Opinion
Civ. No. 00-1219(WGB)
April 17, 2001
Gary S. Kull, Esq., Matthew J. Lodge, Esq., CARROLL, McNULTY KULL L.L.C., Gladstone, N.J., Attorneys for Plaintiff.
Adam L. Rothenberg, Esq., LEVINSON ALEXROD, Edison, N.J., Attorneys for Defendants Nita Patel, Sheetal Patel, Priti Patel, Jighasa Patel, Anamika Patel, and Gita Patel.
Mark P. Ciarrocca, Esq., CIARROCCA CIARROCCA, ESQS., Union, N.J., Attorneys for Looking Glass Assoc.
John Joseph Kapp, Esq., DAVID E. REHE ASSOCIATES, Rutherford, N.J., Attorneys for State Farm Insurance Company.
Bobbi J. Vilacha, Esq., LAW OFFICES OF ROBERT M. SANDERFORD, Fair Lawn, N.J., Attorneys for National Consumer Insurance Company.
Heidi Willis Currier, Esq., CONNELL FOLEY LLP, Roseland, N.J., Attorneys for New Jersey Manufacturers Insurance Company.
F. Lawrence Magro, Esq., Joan B. Sherman, Somerset, N.J., Attorneys for Liberty Mutual Insurance Company.
MEMORANDUM OPINION
Plaintiff Philadelphia Indemnity Insurance Company ("PIIC") has brought a Declaratory Judgment Action pursuant to 28 U.S.C.A. § 2201 et seq., against Defendants, seeking a determination concerning the scope and nature of its obligations, if any, under an excess automobile insurance policy.
Defendants Nita Patel, Sheetal Patel, Priti Patel, Jighasa Patel, Anamika Patel, Gita Patel move to dismiss PIIC's complaint. For the following reasons, the Court grants Defendants' motion to dismiss.
I. BACKGROUND
On June 12, 1998, Defendant Jyoti Patel was driving a rental passenger van occupied by 11 other individuals, when she lost control of the car. As a result, the driver and all of the passengers, Nita Patel, Sheetal Patel, Priti Patel, Jighasa Patel, Anamika Patel, Gita Patel, Divya Patel, Lataben Patel, Dipa Patel, and Devansi Patel, were allegedly injured and one infant, Suruchi Patel, died from her injuries.
A. State Action
The eleven passengers in the rental vehicle, including the deceased infant's estate, (collectively "Patels") commenced a lawsuit in the Superior Court of New Jersey, Nita Patel, et al. v. Jyoti Patel, et al., #L-7493-99, ("State Action") against various defendants, including the driver Jyoti Patel, the rental car company Looking Glass Associates, L.P. d/b/a Budget Car and Truck Rental ("Budget"), and numerous insurance companies, seeking compensation for injuries and death arising out of the accident. The State Action also contains claims for insurance coverage and a request for a determination of the financial obligations of the various insurers, including PIIC, which was added as a defendant on or about July 5, 2000. (See Amended Compl. in State Action.) The Patels seek uninsured and underinsured motorist coverage from PIIC. (Id. at ¶¶ 36, 37.) Jyoti also filed a cross claim against her co-defendants to recover for her own injuries.
By Order dated November 6, 2000, the state court stayed proceedings against PIIC for 6 months or until further order of the court pending this Court's decision on the present motion, whichever occurs sooner.
B. Federal Action
PIIC filed this declaratory judgment action on March 15, 2000, against the Patels and various insurance companies, seeking a determination that it owes no liability coverage obligation to Jyoti Patel and no uninsured or underinsured motorist coverage obligations to any of the Defendants in this declaratory judgment action.
When Defendant Jayant Patel rented the passenger van from Budget, the rental contract provided primary automobile liability insurance coverage on the rental vehicle for $15,000 per person for bodily injury, with a maximum coverage of $30,000 for bodily injury per occurrence. The primary coverage was underwritten by Empire Fire Marine Insurance Company ("Empire").
Defendant Jayant Patel also purchased excess liability insurance coverage through Budget under a Rental Supplemental Liability Insurance ("RSLI") Policy, which was underwritten by PIIC. The RSLI Policy provided excess automobile liability coverage for the difference between the underlying primary coverage and $1,000,000.
In disputing its coverage obligations, PIIC first claims that Jyoti Patel is not an insured under the RSLI Policy because by its terms, the RSLI Policy limits its liability coverage to either the "renter" or an "authorized driver." According to PIIC, only two individuals Defendants Jayant Patel and Sheetal Patel were identified as "authorized drivers" under the rental contract and only Defendant Jayant Patel was the "renter" identified in the agreement. Since Jyoti Patel was neither the "renter or "authorized driver," Jyoti is not an insured and PIIC has no liability under the RSLI Policy. Second, PIIC argues that the RSLI Policy is limited to liability coverage and specifically excludes uninsured and underinsured motorist coverage.
The litigants do not suggest that the Court lacks jurisdiction over this matter, or that the Court could not reach the merits of the dispute. Instead, the central issues raised by Defendants' motion to dismiss are whether the exercise of jurisdiction is discretionary in this matter and if so, whether the Court should exercise that discretion and dismiss the action.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332 .
II. DISCUSSION
A. Discretion Under the Declaratory Judgment Act
The Declaratory Judgment Act provides:
[i]n a case of actual controversy within its jurisdiction . . . any court of the United States . . . 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(a) (emphasis added). In Brillhart v. Excess Insurance Co. of America, 316 U.S. 491 (1942), the Supreme Court indicated that while a district court may have jurisdiction to enter a declaratory judgment in a particular controversy, it is under no compulsion to do so. Id. at 495. In doing so, the Supreme Court noted:
[o]rdinarily it would be uneconomical as well as vexatious for a federal court to proceed in a declaratory judgment suit where another suit is pending in a state court presenting the same issues, not governed by federal law, between the same parties. Gratuitous inference with the orderly and comprehensive disposition of a state court litigation should be avoided.Id. (emphasis added). More recently, the Supreme Court reaffirmed that the Declaratory Judgment Act "confers a discretion on the courts rather than an absolute right upon the litigant." Wilton v. Seven Falls Company, 515 U.S. 277, 287 (1995).
PIIC does not dispute that federal courts have discretion to stay or dismiss a federal declaratory judgment action where a parallel state court proceedings involving the same parties and the same issues is pending. Instead, PIIC argues that this Court lacks discretion to dismiss this action because the State Action does not involve the same key issue that is central in this suit whether PIIC owes liability coverage to the driver of the van, Jyoti Patel, under the RSLI Policy.
Assuming that this issue has not been raised in the State Action, PIIC has not identified any reason why it cannot assert its claim for declaratory judgment in that suit. In fact, New Jersey's entire controversy doctrine requires that PIIC present its cross claim against Jyoti Patel in the State Action. PIIC and Jyoti Patel are both parties to the State Action, which involves the same factual events and insurance policy that give rise to PIIC's claim for declaratory judgment. The entire controversy doctrine seeks to further goals of judicial economy and fairness by requiring, whenever possible, that adjudication of a legal controversy occur in one litigation before one court; accordingly, all parties involved in a litigation should at the very least present in that proceeding all of their claims and defenses, including counterclaims and cross claims, that are related to the underlying controversy. Circle Chevrolet v. Giordano, Halleran Ciesla, 142 N.J. 280, 289 (1995);Kozyra v. Allen, 973 F.2d 1110, 1111 (3d Cir. 1992); DiTrolio v. Antiles, 142 N.J. 253, 267 (1995). The entire controversy doctrine applies to constituent claims that were known to the litigant during the pendency of a prior action. Circle Chevrolet, 142 N.J. at 290, 294.
Therefore, pursuant to the Declaratory Judgment Act, this Court's exercise of jurisdiction in this matter is discretionary.
B. Exercise of Discretion Under Declaratory Judgment Act
A recent decision of the Third Circuit Court of Appeals, State Auto Insurance Companies v. Summy, 234 F.3d 131 (3d Cir. 2000), provides the Court with a clear statement of when it should decline to hear a declaratory judgment action. Generally, a federal court should "decline to exercise its discretionary jurisdiction when doing so would promote judicial economy by avoiding duplicative and piecemeal litigation." Id. at 135. Like the Summy case, in which a duplicative state court proceeding existed, a duplicative state court proceeding involving the same parties and the same issues as those in the federal proceeding exists in this matter. See discussion supra. If this Court were to exercise jurisdiction, it would clearly be a waste of judicial resources.
Additionally, in diversity matters, a district court should hesitate to exercise jurisdiction over declaratory judgment actions when the state law involved is uncertain or undetermined. Summy, 234 F.3d at 135. Federal courts must give serious consideration to the fact that they do not establish state law, but are limited to predicting it. Id. Here, other than a conclusory assertion by PIIC that this case involves "straight forward and settled" New Jersey law, the parties do not address this issue. Even if the applicable state law was clear and settled, the Third Circuit has noted that "[w]hen the state law is firmly established, there would seem to be even less reason for the parties to resort to the federal courts." Id.
Next, a district court should be particularly inclined to question the exercise of its jurisdiction when there are no federal questions presented in the declaratory judgment action, such as in an action seeking to declare a party's obligations under an insurance policy. Id. at 136. Notably, "[t]he desire of insurance companies and their insureds to receive declarations in federal court on matters of purely state law has no special call on the federal forum." Id. There is no dispute that this suit involves "simple matters of contract interpretation," (Pl.'s Memorandum of Law in Opp'n to Mot. to Dimiss, at 15), and the application of only state law.
Finally, PIIC relies heavily on the fact that it was not a party in the State Action until the Patels amended their complaint subsequent to PIIC's filing of this declaratory judgment action. That fact, however, is irrelevant to the issues presently before the Court. See Summy, 234 F.3d at 136 (finding it irrelevant that state declaratory judgment petition was filed after its counterpart in federal court). This is especially so when a defendant vigorously objects to a district court's assumption of jurisdiction, and asks that the matter be resolved in state court. Id.
Although the applicable state law may not be uncertain or unsettled, all of the other guiding factors set out by the Third Circuit in Summy warrant dismissal of this action. Therefore, given the discretion to decline jurisdiction inherent in the Declaratory Judgment Act, the Court now finds every reason to do so. Defendants' motion to dismiss is granted.
III. CONCLUSION
For the foregoing reasons, Defendant's motion to dismiss is granted.
An appropriate order follows.
O R D E R
This matter having come before the Court on Defendants' motion to dismiss; and
The Court having considered the submissions of the parties; and
The Court having decided this matter without oral argument pursuant to Fed.R.Civ.P. 78; and
For the reasons set forth in the Court's Opinion issued this day; and
For good cause shown;
It is on this ___ day of April, 2001 ORDERED that Defendants' motion to dismiss is granted; and
IT IS FURTHER ORDERED that Plaintiff's complaint is dismissed; and
IT IS FURTHER ORDERED that the Clerk of the Court shall close this case.