Opinion
CIVIL ACTION NO: 02-56 SECTION: "R" (5)
November 26, 2002
ORDER AND REASONS
Before the Court is the motion of defendants Glen Holley d/b/a Holley Construction, Denise Garitty Holley, and Mark E. Holley ("the Volleys") to dismiss plaintiff's complaint for declaratory judgment on abstention grounds. For the following reasons, the Court will STAY this case pending resolution of the state court proceedings.
I. Background
Lisa Ann Napolitano Muscarello and Thomas G. Hecker, Jr. filed two lawsuits against the Holleys in state court as a result of their purchase of a home allegedly prone to flooding. On October 10, 2001, these two lawsuits were consolidated.
On August 21, 2001, the Holleys made demand on their insurer, Colony Insurance Company, for a defense and coverage. On September 14, 2001, Colony denied coverage but agreed to provide a defense under a reservation of rights. On January 8, 2002, Colony filed a complaint for declaratory judgment in this Court, naming the Holleys, Muscarello, and Hecker as defendants. On March 5, 2002, the Holleys filed a third-party demand against Colony in the state proceedings, asserting a claim for a defense and coverage. In August of 2002, the Holleys moved to dismiss Colony's complaint in this Court on the grounds of abstention.
Colony argues that the Holleys' motion to dismiss abstention grounds is not a motion permitted under Federal Rule of Civil Procedure 12(b). The Court rejects this argument, as courts have traditionally entertained motions such as these under Rule 12(b), even though they are not specifically mentioned in the Rule. See, e.g., Wilton v. Seven Falls Co., 41 F.3d 934, 935 (5th Cir. 1994); 5A CHARLES ALAN WRIGHT ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1360 at 432, 438-42 (2d ed. 1990). Even if Colony were correct, the Court still has broad discretion to dismiss or stay a declaratory judgment action, sua sponte. See Agora Syndicate, Inc. v. Robinson Janitorial Specialists, Inc., 149 F.3d 371, 373 (5th Cir. 1998) (acknowledging without disapproval that district court dismissed declaratory judgement action sua sponte); State Farm Mutual Automobile Ins. Co. v. Daughdrill, 702 F.2d 70, 71 (5th Cir. 1983) (same); Allstate Ins. Co. v. Employers Liability Assurance Corp., Ltd., 445 F.2d 1278, 1280 (5th Cir. 1971); Houston General Ins. Co. v. Taylor Lumber Treating, Inc., 1997 U.S. Dist. LEXIS 1243, *1 (E.D. La. 1997) Thus, the Court will consider the issue of whether to dismiss or stay Colony's declaratory judgment action.
II. Discussion
A district court possesses "broad discretion to grant (or decline to grant) declaratory judgment." Wilton v. Seven Falls Co., 515 U.S. 277, 281, 115 S.Ct. 2137, 2140, 132 L.Ed.2d 214 (1995); Travelers Ins. Co. v. Louisiana Farm Bureau Fed'n, Inc., 996 F.2d 774, 778 (5th Cir. 1993). Abstention is not mandatory in this case. Because Colony filed its complaint for declaratory relief before the Holleys sued Colony, this is not a case in which the declaratory defendant first raised the issue in state court against the declaratory plaintiff. Thus, the Court is not required to abstain pursuant to the factors outlined in Travelers. See Travelers, 996 F.2d at 776 (court may not consider the merits of a declaratory judgment action when (1) a declaratory defendant has previously filed a cause of action in state court against the declaratory plaintiff, (i) the state case involves the same issues as those involved in the federal case, and (3) the district court is prohibited from enjoining the state proceedings under the Anti-Injunction Act); see also Essex Ins. Co. v. Grefer, 2002 U.S. Dist. LEXIS 13466, *4 n. 1 (E.D.La. 2002). The Declaratory Judgment Act provides that "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 a declaration." 28 U.S.C. § 2201(a). The district court's discretion is broad, but it is not without limits. For example, the court may not dismiss a request for declaratory judgment relief on the basis of "whim or personal disinclination." Travelers, 996 F.2d at 778 (citing Rowan Cos., Inc. v. Griffin, 876 F.2d 26, 28-29 (5th Cir. 1989)). To exercise its discretion, the Fifth Circuit requires the district court to balance on the record the purposes of the Declaratory Judgment Act and the factors relevant to the abstention doctrine. See id.
In discussing the district court's discretion to abstain from entertaining a declaratory judgment action, the Supreme Court in Wilton described the court's task as follows:
In deciding whether to enter a stay, a district court should examine the scope of the pending state court proceeding and the nature of defenses open there. This inquiry, in turn, entails consideration of whether the claims of all parties in interest can satisfactorily be adjudicated in that proceeding, whether necessary parties have been joined, whether such parties are amendable to process in that proceeding.515 U.S. at 283, 115 S.Ct. at 2141 (internal citations omitted) When another suit "involving the same parties and presenting opportunity for ventilation of the same state law issues is pending in state court," a court's consideration of the declaratory judgment action may constitute "gratuitous interference." Id.
Before the Supreme Court decided Wilton, the Fifth Circuit adopted an abstention analysis in Travelers similar to that use in Wilton. The Fifth Circuit found the following factors to be relevant to the Court's determination of the abstention issue: (1) whether there is a pending state action in which all of the matters in controversy may be fully litigated; (2) whether the plaintiff filed suit in anticipation of a lawsuit filed by the defendant; (3) whether the plaintiff engaged forum shopping in bringing the suit; (4) whether possible inequities exist in allowing the declaratory plaintiff to gain precedence in time or to change forums; (5) whether the federal court is a convenient forum for the parties and witnesses; and (6) whether retaining the lawsuit in federal court would serve the purpose of judicial economy. Travelers, 996 F.2d at 778. Many district courts continue to consider the Travelers factors when they decide abstention issues. See, e.g., Westport Ins. Corp. v. Warner, 2001 U.S. Dist. LEXIS 13684, *4-5 (E.D. La. 2001); WTA Marine, L.L.C. v. Antin-Quealy, Inc., 1999 U.S. Dist. LEXIS 10730, *4-5 (E.D. La. 1999); St. Paul Reinsurance Co. v. Iberic Int'l, Inc., 1999 U.S. List. LEXIS 13029, *4-6 (E.D. La. 1999); Scottsdale Ins. Co. v. Bayou Land and Marine, 1999 U.S. List. LEXIS 15561, *17-18 (E.D. La. 1999). Further, the Fifth Circuit does not appear to have abandoned the Travelers factors. See, e.g., Orix Credit Alliance v. Wolfe, 212 F.3d 891, 895 (5th Cir. 2000); Aqora, 149 F.3d at 373. Accordingly, using the Travelers rubric, the Court will consider both the Wilton and Travelers factors.
First, all of the issues in the declaratory judgment action can be resolved in the pending state court proceeding in which the Holleys are defendants and Colony is a third-party defendant. The Holleys filed a third-party demand against Colony, which involves the same coverage dispute that is at issue here. ( See Third Party Demand Against Colony Insurance, attached to Defs.' Mot. to Dismiss, Ex. E; Pl.'s Compl. for Declaratory Judgment.) Parallel proceedings in two courts under these circumstances invite inconsistent policy interpretations and piecemeal litigation. Moreover, the issues involved in Colony's declaratory judgment action are state law issues, which are particularly suited for resolution by the state court.
Colony's reliance on Agora Syndicate, Inc. v. Robinson Janitorial Specialists, Inc., 149 F.3d 371 (5th Cir. 1998) is misplaced. In Agora, the Fifth Circuit reversed the district court's dismissal of a declaratory judgment action for several reasons that are not present here. The declaratory plaintiff was not a party to the state court suit, and the district court incorrectly found it sufficient that the declaratory plaintiff could intervene in the state court proceeding. See Acora, 149 F.3d at 373. Further, the Fifth Circuit found that, because the parties had fully briefed the merits of the case and had conceded that there were no factual disputes, abstention would be wasteful. See id. None of these facts is present in this case. Moreover, the Agora court stated that these were "unusual circumstances" and that usually a district court's finding that some of the Wilton/Travelers factors have been met would not be reversed for abuse of discretion. See id. at 373-74.
Further, because Colony had already denied the Holleys' request for a defense and coverage when it filed this declaratory judgment action, it appears that Colony's filing was in anticipation of being sued by the Holleys. Colony does not suggest anything different. Finally, although this Court is probably as convenient a forum as the state court, that factor alone does not outweigh the other factors favoring abstention. Accordingly, abstention is the proper course here.
The Supreme Court has noted that "where the basis for declining to proceed is the pendency of a state proceeding, a stay will often be the preferable course, because it assures that the federal action can proceed without risk of a time bar if the state case, for any reason, fails to resolve the matter in controversy." Wilton, 515 U.S. at 288 n. 2, 115 S.Ct. 2142 n. 2; see also Melancon v. Union Carbide Corp., 1998 U.S. Dist. LEXIS 3683, 1998 WL 122610, *7 (E.D. La. 1998). Thus, the Court finds that a stay, rather than dismissal, is the appropriate method for exercising its discretion to abstain in this case. Ultimately, this Court grants a stay because the state court can comprehensively resolve all of the state law coverage issues in a forum that is just as convenient as this one. Litigation in one forum will prevent unnecessary duplication of judicial effort and prevent inconsistent policy interpretations.
III. Conclusion
For the reasons set forth above, this case is STAYED pending resolution of the consolidated cases of Muscarello and Hecker v. Garitty and Holley et al. in the 22nd Judicial District Court for the Parish of St. Tammany, State of Louisiana, No. 2001-13146, Division "D", and Muscarello and Hecker v. Garitty and Holley et al. in the 22nd Judicial District Court for the Parish of St. Tammany, State of Louisiana, No. 2001-13665, Division "A."