Accident Insurance Co., Inc. v. Mathews Development Company, LLC et al, No. 2:2019cv00848 - Document 40 (M.D. Ala. 2021)

Court Description: OPINION AND ORDER: it is the ORDER, JUDGMENT, and DECREE of the court that both the 13 motion to dismiss and alternative motion to stay filed by defendants Kelvin Wortham, Sheretha Wortham, Edward Thomas, Ruth Thomas, and Courtney Jordan and the 33 motion to dismiss filed by defendants Mathews Development Company, LLC and James E. Mathews are denied. Signed by Honorable Judge Myron H. Thompson on 4/26/2021. (amf, )
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Accident Insurance Co., Inc. v. Mathews Development Company, LLC et al Doc. 40 IN THE DISTRICT COURT OF THE UNITED STATES FOR THE MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION ACCIDENT INSURANCE CO., INC., ) ) ) ) ) ) ) ) ) ) ) Plaintiff, v. MATHEWS DEVELOPMENT COMPANY, LLC, et al., Defendants. CIVIL ACTION NO. 2:19cv848-MHT (WO) OPINION AND ORDER Pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, plaintiff Accident Insurance Co., Inc. brings this lawsuit seeking a declaratory judgment that it has no obligation to defend defendants Mathews Development Company, brought LLC and against James them E. in Mathews Alabama against state claims court by defendants Kelvin and Sheretha Wortham, Edward and Ruth Thomas, and Courtney Jordan. Diversity jurisdiction is proper pursuant to 28 U.S.C. § 1332. The Worthams, the Thomases, and Jordan have filed a motion to dismiss and an alternative motion to stay the case. They note that three underlying state-court cases remain pending and argue that this federal court should decline to hear this case until they are resolved, citing both the Wilton-Brillhart abstention doctrine and the Colorado River abstention doctrine. The Mathews defendants have filed a motion to dismiss on the same grounds. For the reasons that follow, the motions to dismiss and the alternative motion to stay will be denied. I. BACKGROUND The Worthams, the Thomasas, and Jordan have filed suit against the Mathews defendants, asserting breach of warranty, fraudulent misrepresentation, and other state-law claims in connection with the construction of their homes. constructed, They which say that resulted extensive damage. in the homes numerous were poorly defects and These cases all remain pending in Alabama state court. For much of the time 2 period during which the Worthams, homes, the Mathews Insurance. Thomases and Development Under a Jordan was purchased insured reservation of their by Accident rights, Accident Insurance is defending both Mathews defendants in the state-court suits. However, the insurance company argues that under the terms of its policies, it is not obligated to defend either one. It filed this declaratory-judgment action seeking a determination of its duty to defend in each of the underlying state actions.1 II. DISCUSSION The motions to dismiss or stay both cite to two separate doctrines in explaining why the court should abstain from hearing this case: Wilton-Brillhart abstention and Colorado River abstention. However, in 1. While the Worthams, the Thomases, and Jordan say that Accident Insurance seeks “a declaration that it owes no duty to defend and/or indemnify,” Brief in Support of Defendants’ Motion to Dismiss or Motion to Stay (Doc. 14) at 2, the complaint asks that the court decide only the insurance company’s duty to defend, see Complaint (Doc. 1) at 24. 3 Wilton v. Seven Falls Co., 515 U.S. 277 (1995), the Supreme Court stated that the “discretionary” standard set forth in America, 316 Brillhart U.S. 491, v. 1620 Excess Ins. (1942), and Co. not of the “exceptional circumstances” test developed in Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976), and Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1 (1983), “governs a district court's judgment action” state-court decision during the proceeding. to stay pendency Wilton, 515 a declaratory of a U.S. related at 279. Since Accident Insurance seeks only declaratory relief in this case, the court concludes that Colorado River’s abstention is inapplicable and will proceed to consider whether abstention is warranted under the Wilton-Brillhart “discretionary” standard.2 2. While circuit courts of appeals have split over whether the Wilton-Brillhart standard governs a situation in which a plaintiff requests forms of relief in addition to a declaratory judgment, there is “no doubt” that it applies where “solely declaratory relief is sought,” R.R. Street & Co. v. Vulcan Materials Co., 569 F.3d 711, 715 (7th Cir. 2009), as is the case here. 4 It is well-settled that the Declaratory Judgment Act is “an enabling Act, which confers a discretion on the courts rather litigant.” “federal than an absolute right Wilton, 515 U.S. at 287. courts competence to make upon the The Act gives a declaration of rights,” but “it does not impose a duty to do so.” Ameritas Variable Life Ins. Co. 1328, 1330 (11th Cir. 2005). v. Roach, 411 F.3d The Supreme Court has warned that it is both “uneconomical” and “vexatious” for a federal district court to hear a declaratory-judgment action while proceedings involving the same parties and ongoing in state court. As a result, courts the same legal issues remain Brillhart, 316 U.S. at 495. should generally “decline to entertain a declaratory judgment action on the merits when a pending proceeding in another court will fully resolve the controversy between the parties.” Ven- Fuel, Inc. v. Dep’t of the Treasury, 673 F.2d 1194, 1195 (11th Cir. 1982). 5 The Eleventh Circuit Court of Appeals has set out nine “guideposts” that district courts should consider in wielding Judgment their Act. guideposts discretion Ameritas, are: (1) 411 the under F.3d the at strength Declaratory 1331. of Those the State’s interest in having the issues decided in a state court; (2) whether a judgment in the federal action would settle the controversy; (3) whether the federal action would help clarify the legal relations at issue; (4) whether the federal action is being used for ‘procedural fencing,’ that is, as part of a race to res judicata or to allow a federal court to hear a case that otherwise ruling in between the the wouldn’t federal federal be removable; action and state would (5) cause courts or whether a friction otherwise encroach on state proceedings; (6) whether a better or more effective alternative remedy exists; (7) whether the underlying informed factual resolution of issues the are matter; important (8) to whether an the state court is better suited than the federal court to 6 evaluate those facts; and (9) whether there is a close nexus between the underlying issues and state law or public policy, or whether federal common or statutory law requires action. resolution See id. of the declaratory-judgment This list is not exhaustive, and no one factor is controlling. See id. Accident Insurance argues that the Wilton-Brillhart abstention doctrine does not apply here because there are no state proceedings sufficiently parallel to this case. Suits congruent, if parties and Mercury Ins. Inc., 648 curiam).3 action are sufficiently they involve substantially F. Co. v. App’x that “substantially the same Excellent 861, parallel, 866 (11th the issues.” Computing Cir. is, same First Distribs., 2016) (per When an insurer brings a declaratory-judgment against an insured, the proceedings are not sufficiently parallel or overlapping if “the insurer 3. While unpublished opinions are not controlling authority, they may be cited as persuasive authority to the extent that their legal analysis warrants. See Bonilla v. Baker Concrete Constr., Inc., 487 F.3d 1340, 1345 n.7 (11th Cir. 2007). 7 was not a party to the suit pending in state court” and “the state court actions involved issues regarding the insured’s liability, whereas the federal suit involved matters of insurance coverage.” Cont’l Cas. Co. v. Advance Terrazzo & Tile Co., 462 F.3d 1002, 1006 (8th Cir. 2006). That is clearly the case here. Accident Insurance is not party to any of the three underlying suits. None of the suits will determine whether the claims asserted in those suits lie within the scope of the Mathews defendants’ insurance policy, nor will they determine defend whether the Accident Mathews Insurance defendants. In has a duty short, to these proceedings are merely related, and not sufficiently parallel or congruent. However, the Eleventh Circuit has never held that abstention applies only congruent proceedings. when there are completely Instead, it has said that “the district court must weigh all relevant factors,” even if the federal action is not parallel to any state action. First Mercury, 648 F. App’x at 866. 8 In any event, the court finds that the Ameritas factors weigh heavily against abstention here, so it will exercise its discretion to retain jurisdiction over this declaratory-judgment action. As other federalism, courts have comity and Wilton/Brillhart found, “the interests efficiency abstention are on founded of which are not directly implicated” where the legal issues presented in the federal case differ from those in the underlying state action. Emp’rs Mut. Cas. Co. v. Kenny Hayes Custom Homes, LLC, 101 F. Supp. 3d 1186, 1191 (S.D. Ala. 2015) (Granade, J.). Indeed, “[t]he bulk of the Ameritas guideposts ... only favor abstention when both the state and federal courts are asked to decide the same legal or factual issues.” Atl. Cas. Ins. Co. v. GMC Concrete Co., Inc., No. 07-0563, 2007 WL 4335499, at *3 (S.D. Ala. Dec. 7, 2007) (Steele, J.). That is simply not the case here, and defendants’ arguments to the contrary company's duty misunderstand to defend the its 9 law. An insured from insurance suit is determined by the language of the insurance policy and by the against factual the allegations insured. See in the Alfa complaint Mut. Ins. Morrison, 613 So. 2d 381, 382 (Ala. 1993). filed Co. v. There is no need for this court to make any “specific findings of fact as to the merits or validity of those factual allegations in the pleading,” so the resolution of any disputed factual issues by the state court irrelevant to resolution of the federal case. is See Pa. Nat. Mut. Cas. Ins. Co. v. King, No. 11-0577, 2012 WL 280656, at *3 n.5 (S.D. Ala. Jan. 30, 2012) (Steele, C.J.). Nor is there any overlap in the legal issues presented: The issue of the insured’s liability has not been raised in the federal case, and the issue of insurance coverage state-court cases. are separate--there has not been raised in the While the cases are related, they is “no reasonable risk of inconsistent rulings, duplication of effort, or federal entanglement with the state court proceedings.” State Farm Fire & Cas. Co. v. Knight, No. 09-0783, 2010 WL 10 551262, at *4 (S.D. Ala. Feb. 11, 2010) (Steele, J.). Thus, there is no reason for this court to abstain from hearing the declaratory-judgment action. Evaluating each of the Ameritas factors individually leads to the same conclusion. As to the first factor (State’s interest), it is true that state law controls interpretation of the insurance policy. However, given that the issue has not been raised in any Alabama proceeding, there is no indication that the State has a strong interest in having it decided in a state court. The second factor (settling controversy) similarly weighs against abstention. Given that this case presents distinct legal issues, a judgment by this court would state-court not claims. settle any Moreover, of it the is underlying unquestionable that a judgment in this case would help clarify the legal relations between Accident Insurance and the Mathews defendants, so the third factor (clarification of legal relations) supports the conclusion that the court should not abstain from hearing this case. 11 As to the fourth factor (procedural fencing), the court also lacks any evidence that this action is being used for procedural fencing. Because there is no overlap between the legal and factual issues in this case and those in the state-court cases, there is no risk of res judicata. Accident Insurance “appears to have brought this action in the proper forum for a proper purpose to resolve underlying action.” issues not joined in the Emp’rs Mut., 101 F. Supp. 3d at 1191. The fifth factor (friction between state and federal courts) also supports the conclusion that this court should retain jurisdiction over the declaratoryjudgment action. The issues of insurance coverage and Accident Insurance’s duty to defend are not pending in any of the underlying state-court actions, so there is no reason to believe that this case would cause any friction with the state courts or encroach on the state proceedings. 12 Under the sixth factor (better remedy), the Mathews defendants because argue that Accident intervene in an alternative Insurance the could state-court remedy simply cases and question of its duty to defend there. exists seek raise to the However, the Mathews defendants have provided no reason to believe that this remedy would be better or more effective. The state court could deny the motion to intervene, preventing Accident Insurance from making use of this approach. And it would be more efficient for this court “to make a timely declaration of the insurer’s duty to defend obligations” now than either to wait for Accident Insurance to intervene and raise the issue before the state court--or, worse, for the question to remain undecided for even longer while the company continues to provide a defense in the underlying case. Atl. Cas. Ins., 2007 WL 4335499, at *3. With respect to the seventh factor (importance of underlying factual allegations) and eighth factor (better suited court), informed resolution of this case 13 does not turn on any of the factual issues in the underlying cases because duty to defend is based solely on the language of the insurance policy and the factual allegations in the state-court complaints. The defendants have not raised any other overlapping issues of fact that would arise between this case and the underlying cases, so these factors also weigh against abstention. Finally, under the ninth factor (nexus between underlying issues and state law), as under the first, it is true insurance the coverage accordance issue that is with not state-court in question this Alabama currently cases, or about case law. must be However, pending in the any in scope of decided in because the other the underlying state-court litigation, this factor does not favor abstention. In any event, dismissing this case or staying it pending the outcome of the underlying action would be unproductive and would waste judicial resources because the question of Accident Insurance’s 14 duty to defend “would remain undecided ... after the underlying action was completed.” Emp’rs Mut., 101 F. Supp. 3d at 1191. In fact, the issue would “almost certainly be rendered moot” by a stay, “needlessly frustrating” Insurance’s efforts to obtain a resolution. from being wasteful or inefficient, Accident Id. “Far allowing this declaratory judgment action to proceed would provide substantial benefits to all parties by affording them certainty as to the currently murky status” of Accident Insurance’s duties towards the Mathews defendants, providing good reason for this court to hear this case. State Farm Fire & Cas., 2010 WL 551262, at *4. In sum, this court finds that the Ameritus factors weigh strongly in favor of retaining jurisdiction over this declaratory-judgment action. The defendants have offered no reason to believe that dismissing or staying this action would promote the objectives of federalism, efficiency, and comity Declaratory Judgment that Act and 15 underly the the Federal Brillhart-Wilton doctrine. Therefore, the court will exercise its discretion to hear this declaratory-judgment action. * * * Accordingly, it is the ORDER, JUDGMENT, and DECREE of the court that both the motion to dismiss and alternative motion to stay filed by defendants Kelvin Wortham, Sheretha Wortham, Edward Thomas, Ruth Thomas, and Courtney Jordan (Doc. 13) and the motion to dismiss filed by defendants Mathews Development Company, LLC and James E. Mathews (Doc. 33) are denied. DONE, this the 26th day of April, 2021. /s/ Myron H. Thompson UNITED STATES DISTRICT JUDGE 16