to exercise its jurisdiction under the Declaratory Judgments Act, 28 U.S.C. § 2201(a), and dismiss this action without prejudice to the parties to litigate in state court the coverage issues raised here.

Statement of the Facts

On October 27, 1999, Defendant Cockman was involved in an automobile accident with Defendant Amy Thompson. At the time of the accident, Cockman was driving a vehicle owned by his employer, Defendant Midland Service, Inc. ("Midland"), and Defendant Amy Thompson was driving a vehicle owned by her mother, Defendant Carrie Thompson. Plaintiff Netherlands Insurance Company ("Netherlands Insurance") was the underinsured motorist/uninsured motorist ("UIM/UM") carrier for Midland, and Defendant Travelers Indemnity Company ("Travelers") was the liability insurance carrier for certain cars owned by Defendant Carrie Thompson. Wright Aff. ¶ 4. On November 6, 2001, Cockman filed a personal injury lawsuit against Defendants Amy Thompson and Carrie Thompson in Guilford County Superior Court. Defendants Amy Thompson and Carrie Thompson subsequently hired attorney Robert McIver to defend them in the action. On or about June 26, 2002, Defendant Travelers received for the first time a copy of the summons and complaint against the Thompsons. Grant Aff. ¶ 6. Attorney Mclver thereafter continued to represent the Thompsons in the lawsuit, with Travelers providing the defense costs after Mclver agreed to work under Travelers' legal guidelines. See Grant Aff. ¶ 7. On October 14, 2002, Cockman's counsel notified Netherlands Insurance of a potential UIM claim. Wright Aff. ¶ 5.

On January 28, 2003, after defending the Thompsons in the state court lawsuit for more than seven months, Travelers determined that the car involved in the accident was not insured under Travelers' policy with Carrie Thompson. See Grant Aff. ¶¶ 8-9. On around January 29, 2003, Travelers notified the Thompsons that it was denying coverage and that it would no longer defend them in the lawsuit. Wright Aff. ¶ 6 & Ex. B. On February 10, 2003, in response to receiving a copy of Travelers' letter regarding noncoverage, Cockman's counsel notified Netherlands Insurance of a potential UM claim. Wright Aff. ¶ 7. On March 5, 2003, Netherlands Insurance, proceeding as an unnamed defendant in the lawsuit against the Thompsons, filed a motion to dismiss and/or motion for summary judgment, alleging insufficient process, insufficient service of process, lack of personal jurisdiction, and statute of limitations as to Cockman's UIM/UM claims.² On March 18, 2003, Defendant Cockman's counsel served on Netherlands Insurance, through the North Carolina Commissioner of Insurance, copies of the complaint and summons in the personal injury lawsuit. Wright Aff. ¶ 8 & Ex. D On September 26, 2003, while its motion for summary judgment on the UM coverage issue was pending in the state court lawsuit, Plaintiff Netherlands Insurance filed a declaratory judgment action in this court against Defendants Cockman, Amy Thompson, Carrie Thompson, Midland, and Travelers. Netherlands Insurance seeks an order from this court stating that the insurance policy issued by Netherlands Insurance to Midland provides no UIM or UM coverage for Cockman's claims in the state court personal injury lawsuit against the Thompsons. On April 8, 2004, the state court held a hearing on Netherland Insurance's pending state court motion for summary judgment on this same issue. The state court declined to rule on Netherland Insurance's motion, and, instead, entered an order on April 22, 2004, staying the proceedings pending resolution of this action. See Wright Aff. ¶ 9 & Ex. E.

Standard of Review

Before reaching the substantive issues on the parties' respective motions for summary judgment, I first discuss whether this court should exercise its jurisdiction in this matter. Netherlands Insurance brought this action pursuant to the Declaratory Judgments Act, 28 U.S.C. § 2201(a), which provides that "[i]n a case of actual controversy within its jurisdiction... any court of the United States ... 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."³ The exercise of jurisdiction under the Act is not compulsory. Brillhart v. Excess Ins. Co., 316 U.S. 491, 494, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942). Thus, even when a district court clearly has jurisdiction under the Act, it may in its discretion decline to exercise that jurisdiction if it determines that declaratory relief is not appropriate.

This circuit's court of appeals first made clear in Aetna Casualty & Surety Co. v. Quarles that 28 U.S.C. § 2201 gives district courts the discretionary authority to grant declaratory relief where doing so "(1) will serve a useful purpose in clarifying and settling the legal relations in issue, and (2) will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding." 92 F.2d 321, 325 (4th Cir.1937); see also Aetna Cas. & Sur. Co. v. Ind-Com Elec. Co., 139 F.3d 419, 422 (4th Cir.1998). Since then, the court of appeals has stated that a district court's discretion must be guided not only by the criteria outlined in Quarles, but also by considerations of federalism, efficiency, and comity. Mitcheson v. Harris, 955 F.2d 235, 237-40 (1992). These additional concerns require a court to consider: (1) the strength of the state's interest in having the issues raised in the federal declaratory judgment action decided in the state courts; (2) whether the issues raised in the federal action can be more efficiently resolved in the court in which the state action is pending; (3) whether permitting the action to go forward would result in unnecessary "entanglement" between the federal and state courts; and (4) whether the federal action is being used merely as a device for "procedural fencing" — that is, "to provide another forum in a race for res judicata" or "to achieve a federal hearing in a case otherwise not removable." Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371, 377 (4th Cir.1994) (citations and internal quotations omitted).

Furthermore, in 1995, in Wilton v. Seven Falls Co., the United States Supreme Court resolved two circuit conflicts concerning a district court's decision to decline jurisdiction in a declaratory judgment action. 515 U.S. 277, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995). First, the Wilton Court held that the applicable standard for an appellate court's review of a district court's decision against exercising jurisdiction in a declaratory judgment action was not de novo, but abuse of discretion.⁴ Id. at 289-90, 115 S.Ct. 2137. The second split among the circuits involved the breadth of a district court's discretion in determining whether to exercise its jurisdiction in declaratory judgment actions. Several circuits, drawing on the language of the abstention doctrine developed in Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), and Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), had held that a district court may decline jurisdiction in a declaratory judgment action under only "exceptional circumstances." See Wilton, 515 U.S. at 281-82, 115 S.Ct. 2137 (collecting cases). Other circuits, including the Fourth Circuit, had held that a district court had more discretion in determining whether to exercise jurisdiction. The Wilton Court firmly rejected the "exceptional circumstances" standard of Colorado River and Moses H. Cone in the context of declaratory judgment actions, observing that neither Colorado River nor Moses H. Cone had involved an...