Case No. 1:08-cv-404.
October 28, 2008
This is an action under the Declaratory Judgment Act, 28 U.S.C. § 2201, arising in the insurance context. Plaintiff State Farm Mutual Automobile Insurance Company ("State Farm") alleges, without contradiction from defendant Debra Carter ("Carter"), that it is an Illinois corporation with its principal place of business in Illinois and she is a resident of the State of Florida. See Complaint filed May 1, 2008 ("Comp") ¶¶ 1-2. While State Farm fails to allege Carter's state of citizenship, rather than mere residence, the unchallenged allegations of Carter's affidavit establish that Florida is her domicile and therefore her state of citizenship. And Carter does not challenge State Farm's allegation that more than $75,000 is at stake. The court finds that diversity exists.
"[I]t is well established that § 2201 does not create an independent cause of action." Poly-Flex Const., Inc. v. Neyer, Tiseo Hindo, Ltd., 2008 WL 793759, *2 (W.D. Mich. Mar. 24, 2008) (Paul L. Maloney, J.) (citing Davis v. US, 499 F.3d 590, 594 (6th Cir. 2007) (Gilman, Griffin, D.J. Ackerman) (citing Skelly Oil Co. v. Philips Petroleum Co., 339 U.S. 667, 671 (1950) (holding that by passing the Declaratory Judgment Act, "Congress enlarged the range of remedies available in federal courts but did not extend their jurisdiction."))). Thus, State Farm must show some other basis for subject-matter jurisdiction before it can invoke the Declaratory Judgment Act. See Poly-Flex, 2008 WL 793759 at *2 (citing Davis, 499 F.3d at 594 (citing Toledo v. Jackson, 485 F.3d 836, 839 (6th Cir. 2007)).
In May 1988, State Farm issued a personal protection insurance ("PIP") policy covering Carter and her automobile; at that time, Carter was a resident of Michigan and her automobile was located there as well. Comp ¶ 4 and Affidavit of Debra Carter dated July 23, 2008 ("Carter Aff") ¶¶ 3-4. Later that same month, Carter was injured in an accident in that automobile, and to date State Farm has paid nearly $2.8 million in no-fault PIP benefits under the policy. Comp ¶ 5 and Carter Aff ¶¶ 5-6. Carter's claims for PIP benefits are submitted to, investigated and handled by claims representatives in the City of Wyoming, Michigan, and State Farm is reimbursed for the PIP payments by the Michigan Catastrophic Claims Association ("MCCA"), Comp ¶¶ 6-7, which is an unincorporated non-profit association of private insurers. Carter alleges that "[t]here was a point in the 1990s, however, when State Farm had Florida adjusters working on my claim", but State Farm then resumed using Michigan adjusters for her claims. Carter Aff ¶ 10.
Every insurer which writes no-fault insurance for vehicles registered in Michigan must be a member of the MCCA, MICH. COMP. LAWS § 500.3104(1), and must pay an annual premium of each of its no-fault policies covering automobiles and motorcycles registered in Michigan, MICH. COMP. LAWS § 500.3104(7)(d).
Then, when the insurer pays out on a no-fault PIP claim, the MCCA indemnifies the insurer for amounts paid to a single claimant above the "catastrophic" level, which is set at $250,000 for payments under policies that were issued or renewed prior to July 1, 2002. See In re Certified Question: Preferred Risk Mut. Ins. Co. v. MCCA, 449 N.W.2d 660, 661 (Mich. 1989) (interpreting the Michigan Motor Vehicle and Personal Property Protection Act, MICH. COMP. LAWS § 500.3101— 500.3179); MICH. COMP. LAWS § 500.3104(2)(a) and (7)(a). The insurers are permitted to include their MCCA assessments as expenses when applying for approval for premium rates, i.e., they are generally permitted to pass along the cost of their MCCA premiums to insureds in the form of higher premiums. See Certified Question, 449 N.W.2d at 679; MICH. COMP. LAWS § 500.3104(22).
In 1990, about two years after the accident, Carter moved to Florida; since that time, she has continuously resided in Florida, and that is where she has received all her medical care and treatment, received her premium statements, received PIP payments, and made her premium payments. See Comp ¶ 8 and Carter Aff ¶¶ 2 7-8. In 2003 Carter brought suit against State Farm in Florida state court, seeking payment of additional PIP benefits and damages for tortious breach of contract, negligence, and intentional infliction of emotional distress ("IIED"); the lawsuit settled. See Comp ¶ 9. In January 2008, Carter sent a "Civil Remedy Notice of Insurer Violations" that arguably threatened to sue State Farm, presumably in a Florida court, for IIED, breach of the insurance contract, and "bad faith claims handling" pursuant to FLA. STAT. ANN. § 624.155. Comp ¶ 10. In March 2008, State Farm responded to the notice by paying about $78,000. Comp ¶ 11.
Carter does not specify how she has made her premium payments while living in Florida, i.e., by sending a check, money order or credit card number through the regular mail; by check or credit card over the telephone; or by credit card or electronic debit of a bank account online. Accordingly, the court intimates no opinion as to how Carter's method of transmitting premiums might affect a personal-jurisdiction or choice-of-law analysis on a fuller record.
In April 2008, Carter's counsel wrote to State Farm and offered to accept $5 million to resolve all claims that Carter might have against State Farm. Comp ¶ 12. Carter's counsel wrote as follows:
I received your letter of March 25, 2008 and I also received the letter from Karen Winters dated March 24, 2008 along with a check in the amount of $77,564.00. Please be advised that we do not believe that this check constitutes a cure of the Civil Remedy Notice of Insurer Violation that we filed on Ms. Carter's behalf. All of her medical bills have not been paid [sic] and we have incurred significant attorney's fees over the past several years fighting with State Farm over these bills.
Moreover, Ms. Carter's medical condition has continued to deteriorate as a result of State Farm's intentional and deliberate decision not to pay for medically necessary care that Debra Carter required. As you know[,] Debra Carter is an amputee as a result of an accident that happened back in 1988. She suffers from RSD, Dystonia, diabetes and many other ailments all of which flow from the initial incident. It has been a constant struggle to get State Farm to pay for medically necessary care and treatment that Debra Carter requires. Her physicians have repeatedly notified State Farm that the care and treatment they were rendering to Debra Carter was medically necessary and related to the accident.
[I]t is our intent to proceed with litigation against State Farm for its [IIED] against Ms. Carter, for tortious breach of contract and for its bad faith claims handling. As you can imagine, Ms. Carter is tired of having her life dictated by State Farm. Her mental health in addition to her physical health have suffered greatly. She is currently under the care of many medical doctors as well as a psycho-analyst. They are extremely concerned about Debra's deteriorating physical and mental health. Debra Carter has lost the will to live as a result of this ongoing battle.
I have been authorized by Ms. Carter to accept 5,000,000.00 from State Farm to resolve all claims that she has against State Farm. * * * If your client has any interest whatsoever in resolving this matter, I would appreciate your letting me know within the next thirty (30) days.
Comp, Ex 1 at 1-2 (second paragraph break added, emphasis added).
The court finds that State Farm could reasonably perceive the highlighted language as a threat to sue. Contrast World Religious Belief v. Gospel Music Channel, 563 F. Supp.2d 714 (E.D. Mich. 2008) (correspondence between parties was insufficient to create actual controversy of sufficient immediacy for federal declaratory-judgment jurisdiction, as "[t]he prospect of litigation was not mentioned by either party, and Defendant's tone in its letters, while protective of what it perceives to be its legal interests, was certainly not threatening."). The court also finds, however, that the highlighted language in Carter's April 2008 letter constituted no more than a conditional threat, rather than a "guarantee" or unequivocal statement of impending suit. That characterization will prove unhelpful to State Farm's contention that it has presented a case or controversy for purposes of Article III.
A few weeks after Carter sent that letter, State Farm filed the instant complaint in May 2008, seeking a declaration that Carter's claims for PIP benefits are governed only by Michigan law; that Carter is therefore not entitled to bring claims for IIED, tortious breach of contract, or bad-faith claims handling, as none of those claims is recognized by Michigan law; and that Carter cannot increase State Farm's legal obligations by moving to Florida after incurring a loss in Michigan, as those obligations are governed solely by the Michigan no-fault insurance policy and the Michigan No-Fault Insurance Act. Comp ¶ 13 and Prayer for Relief ¶¶ a-c. By order dated Thursday, October 9, 2008, the court directed State Farm to file a copy of the policy, and State Farm did so on Tuesday, October 14, 2008.
DISCUSSION: Personal Jurisdiction
Personal Jurisdiction, Generally.
Carter contends that this court lacks personal jurisdiction over her in connection with this matter. The court disagrees.
The validity of a court's order depends on the court having jurisdiction over the subject matter and the parties. Days Inn Worldwide, Inc. v. Patel, 445 F.3d 899, 903 (6th Cir. 2006) (Richard Allen Griffin, J.) (citing Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites des Guinee, 456 U.S. 694, 701 (1982)). Without personal jurisdiction, this court would be powerless to proceed to an adjudication. Days Inn, 445 F.3d at 903-04 (citing Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 584 (1999)). Personal jurisdiction must be analyzed and established over each defendant independently, Days Inn, 445 F.3d at 904 (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985), but here there is only one defendant.
"`Personal jurisdiction analysis focuses on the fairness of forcing a defendant to defend an action in a given forum, whereas the subject matter jurisdiction inquiry in a diversity case focuses on whether a particular court is competent to hear a controversy.'" Days Inn, 445 F.3d at 904 (quoting Schwartz v. EDS, Inc., 913 F.2d 279, 294 n. 9 (6th Cir. 1990)) (other internal quotation marks omitted).
The burden is on the plaintiff, State Farm, to establish the existence of personal jurisdiction over Carter. Harris v. Lloyds TSB Bank, PLC, 281 F. App'x 489, 492 (6th Cir. 2008) (citing Intera Corp. v. Henderson, 428 F.3d 605, 615 (6th Cir. 2005)); accord Witbeck v. Bill Cody's Ranch Inn, 411 N.W.2d 439, 450 n. 13 (Mich. 1987). However, State Farm needs to present only a prima facie case for personal jurisdiction. Harris, 281 F. App'x at 492 (citing Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991)); see also Gagnon v. Emerson Elec. Ben. Health Plan Trust Fund, 2001 WL 34399192, *1 (W.D. Mich. Aug. 13, 2001) (Bell, C.J.) ("When personal jurisdiction is challenged, a plaintiff has the burden of showing that it does exist. Where, as here, the Court considers the issue without the benefit of an evidentiary hearing, the burden is relatively slight; a prima facie showing is sufficient.") (citing Third Nat'l Bank in Nashville v. Wedge Group, Inc., 882 F.2d 1087, 1089 (6th Cir. 1986)). Also, because the court is ruling on personal jurisdiction without conducting an evidentiary hearing, it "must view the pleadings and affidavits in the light most favorable to [State Farm] and not consider the controverting [factual] assertions of" Carter. Harris, 281 F. App'x at 492 (citing Calphalon Corp. v. Rowlette, 228 F.3d 718, 721 (6th Cir. 2000)).
Personal jurisdiction is either general jurisdiction, where the defendant has "systematic and continuous" contact with the forum State, or limited jurisdiction, also known as specific jurisdiction, where the subject matter of the lawsuit is related to defendant's contacts with the forum State. Walker Motorsport, Inc. v. Henry Motorsports, Inc., No. 95-2250, 110 F.3d 66, 1997 WL 148801, *2 (6th Cir. Mar. 31, 1997) (p.c.) (Kennedy, Jones, Boggs) (citing Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 445-47 (1952) and Nationwide Mut. Ins. Co. v. Tryg Inbt'l Ins. Co., 91 F.3d 790, 793 (6th Cir. 1996)).
To exercise personal jurisdiction over Carter, the court must be satisfied that Michigan law would authorize this State's courts to exercise jurisdiction, and the exercise must comport with the Due Process Clause of the United States Constitution. Harris, 281 F. App'x at 492 (citing Brunner v. Hampson, 441 F.3d 457, 463 (6th Cir. 2006)).
Is Personal Jurisdiction Over Carter Authorized by Michigan State Law?
The court first considers whether Michigan law authorizes a court in Michigan to exercise jurisdiction over Carter under these circumstances. See Perry Drug Stores v. CSK Auto. Corp., 93 F. App'x 677, 680 n. 6 (6th Cir. 2003) (Siler, Daughtrey,U.S.D.J. Ann Aldrich) ("A district court has personal jurisdiction over any defendant that `could be subjected to the jurisdiction of a court of general jurisdiction of the state in which the district court is located.'") (quoting FED. R. CIV. P. 4(k)(1)(A)). Michigan's long-arm statute governing "limited", i.e., specific jurisdiction over an individual, provides:
The existence of any of the following relationships between an individual or his agent and the state shall constitute a sufficient basis of jurisdiction to enable a court of record of this state to exercise limited personal jurisdiction over the individual and to enable the court to render personal judgments against the individual or his representative arising out of an act which creates any of the following relationships:
(1) The transaction of any business within the state.
(2) The doing or causing an act to be done, or consequences to occur, in the state resulting in an action for tort.
(3) The ownership, use or possession of real or tangible personal property situated within the state.
(4) Contracting to insure a person, property, or risk located within this state at the time of contracting.
(5) Entering into a contract for services to be rendered or material to be furnished in the state by the defendant.
(6) Acting as a director, manager, trustee of other officer of a corporation incorporated under the laws of, or having its principal place of business within this state.
(7) Maintaining a domicile in this state while subject to a marital or family relationship which is the basis of the claim for divorce, alimony, separate maintenance, property settlement, child support, or child custody.
MICH. COMP. LAWS § 600.705 (emphasis added). See Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 888 (6th Cir. 2002) ("The `transaction of any business' necessary for limited personal jurisdiction under § 600.715(1) [the analogous provision for corporations] is established by `the slightest act of business in Michigan.'") (quoting Lanier v. Am. Bd. of Entodontics, 843 F.2d 901, 906 (6th Cir. 1988) (citing Sifers v. Horen, 188 N.W.2d 623, 624 n2 (Mich. 1971))).
Technically, the federal constitutional question does not arise until the court first confirms that a defendant is subject to jurisdiction under the applicable Michigan long-arm statute. Perry Drug Stores, 93 F. App'x at 680 (citing CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1262 (6th Cir. 1996)). The reach of the Michigan long-arm statutes, however, is coextensive with the jurisdiction permitted by the federal Due Process Clause. Perry Drug Stores, 93 F. App'x at 680 (citing Michigan Coalition of Radioactive Material Users, Inc. v. Griepentrog, 954 F.2d 1174, 1176 (6th Cir. 1992)). In other words, "[t]he Michigan long-arm statute . . . confers on courts `the maximum scope of personal jurisdiction permitted by the Due Process Clause of the Fourteenth Amendment.'" Mott v. Schelling Co., No. 91-1540, 966 F.2d 1453, 1992 WL 116014, *3 (6th Cir. May 29, 1992) (p.c.) (Boggs, Norris Contie) (citing, inter alia, Chrysler Corp. v. Fedders Corp., 643 F.2d 1229, 1236 (6th Cir. 1991) and Hertzberg Noveck v. Spoon, 681 F.2d 474, 478 (6th Cir. 1982)).
The long-arm statutes governing "limited", i.e., specific, personal jurisdiction over corporations, partnerships, and unincorporated voluntary associations are MICH. COMP. LAWS § 600.715 and § 600.725 and § 600.735, respectively.
Thus, the court need only determine whether the exercise of jurisdiction over Carter in this case would comport with due process. Perry Drug Stores, 93 F. App'x at 680 (citing Michigan Coalition, 954 F.2d at 1176).
Our Circuit has recognized a possible exception to the rule that the Michigan long-arm statute is coextensive with the jurisdiction allowed by due process, but that exception does not apply here. As the Circuit has explained,
It has been suggested that, in certain circumstances, the Michigan long-arm statute may not extend to the limit permitted by the federal Constitution. See, e.g., Theunissen v. Matthews, 935 F.2d 1454, 1462 (6th Cir. 1991); LAK, Inc. v. Deer Creek Enterprises, 885 F.2d 1293, 1298 n. 4 (6th Cir. 1989)). These cases, however, involve situations where a Michigan plaintiff's injuries occur out of the forum state (and sometimes out of the country), but where the defendant still has some minimal contact with Michigan.Mott, 1992 WL 116014 at n. 1. Here, by contrast, Carter was a Michigan resident who sustained her physical injuries in Michigan. She was entitled to payment of PIP benefits only by virtue of a contract that was issued in Michigan when she was living in Michigan. See id. (" The injury in this case took place in Michigan and was caused by a product sold and transported into the state. In these circumstances, the Michigan statute reaches as far as the due process clause will allow.") (emphasis added).
Is Personal Jurisdiction Over Carter Consistent with Her Federal Due-Process Rights?
The parties agree that Carter is a resident of Florida, and the court so finds. Consistent with the right of due process, this nonresident defendant's amenability to suit in this State depends on whether she conducted herself so that she could reasonably anticipate being haled into court here. Days Inn, 445 F.3d at 904 (citing Neal v. Janssen, 270 F.3d 328, 331 (6th Cir. 2001) (quoting World-Wide VW Corp. v. Woodson, 444 U.S. 286, 297 (1980))). As the Supreme Court has explained,
By requiring that individuals have "fair warning that a particular activity may subject [them] to the jurisdiction of a foreign sovereign," the Due Process Clause "gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit."Burger King, 471 U.S. at 472 (quoting Schaffer v. Heitner, 433 U.S. 186, 218 (1977) (Stevens, J., concurring) and World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980) (" VW")).
As to the due process inquiry for personal jurisdiction, our Circuit has developed a three-part test to determine whether a district court may exercise such jurisdiction: (1) first, the defendant must purposefully avail himself of the privilege of acting in the forum State or causing a consequence in the forum State; (2) the cause of action must arise from the defendant's activities in the forum State; and (3) the defendant must have a sufficiently substantial connection with the forum State to make the exercise of jurisdiction over the defendant reasonable. Air Prods., 503 F.3d at 550 (citing So. Mach. Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th Cir. 1968) (developing criteria to flesh out the requirement of Int'l Shoe Co. v. State of Washington, 326 U.S. 310, 316 (1945) that the defendant "have certain minimum contacts with [the forum State] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice")); accord Aaronson v. Lindsay Hauer Int'l, Ltd. 597 N.W.2d 227, 231 (Mich.App. 1999) (citing Mozdy v. Lopez, 494 N.W.2d 866, 868 (Mich.App. 1992) (p.c.) (P.J. Richard Allen Griffin, Holbrook, Reilly)). The first criterion, purposeful availment, is the sine qua non of personal jurisdiction. Air Prods., 503 F.3d at 550 (citing So. Mach. Co., 401 F.2d at 381-82).
See also Days Inn, 445 F.3d at 904 (personal jurisdiction exists if the defendant "purposefully directed [her] activities at residents of the forum [State] and the litigation results from alleged injuries that arise out of relate to those activities. . . .") (quoting Neal, 270 F.3d at 331 (quoting Burger King, 471 U.S. at 472)) (footnote 5 and internal quotation marks omitted), reh'g reh'g en banc denied (6th Cir. July 18, 2006).
This test, which seeks to ensure that the defendant has fair warning that she can be haled into court in Michigan, "is satisfied if the defendant has `purposefully directed' [her] activities toward the forum state and the alleged injuries [damages] `arise out of or relate to' those activities." Burger King, 471 U.S. at 472 (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774 (1984) and Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984)). Even a single act can suffice for minimum contacts so long as it creates the required relationship between the defendant's occurrence, transaction or injury and the forum State. Mott, 1992 WL 116014 at *3 (citing McGee v. Int'l Life Ins. Co., 335 U.S. 220, 223 (1957)).
The facts of this dispute easily satisfy this standard. All the legal wrongs for which Carter has threatened to sue arise out of State Farm's handling of her claims under an insurance policy that was issued in Michigan, while she was a Michigan resident, and for medical expenses stemming from an accident that occurred in Michigan. Cf. Kakish v. Dominion of Canada Gen. Ins. Co., 2005 WL 3556160, *3 n. 4 (Mich.App. Dec. 29, 2005) (P.J. Fitzgerald, O'Connell, Kelly) (acknowledging that Michigan courts had limited personal jurisdiction over Canadian insurer as to Canadian resident's claim for no-fault benefits arising out of accident that occurred in Michigan); Kriko v. Allstate Ins. Co. of Canada, 357 N.W.2d 882 (Mich.App. 1984) (same). These are not "random, fortuitous or attenuated contacts" of the sort which the minimum-contacts test treats as insufficient to confer personal jurisdiction over a non-resident. See Neogen Corp., 282 F.3d at 888 (quoting Burger King, 471 U.S. at 475).
Cf. Hettich v. Allstate Cty. Mut. Ins. Co., 2006 WL 287430 (Mich.App. Feb. 7, 2006) (p.c.) (P.J. Zahra, Murphy, Neff), where plaintiff, a Texas resident, obtained an automobile insurance policy from the defendant insurer. Plaintiff insured moved to Michigan and added a Michigan-registered vehicle to the Texas policy in June 2003, and his wife, a covered driver, died in an accident in that Michigan-registered vehicle in August 2003. The insured sued in Michigan, and the trial court granted summary disposition to the insurer due to lack of personal jurisdiction. The Michigan Court of Appeals vacated and remanded for discovery to determine whether the insurer, apparently neither incorporated in Michigan nor maintaining its principal place of business here, was nonetheless subject to limited (specific) personal jurisdiction here.
The Hettich decision is unpublished and, therefore, not precedentially binding on this court when sitting in diversity as a "state court." See Appalachian Railcar Servs., Inc. v. Boatright Enters., Inc., ___ F. Supp.2d ___, ___, 2008 WL 828112, *14 (W.D. Mich. 2008) (Paul L. Maloney, C.J.) (Michigan courts are not bound by unpublished decisions of other Michigan courts) (citing Iqbal v. Bristol West Ins. Group, 748 N.W.2d 574, 582 n. 5 (Mich.App. 2008) (citing MICH. CT. R. 7.215(J)(1))).
But the court finds Hettich logical and not inconsistent with published Michigan appellate decisions. See Amerisure Mut. Ins. Co. v. Carey Transp., Inc., ___ F. Supp.2d ___, ___, 2008 WL 4382806, *8 (W.D. Mich. Sept. 26, 2008) (Maloney, C.J.) ("[T]his court may consider and follow unpublished state-court decisions, so long as they do not contradict published decisions of the Michigan Supreme Court or Michigan Court of Appeals.") (citing, inter alia, Republic-Franklin Ins. Co. v. Bosse, 1996 WL 301722, *5 n. 4 (6th Cir. June 4, 1996)).
Hettich suggests that Michigan courts consider it potentially significant, for purposes of limited personal jurisdiction, that an insured's accident occurred in Michigan.
And the fact that Carter subsequently moved to Florida and has resided there for a long period of time cannot retroactively alter the Michigan-based nature of both the insurance contract and the incident that gave rise to State Farm's liability under the contract. Cf. Schneider v. Linkfield, 198 N.W.2d 834 (Mich.App. 1972) ("We see nothing unfair about allowing a plaintiff to sue in Michigan a defendant who was a resident of the jurisdiction at the time the cause of action arose.") (emphasis added), aff'd, 209 N.W.2d 225 (Mich. 1973), quoted with approval by Krueger v. Williams, 300 N.W.2d 910, 916 (Mich. 1981) ("In Schneider, an automobile accident occurred in Michigan. The defendants were Michigan residents at the time of the accident but had subsequently moved out of state.").
As to the potential Florida-law claims for alleged bad-faith handling of Carter's claims, the court acknowledges Carter's allegation that State Farm had Florida adjusters handling her claims for some period of time in the 1990s. See MTD at 11 n. 2 and Carter Aff. But for two reasons, this allegation is of no avail to Carter for purposes of the personal-jurisdiction analysis.
First, because the case comes before the court on Carter's motion to dismiss, the court is obligated to accept State Farm's factual allegations. State Farm has not alleged or conceded that it ever used Florida-based personnel to handle any of Carter's PIP claims. Even if State Farm has not expressly denied that allegation in its post-pleading filings, "it is not proper to assume facts that a plaintiff has not plead" when the plaintiff is opposing a Rule 12(b)(6) motion. HMS Prop. Mgmt. Group, Inc. v. Miller, Nos. 94-3668 94-3669, 9 F.3d 537, 1995 WL 641308, *3 (6th Cir. Oct. 31, 2005) (p.c.) (Jones, Daughtrey, W.D. Mich. D.J. Benjamin Gibson) (citing Assoc'd Gen. Contractors, Inc. v. Calif. State Council of Carpenters, 459 U.S. 519, 526 (1983)). See also Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 888 (6th Cir. 2002) (when determining whether plaintiff had established that defendant had sufficient minimum contacts with Michigan to support personal jurisdiction, "this court will not consider facts proffered by the defendant that conflict with those offered by the plaintiff") (citing Serras v. First Tenn. Bank Nat'l Ass'n, 875 F.2d 1212, 1214 (6th Cir. 1989)).
The court could make a factual finding inconsistent with allegations in a non-movant plaintiff's complaint if those allegations were flatly contradicted "by facts established in exhibits attached to the pleading", i.e., State Farm's complaint, see HMS Prop. Mgmt, Group, 1995 WL 641308 at *3 (citing Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir. 1987)). Cf., e.g., Collins v. IRS, No. 95-3800, 1996 WL 279180, *1, 86 F.3d 1155 (6th Cir. May 23, 1996) (p.c.) (Ryan, Norris, E.D. Mich. D.J. Charles Joiner) (although plaintiff was opposing 12(b)(6) motion, the court rejected his "bare allegation that Magistrate Judge Gallas permitted the arrest warrant to be issued without his prior approval [as] incredible and contradicted by the record"). But Carter has not identified any exhibit attached to the complaint which contradicts State Farm's unqualified allegation that it used Michigan-based personnel to handle her claims.
Second, even if the court could find that State Farm used adjusters outside Michigan to handle some of Carter's claims in the 1990s, that would not change the fact that the policy was issued in Michigan, and the accident that triggered coverage and led to all the pertinent claims/adjusting activities occurred in Michigan. The court would still find that Carter "purposefully directed her activities" toward Michigan and that her physical injuries, and the consequent alleged wrongs by State Farm, "arose out of and related to" those activities, Burger King, 471 U.S. at 472.
Moreover, the policy contained several provisions that defined some of the parties' rights and responsibilities by reference to Michigan law.
Most significantly, in the policy's Liability Coverages section, the subsection entitled Limited Property Damage Liability — Coverage Y both invokes Michigan substantive law and requires a Michigan forum for certain disputes:
We will pay for damage to motor vehicles for which the insured is liable pursuant to Section 500.3135, Subsection 2(d) of the Michigan Insurance Code.
The insured must appear and defend himself in any action commenced for this damage in the Small Claims Division of the District Court or the Conciliation Division of the Common Pleas Court of the City of Detroit or the Municipal Court. FAILURE OF THE INSURED TO APPEAR AND DEFEND HIMSELF OR HERSELF VOIDS THE COVERAGE PROVIDED FOR THESE DAMAGES.
Under the liability coverages, except where prohibited by Michigan law, we will defend any suit against an insured for such damages with attorneys hired and paid by us. * * *
State Farm's Oct. 14, 2008 Supp. Filing, Policy No. 5618-277-22 ("Policy"), at 6 (emphasis added). While this is not dispositive on its own, it demonstrates that Carter availed herself of the benefits and protections of Michigan law with regard to the policy. That bolsters the conclusion that Carter cannot be unfairly surprised or prejudiced, for due process purposes, if she is haled into court here for a dispute arising out of the policy. See Ford Dealer Computer Servs., Inc. v. Fullerton Motors, LLC, 42 F. App'x 770, 772 (6th Cir. 2002) (p.c.) (Keith, Daughtrey, N.D. Ohio D.J. James G. Carr) ("While insufficient on its own, the choice of law clause in the guaranty under which [non-resident defendant's principal] Mr. Fullerton availed himself of the benefits and protections of Michigan law, in conjunction with the other circumstances of this case, is sufficient to confer personal jurisdiction.") (citing Burger King, 471 U.S. at 472, and LAK, 885 F.2d at 1295).
That is not to say that the Western District of Michigan is the most logical or most convenient forum to hear this matter. But Carter did not move for a transfer of venue pursuant to 28 U.S.C. § 1404. This court has the authority to raise the issue of most-appropriate venue sua sponte, but that never arises, given the lack of a case or controversy.
Other provisions of the policy, while not as significant as Section I's choice of a Michigan forum for certain disputes, also support the conclusion that the parties understood the policy, and their relationship as insurer and insured, to center on Michigan. Also in Section I, the subsection entitled "When and Where Coverage Applies" states in capital letters, "PERSONAL PROTECTION COVERAGE APPLIES ONLY IN MICHIGAN." See Policy at 4.
In Section II, entitled No-Fault, the subsection governing Coverage P — Personal Injury Protection, provides in pertinent part, "The most we will pay for work loss in any 30-day period shall not exceed $1000, or the adjusted amount in effect on the date of the accident as determined by the Commissioner of Insurance in accordance with the no-Fault Act.", emphasis added, presumably the Michigan Commissioner.
Next, in the subsection explaining When Coverages N, P and Q1 Do Not Apply, the policy qualifies one of the disclaimers of liability by stating, "This applies only if you are a motor carrier as defined by Michigan law, and evidence of security has been filed no your behalf with a regulatory body." Policy at 11.
Later in Section II, No-Fault, the policy disclaims coverage
2. for bodily injury to any person, other than you or any relative:
a. injured as a pedestrian outside the State of Michigan.
* * *
d. while occupying a motor vehicle which is:
* * *
2) Operated outside the State of Michigan by you or any relative; and
* * *
4. For any person:
a. Not a resident of the State of Michigan;
b. Occupying a motor vehicle or motorcycle not registered in Michigan;. . . .
Policy at 12 (emphasis added).
Finally, if arbitration had been necessary to determine the liability of the driver of an uninsured vehicle to Carter, the policy committed the parties to arbitration in the insured's State of residence; at the time of Carter's accident and for more than a year thereafter, that was Michigan. See Policy at 14:
Deciding Fault and Amount
Two questions must be decided by agreement between the insured and us:
1. Is the insured legally entitled to collect damages from the owner or driver of the uninsured motor vehicle; and
2. If so, in what amount?
If there is no agreement, these questions shall be decided by arbitration upon written request of the insured or us. * * *
* * *
The arbitration shall take place in the county in which the insured resides unless the parties agree to another place. State court rules governing procedure and admission of evidence shall be used.
Boldface in original, italics added.
Accordingly, the court determines that specific personal jurisdiction exists in Michigan over Carter with relation to this policy, Carter's accident, and their sequelae, such as Carter's injuries and State Farm's handling, payment or non-payment of her claims under the policy.
Because the court determines that it has specific personal jurisdiction over Carter with regard to this controversy, it need not consider whether it might also have general personal jurisdiction over Carter. See generally Kerry Steel, Inc. v. Paragon Indus., Inc., 106 F.3d 147, 149 (6th Cir. 1997) (explaining distinction between specific and general jurisdiction); see, e.g., Air Prods. Controls, Inc. v. Safetech Int'l, Inc., 503 F.3d 544, 550 (6th Cir. 2007) ("Because we ultimately conclude that the district court had specific jurisdiction over Defendants, we focus only on that question and do not reach the question of general jurisdiction."); Scotts Co. v. Aventis SA, 145 F. App'x 109, 115 (6th Cir. 2005) (Suhrheinrich, J.) ("Given the conclusion that the exercise of specific jurisdiction is proper, we need not address Scotts' argument regarding general jurisdiction.").
DISCUSSION: Case or Controversy
Federal Constitutional "Case or Controversy" Requirement, Generally.
Next, Carter contends that State Farm has not established the existence of a "case or controversy" as necessary to permit this court to render an opinion. The court agrees.
Article III of the Constitution limits federal court jurisdiction to "cases" or "controversies." "These two words `confine the business of federal courts to questions presented in an adversary context and in a form historically viewed as capable of resolution through the judicial process.'" Massachusetts v. EPA, 549 U.S. 497, ___, 127 S.Ct. 1438, 1452 (2007) (quoting Flast v. Cohen, 392 U.S. 83, 95 (1968)). "The Constitution's case or controversy requirement precludes courts from rendering advisory opinions and confines the jurisdiction of the courts to `real and substantial controvers[ies] admitting of specific relief through a decree of a conclusive character. . . .'" Bogaert v. Land, ___ F.3d ___, ___, 2008 WL 4489263, *6 (6th Cir. Oct. 8, 2008) (quoting North Carolina v. Rice, 404 U.S. 244, 246 (1971)); see also Massachusetts v. EPA, 549 U.S. at ___, 127 S.Ct. at 1452 (no justiciable controversy exists when the parties request what would be an advisory opinion) (citing Clinton v. Jones, 520 U.S. 681, 700 n. 33 (1997) and Hayburn's Case, 2 Dall. 409, 1 L.Ed. 436 (1792)).
"`A claim is not ripe for adjudication if it rests upon anticipated future events that may not occur as anticipated, or indeed may not occur at all.'" Winget v. JPMorgan Chase Bank, N.A., 537 F.3d 565, 581-82 (6th Cir. 2008) (quoting Cooley v. Granholm, 291 F.3d 880, 883-84 (6th Cir. 2002) (quoting Texas v. US, 523 U.S. 296 (1998))). As a rule, our Circuit does not allow litigation premature claims to ensure that courts litigate only `existing, substantial controversies, not hypothetical questions or possibilities.'" Winget, 537 F.3d at 582 (quoting City Comms., Inc. v. City of Detroit, 888 F.2d 1081, 1089 (6th Cir. 1989)) ("Because Winget's claims regard the valuation of collateral the Defendants have not yet sought, those claims are only hypothetical questions or possibilities, and the district court correctly dismissed those claims.").
State Farm "must have suffered an injury in fact for a case or controversy to be present under Article III." Prime Media, Inc. v. City of Brentwood, 485 F.3d 343, 354 (6th Cir. 2007) (citing Adland v. Russ, 307 F.3d 471, 477-78 (6th Cir. 2002)), reh'g en banc denied (6th Cir. Sept. 24, 2007). As the Supreme Court has explained,
Concrete injury, whether actual or threatened, is that indispensable element of a dispute which serves in part to cast it in a form traditionally capable of judicial resolution. It adds the essential element of specificity to the dispute by requiring that the complaining party have suffered a particular injury caused by the action challenged as unlawful. This personal stake is what the Court has consistently held enables a complainant authoritatively to present to a court a complete perspective upon the adverse consequences flowing from the specific set of facts undergirding his grievance.Prime Media, 485 F.3d at 354 (quoting Schlesinger v. Reservists Committee to Stop the War, 418 U.S. 208, 220-21 (1974)).
MedImmune (U.S. 2007) is Readily Distinguishable and Thus of No Avail to State Farm
State Farm argues as follows:
[P]ursuant to the clear and recent ruling of our Supreme Court in MedImmune, Inv. v. Genentech, Inc., 449 U.S. 118 . . . (2007), it is clear that this Court does in fact have subject matter jurisdiction as State Farm['s] self avoidance of imminent injury, coerced by the threatened enforcement action of a bad faith civil lawsuit in Florida by Defendant, creates an actual case or controversy and a justiciable dispute.
* * *
On January 28, 2008, Debra Carter threatened to sue State Farm for [IIED] arising from claims handling in the State of Michigan, tortious breach of the Michigan insurance contract, and for bad faith claims handling, pursuant to Section 624.155 Florida statutes. . . . (Exhibit 1). * * * Thereafter, on April 7, 2008, attorneys hired by Defendant forwarded correspondence to State Farm demanding $5 Million to resolve all claims that Defendant may have against State Farm. (Exhibit 3).
Plaintiff State Farm brought this lawsuit because it was forced to pay, and continues to pay, benefits in such a manner as to avoid liability for being sued in the State of Florida on a "bad faith" insurance handling claim. * * *
* * *
The facts of MedImmune are actually quite similar to the facts presented in this case. In MedImmune there was a patent dispute between the parties. Defendant felt that a product plaintiff was using infringed upon its patent and therefore the plaintiff owed it royalties. MedImmune, Inc., 127 S.Ct. at 768. Gene[n]tech went so far as to right [sic] a letter to the plaintiff demanding royalties and threatening to sue the plaintiff for patent infringement if the royalty payments were not made as demanded. Id.
Plaintiff knew that if defendant prevailed in a patent infringement action, that plaintiff could be ordered to pay trebled damages and attorney fees and could be barred from selling a product that accounted for more than 80% of its revenues since 1999. Id. Unwilling to risk such serious consequences, petitioner paid the demanded royalties and then filed the declaratory judgment [action] which led to the Supreme Court's opinion.
[B]ecause the plaintiff continued to make royalty payments, the defendant argued that there was no case or controversy vesting a federal court with subject matter jurisdiction despite the fact that the factual and legal dimensions of the dispute were well defined:
The factual and legal dimensions of the dispute are well defined, but for petitioner's continuing to make royalty payment makes what would otherwise be an imminent threat at last remote, if not non-existent. As long as those payments are made, there is no risk that respondents will seek to enjoin petitioner's sales. Petitioner's own acts, in other words, eliminate the imminent threat of harm. The question before us is whether this causes the dispute no longer to be a case or controversy within the meaning of Article III.
[ MedImmune, 127 S.Ct. at 772 (footnote omitted, emphasis added)] MedImmune stands for the proposition [that] where a declaratory judgment plaintiff[']s self avoidance of imminent injury is coerced by the threatening enforcement action of a private party, rather than a government, lower and federal state courts have long accepted jurisdiction because such situations create an actual case or controversy between the parties subject to judicial determination. MedImmune, Inc., 127 S.Ct. at 773. As the Court observed,
The rule that plaintiff must destroy a large building, bet the farm or, (as here) risk treble damage and loss of 80% of its business, before seeking a declaration of its actively contested legal rights find[s] no support in Article III.
[ MedImmune, 127 S.Ct. at 775 (footnote omitted)]
State Farm's Brief in Opposition to Motion to Dismiss ("State Farm's Opp") at 8-10.
It is difficult to fathom how State Farm could possibly find the facts of Medimmune "quite similar to the facts presented in this case." The facts of this case are vastly and obviously different from those in MedImmune, and MedImmune's reasoning accordingly does not compel any deviation from the traditional case-or-controversy standard here. If the federal court in MedImmune had refused to issue the declaration sought by MedImmune — by finding no case or controversy — MedImmune would have to choose between continuing to pay royalties or facing certain, immediate suit by Genentech for infringement. In turn, if Genentech succeeded on its infringement action, MedImmune would immediately lose over 80% of its revenues and pay treble damages for the unpaid royalties. See MedImmune, Inc., 127 S.Ct. at 765 and 768.
Here, by contrast, Carter's threats to sue State Farm in Florida were hardly unequivocal and uncompromising, either when they were made or in retrospect. After all, State Farm alleges that Carter "threatened to sue State Farm" on January 28, 2008, see State Farm's Opp, Ex 1, yet Carter never followed through on that threat. Carter's mere threat of suit, which was not a guarantee of suit or something realistically close to a guarantee, is not enough. "The threat of suit, however immediate, is not by itself sufficient for invocation of the federal power to issue a declaratory judgment." Hyatt Internat'l Corp. v. Coco, 302 F.3d 707l 715 (7th Cir. 2002). Over two months after the January 28, 2008 threat to sue, Carter still had not sued. Instead, Carter merely sent another letter to State Farm threatening to sue. See State Farm's Opp, Ex 3 (Carter's April 7, 2008 letter to State Farm).
Even then, Carter's counsel held out the real prospect of settlement instead of litigation. See State Farm's Opp, Ex 3 (Carter's April 7, 2008 letter to State Farm). The inadequacy of Carter's threat as a basis for declaratory-judgment jurisdiction is especially apparent in light of Carter's counsel's concomitant offer to settle rather than litigate. This point is well illustrated by Microstrategy, Inc. v. Convisser, 2000 WL 554264 (E.D. Va. May 2, 2000). In that case, one Lauricia Convisser had filed an administrative charge against her employer with the Equal Employment Opportunity Commission ("EEOC") — more than Carter actually did here — and then threatened to sue the employer under Title VII and the Age Discrimination in Employment Act. Those actions and statements, the district court held, were not enough to create a case or controversy:
[T]he Convisser letter, although clearly indicating that litigation of some kind is a real possibility, does not present a substantial controversy of sufficient immediacy and reality to warrant declaratory relief. First, the Convisser letter does not signal a guarantee that Lauricia will sue. In fact, the letter invites Microstrategy to reach an out-of-court resolution.Id. at *3.
Thus far the court has focused on distinguishing Carter's statements and actions (or the lack thereof) from those the declaratory-judgment defendant in MedImmune. But the weightier and starker distinction between this case and MedImmune rests in the consequences if the declaratory-judgment plaintiff failed to comply with the defendant's demands and lost the subsequent lawsuit. The Supreme Court placed heavy emphasis on the fact that if MedImmune could not seek federal declaratory relief, it would be forced to meet its adversary's demands or risk the devastation of its entire business. Here, by contrast, State Farm Mutual Automobile Insurance Company is the main company within State Farm, and it owns the other State Farm companies. See http://www.statefarm.com/about/companie.asp, retrieved October 10, 2008. For every year from 1942 through 2008 inclusive, State Farm Mutual Automobile Insurance Company has been the largest insurer of automobiles in the United States of America, such that about 20% of all cars on the road in the USA are insured by the company. Id.
Collectively, the State Farm Insurance group was ranked 32nd in the Fortune 500 listing of American corporations by revenue for 2008. Id. For the year 2007, State Farm had more than $181 billion in assets, $61.6 billion in revenues, and $5.4 billion in profits. See http://money.cnn.com/magazines/fortune/fortune500/2008/snapshots/10199.html, retrieved October 10, 2008. The $5 million settlement demanded by Carter as an alternative to litigation in Florida represents approximately 0.000027% of State Farm's Year 2007 revenues — while the loss faced by MedImmune if it risked unsuccessful litigation was more than eighty percent of its revenues (loss of a product that accounted for 80% fo its revenues, plus treble damages and attorney fees).
Thus, in addition to not being sufficiently certain and imminent, the consequences that State Farm seeks to avoid or minimize by requesting federal declaratory relief are vastly less grave, in relative financial terms, than those at stake in MedImmune.
In addition to the enormous factual distinctions between this case and MedImmune, the court notes that intellectual-property disputes typically present a materially different situation than contract and tort disputes in the insurance context. In Sankyo Corp. v. Nakamura Trading Corp., 139 F. App'x 648 (6th Cir. 2005), discussed in more detail below, plaintiff asked a federal court to declare that if the defendant filed certain claims against it, those claims would be subject to arbitration under the parties' contract. The plaintiff relied on Robin Prods. Co. v. Tomecek, 465 F.3d 1193 (6th Cir. 1972). At that time, long before MedImmune, Robin Products "set out the test for determining whether a justiciable controversy exists in a declaratory judgment action involving patent infringement." Sankyo, 139 F. App'x at 652 (citing Robin Products, 465 F.2d at 1195-96). Using reasoning that applies substantially to our case, the Sixth Circuit rejected the plaintiff's reliance on the Robin Products patent decision as misplaced. Sankyo, 139 F. App'x at 652. The panel wrote,
Although Sankyo attempts to analogize the facts of this case to Robin Products and to patent infringement cases more generally, its attempts fail. The issuance of declaratory judgments in patent infringement cases may resolve uncertainty faced by the alleged infringer by conclusively resolving the infringement question. In this case, on the other hand, Sankyo's allegations of uncertainty — possible claims that may or may not be brought by NTC — will not be relieved by the declaration it seeks.Sankyo, 139 F. App'x at 652-53 (emphasis added).
The Eastern District of Michigan also recently confronted a case where the declaratory-judgment plaintiff failed to show that it faced extreme and certainly imminent consequences like those faced by MedImmune. The Eastern Michigan judge held that under the circumstances, the possibility of a future civil claim was not sufficient to create a case or controversy:
As the Supreme Court reiterated in MedImmune, Inc. . . ., 127 S.Ct. 764, 771 . . . "The dispute must be definite and concrete, touching the legal relations having adverse legal interests; and must be real and substantial and admit of specific relief through a decree of conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts."
Dow Chemical has not here identified any basis on which it faces a coercive dilemma that requires it to choose between rights and the risk of prosecution, such as the cost and expense of a patent enforcement action anticipated by the plaintiff in MedImmune.
Instead, Dow Chemical may yet face a claim from Kreinberg — if he chooses to challenge its election not to provide him notice of his COBRA rights. The events that would permit Kreinberg to advance such a claim have, seemingly, already transpired. In contrast, the central event that would transform that issue into a case or controversy — that Kreinberg disputes Dow Chemical's election not to provide him notice of the opportunity to continue his health care coverage — has not.
Accordingly, Dow Chemical's Count V presents the Court with a request for declaratory judgment over which the Court has no jurisdiction, because Dow Chemical seeks a declaration of rights based on a hypothetical situation that has not yet occurred.Kreinberg v. Dow Chem. Co., 2007 WL 2782060, *9-10 (E.D. Mich. Sept. 24, 2007) (Ludington, J.) (emphasis added, second and third ¶ breaks added); see also Dow Chem. Co. v. Reinhard, 2007 WL 2780545, *9-10 (E.D. Mich. Sept. 20, 2007) (Ludington, J.) (same). As in Judge Ludington's Dow Chemical cases, the events that would permit Carter to advance the threatened claims — State Farm's response to her past PIP claims — have already transpired. But "the central event that would transform that issue into a case or controversy" — Carter actually suing State Farm over that completed conduct — has not.
Cf., finding no case or controversy and dismissing declaratory-judgment claim:
Norwood v. Berghuis, 2006 WL 1374051 (E.D. Mich. May 17, 2006) (Tarnow, J.) (prisoner requested declaratory judgment as to whether a habeas petition would be timely if he filed it);
Northfield Ins. Co. v. Isles of June Consulting, Ltd., 2001 WL 34090035, *4-5 (M.D. Tenn. 2001) (Nixon, J.) (insurer sought declaration that it would be entitled to subrogation under a certain policy once the defendant was "made whole", but "[s]ince [defendant] has not been made whole by any entity, there is no live controversy between these parties regarding the right to subrogation");
In re Murray Indus., Inc., 122 B.R. 135 (Bankr. M.D. Fla. 1990) (plaintiff sought declaration as to whether there would be coverage under insurance policy if debtor pursued claims against its officers and directors).
Sankyo (6th Circuit 2005) Counsels Against Finding a Case or Controversy
In support of her argument that State Farm has not presented a case or controversy for Article III purposes, Carter advances Sankyo Corporation v. Nakamura Trading Corporation, 139 F. App'x 648 (6th Cir. 2005) (Nelson, Sutton, N.D. Ohio D.J. Lesley Wells). See MTD at 4-8. The court finds Sankyo's reasoning persuasive and finds that it offers additional support for the conclusion that State Farm has not presented a case or controversy.
In 197, Sankyo Corporation ("Sankyo") and one of its officers, Mr. Nakamura, formed a joint enterprise known as Nakamura Trading Corporation ("NTC"), an Illinois corporation. Sankyo, 139 F. App'x at 648. The owners of Nakamura carried on their relationship without a written contract until 2002, when they executed a written Basic Distributorship Agreement ("the agreement"). Id. at 648-49. The agreement provided that NTC would market and sell Sankyo's products overseas as a commissioned agent of Sankyo. Id. at 649. The agreement provided that if an international dispute arose, arbitration would take place in Illinois if Sankyo brought suit, but would take place in Japan if NTC brought suit. Id. at 649.
In May 2003, Sankyo sent a letter purporting to terminate its agreement with NTC. Sankyo, 139 F. App'x at 649. At a July 2003 meeting designed to wind up the relationship, NTC stated that Sankyo owed it $3 million; when Sankyo disagreed, NTC sent several letters reiterating the $3 million demand and advising that NTC was prepared to litigate this case in a United States District Court. Id. In an August 10, 2003 letter, NTC went so far as to submit a draft complaint raising a statutory claim and three common-law claims under Illinois law. Id. In the various letters, NTC imposed three deadlines — September 10, September 28, and the end of October 2003 — by which it would sue Sankyo if Sankyo failed to respond or tender a counter-proposal for settlement. Id.
NTC's first two deadlines, September 10 and September 28, passed without incident. Rather than wait to see if NTC would see after the final deadline (end of October) passed, Sankyo brought suit in the United States District Court for the Eastern District of Michigan, seeking declaratory and injunctive relief. Sankyo, 139 F. App'x at 649. Specifically, Sankyo asked the federal court to declare that any claims that NTC might bring relating to the agreement — including those in the draft complaint — would be subject to mandatory arbitration in Japan. Id. After receiving briefs on the issue, the district court dismissed Sankyo's declaratory-judgment action for lack of a case or controversy. Id. at 650.
Sankyo appealed, contending that the appropriate test for determining the existence of a case or controversy in the context of potential litigation is whether the defendant's actions have created a reasonable apprehension on the plaintiff's part that the defendant will initiate litigation. Sankyo, 139 F. App'x at 650. The Sixth Circuit affirmed the dismissal of Sankyo's declaratory-judgment action. It emphatically rejected Sankyo's articulation of the test for determining the existence of a case or controversy, writing as follows:
Although a few circuits have employed the "reasonable apprehension" language in cases involving the possibility of future litigation . . ., none of these cases stand for the categorical rule suggested by Sankyo.
To the contrary, to meet the jurisdictional requirements of Article III's "case" or "controversy" requirement, "a plaintiff must, generally speaking, demonstrate that he has suffered `injury in fact,' that is `fairly traceable' to the actions of the defendant, and that the injury will likely be redressed by a favorable decision." Bennett v. Spear, 520 U.S. 154, 62 . . . (1997). The Supreme Court has clearly identified what qualifies as injury in fact: "[W]e have said many times before and reiterate today: Allegations of possible future injury do not satisfy the requirements of Art. III. A threatened injury must be `certainly impending to constitute injury in fact." Whitmore v. Arkansas, 495 U.S. 149, 158 . . .; Deja Vu of Nashville, Inc. v. Metropolitan Gov't of Nashville and Davidson County, Tennessee, 274 F.3d 377, 399 (6th Cir. 2001) ("Ripeness requires that the `injury in fact be certainly impending.'").
In our view, the cases relied on by Sankyo are unhelpful because each involves a very specific factual situation and none reach the particular fact pattern at issue in this case. The critical facts of this case are:
• Sankyo has no plan to pursue any affirmative claims against NTC;
• NTC has threatened litigation against Sankyo;
• NTC's claims are arguably subject to arbitration.
While the underlying facts are not uncommon, Sankyo's response is somewhat atypical. More commonly, NTC would decide whether or not to sue Sankyo, and, if it elected to do so, Sankyo, at that time, would file a motion to compel arbitration. In this case, Sankyo is attempting to take preemptive action by filing a lawsuit to settle the arbitration question in advance. Such a novel approach is precluded by the Case [or] Controversy requirement of the United States Constitution.
Absent one unreported case from the Northern District of Alabama which did not explicitly address case or controversy issues, all of the cases cited by Sankyo are inapposite. Sankyo's case law essentially consists of actions filed by plaintiffs for two purposes: 1) to compel arbitration of their affirmative claims when defendants have resisted arbitration; or 2) to obtain a declaratory judgment to resolve the substantive rights of the parties.
The present case is of a wholly different nature because Sankyo does not seek arbitration of its claims against NTC or a declaration regarding the substantive rights of the parties. Rather, Sankyo's declaratory judgment action is merely directed at resolving the forum for NTC's potential claims, which NTC may or may not pursue. This would be a very different case if Sankyo brought an action seeking a declaration about its legal rights and responsibilities — for example, seeking a declaration that it did not breach the agreement. Such an action, unlike the present one, might resolve an actual dispute.Sankyo, 139 F. App'x at 651-52 (footnotes 7-9 omitted, emphasis added, final paragraph break added).
Likewise here, State Farm response to Carter's qualified threat of litigation is somewhat atypical. More commonly, Carter would decide whether or not to sue State Farm in Florida, and, if she elected to do so, State Farm at that time would ask the Florida court (federal or state) to apply Michigan rather than Florida law. Instead, State Farm seeks to short-circuit that customary and proper way of proceeding — resolving both the choice-of-law and merits questions in a single action — by settling the choice-of-law question in advance. If Carter ever asserts actual claims against State Farm in a Florida court, that court can decide which State's law applies to each claim, and what rights and obligations obtain under the applicable substantive law. Cf. Sankyo, 139 F. App'x at 653 (the more sensible approach is that "once an actual claim is asserted, courts decide whether the parties must arbitrate."). Like Sankyo's declaratory-judgment action, State Farm's unusual and premature invocation of federal declaratory jurisdiction is not countenanced, and is in fact precluded, by our Constitution's case-or-controversy requirement.
State Farm may feel it is likely that Carter will carry out her apparent threat to sue State Farm under Florida law, and events subsequent to this opinion may prove State Farm right. Nonetheless, State Farm fails to show that such a suit is inevitable or verifiably imminent, let alone that it will face extreme risks like the plaintiff in MedImmune if federal declaratory-judgment relief is not available. On this record, State Farm's declaratory-judgment claim is not ripe, i.e., it does not present a case or controversy. See Mozdzierz Consulting, Inc. v. Mile Marker, Inc., 2006 WL 799222, *4 (E.D. Mich. Mar. 28, 2006) (Hood, J.) ("Plaintiff have not shown that a lawsuit is inevitable and that the sole impediment to ripeness is a delay before Defendants file a lawsuit against them. * * * Courts have declined to issue an advisory opinion where an event has not yet occurred. * * * Defendants have not filed an action against Plaintiffs to enforce the 1998 Sales Representative Agreement. . . . * * * Plaintiffs' first amended complaint must be dismissed for lack of subject matter jurisdiction.") (internal citations omitted).
It may be that Carter is strategically waiting for the resolution of the instant action before asserting its threatened Florida-law claims against State Farm in Florida. But our Circuit has held that such speculation provides no basis for federal declaratory-judgment jurisdiction in circumstances like these. See Sankyo, 139 F. App'x at 653 ("During oral argument, Sankyo took the position that NTC was just `waiting for a decision from this Court' to file its complaint. Even if that were true, Sankyo could seek to compel arbitration at that time, when NTC's claims are clearly evident. Under those circumstances, the court would be resolving an actual case or controversy, not merely engaging in a hypothetical exercise.").
In short, State Farm effectively seeks an order from this court that it can brandish if Carter ever asserts the threatened claims. Absent a live, concrete case or controversy, Article III of the Constitution prohibits this court from issuing such an order. See In re Clean Earth Kentucky, LLC, ___ F. App'x ___, ___, 2008 WL 2385246, *6 (6th Cir. June 9, 2008) (p.c.) (Rogers, Cook, McKeague) ("Alabama Power . . . seeks an advisory opinion that it can brandish the next time a bankrupt customer attempts to secure a similar § 366 order. * * * [T]his appeal presents no actual case or controversy. . . ."); see also in re Julien Co., 136 B.R. 784, 790 (Bankr. W.D. Tenn. 1992) ("A defendant's desire, no matter how compelling, to know in advance of an actual controversy how a court may rule is not the equivalent of a concrete controversy between adverse parties.") (citing Railway Mail Ass'n v. Corsi, 326 U.S. 88, 93 (1945)).
DISCUSSION: Discretion to Decline Declaratory-Judgment Jurisdiction
In any event, even if this complaint presented a sufficient "case or controversy" to confer subject-matter jurisdiction, the court in its discretion would decline to exercise that jurisdiction. Cf. Plum Creek Timber Co., Inc. v. Trout Unlimited, 255 F. Supp.2d 1159, 1166 (D. Idaho 2003) ("[E]ven if the Plaintiff had established a basis for jurisdiction, the Court would decline to exercise its discretion to adjudicate the declaratory relief requested under 28 U.S.C. § 2201.") (citation omitted).
The Declaratory Judgment Act provides that "in a case of actual controversy within its jurisdiction . . . 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 declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201(a). This language affords the district court discretion in determining whether and when to entertain an action under the Declaratory Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional prerequisites. Travelers Indem. Co. v. Bowling Green Prof. Assocs., PLC, 495 F.3d 266, 271 (6th Cir. 2007) (Richard Allen Griffin, J.) (quoting Adrian Energy Assocs. v. Michigan PUC, 481 F.3d 414, 421 (6th Cir. 2007) (quoting Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995))).
In applying this standard, courts in our circuit have long considered five factors:
(1) whether the declaratory judgment action would settle the controversy;
(2) whether the declaratory action would serve a useful purpose to clarify the legal relations in issue;
(3) whether the declaratory remedy is being used merely for the purpose of "procedural fencing" or to "provide an arena for a race for res judicata";
(4) whether the use of a declaratory action would increase friction between our federal and state courts and improperly encroach on state jurisdiction; and
(5) whether there is an alternative remedy which is better or more effective.Travelers, 495 F.3d at 271 (citing Grand Trunk W. R.R. Co. v. Consol. R. Co., 746 F.2d 323, 326 (6th Cir. 1984)). More recently, our Circuit added three factors to guide district courts' discretion in deciding whether to exercise jurisdiction in response to a declaratory-judgment request:
(6) whether the underlying factual issues are important to a resolution of the case;
(7) whether the state trial court is in a better position to evaluate those factual issues than is the federal court;
(8) whether there is a close nexus between the underlying factual and legal issues and state law and/or public policy, or whether federal common law or statutory law dictates a resolution of the declaratory judgment action.Travelers, 495 F.3d at 271 (citing Scottsdale Ins. Co. v. Roumph, 211 F.3d 964, 968 (6th Cir. 2000) (citing Wilton, 515 U.S. at 277)).
On balance, these factors weigh decidedly against exercising jurisdiction and issuing a declaratory judgment here. First and most significant, the declaratory judgment requested by State Farm would not settle the controversy. It would leave the next court to interpret and apply Michigan and/or Florida law to the claims which Carter may eventually file (and of course there is no assurance the Carter will ever file any claims). See, e.g., declining declaratory-judgment jurisdiction: Westfield Ins. Corp. v. Mainstream Capital Corp., 366 F. Supp.2d 519 (E.D. Mich. 2005) (Lawson, J.) ("A decision on the coverage question in this Court * * * will not result in a conclusive pronouncement on whether Westfield must indemnify Mainstream at all, since there are certain categories of damages claimed by Grover that apparently fall within the scope of the CGL policy and some that do not. * * * The total amount of Westfield's damages that Westfield may be called upon to pay must abide the determination of the State court action."); Northern Ins. Co. of NY v. Addison Prods., Inc. 148 F. Supp.2d 859 (E.D. Mich. 2001) (Gadola, J.) (it would serve little useful purpose to declare whether insurer had obligation to indemnify and defend insured in product-liability actions pending in California state court, as ruling would not settle the state-court actions, and some coverage questions could be resolved only in light of facts to be determined in state court).
It is possible that Michigan's substantive law would apply to some of Carter's claims and Florida's substantive law would apply to others. See, e.g., Urban Assocs., Inc. v. Standex Electronics, Inc., 216 F. App'x 495, 501 n. 2 (6th Cir. 2007) (Griffin, J.) (approving district court's application of Ohio law applied to claims for breach of contract, bad-faith breach of contract, and unjust enrichment/ quantum meruit but Michigan law to claim for tortious interference with employment relationship).
Second, a declaratory judgment would "clarify the legal relations in issue" only in the very limited sense of determining which State's law would apply to Carter's contemplated future claims. The third factor does not weigh in either direction, as there is no evidence that State Farm is engaged in "procedural fencing", and it cannot be engaged in a race for res judicata on any claims, because Carter still has not actually filed any of the threatened claims.
The fourth factor, if it has any effect, tends to weigh against declaratory-judgment jurisdiction, because this court would be unnecessarily deciding choice-of-law issues that could be decided by a state court in Florida, where Carter resides. Cf. Travelers Indem. Co. v. Bowling Green Prof. Assocs., PLC, 495 F.3d 266, 272 (6th Cir. 2007) (Griffin, J.) ("Examining the fourth factor, the district court [Eastern District of Kentucky] held that the state court would not be in a significantly better position to evaluate the terms or exclusions in the insurance contracts because both forums would apply Kentucky state law. However, because Kentucky state law is controlling, we conclude that Kentucky courts are in the better position to apply and interpret its law on these issues.").
The fifth factor, whether there is a better or more effective alternative remedy, weighs strongly against declaratory-judgment jurisdiction in this district. For one thing, under chapter 86 of the Florida statutes, State Farm can secure a declaratory judgment from the Florida courts as to which State's law applies to Carter's threatened contract and tort claims. Indeed, the Florida Supreme Court has specifically emphasized the breadth of the trial courts' authority to render declaratory judgments in the insurance context. See Higgins v. State Farm Fire Cas. Ins. Co., 894 So.2d 5 (Fla. 2004) (discussing FLA. STAT. ANN. §§ 86.011, 86.021, 86.051, 86.071 and 86.101). State Farm has not identified any impediment to lodging its declaratory-judgment request with an appropriate Florida state court. Cf. Travelers, 459 F.3d at 273 ("[W]ith respect to the fifth factor, the district court held that alternative remedies to federal jurisdiction existed pursuant to Kentucky's declaration of rights procedure set forth in KY. REV. STAT. § 418.040. * * * As a result, the district court held that this factor weighed against federal discretionary jurisdiction. We agree.").
Moreover, State Farm does not even face a choice between a declaratory-judgment action in this court regarding choice of law and a declaratory-judgment action in Florida court regarding choice of law. If Carter ever sues State Farm in Florida, either a Florida federal court or a Florida state court can adjudicate the choice-of-law issue and the substantive merits of Carter's claims all in a single proceeding. Cf. Chubb Custom Inc. Co. v. RPM, Inc., 2006 WL 314434, *4 (N.D. Ohio Feb. 9, 2006) ("[T]here is an alternative remedy that is better than this court's adjudication of this federal declaratory action. The pending state court case is broader than the federal case and encompasses the coverage issues raised in the federal case. The state court can resolve all coverage issues vis-a-vis Chubb and Agricultural, and any subsequent unresolved issues between Defendants and their insurance broker Marsh."). The sixth and seventh factors have little bearing on the analysis, as it unclear what factual issues would need to be resolved on Carter's threatened claims. In any event, a Florida state court would be in at least as good a position to resolve such factual issues as this court.
Finally, the eighth factor weighs strongly against exercising declaratory-judgment jurisdiction here, because federal statutory and common law would play no role in determining which State's laws would apply to Carter's possible future claims. Rather, the gravamen of State Farm's declaratory-judgment request would be governed purely by Michigan or Florida choice-of-law rules. In turn, if Carter ever does sue State Farm, her claims would be governed solely by state substantive law, whether Michigan's, Florida's, or both. When reasonably possible, it is far preferable for Michigan courts to interpret Michigan law (or Florida courts to interpret Florida law), rather than this court attempting to do so.
Indeed, that principle underlies the general rule that when "`the federal claims are dismissed before trial . . . the state claims should be dismissed as well.'" Allen v. City of Sturgis, 559 F. Supp.2d 837, 852 (W.D. Mich. 2008) (Paul L. Maloney, J.) (quoting United Mine Workers v. Gibbs, 383 U.S. 715, 726 (1966)).
See, e.g., Allen, 559 F. Supp. at 852 (after dismissing FMLA claim, court exercised 28 U.S.C. § 1367(c) discretion to decline supplemental jurisdiction over state-law claims and noted, "The interests of justice and comity are best served by deferring to Michigan's courts, which are best equipped to apply their own State's law in the first instance.") (citing Midgren v. Maple Grove Twp., 429 F.3d 575, 585 (6th Cir. 2005) ("[T]he district court did not abuse its discretion in declining to exercise supplemental jurisdiction over the state law issues based on its consideration of the interests of justice and comity best served by a state court's resolution of the remaining state law claims.")).
This is even more true where, as here, judges in both the States in question are elected by, and thus directly accountable to, the citizens of those States.
For a general description of Florida's process for selecting judges, see http://election.dos.state.fl.us/gen-faq.shtml, retrieved October 10, 2008 ("Judges of the Supreme Court and Judges of the District Courts of Appeal are subject to retention voting. Circuit judges and county judges are subject to election just like other candidates except where a local option has passed calling for selection of these judges by merit selection and retention voting.") (citing FLA. STAT. ANN. § 105.041(2) and § 105.051(2) and FLA. CONST. Art. V, § 10).
ORDERDefendant's motion to dismiss the complaint [document # _____] is GRANTED in part and DENIED in part.
The motion to dismiss for lack of personal jurisdiction is DENIED.
The motion to dismiss for lack of a "case or controversy" is GRANTED.
The complaint is DISMISSED without prejudice for lack of a case or controversy.
This is a final and appealable order. See City of Parma, Ohio v. Cingular Wireless, LLC, 278 F. App'x 636, 640 (6th Cir. 2008) (Circuit reviews de novo the determination whether a case or controversy exists for adjudication) (citing No. American Nat. Resources, Inc. v. Strand, 252 F.3d 808, 812 (6th Cir. 2001)); Travelers, 495 F.3d at 271 (Circuit reviews decision whether to exercise jurisdiction over a declaratory judgment request only for abuse of discretion).