Sandefer Oil & Gas, Inc. v. Duhon

• Citation: 871 F.2d 526
• Decision Date: 28 April 1989
• Docket Number: No. 88-4555,88-4555
• Parties: SANDEFER OIL & GAS, INC., and Sohio Petroleum Co., Plaintiffs-Appellants, v. Deanne Lounsberry DUHON, and Freddie Paul Lounsberry, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 526

871 F.2d 526

13 Fed.R.Serv.3d 1209

SANDEFER OIL & GAS, INC., and Sohio Petroleum Co. Plaintiffs-Appellants, v. Deanne Lounsberry DUHON, and Freddie Paul Lounsberry Defendants-Appellees.

No. 88-4555.

United States Court of Appeals Fifth Circuit.

April 28, 1989.

George W. Hardy, III, Herman E. Garner, Lafayette, La., for plaintiffs-appellants.

Clifton O. Bingham, Jr., Rudolph Estess, Jr., Baton Rouge, La., for defendants-appellees.

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

Before GARZA, JOLLY and JONES, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

In this case we consider whether the district court abused its discretion in declining to exercise jurisdiction under the Declaratory Judgment Act over a complaint seeking a declaration of rights under a disputed portion of an oil, gas and mineral lease. Finding that the court did abuse its discretion, we reverse its dismissal of that complaint and remand for further proceedings.

I

On January 31, 1985, Deanne Lounsberry Duhon and Freddie Paul Lounsberry as lessors ("Lessors") executed an oil, gas and mineral lease in favor of Allen, Fisher, Kirmse & Allen, Ltd. ("Allen"), as lessee. Allen was an oil and gas lease broker, acting as an agent for Sandefer Oil & Gas, Inc. ("Sandefer"), and subsequently assigned to Sandefer all right, title and interest in the lease. Sandefer later assigned to Sohio Petroleum Company ("Sohio") an undivided interest in the lease.

The primary term of the lease expired on January 31, 1988, and a dispute arose as to whether certain portions of the lease had been maintained beyond the primary term of the lease. Sandefer and Sohio filed this suit for declaratory judgment on February 22, 1988 in federal district court.

On April 14, 1988 the Lessors filed a Petition for Partial Cancellation of Oil, Gas and Mineral lease against Allen, Sandefer and Sohio in Louisiana state court. On April 15, 1988, they then moved to dismiss the previously filed declaratory judgment action, alleging, first, that Allen, a Louisiana corporation, was an indispensable party plaintiff to the suit for declaratory relief and its naming as a party would defeat the district court's diversity jurisdiction; and second, if Allen were not an indispensable party, the district court should exercise its discretion under 28 U.S.C. Sec. 2201 to decline to hear Sandefer's and Sohio's suit because the pending nonremovable state court action, in which Allen was a party, would settle all the issues between all the parties.

On July 6, 1988, the district court granted the Lessors' Motion to Dismiss Sandefer's and Sohio's declaratory judgment suit. In pertinent part the court's order reasoned as follows:

Ordinarily it would be uneconomical as well as vexatious for a federal court to proceed in a delaratory judgment suit where another suit is pending in state court presenting the same issues, not governed by federal law, between the same parties. See Brillhart v. Excess Insurance Co., 316 U.S. 491, 62 S.Ct. 1173 . Furthermore, where a contemporaneous state proceeding will resolve expeditiously all issues in controversy, a federal district court should defer to the state court proceeding by declining to exercise jurisdiction under the Declaratory Judgment Act. See 28 U.S.C. Sec. 2201 et seq. and Fed.R.Civ.P. 67.

This Court should abstain from hearing plaintiffs' declaratory judgment suit, because there exists a similar state court action wherein all the issues raised in this suit can be fully and more appropriately litigated. Furthermore, there exists no compelling federal interest to be resolved. In addition, the federal declaratory judgment action is not too far advanced and the lessee will not face the danger of potentially conflicting obligations. See Transamerica Occidental Life Ins. v. Digregorio, 811 F.2d 1249.

Sandefer and Sohio filed their notice of appeal to this court from that order on the same day.

On October 20, 1988, the state court ruled on exceptions Allen, Sandefer and Sohio had since filed to the state court suit, alleging that that suit was premature as to Allen and Sohio because the Lessors made no demand on either party for a release, and alleging that, as to Sandefer, the existence of the federal suit precluded any further proceedings in state court. The state court sustained Allen's exception of prematurity, denied Sohio's exception of prematurity, and sustained Sandefer's exception of pendency of another action. It stayed all further proceedings in the state court case against any party until dissolution of the stay, or until final judgment is rendered in the previously filed federal court action.

II

On appeal, Sandefer and Sohio urge that the district court had diversity jurisdiction over their declaratory judgment action and erred in refusing to hear it, because, under Colorado River and Moses Cone, the Lessors had shown no "exceptional circumstances" in which "an important countervailing interest" would clearly be served by having the parties repair to state court. Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 14 103 S.Ct. 927, 936, 74 L.Ed.2d 765 (1983); Colorado River Water Conservation District v. United States, 424 U.S. 800, 813, 96 S.Ct. 1236, 1244, 47 L.Ed.2d 483 (1976).

There is a conflict among cases in this circuit concerning whether the Colorado River-Moses Cone factors apply in declaratory judgment actions. In Mission Ins. Co. v. Puritan Fashions Corp., 706 F.2d 599 (5th Cir.1983), we explicitly stated that "the purely remedial and equitable nature of declaratory judgments vests the court with discretion, and sets declaratory judgments outside the scope of Cone." 706 F.2d at 601, n. 1. Mission cited Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942), with approval for the proposition that the Declaratory Judgment Act "confers no jurisdiction but is a procedural device designed to provide a new remedy to the federal court arsenal.... [I]t is a matter for the district court's discretion whether to decide a declaratory judgment action." Id. (citations omitted). The Supreme Court had held in Brillhart that where the district court had dismissed a complaint without considering whether the claims could be raised in the pending state court proceeding, it had abused its discretion. The Court remanded so that the district court might properly exercise its discretion. See 316 U.S. at 493-96, 498, 62 S.Ct. at 1174-76, 1177.

In contrast, in Evanston Ins. Co. v. Jimco, Inc., 844 F.2d 1185 (5th Cir.1988), a Fifth Circuit panel reviewed a district court's decision to abstain from exercising jurisdiction over a declaratory judgment action, using the Colorado River and Moses Cone factors. The district court had discussed and applied each of the six Colorado River-Moses Cone factors; the panel in Jimco concluded that the court had misapplied several of the factors and failed to weight the balance heavily in favor of exercising jurisdiction, and reversed for those reasons. Jimco can certainly be...