Scottsdale Ins. Co. v. MRH Indian Enters.

• Decision Date: 30 June 2020
• Docket Number: Civil Action No. 19-cv-11878-ADB
• Parties: SCOTTSDALE INSURANCE COMPANY, Plaintiff, v. MRH INDIAN ENTERPRISES LLC d/b/a A PLUS WASTE RECYCLING and RON C. HIGH, JR., Defendants.
• Court: U.S. District Court — District of Massachusetts

SCOTTSDALE INSURANCE COMPANY, Plaintiff, v. MRH INDIAN ENTERPRISES LLC d/b/a A PLUS WASTE RECYCLINGand RON C. HIGH, JR., Defendants.

Civil Action No. 19-cv-11878-ADB

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

June 30, 2020

MEMORANDUM AND ORDER ON DEFENDANTS' MOTION TO DISMISS

BURROUGHS, D.J.

Scottsdale Insurance Company ("Plaintiff") brings this declaratory judgment action against MRH Indian Enterprises LLC d/b/a A Plus Waste Recycling and Ron C. High, Jr. ("Defendants") to determine its duty to defend or indemnify Defendants in an underlying environmental action pending in Massachusetts Superior Court (the "Underlying Action"). [ECF No. 1]. Currently before the Court is Defendants' motion to dismiss the complaint. [ECF No. 8]. For the reasons set forth below, the motion to dismiss, [ECF No. 8], is GRANTED, and the complaint is dismissed without prejudice to allow Plaintiff to re-file the action in state court.

I. FACTUAL BACKGROUND

The Court draws the relevant facts from the complaint. See MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 121 (2007) ("Because the declaratory-judgment claims in this case were disposed of at the motion-to-dismiss stage, we take the following facts from the allegations in petitioner's amended complaint and the unopposed declarations that petitioner submitted in response to the motion to dismiss.").

On March 25, 2016, twenty-one plaintiffs filed a claim in Massachusetts Superior Court, alleging private nuisance, public nuisance, negligence, gross negligence, and violations of both 310 C.M.R. § 7.09(1) and § 16.04(3)(a)(1), which regulate air pollution control and solid waste, stemming from Defendants' operation of a composting facility in Middleborough, Massachusetts. [ECF No. 1 ¶ 12]. Specifically, the state-court plaintiffs, who live near the composting facility, allege that

[c]omposting operations at the Facility generate putrid odors that pollute the air at Plaintiffs' properties, severely diminishing Plaintiffs' enjoyment of their properties and the quality of their lives. Despite frequent and escalating complaints over a period of years, and despite repeated regulatory enforcement action by the Massachusetts Department of Environmental Protection ("MassDEP"), the Facility's odors have persisted, and have become worse.

[ECF No. 1 ¶ 11].

Plaintiff's alleged duty to defend arises from several insurance policies that Plaintiff issued to Defendants covering the period from November 2, 2011, through October 27, 2015 (the "Insurance Policies"). [ECF No. 1 ¶ 9]. Though Plaintiff is not a party to the Underlying Action, it agreed to defend the Defendants, but reserved its right to challenge whether it has a duty to defend and indemnify. [ECF No. 9-1; ECF No. 10 at 3]. The Underlying Action was originally scheduled for trial on June 4, 2019, but was continued to September 23, 2019 and then to January 23, 2021. [ECF No. 9-1 at 12, 13].¹

II. PROCEDURAL BACKGROUND

On September 4, 2019, Plaintiff filed its complaint in which it seeks a declaratory judgment that it does not have a duty to defend or indemnify Defendants in the Underlying Action. [ECF No. 1 ¶ 2]. Plaintiff asserts twenty-six reasons in support of its claim that it has no duty to defend Defendants. [ECF No. 1 ¶ 15(a)-(z)]. Defendants moved to dismiss the complaint on October 10, 2019. [ECF Nos. 8, 9]. On October 24, 2019, Plaintiff opposed the motion to dismiss and clarified that despite claiming twenty-six reasons that it has no duty to defend Defendants, its complaint relied principally on a total pollution exclusion within the Insurance Policies. [ECF No. 10 at 3].

III. LEGAL STANDARD

The Declaratory Judgment Act, 28 U.S.C. § 2201, states in relevant part that

[i]n a case of actual controversy within its jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, 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. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.

28 U.S.C. § 2201(a). "[T]he Declaratory Judgment Act [is] 'an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant.'" Wilton v. Seven Falls Co., 515 U.S. 277, 287 (1995) (quoting Public Serv. Comm'n of Utah v. Wycoff Co., 344 U.S. 237 (1952)). "[D]istrict courts possess discretion in determining whether and when to entertain an action under the Declaratory Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional prerequisites." Atain Specialty Ins. Co. v. Davester LLC, No. 19-cv-11634, 2019 WL 5087338, at *3-4 (D. Mass. Oct. 10, 2019) (alteration in original) (quoting Wilton, 515 U.S. at 282); see also U.S. Liab. Ins. Co. v. Wise, 877 F. Supp. 348, 348 (D. Mass. 1995) (declining to exercise jurisdiction sua sponte in a declaratory judgment insurance action).

"The question for a district court presented with a suit under the Declaratory Judgment Act . . . is whether the questions in controversy between the parties to the federal suit, and which are not foreclosed under the applicable substantive law, can better be settled in the proceeding pending in the state court." Flectat Ltd. v. KASL Seabreeze LLC, 257 F. Supp. 3d 152, 157 (D. Mass. 2017) (alteration in original) (quoting Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Mar. Terminal, Inc., No. 14-cv-14541, 2015 WL 3952766, at *3 (D. Mass. June 29, 2015)).

Several factors, originally identified by the Supreme Court in Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942), guide whether a court should exercise its discretion to consider an action seeking declaratory relief related to a state-court case:

(1) the scope of the pending state court proceeding and the nature of the defenses open there; (2) whether the claims of all parties in interest can be adjudicated satisfactorily in the state proceeding; (3) whether necessary parties have been joined; (4) whether all necessary parties are amenable to process in the state proceeding; and (5) the virtue of avoiding uneconomical proceedings, vexatious proceedings, and gratuitous interference by a federal court with an orderly and comprehensive suit pending in a state court, presenting the same issues, not governed by federal law, between the same parties.

Flectat Ltd. v. KASL Seabreeze, LLC, 257 F. Supp. 3d 152, 156-57 (D. Mass. 2017) (citing Wilton, 515 U.S. at 283). No individual factor is dispositive and this list does not preclude consideration of additional factors that may inform "a district court's decision to stay or to dismiss a declaratory judgment action at the outset." Wilton, 515 U.S. at 283; see also Riva v. Massachusetts, 61 F.3d 1003, 1012 (1st Cir. 1995) (stating that it was appropriate for a court to exercise it discretion and consider a declaratory action when there was little factual uncertainty and the court determined that it would be more efficient and fair to the litigants to exercise its discretion); Haley & Aldrich, Inc. v. Specialty Tech. Consultants, Inc., 158 F. Supp. 3d 16, 19 (D. Mass. 2016) (dismissing declaratory judgment action regarding an alleged duty to indemnify in an underlying wrongful death action because the case did not involve federal law or federalissues); Seaton Ins. Co. v. Clearwater Ins. Co., 736 F. Supp. 2d 472, 476-77 (D.R.I. 2010) (denying a motion to dismiss a declaratory action because there were no common factual questions between the federal action and related state-law action); Nat'l Union Fire Ins. Co., 2015 WL 3952766, at *6 (staying an insurance coverage declaratory action concerning underlying breach of contract claims because of the absence of federal claims and the conflicts of interest in representation).

The party seeking declaratory judgment has the burden of establishing the court's jurisdiction. See Cardinal Chem. Co. v. Morton Int'l, Inc., 508 U.S. 83, 95 (1993) ("In the trial court . . . a party seeking a declaratory judgment has the burden of establishing the existence of an actual case or controversy." (citing Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240-241 (1937))). Thus, in considering Defendants' motion to dismiss, this Court must determine whether Plaintiff has met its burden by establishing that the instant action would be better settled in federal court based on the factors referenced above.

IV. DISCUSSION

This case asks the Court to determine whether a total pollution exclusion contained in Defendants' Insurance Policies with Plaintiff absolves Plaintiff of its duty to defend or indemnify Defendants in an underlying environmental action in state court. [ECF No. 10 at 1]. Defendants want the Court to dismiss the declaratory action, so that it can be brought in state court, or, in the alternative, to stay these proceedings until the conclusion of the Underlying Action. [ECF No. 8 at 1].

Because a determination of Plaintiff's duty to defend or indemnify Defendants in the Underlying Action would require the Court to consider whether Defendants' conduct caused "pollution," the exact issue presently before the state court in the Underlying Action, thisdeclaratory action is more appropriately brought in the state court. Additionally, it is more appropriate that the Court dismiss this case, rather than stay these proceedings while the Underlying Action is resolved in state court. If the Court were to stay these proceedings, the issue of whether Plaintiff has a duty to defend would not be resolved until after Plaintiff had already performed that duty by continuing to defend Defendants in the Underlying Action. Also, if it is necessary for a court to decide any indemnification issues after the resolution of the Underlying Action, the state court—having already heard the evidence relevant to whether Defendants' actions constituted pollution and thereby were excluded under the Insurance Policies—would be better...