The Cincinnati Specialty Underwriters Ins. Co. v. Richards

• Decision Date: 13 September 2022
• Docket Number: 5:22-cv-06010-RK
• Parties: THE CINCINNATI SPECIALTY UNDERWRITERS INSURANCE COMPANY, Plaintiff, v. KRISTY RICHARDS, THE BUNKHOUSE BAR & GRILL, Defendants.
• Court: U.S. District Court — Western District of Missouri

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THE CINCINNATI SPECIALTY UNDERWRITERS INSURANCE COMPANY, Plaintiff, v. KRISTY RICHARDS, THE BUNKHOUSE BAR & GRILL, Defendants.

No. 5:22-cv-06010-RK

United States District Court, W.D. Missouri, St. Joseph Division

September 13, 2022

ORDER

ROSEANN A. KETCHMARK, JUDGE.

This is a diversity case seeking declaratory judgment as to Plaintiff The Cincinnati Specialty Underwriters Insurance Company's (“Cincinnati Specialty”) coverage obligation under a liability insurance policy it issued to Defendant The Bunkhouse Bar & Grill. Before the Court is Defendant Kristy Richards' motion to dismiss. (Doc. 6.) The motion is fully briefed. (Docs. 7, 10, 11.) Ms. Richards argues this insurance-coverage declaratory judgment action should be dismissed under the Wilton/Brillhart abstention doctrine in light of a pending equitable garnishment and declaratory judgment action in Missouri state court she has brought against Cincinnati Specialty. After careful consideration and for the reasons explained below, the Court ORDERS that Ms. Richards' motion to dismiss (Doc. 6) is GRANTED, and this case is DISMISSED under the Wilton/Brillhart abstention doctrine.

I. Background

In 2018, Ms. Richards sued The Bunkhouse Bar & Grill and its owner/manager Rachel Jackson following a 2013 physical altercation outside the bar involving Ms. Richards, Ms Jackson, and others. (Doc. 1 at 2-3, ¶¶ 9-13.) Ms. Richards asserted claims against The Bunkhouse Bar & Grill for negligence per se concerning violation of state liquor regulations and common law negligence concerning hiring and supervision of employees. (Id. at 3, ¶¶ 14-15.) Ms. Richards also asserted a claim for battery against Ms. Jackson. (Id. at ¶ 16.) At trial, the jury ultimately found in favor of Ms. Jackson as to Ms. Richards' battery claim, and in favor of Ms. Richards as to her negligence claims against The Bunkhouse Bar & Grill. (Id. at 5, ¶¶ 26-27.) On April 30, 2018, the Circuit Court of Platte County, Missouri, accordingly entered judgment in favor of Ms. Richards against The Bunkhouse Bar & Grill in the amount of $405,000 plus costs and postjudgment interest. (Id. at ¶ 28.)

Less than one month later, on May 18, 2018, Cincinnati Specialty - which had issued a liability insurance policy to The Bunkhouse Bar & Grill at the time of the 2013 physical altercation (“2013 policy”) - sent a check to Ms. Richards for $29,711.24 (representing a $25,000 policy limit plus costs and post-judgment interest). (Id. at 8, ¶ 33.) More than three years later, on September 28, 2021, Ms. Richards filed a garnishment action in state court against Cincinnati Specialty for $468,241.34. (Id. at ¶ 34.) Shortly after Cincinnati Specialty removed the garnishment action to federal court, Ms. Richards released the garnishment against Cincinnati Specialty. (Id. at ¶ 35); see Richards v. The Bunkhouse Bar & Grill, No. 5:21-cv-06142-RK (W.D. Mo.) (doc. 11 (order remanding the case to state court for lack of subject matter jurisdiction because the garnishment had been released)).

On January 17, 2022, approximately two months after it was released from garnishment in the prior action, Cincinnati Specialty filed this federal declaratory judgment action seeking a determination of its obligation under the 2013 policy as applied to Ms. Richards' 2018 judgment against The Bunkhouse Bar & Grill. (Doc. 1 at 8-9.) Specifically, Cincinnati Specialty seeks a declaratory judgment that it has fully satisfied its obligation under the 2013 policy by issuing the earlier payment to Ms. Richards. Cincinnati Specialty contends the 2013 policy includes a $25,000 limit for claims arising out of assault or battery (or the failure to prevent or suppress assault or battery). (Id. at 8, ¶¶ 37, 43.) On March 10, 2022, Ms. Richards filed an equitable garnishment and declaratory judgment action in the Circuit Court of Platte County, Missouri, against The Bunkhouse Bar & Grill and Cincinnati Specialty regarding coverage under the 2013 policy as it relates to her 2018 judgment against The Bunkhouse Bar & Grill. Richards v. The Bunkhouse Bar & Grill, LLC, No. 22AE-CC00066 (Cir. Ct. of Platte Cty.)

II. Discussion

Ms. Richards argues in her motion to dismiss that this Court should abstain from exercising its jurisdiction in Cincinnati Specialty's federal declaratory judgment action in favor of the pending equitable garnishment and declaratory judgment action before the Circuit Court of Platte County. Cincinnati Specialty argues the Court should continue to exercise its jurisdiction in this federal case notwithstanding the parallel state-court insurance-coverage lawsuit.

A. Whether abstention under the Wilton/Brillhart abstention doctrine is appropriate in this case

Generally, federal courts “must exercise [their] jurisdiction over a claim unless there are ‘exceptional circumstances' for not doing so.” Scottsdale Ins. Co. v. Detco Indus., Inc., 426 F.3d 994, 996 (8th Cir. 2005) (citing Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 16-19 (1983); Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 818 (1976)). However, where (as here) a federal lawsuit seeks relief under the Declaratory Judgment Act, 28 U.S.C. § 2201, the United States Supreme Court has recognized that federal courts have “greater discretion” to “decline to enter a declaratory judgment” when there is a parallel action pending in state court. Wilton v. Seven Falls Co., 515 U.S. 277, 286 & 287 (1995); accord Royal Indem. Co. v. Apex Oil Co., 511 F.3d 788, 792-93 (8th Cir. 2008) (recognizing “in a declaratory judgment action, a federal court has broad discretion to abstain from exercising jurisdiction even if there are no exceptional circumstances as articulated in Colorado River”) (citation omitted).

In Wilton, the Supreme Court explained: “If a district court, in the sound exercise of its judgment, determines after a complaint is filed that a declaratory judgment will serve no useful purpose, it cannot be incumbent upon that court to proceed to the merits before staying or dismissing the action.” 515 U.S. at 288. The guiding inquiry 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.'” Id. at 282 (quoting Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494 (1942)).

In other words, “[w]hen there is a federal declaratory judgment action and a parallel state court proceeding, ‘the normal principle that federal courts should adjudicate claims within their jurisdiction yields to considerations of practicality and wise judicial administration.'” GEICO Cas. Co. v. Isaacson, 932 F.3d 721, 724 (8th Cir. 2019) (quoting Wilton, 515 U.S. at 288). “Rendering a declaratory judgment where there are parallel state court proceedings and no issues of federal law would ordinarily be uneconomical as well as vexatious.” Id. at 724 (citation and quotation marks omitted). The Eighth Circuit has set forth the operative consideration in this context as follows:

[I]n [d]eciding whether to entertain a declaratory judgment action, a district court should determine if the question in controversy would be better settled in the proceedings in state court. This analysis includes whether the state case involves the same issues and parties as the federal declaratory case, whether all claims can be decided in the state court, and whether all parties are joined and amenable to process there. The issues cannot be governed by federal law.

Cincinnati Indem. Co. v. A&K Constr. Co., 542 F.3d 623, 625 (8th Cir. 2008) (citations omitted); accord Lexington Ins. Co. v. Integrity Land Title Co., Inc., 721 F.3d 958, 967 (8th Cir. 2013) (when a parallel state action is pending vis-a-vis a federal declaratory judgment action, a federal court's discretionary decision whether to abstain in a declaratory judgment action “is to be guided by considerations of judicial economy, by considerations of practicality and wise judicial administration, and with attention to avoiding gratuitous interference with state proceedings”) (citations and quotation marks omitted) (cleaned up).

Ms. Richards argues that the equitable garnishment and declaratory judgment action now pending in state court is parallel to this federal declaratory judgment action and that the Court should accordingly abstain from exercising its jurisdiction in this case under the Wilton/Brillhart abstention doctrine. Ms. Richards argues that abstention is appropriate here because the issue in controversy is the same - i.e., Cincinnati Specialty's obligation under the 2013 policy applied to the 2018 judgment against The Bunkhouse Bar & Grill - and is a controversy that squarely involves issues of state (not federal) law. Thus, Ms. Richards argues the state court is in the best position to interpret the 2013 policy as applied to her 2018 judgment. Cincinnati Specialty does not challenge Ms. Richards' characterization of the equitable garnishment and declaratory judgment action now pending in state court as parallel to this federal case. See Scottsdale Ins., 426 F.3d at 997 (“Suits are parallel if substantially the same parties litigate substantially the same issues in different forums.”) (citations and quotation marks omitted). Rather, Cincinnati Specialty argues that the Court should simply continue to exercise its jurisdiction in this case.

First Cincinnati Specialty relies on AMCO Insurance Co. v. Columbia Maintenance Co., 510 F.Supp.3d 836 (E.D. Mo. 2020), in which the district court declined to abstain from exercising jurisdiction in a federal declaratory judgment action despite parallel state proceedings. In AMCO, the district court found that abstention would not serve...