Standard Fire Ins. Co. v. Sassin

• Decision Date: 02 August 1995
• Docket Number: Civ. No. 3:94-CV-0964-H,3:94-CV-2504-H.
• Citation: 894 F. Supp. 1023
• Parties: STANDARD FIRE INSURANCE COMPANY, Plaintiff, v. Faheem John SASSIN and Betty Sue Goolsby Sassin, Defendants. AMERICAN ECONOMY INSURANCE COMPANY, Plaintiff, v. Faheem John SASSIN, Betty Sue Goolsby Sassin, and J.T. and V.T., Minor Children, By and Through Their Managing Conservator, Monica Triplett, Defendants.
• Court: U.S. District Court — Northern District of Texas

894 F. Supp. 1023

STANDARD FIRE INSURANCE COMPANY, Plaintiff, v. Faheem John SASSIN and Betty Sue Goolsby Sassin, Defendants.

AMERICAN ECONOMY INSURANCE COMPANY, Plaintiff, v. Faheem John SASSIN, Betty Sue Goolsby Sassin, and J.T. and V.T., Minor Children, By and Through Their Managing Conservator, Monica Triplett, Defendants.

Civ. Nos. 3:94-CV-0964-H, 3:94-CV-2504-H.

United States District Court, N.D. Texas, Dallas Division.

August 2, 1995.

Robert Lynn Fielder, Fisk & Fielder, Dallas, TX, for Standard Fire Ins. Co.

E. Thomas Bishop, Kathryn Elaine Eriksen, Law Office of E. Thomas Bishop, Dallas, TX, for American Economy Ins. Co.

Charles Gregory Shamoun, Law Office of Joseph E. Ashmore Jr., Dallas, TX, for Faheem John Sassin, Betty Sue Goolsby Sassin.

Charles Gregory Shamoun, Howard Jay Klatsky, Law Office of Joseph E. Ashmore Jr., Dallas, TX, for Monica Triplett.

MEMORANDUM OPINION AND ORDER

SANDERS, District Judge.

Before the Court is a Motion to Dismiss for Failure to State a Claim Upon Which Relief Can be Granted ("Motion to Dismiss"), filed January 17, 1995 in Civil No. 3:94-CV-2504-H by J.T. and V.T., minor children, by and through their managing conservator, Monica Triplett (collectively, the "Triplett Defendants"). Also before the Court are the Response filed by Plaintiff American Economy Insurance Company ("AEIC") on January 26, 1995, and Defendants' Reply, filed January 30, 1995.

Also before the Court is Plaintiff AEIC's Motion for Summary Judgment, filed March 15, 1995, to which Defendants have filed no response.

I. Background

The cases consolidated as 3:94-CV-0964-H relate to a coverage dispute over homeowners insurance policies issued by Plaintiffs Standard Fire Insurance Company ("Standard") and AEIC to Defendants Faheem John Sassin and Betty Sue Goolsby Sassin (collectively, "the Sassins" or the "Sassin Defendants"). In each case, an issuer of homeowners insurance seeks a declaration that it has no duty to defend and no duty to indemnify the Sassins with regard to a state court suit alleging that the Sassins molested two minor children.

The state court suit, Cause No. 94-3419-F, was filed in the 116th Judicial District Court of Dallas County, Texas, on April 8, 1994. Standard's Original Complaint for Declaratory Judgment ("Standard Complaint") at 3. Plaintiffs in the state court suit allege that Faheem John Sassin, Betty Sue Goolsby Sassin, and Clyde Perkins¹ "committed acts and omissions constituting sexual assault against Plaintiffs dating back to Spring 1985." AEIC's Original Complaint for Declaratory Judgment ("AEIC Complaint") ¶ 8. After being served with process in the state court suit, the Sassin Defendants demanded defense and indemnification from each of the insurers. Id. ¶ 9; Standard Complaint ¶ 7.

Standard filed its Original Complaint for Declaratory Judgment against the Sassin Defendants on May 16, 1994. AEIC filed its Original Complaint for Declaratory Judgment on November 22, 1994, seeking declarations as to both the Sassin Defendants and the Triplett Defendants (plaintiffs in the underlying state court suit). Finding that the two cases involved common questions of law and fact, the Court consolidated the cases in an Order dated January 6, 1995.

The Triplett Defendants initially did not answer AEIC's Complaint, and default was entered against them on January 13, 1995. Before default was entered, however, AEIC's counsel spoke with Defendant Triplett, who advised counsel that her state court lawyers could not represent her in the federal suit and that she was attempting to locate counsel to represent her in the instant suit.² Response at 2; Motion for Leave to File Motion to Dismiss ("Motion for Leave") ¶¶ 3-4. Knowing that Defendant Triplett was unrepresented, AEIC's counsel nonetheless attempted to secure an agreed judgment against the Triplett Defendants. Response at 2; Motion for Leave ¶ 4. Although the parties provide different characterizations of these events,³ their description of the proposed judgment is the same: the Triplett Defendants were to concede that AEIC's policies provided no coverage or indemnification for the state court suit, and in return AEIC would not seek costs or attorneys' fees from the Triplett Defendants in the instant suit. See Response at 2.

The proposed judgment was never signed. Instead, the Triplett Defendants obtained counsel and sought leave to file a motion to dismiss. In an Order dated January 17, 1995, the Court set aside the default for good cause shown and allowed the Triplett Defendants to file their motion to dismiss. AEIC filed its summary judgment motion on March 15, 1995; subsequently, on April 13, 1995, it dismissed its claims against the Sassin Defendants. See Order Dismissing American Economy Insurance Company's Claims Against Faheem John Sassin and Betty Sue Goolsby Sassin. Accordingly, AEIC's only remaining claim is its declaratory judgment action against the Triplett Defendants.

II. Motion to Dismiss

The Triplett Defendants seek dismissal of Plaintiff AEIC's claims against them on the ground that no controversy sufficient to confer jurisdiction currently exists.⁴ AEIC contends, however, that the Tripletts' state court suit against the Sassins creates a justiciable controversy between the Tripletts and AEIC. Specifically, AEIC asserts that the Triplett Defendants "are interested parties in this litigation because they seek to recover payments under the Policies issued by American Economy." AEIC Complaint ¶ 10.

In support of their motion, the Triplett Defendants cite Texas cases concerning the relationship between an insurer and a tort plaintiff. Texas courts, applying the Texas Declaratory Judgment Act, have held that no justiciable controversy exists between an insurer and a tort plaintiff who has a suit pending against the insured. See Firemen's Ins. Co. v. Burch, 442 S.W.2d 331, 332-33 (Tex.1968); Providence Lloyds v. Blevins, 741 S.W.2d 604, 606 (Tex.App. — Austin 1987, no writ); National Savings Ins. Co. v. Gaskins, 572 S.W.2d 573, 575-76 (Tex.Civ.App. — Fort Worth 1978, no writ). As AEIC points out, however, cases decided by reference to the Texas Declaratory Judgment Act are not binding on this Court. In this declaratory judgment action, in which subject matter jurisdiction is based solely on diversity, federal law governs whether a justiciable controversy exists within the purview of the Declaratory Judgment Act, 28 U.S.C. § 2201. Hunt v. State Farm Mut. Auto. Ins. Co., 655 F.Supp. 284, 286 (D.Nev.1987); MacMillan-Bloedel, Inc. v. Firemen's Fund Ins. Co., 558 F.Supp. 596, 598 (S.D.Ala.1983). Accordingly, the Court turns to the relevant federal statute and case law.

The Declaratory Judgment Act 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.

28 U.S.C. § 2201. The Declaratory Judgment Act does not exempt federal district courts from the constitutional requirement that there be an actual controversy between the parties. Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-41, 57 S.Ct. 461, 463-64, 81 L.Ed. 617 (1937); Middle South Energy, Inc. v. City of New Orleans, 800 F.2d 488, 490 (5th Cir.1986). If there is no actual controversy between the parties, the district court lacks subject matter jurisdiction and must dismiss the case. There is, however, no precise test for determining whether a case or controversy exists. In each case, the court must determine whether the facts alleged show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment. See Haworth, 300 U.S. at 239-42, 57 S.Ct. at 463-65.

In the leading case on the issue, Maryland Casualty, the Supreme Court reversed two lower court decisions dismissing an insurer's declaratory judgment action against a tort plaintiff. Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 61 S.Ct. 510, 85 L.Ed. 826 (1941). In determining that an actual controversy existed, Justice Murphy emphasized that Ohio law gave the tort plaintiff a statutory right of action against the insurance company and allowed him to take actions, such as providing the insurer with notice of the accident, that were required in order to keep the policy from lapsing. Id. at 273-74, 61 S.Ct. at 512-13. This emphasis on the rights of the parties under state law was accompanied by a policy concern, that an insurer might be subjected to contradictory policy interpretations if it were not allowed to join the insured and the state court plaintiff in a single forum. Id. at 274, 61 S.Ct. at 512-13.

Since Maryland Casualty, several lower courts have held that an insurer's claim against a tort plaintiff constitutes a case or controversy sufficient to confer federal jurisdiction. See, e.g., Cincinnati Ins. Co. v. Holbrook, 867 F.2d 1330 (11th Cir.1989). These cases do not doom the Triplett Defendants' motion, however. Consistent with Maryland Casualty, courts faced with declaratory judgment actions involving insurers and tort plaintiffs have acknowledged that state law, by defining the substantive rights of the parties, plays a large role in determining whether a case or controversy exists. See Holbrook, 867 F.2d at 1332-33; Vermont Mut. Ins. Co. v. Everette, 875 F.Supp. 1181, 1185-86 (E.D.Va.1995); Hunt, 655 F.Supp. at 286-87; MacMillan-Bloedel, 558 F.Supp. at 598. As one district court has observed, the applicability of federal declaratory judgment law to the "case or controversy" question does not render state law irrelevant: "Where ... substantive law governing the rights of the parties is relevant to the Court's analysis, state law applies." Hunt, 655 F.Supp. at 286 (citing St. Paul Fire and Marine Ins....