New Hamp. Ins. v. Home Sav., Loan, Youngs., Ohio

• Decision Date: 24 September 2009
• Docket Number: No. 08-3902.,08-3902.
• Citation: 581 F.3d 420
• Parties: NEW HAMPSHIRE INSURANCE CO., Plaintiff-Appellant, v. HOME SAVINGS AND LOAN CO. OF YOUNGSTOWN, OHIO, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

581 F.3d 420

NEW HAMPSHIRE INSURANCE CO., Plaintiff-Appellant, v. HOME SAVINGS AND LOAN CO. OF YOUNGSTOWN, OHIO, et al., Defendants-Appellees.

No. 08-3902.

United States Court of Appeals, Sixth Circuit.

Argued: March 13, 2009.

Decided and Filed: September 24, 2009.

ARGUED:

Edward R. Goldman, Rendigs, Fry, Kiely & Dennis, L.L.P., Cincinnati, Ohio, for Appellant. Robert S. Fulton, Newman, Olson & Kerr, Canfield, Ohio, Rosemary Taft Milby, Weltman, Weinberg & Reis Co., L.P.A., Cleveland, Ohio, for Appellees.

ON BRIEF:

Edward R. Goldman, Donald C. Adams, Jr., Rendigs, Fry, Kiely & Dennis, L.L.P., Cincinnati, Ohio, for Appellant. Robert S. Fulton, Newman, Olson & Kerr, Canfield, Ohio, Rosemary Taft Milby, Weltman, Weinberg & Reis Co., L.P.A., Cleveland, Ohio, Michael D. Rossi, Guarnieri & Secrest, P.L.L., Warren, Ohio, for Appellees.

Before: BATCHELDER, Chief Judge; CLAY, Circuit Judge; COX, District Judge.^*

OPINION

CLAY, Circuit Judge.

Plaintiff, New Hampshire Insurance Company ("New Hampshire" or "NHIC") appeals from the district court's order and judgment granting Defendants' motion to dismiss pursuant to its discretion to decline to exercise jurisdiction over claims brought under the Declaratory Judgment Act of 1934, 28 U.S.C. § 2001. Applying the Brillhart/Wilton abstention framework, the district court dismissed New Hampshire's complaint in favor of parallel proceedings pending in Ohio state court. On appeal, New Hampshire challenges the district court's application of the Brillhart/Wilton doctrine, contending that several factors support federal jurisdiction.

For the reasons set forth herein, we REVERSE the district court's assumption that it has jurisdiction and VACATE its analysis of the abstention issue, but AFFIRM its judgment dismissing NHIC's claims, although on different grounds.

I.

In November 2003, National Marine, Inc. ("National Marine"), a yacht dealer and marina operator, purchased a "Yacht Dealer/Marina Operators" general liability insurance policy from NHIC. The policy covered both "Yacht Dealer Operations" and "Marina Operations," as those terms are defined in the contract. ROA at 67. Generally speaking, the policy insured National Marine against loss or damage to its inventory, loss or damage to third-party property while in its custody, personal injury or property damage occurring on its boats or at its marina, and loss or damage to its tools and equipment. The policy also includes $300,000 in "Truth in Lending Errors and Omissions Liability Coverage," to insure against any damage due to "the unintentional violation of any Federal or State Consumer Credit Act, or similar statute, law or ordinance." ROA at 61.

In November 2004, several of National Marine's customers and two banks sued National Marine in the Court of Common Pleas in Trumbull County, Ohio, see Suhar v. Lukowski, No. 04-CV-2779, alleging that National Marine made fraudulent misrepresentations and failed to deliver certain boats with clean title, as promised. These former customers and banks sought recovery for breach of contract, fraud, and violation of the Ohio Consumer Sales Practices Act. National Marine filed a claim with NHIC under the "Truth in Lending" provision of the policy, requesting legal defense and indemnification from the charges.

NHIC provided coverage under reservation of rights, but also sued in federal court naming all the parties that had been named in the state court action, including Home Savings & Loan Company of Youngstown, Ohio ("Home Savings"), Sky Bank Financial Group ("Sky Bank"), National Marine Inc. and its predecessor National Marine & Auto (collectively "National Marine"), Andrew Suhar, receiver for National Marine, and additional individual defendants. Because one of these defendants was a New York resident and NHIC is a corporation with its principal place of business in New York, NHIC could not establish federal jurisdiction based on diversity. See 28 U.S.C. § 1332. NHIC instead asserted that jurisdiction existed under 28 U.S.C. § 1333(1), federal maritime jurisdiction. NHIC's complaint asked the district court to rescind the policy (on misrepresentation grounds) or declare that it did not cover these charges.

In light of the pending state court proceedings, Sky Bank moved to dismiss this action in October 2005. Home Savings subsequently joined that motion. Defendants' motion primarily argued that the federal district court should abstain from exercising its discretionary jurisdiction under the Declaratory Judgment Act because prior state court proceedings would resolve the same factual and legal disputes between the same parties.

Due to a November 2005 bankruptcy filing by one of the defendants, the district court stayed the federal proceedings without resolving the Defendants' motion to dismiss. After the case was reopened in March 2008, NHIC filed its opposition to the motion to dismiss. Home Savings filed a reply brief in support of the motion.

In May 2008, before the district court resolved Defendants' motion, NHIC filed an amended complaint seeking additional relief, including an order that the insurance policy at issue was void ab initio due to material misrepresentations in the policy application by National Marine. In addition to this rescission claim, NHIC also sought restitution, costs, and attorney fees.

On June 16, 2008, the district court dismissed the case without prejudice, framing NHIC's complaint as a request for declaratory judgment and concluding that, under the Declaratory Judgment Act, 28 U.S.C. § 2201(a), it had discretion to accept or deny jurisdiction. Because the Declaratory Judgment Act does not provide for its own federal subject matter jurisdiction, the court stated that it would assume subject matter jurisdiction pursuant to 28 U.S.C. § 1333(1) because the insurance policy at issue was a "marine insurance policy." The court then proceeded to hold that Brillhart v. Excess Insurance Co. of America, 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942), and Wilton v. Seven Falls Co., 515 U.S. 277, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995), provided the appropriate framework for resolving Defendants' motion and that the factors set forth in those decisions supported abstention. The district court rejected NHIC's contention that its claims for additional relief rendered the Brillhart/Wilton framework inapposite, declining to apply the "exceptional circumstances" test set forth in Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976).

This timely appeal followed.

II.

The district court assumed that NHIC had established federal subject matter jurisdiction pursuant to 28 U.S.C. § 1333(1) because the insurance policy at issue was a "marine insurance policy," and the parties have not contested this assumption on appeal. But "federal courts have a duty to consider their subject matter jurisdiction in regard to every case and may raise the issue sua sponte." Answers in Genesis of Ky., Inc. v. Creation Ministries Intern., Ltd., 556 F.3d 459, 465 (6th Cir.2009). As an initial matter, then, we must fulfill our duty to determine whether NHIC's claims fall within the scope of our federal maritime jurisdiction.

A.

Whether this dispute falls within the scope of our jurisdiction under 28 U.S.C. § 1333(1) depends upon whether the underlying claims arise under a "maritime contract," which in turn "depends upon the nature and character of the contract, and the true criterion is whether [the contract] has reference to maritime service or maritime transactions." Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 24, 125 S.Ct. 385, 160 L.Ed.2d 283 (2004) (quotation marks, citations, and editorial marks omitted).

The "Yacht Dealers/Marina Operators" policy that NHIC issued to National Marine covers both "Yacht Dealer Operations" and "Marina Operations," as those terms are defined in the policy. ROA at 67. With respect to the operation of the marina, the policy covers repairs, moorings of slips, hauling and launching of craft, and other marina services. ROA at 63. The policy also covers certain operations and services with respect to "pleasure craft covered by this policy which are being operated ... within a 500 mile radius of the insured's premises." ROA at 67. The policy does not cover any particular vessel or any particular commercial transaction. In fact, the policy appears to exclude any "owned water craft" from coverage. ROA at 40. With respect to the yacht dealer operations, the policy provides insurance coverage for "stock for sale," which includes "vessel[s] being held for sale by [the insured] or in [the insured's] care, custody or control, but only while such vessel[s are] afloat." ROA at 58, 65. The policy also includes, with respect to both operations, $300,000 in "Truth in Lending Errors and Omissions Liability Coverage," to insure against any damage due to "the unintentional violation of any Federal or State Consumer Credit Act, or similar statute, law or ordinance." ROA at 61.

Simply because this insurance policy relates to boats and a marina does not necessarily imply that it is a "maritime contract." As the Supreme Court explained in Kirby, "[t]o ascertain whether a contract is a maritime one, we cannot look to whether a ship or other vessel was involved in the dispute, as we would in a putative maritime tort case." 543 U.S. at 23, 125 S.Ct. 385. Rather, we must "focus[] our inquiry on whether the principal objective of a contract is maritime commerce." Id. at 25, 125 S.Ct. 385 (emphasis added); accord Sisson v. Ruby, 497 U.S. 358, 367, 110 S.Ct. 2892, 111 L.Ed.2d 292 (1990) ("The fundamental interest giving rise to maritime jurisdiction is `the protection of maritime commerce.'" (quoting Foremost Ins. Co. v. Richardson, 457 U.S. 668, 674, 102 S.Ct. 2654, 73 L.Ed.2d 300 (1982))). After the Court's decision in Kirby there can be no doubt that our inquiry into whether a contractual dispute falls within our...