Seneca Specialty Ins. Co. v. Chappell
| Docket Number | Civil Action 1:20-CV-222 |
| Decision Date | 24 November 2021 |
| Parties | SENECA SPECIALTY INSURANCE COMPANY, Plaintiff, v. RANDY E. CHAPPELL, VINTON HOOKAH LOUNGE, LLC d/b/a Angels, AARON MICHAEL WARREN, and FELICIA MANUEL, individually and as next friend of Noah Manuel and on behalf of the Estate of Damien Manuel, Defendants. |
| Court | U.S. District Court — Eastern District of Texas |
Pending before the court is Defendant Felicia Manuel's (“Manuel”) Rule 12(b)(1) Motion to Dismiss for Lack of Subject Matter Jurisdiction (#33). Plaintiff Seneca Specialty Insurance Company (“Seneca”) filed a response (#36). Having considered the pending motion Seneca's response, the record, and the applicable law the court is of the opinion that the motion should be granted.
This lawsuit involves a state court action (the “Underlying Lawsuit”)[1] filed by Manuel, individually and as next fried of Noah Manuel, against Defendants Randy E. Chappell, Vinton Hookah Lounge, LLC d/b/a Angels (“Angels”), and Aaron Michael Warren (“Warren”) (collectively, “Underlying Defendants”), in connection with the personal injuries and death of Damien Manuel (the “Decedent”). The Original Petition alleged that the Decedent sustained serious injuries at Angels as the result of Warren's commission of assault and/or battery. Angels has a commercial general liability insurance policy issued by Seneca (the “Policy”), which covers Angels and its employees who are acting within the scope of their employment and has exclusions for damages due to bodily injury arising out of assault and/or battery.
Manuel filed the Underlying Lawsuit on February 6, 2017, alleging that the Decedent's injuries were caused by Warren's assault and/or battery. After Seneca denied Angels a defense under the Policy, Manuel amended the state court petition to omit allegations of assault and/or battery, basing her claims instead on theories of negligence.
On May 22, 2020, Seneca filed suit in this court seeking a declaratory judgment regarding its duties to defend and indemnify the Underlying Defendants in the Underlying Lawsuit. In its initial complaint (#1), Seneca denied that it had a duty either to defend or indemnify the Underlying Defendants based on the assault and battery exclusion in the Policy. On August 18, 2020, Seneca amended its complaint (#29), asserting that it is currently defending the Underlying Defendants in the Underlying Lawsuit but that it is doing so subject to a reservation of rights. Nevertheless, when Seneca amended its complaint, it removed its request for a judicial declaration that it does not owe the Underlying Defendants a duty to defend. Accordingly, Seneca seeks a judicial declaration on a single issue-whether it owes the Underlying Defendants a duty to indemnify because the alleged damages in the underlying action are not the result of an accidental “occurrence, ” but rather an assault and/or battery which is excluded under the Policy.
Manuel filed a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, arguing that the duty to indemnify issue is not ripe, as the Underlying Lawsuit has not been resolved.[2] The court agrees.
A motion to dismiss filed under Rule 12(b)(1) of the Federal Rules of Civil Procedure challenges the subject matter jurisdiction of the federal district court. See Fed. R. Civ. P. 12(b)(1). “Federal courts are courts of limited jurisdiction.” Home Depot U.S.A., Inc., v. Jackson, __U.S.__, 139 S.Ct. 1743, 1746 (2019) (quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994)); accord Gunn v. Minton, 568 U.S. 251, 256 (2013); Rasul v. Bush, 542 U.S. 466, 489 (2004); Lavery v. Barr, 943 F.3d 272, 275 (5th Cir. 2019); Energy Mgmt. Servs., LLC v. City of Alexandria, 739 F.3d 255, 257 (5th Cir. 2014). “They possess only that power authorized by Constitution and statute, which is not to be expanded by judicial decree.” Rasul, 542 U.S. at 489 (quoting Kokkonen, 511 U.S. at 377 (citations omitted)). The court “must presume that a suit lies outside this limited jurisdiction, and the burden of establishing federal jurisdiction rests on the party seeking the federal forum.” Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir.) (citing Kokkonen, 511 U.S. at 377), cert. denied, 534 U.S. 993 (2001); accord Hertz Corp. v. Friend, 559 U.S. 77, 96 (2010); Gonzalez v. Limon, 926 F.3d 186, 188 (5th Cir. 2019); Clayton v. Conoco Phillips Co., 722 F.3d 279, 290 (5th Cir. 2013), cert. denied, 571 U.S. 1156 (2014).
In this instance, Seneca seeks a declaratory judgment that it does not have the duty to indemnify the Underlying Defendants in the Underlying Lawsuit. The Declaratory Judgment Act (“DJA”) provides in relevant part:
In 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). “The purpose of the Declaratory Judgment Act is to settle ‘actual controversies' before they ripen into violations of law or breach of some contractual duty.” United Transp. Union v. Foster, 205 F.3d 851, 857 n.8 (5th Cir. 2000) (quoting Hardware Mut. Cas. Co. v. Schantz, 178 F.2d 779, 780 (5th Cir. 1949)); accord Sherwin-Williams Co. v. Holmes County, 343 F.3d 383, 397 (5th Cir. 2003); Rowan Cos., Inc. v. Griffin, 876 F.2d 26, 28 (5th Cir. 1989); Precision Drilling Co. v. Crum & Forster Ins. Co., No. 4:21-CV-00570, 2021 WL 4820670, at *2 (S.D. Tex. Oct. 15, 2021). The DJA “‘enlarged the range of remedies available in the federal courts,' but it did not create a new right to seek those remedies.” Harris County v. MERSCORP Inc., 791 F.3d 545, 552 (5th Cir. 2015) (quoting Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671-72 (1950)); accord Marriott Int'l, Inc. v. Danna, 772 Fed.Appx. 42, 45 (5th Cir. 2019). The DJA, therefore, allows “relief to be given by way of recognizing the plaintiff's right even though no immediate enforcement of it was asked.” Textron Lycoming Reciprocating Engine Div. v. United Auto., Aerospace & Agric. Implement Workers of Am. Int'l Union, 523 U.S. 653, 660 n.3 (1998) (quoting Skelly Oil Co., 339 U.S. at 671-72); accord Jacuzzi v. Pimienta, 762 F.3d 419, 421 (5th Cir. 2014).
It is well established that the “determination of whether to grant declaratory relief is within the district court's discretion.” Env't Tex. Citizen Lobby, Inc. v. Exxon Mobil Corp., 824 F.3d 507, 523 (5th Cir. 2016); Odeco Oil & Gas Co., Drilling Div. v. Bonnette, 4 F.3d 401, 404 (5th Cir. 1993), cert. denied, 511 U.S. 1004 (1994); see Wilton v. Seven Falls Co., 515 U.S. 277, 281 (1995); Brillhart v. Excess Ins. Co., 316 U.S. 491, 494 (1942). This discretion, however, is qualified by the proviso that a court must have a sufficient reason for declining to grant a declaratory judgment. Mullen v. JPMorgan Chase Bank, N.A., 726 Fed.Appx. 246, 247 (5th Cir. 2018); Ironshore Specialty Ins. Co. v. Tractor Supply Co., 624 Fed.Appx. 159, 164 (5th Cir. 2015); Vulcan Materials Co. v. City of Tehuacana, 238 F.3d 382, 390 (5th Cir. 2001); St. Paul Ins. Co. v. Trejo, 39 F.3d 585, 590 (5th Cir. 1994). In determining whether to grant a declaratory judgment, a court must act in accordance with the purposes of the DJA and the principles of sound judicial administration. Sherwin-Williams Co., 343 F.3d at 389; EMC Corp. v. Norand Corp., 89 F.3d 807, 813-14 (Fed. Cir. 1996), cert. denied, 519 U.S. 1101 (1997); Trejo, 39 F.3d at 590; Honey Holdings I, Ltd. v. Alfred L. Wolff, Inc., 81 F.Supp.3d 543, 555 (S.D. Tex. 2015). When considering a declaratory judgment action, a district court must determine: “(1) whether the declaratory action is justiciable; (2) whether the court has the authority to grant declaratory relief; and (3) whether to exercise its discretion to decide or dismiss the action.” Sherwin-Williams Co., 343 F.3d at 387; accord Sasol N. Am., Inc. v. GTL Petrol, L.L.C., 682 Fed.Appx. 312, 314 (5th Cir. 2017); Orix Credit All., Inc. v. Wolfe, 212 F.3d 891, 895 (5th Cir. 2000); JMCB, LLC v. Bd. of Com. & Indus., 293 F.Supp.3d 580, 597 (M.D. La. 2017).
Under the first prong, no declaratory judgment may issue unless there exists an “actual controversy.” Ironshore Specialty Ins. Co., 624 Fed.Appx. at 163; Orix Credit All., Inc., 212 F.3d at 895. The meaning of “actual controversy” for purposes of a declaratory judgment is identical to the meaning of “case or controversy” under Article III of the United States Constitution. Ironshore Specialty Ins. Co., 624 Fed.Appx. at 163 (citing Texas v. W. Publ'g Co., 882 F.2d 171, 175 (5th Cir. 1989), cert. denied, 493 U.S. 1058 (1990)); Lawson v. Callahan, 111 F.3d 403, 405 (5th Cir. 1997). Thus, to obtain declaratory relief, the plaintiff must demonstrate that the “particular dispute is ripe for adjudication, ” meaning that “a substantial controversy of sufficient immediacy and reality exists between parties having adverse legal interests.” Lower Colo. River Auth. v. Papalote Creek II, L.L.C., 858 F.3d 916, 924 (5th Cir. 2017) (quoting Venator Grp. Specialty, Inc. v. Matthew/Muniot Family, LLC, 322 F.3d 835, 838 (5th Cir. 2003)), cert. denied, 138 S.Ct. 747 (2018).
Under Texas law, which applies in this case, [3] “the duties to defend and indemnify ‘are distinct and separate duties' and ‘enjoy a degree of independence from each other.'” Weeks Marine, Inc. v. Standard Concrete Prods., Inc., 737...
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