Opinion
CIVIL ACTION NO. 4:21cv72
2021-08-17
INDIAN HARBOR INSURANCE COMPANY, Plaintiff, v. Melissa S. FRENCH, Individually and as Administrator of the Estate of Lamar Jerome French, Deceased, Defendant.
Anna Pulliam Cathcart, Phelps Dunbar LLP, Raleigh, NC, for Plaintiff. Michael Andrew Boran, Rutter Mills LLP, Norfolk, VA, for Defendant.
Anna Pulliam Cathcart, Phelps Dunbar LLP, Raleigh, NC, for Plaintiff.
Michael Andrew Boran, Rutter Mills LLP, Norfolk, VA, for Defendant.
MEMORANDUM DISMISSAL ORDER
REBECCA BEACH SMITH, SENIOR UNITED STATES DISTRICT JUDGE
This matter comes before the court on the Motion to Dismiss filed on July 1, 2021, by Defendant Melissa S. French, individually and as administrator of the estate of Lamar Jerome French, deceased. ECF No. 9.
I. BACKGROUND
On September 16, 2019, Elijah Armstrong shot and killed Ms. French's husband, Lamar French, while Mr. French was providing rides through a rideshare application created by Lyft, Inc. ECF No. 1 ¶¶ 7, 9. On April 1, 2021, Ms. French filed a wrongful death suit in Virginia state court against Mr. Armstrong for $10,000,000. ECF No. 1 ¶ 11; see ECF No. 1-2 (copy of state suit complaint); French v. Armstrong, No. CL21000744-00 (Hampton Cir. Ct. 2021).
Indian Harbor Insurance Co. ("Indian Harbor") issued an insurance policy to Lyft that was in effect when Mr. Armstrong killed Mr. French. ECF No. 1 ¶ 13. The policy provided up to $1,000,000 in uninsured motorist coverage. Id. ¶ 15. The state suit does not name Indian Harbor as a defendant, but Ms. French nevertheless served Indian Harbor under Va. Code § 38.2-2206, arguing that Mr. French was insured by the insurance policy issued by Indian Harbor to Lyft. ECF No. 1-2 ¶ 10. Thereafter, Indian Harbor filed the instant suit in federal court on June 9, 2021, seeking a declaration that "under the terms of the policy, Indian Harbor is not obligated to pay uninsured or underinsured motorist benefits to Ms. French or to the estate of Mr. French." ECF No. 1 at 4. Ms. French filed a Motion to Dismiss on July 1, 2021, claiming that the court lacks subject matter jurisdiction. ECF No. 9. Indian Harbor filed a response in opposition on July 15, 2021, and Ms. French filed a reply on July 21, 2021. ECF Nos. 11, 12.
Va. Code § 38.2-2206(F) provides:
If any action is instituted against the owner or operator of an uninsured or underinsured motor vehicle by any insured intending to rely on the uninsured or underinsured coverage provision or endorsement of this policy under which the insured is making a claim, then the insured shall serve a copy of the process upon this insurer in the manner prescribed by law, as though the insurer were a party defendant.
II. LEGAL STANDARD
"In a case of actual controversy within its jurisdiction," a federal court "may declare the rights and other legal relations of any interested party seeking such declaration." Declaratory Judgment Act, 28 U.S.C § 2201 (emphasis added). Notably, "the Declaratory Judgment Act is not an independent source of jurisdiction, and does not create or confer federal subject matter jurisdiction over an action that would not normally come within the federal court's original jurisdiction." Johnson v. Quin Rivers Agency for Cmty. Action, Inc., 128 F. Supp. 2d 332, 337–38 (E.D. Va. 2001) (Williams, J.).
Even if a court has jurisdiction to entertain a declaratory judgment action, it may decline to do so in the exercise of its discretion. Penn-Am. Ins. Co. v. Coffey, 368 F.3d 409, 412 (4th Cir. 2004) ("The Supreme Court has ‘repeatedly characterized the Declaratory Judgment Act as an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant.’ ") (quoting Wilton v. Seven Falls Co., 515 U.S. 277, 287, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995) ). The court should only exercise its discretion to grant declarative relief if doing so "will serve a useful purpose in clarifying and settling the legal relations in issue, and ... when it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding." Coffey, 368 F.3d at 412 (quoting Aetna Casualty & Surety Co. v. Quarles, 92 F.2d 321, 325 (4th Cir. 1937) ). However, "[i]n the declaratory judgment context, the normal principle that federal courts should adjudicate claims within their jurisdiction yields to considerations of practicality and wise judicial administration." Wilton, 515 U.S. at 288, 115 S.Ct. 2137.
III. ANALYSIS
A. Jurisdiction
Ms. French, defendant in this matter and plaintiff in the parallel state case, argues that the court must dismiss this declaratory judgment action for lack of subject matter jurisdiction. In the Complaint, Indian Harbor alleges that this court possesses diversity jurisdiction because "there is complete diversity between the parties, and the amount in controversy exceeds $75,000." ECF No. 1 ¶ 4; see 28 U.S.C. § 1332. Ms. French agrees that there is complete diversity, but argues that there is no amount in controversy because no judgment has been entered in the parallel state case that would entitle Ms. French to any recovery from Indian Harbor at this time. See ECF No. 10 ¶¶ 4-5. Indian Harbor argues that the amount in controversy is the amount of uninsured motorist coverage of up to $1,000,000 that Ms. French seeks to recover from Indian Harbor in the event Mr. Armstrong is found liable in the parallel state case. See ECF No. 11 ¶ 14.
When a declaratory judgment action is brought in federal court by an insurer based on the insurer's potential liability in a parallel state case, the federal court's jurisdiction to hear the declaratory action is not defeated just because the a tort-feasor's liability has not been established in the parallel state action. See Cont'l Cas. Co. v. Fuscardo, 35 F.3d 963, 965 (4th Cir. 1994) (acknowledging that the district court had diversity jurisdiction in declaratory judgment action brought by insurer even though the insurer's potential liability had not yet been determined in parallel state case); White v. Nat'l Union Fire Ins. Co. of Pittsburgh, 913 F.2d 165, 168 (4th Cir. 1990) (determining that federal court had jurisdiction to hear declaratory judgment action brought by insurance company even though the injured person had not yet obtained a judgment against the insured in underlying state case). Therefore, the fact that Ms. French has not obtained a judgment against Mr. Armstrong in the underlying state case does not bear on whether the court has diversity jurisdiction in this matter. Since there is no disagreement that complete diversity exists between the parties, the court has diversity jurisdiction to entertain the matter if the court finds that the amount in controversy for this declaratory action exceeds $75,000.
In declaratory judgment actions, the amount in controversy is measured by the value of the object of the litigation. Hunt v. Washington State Apple Advert. Comm'n, 432 U.S. 333, 347, 97 S. Ct. 2434, 2443, 53 L. Ed. 2d 383 (1977). In this case, the value of the object of the litigation is the value of the potential claim against Indian Harbor in the underlying state case. See Princeton Excess & Surplus Lines Ins. Co. v. Immigr. Centers of Am. - Farmville, LLC, No. 3:12CV895, 2013 WL 6246366, at *3 (E.D. Va. Nov. 21, 2013) (Payne, J.) (finding that diversity jurisdiction existed after determining that the amount sought in the underlying state litigation exceeded $75,000); Pennsylvania Nat. Mut. Cas. Ins. Co. v. Jones, No. 2:12CV7, 2012 WL 4364326, at *2 (W.D.N.C. Aug. 27, 2012) ("Where a party seeks a declaratory judgment determining the application of an insurance policy to a particular occurrence, the object of the litigation is not the policy limit but, rather, the value of the underlying claim."), report and recommendation adopted, No. 2:12CV07, 2012 WL 4364357 (W.D.N.C. Sept. 24, 2012). In the underlying state case, Ms. French intends to recover up to $1,000,000 in uninsured motorist benefits from Indian Harbor in the event she obtains a judgment against Mr. Armstrong. Thus, the amount in controversy in this declaratory action is $1,000,000, and the court therefore has diversity jurisdiction to entertain this matter. The court will now consider whether this matter should nevertheless be dismissed given the court's discretionary authority under the Declaratory Judgment Act.
B. Discretionary Authority
"When a related state court proceeding is pending" in the context of a federal declaratory judgment action, "considerations of federalism, efficiency, and comity should inform the district court's decision whether to exercise jurisdiction over a declaratory judgment action." Coffey, 368 F.3d at 412. Specifically, the court should consider the following: (1) whether the state has a strong interest in having the issues decided in its courts; (2) whether the state courts could resolve the issues more efficiently than the federal courts; (3) whether the presence of "overlapping issues of fact or law" might create unnecessary "entanglement" between the state and federal courts; and (4) whether the federal action is mere "procedural fencing," in the sense that the action is merely the product of forum-shopping. Id. (citing Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371, 377 (4th Cir. 1994) ).
Here, the underlying state action is a $10,000,000 wrongful death suit brought by Ms. French against Mr. Armstrong. According to the state complaint, the decedent was operating his vehicle as a driver on behalf of Lyft, a rideshare service. ECF No. 1-2 ¶ 9. Mr. Armstrong secured a ride with the decedent using the Lyft application, and thereafter murdered the decedent. Id. ¶¶ 11, 12.
Ms. French claims that the decedent was an insured under the uninsured/underinsured motorist coverage provision of the insurance policy issued by Indian Harbor to Lyft. Id. ¶ 10. Indian Harbor brought this federal action for a declaration that Ms. French is not entitled to recover uninsured motorist benefits because Ms. Armstrong was not occupying the vehicle at the time of the shooting, he was not owner or operator of an uninsured motor vehicle, and the decedent's death was not caused by Armstrong's use of the vehicle as a vehicle. ECF No. 1 ¶ 17.
The applicability of Indian Harbor's insurance policy hinges on the facts alleged in the underlying state case, for which a jury trial has been demanded. Determination of the facts is better suited for disposition in state court for a number of reasons. First, Indian Harbor's potential liability depends upon the scope of its uninsured motorist coverage under Virginia law and the circumstances surrounding the murder. In other words, Virginia has a strong interest in deciding Indian Harbor's obligations under the insurance policy because the issues concerning the scope of coverage are governed by Virginia law. See Mitcheson v. Harris, 955 F.2d 235, 238 (4th Cir. 1992) ("Given the previously filed state litigation on the primary claims and the exclusively state law nature of the declaratory action, however, the state interest in resolving matters of state law should have guided the exercise of federal judicial discretion."); Fuscardo, 35 F.3d at 967 (4th Cir. 1994) (affirming dismissal of declaratory judgment action "[b]ecause the issues that will determine the outcome of the [relevant issues] are governed by substantive West Virginia law," and West Virginia therefore "has an interest in having the issues decided in state court").
This is not a declaratory judgment action whereby the plaintiff (insurance company) agrees it owes a sum certain, but recognizes there are competing claimants for the sum. The plaintiff then pays that agreed sum into court, and the competing claimants litigate their interests thereto in that court.
"The second state interest favoring dismissal of the declaratory action is that of resolving all litigation stemming from a single controversy in a single court system." Mitcheson, 955 F.2d at 239. Concerns regarding the efficiency and practicality of determining coverage issues weigh in favor of dismissal because Ms. French filed the state court action before Indian Harbor filed this action, and both actions involves "the same overall controversy." Id. Importantly, the determination of Indian Harbor's obligations under the insurance policy would be completely unnecessary in the event Ms. French does not succeed in her wrongful death suit against Mr. Armstrong. Therefore, the state court can more efficiently determine when and how to decide the policy coverage issues should that become necessary. The court also notes that even though Indian Harbor is not a named party in the state case, it still has "the right to file pleadings and take other action" on its own behalf in that action. Va. Code Ann. § 38.2-2206(F). See Fuscardo, 35 F.3d at 968 (insurance "coverage issues could have been resolved efficiently in ... the state proceedings" because the insurer "was fully capable of entertaining a state declaratory action which would have provided the same benefits" as a federal one).
See supra note 2 and accompanying text.
Moreover, a determination of potentially material facts at issue in Ms. French's wrongful death suit, such as Mr. Armstrong's occupancy or non-occupancy of the decedent's vehicle during the murder, will inform the scope of Indian Harbor's uninsured motorist coverage. See ECF No. 1 ¶ 17. If this court entertains the declaratory action, it would make factual findings that are highly relevant to Ms. French's wrongful death claim, thereby creating unnecessary "entanglement" between the state and federal actions. Coffey, 368 F.3d at 412. Further, if the federal court's fact-finding differs from the state jury's fact-finding, the "entanglement" and confusion may only lead to further, unnecessary litigation.
See supra notes 2 and 3 and accompanying text.
Finally, Indian Harbor seems to have brought this federal declaratory action as a form of procedural fencing given that Indian Harbor filed this federal action after Ms. French had filed the state court action, despite being capable of raising its coverage claims in state court. See Fuscardo, 35 F.3d at 968 (suggesting that procedural fencing occurred since "[t]he underlying tort action was already pending in state court when Continental Casualty filed in federal court," and "the state court was just as capable of promptly resolving the dispute over the insurance coverage question as the district court was"). "[C]onsiderations of federalism, efficiency, and comity" convince the court that this matter is better suited for state court. Coffey, 368 F.3d at 412.
The court notes that diversity does not exist in the state court litigation given that the Plaintiff and Defendant are both residents of Virginia. By filing this declaratory judgment action in federal court, Indian Harbor is able to "procedurally fence" its way into federal court. See supra note 2 and accompanying text.
IV. CONCLUSION
Given Virginia's interest in resolving the insurance coverage issue, the efficiency with which the state court could resolve the coverage issue given the related state court action, and the probability that Indian Harbor filed this action to acquire a preferred forum, this court asserts its discretionary authority and declines to exercise its jurisdiction to entertain this matter. Accordingly, Defendant's Motion to Dismiss, ECF No. 9, is GRANTED .