Opinion
Civil Action No. 3:01-CV-1858-D
December 17, 2001
ORDER
Plaintiff-counterdefendant The CIT Group/Commercial Services, Inc. ("CIT") moves under Fed.R.Civ.P. 12(b)(6) to dismiss for failure to state a claim on which relief can be granted the part of count four of the cross-claim and counterclaim of defendant-counterplaintiff Evenflo Company, Inc. ("Evenflo") in which it seeks a declaratory judgment against CIT. CIT maintains that Evenflo cannot bring a declaratory judgment action to determine rights that are already subject to determination in this suit, because the counterclaim is redundant of CIT's claims and Evenflo's defenses. The court grants the motion and dismisses Evenflo's counterclaim against CIT (count four of its cross-claim and counterclaim). Evenflo's cross-claim is not affected by this decision.
In its third amended complaint, CIT sues VMI, Inc. ("VMI"), Northport Industries, Inc. ("Northport"), Evenflo, Trim and Design, Inc. ("T D"), Regal Plastic Company, LLC ("Regal"), Robert Michelini ("Michelini"), and ETM, Inc. ("ETM") to recover against some or all defendants for breach of contract, on an account, and for unjust enrichment arising from indebtedness under a notification factoring agreement with VMI and financing agreement with Northport. CIT alleges, in pertinent part, that it owns VMI's accounts receivable from Evenflo, TD, Regal, and ETM and that Michelini guarantied the indebtedness of VMI to CIT. CIT alleges that VMI, Evenflo, TD, Regal, ETM, Northport, and Michelini are indebted to it in various sums.
By way of cross-claim and counterclaim, Evenflo seeks a declaratory judgment against Northport, VMI, and CIT. It maintains that Northport and/or VMI have converted its equipment, supplies, and inventory. Evenflo also asserts that there are disagreements concerning (1) the amount that Evenflo owes to Northport and/or VMI and/or CIT for goods actually delivered and/or services actually provided to Evenflo under purchase orders by which Evenflo supplied equipment and supplies for use in manufacturing parts for child restraints, and (2) which party Evenflo is to pay. Evenflo alleges that, in light of Northport's and/or VMI's conversion of Evenflo's equipment, supplies, and inventory, and the fact that there is a dispute concerning the correct amount of Evenflo's accounts receivable and which party is to receive payment, there is a controversy between Evenflo and Northport, VMI, and CIT regarding the amount of Evenflo's accounts receivable under the purchase orders and which party is to receive payment.
CIT moves to dismiss, contending that the counterclaim is redundant of CIT's claims and Evenflo's defenses. Evenflo argues in response that its counterclaim is not redundant because CIT's claims and defenses do not resolve Evenflo's risk of paying both CIT and VMI and/or Northport for the same claim. It asserts that, under its agreement with VMI and/or Northport, the equipment, supplies, and inventory at all times remained Evenflo's property and was to be returned. Instead, VMI and/or Northport shut their plants down, preventing access to Evenflo's property. CIT then notified Evenflo that it held VMI's and Northport's accounts receivable and that Evenflo was to pay CIT for all outstanding indebtedness to VMI and/or Northport. Evenflo contends it has brought a counterclaim because it is unsure as to the propriety and amount of what CIT contends Evenflo owed VMI and/or Northport. It states that it is concerned that if CIT is successful on its claim and collects the accounts receivable that Evenflo arguably owes to VMI and/or Northport, the judgment will not resolve the issue whether VMI and Northport still have the right to collect from Evenflo because this issue is not presented by the claims of CIT's complaint and the defenses raised by Evenflo's answer.
The federal Declaratory Judgment Act, 28 U.S.C. § 2201, is "an authorization, not a command." Public Affairs Assocs., Inc. v. Rickover, 369 U.S. 111, 112(1962) (per curiam). Federal district courts have broad discretion to grant or refuse declaratory relief. See Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494 (1942) (holding that district courts are under no compulsion to exercise jurisdiction under Declaratory Judgment Act); Vulcan Materials Co. v. City of Tehuacana, 238 F.3d 382, 390 (5th Cir. 2001). The only claim that CIT moves to dismiss is Evenflo's declaratory judgment counterclaim against CIT. Dismissal of that counterclaim will not affect Evenflo's cross-claim against VMI and Northport. In other words, if the court dismisses the counterclaim, Evenflo can still pursue via cross-claim a declaratory judgment concerning whether VMI and Northport still have the right to collect from Evenflo. And it can contest any indebtedness (in whole or in part) to CIT on any of the theories on which CIT brings suit by denying the essential elements of the claims and/or by asserting defenses to the claims. Because Evenflo can adequately defend itself against CIT's claims and can still seek declaratory relief via cross-claim against VMI and Northport, the court declines in its discretion to consider Evenflo's declaratory judgment counterclaim against CIT.
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Accordingly, CIT's November 9, 2001 motion to dismiss is granted. Count four of Evenflo's cross-claim and counterclaim, filed October 22, 2001, is dismissed only to the extent that it asserts a counterclaim against CIT.SO ORDERED.