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Encompass Indemnity Co. v. O'Brien

United States District Court, E.D. Louisiana

February 23, 2015

ENCOMPASS INDEMNITY COMPANY
v.
EDWARD JOSEPH O'BRIEN, ET AL

ORDER AND REASONS

HELEN G. BERRIGAN, District Judge.

This matter comes before the Court on the issue whether the Court should exercise its discretion to entertain this declaratory action, motion to dismiss pursuant to Rule 12(b)(1), or alternatively, motion to abstain and dismiss declaratory action filed by defendants Edward Joseph O'Brien and Linda Rawls O'Brien ("O'Briens"), and motion to dismiss or alternatively, motion to abstain filed by defendant Patrick Simmons ("Simmons"). The plaintiff, Encompass Indemnity Company ("Encompass") supports the exercise of jurisdiction and opposes the motions. Having considered the record, the memoranda of counsel, and the law, the Court determines that dismissal is appropriate for the following reasons.

According to the complaint for declaratory action, Patrick Simmons and Laura Stipanowich Simmons ("the Simmones") were allegedly injured on November 1, 2013, while customers at the O'Brien Terrell House, a bed and breakfast allegedly owned by O'Brien Terrell, LLC. and/or the O'Briens on Magazine Street in New Orleans. Encompass seeks a declaration that it does not owe defense or indemnity to the O'Briens under the policy it has issued to the O'Briens for any claim brought by the Simmons for injuries allegedly sustained in the November 2013 accident. The complaint was filed against the O'Briens on October 15, 2014, after Encompass had received a letter dated October 8, 2014, from counsel representing the Simmonses setting forth their claims and containing a settlement offer of $100, 000.00. Encompass added the Simmonses as defendants in a supplemental and amending complaint filed on October 30, 2014. Rec. Doc. 9. Encompass subsequently moved to dismiss Laura Stipanowich Simmons as a defendant in this suit after Patrick Simmons ("Simmons") alone filed suit against Encompass and O'Brien Terrell House, LLC in state court on October 30, 2014. Rec. Docs. 19, 25.

There is no dispute that prior to filing this complaint, the Simmonses pursued claims for the alleged damages. Encompass asked counsel for the Simmonses for a settlement demand in September 2014, which produced a demand letter dated October 8, 2014, containing a $100, 000 settlement demand. Rec. Docs. 23-4 at 1. According to the letter, Simmons complained of cervical pain, headaches, numbness in his fingers and pain in his shoulders. Rec. Doc. 15-1 at 2. He received injections for the pain and suffered mental anguish, lost wages and planned on seeking the help of a mental health professional. Id. He incurred medical expenses in the amount of $8, 379.64. Id. The O'Briens argue that the jurisdictional minimum did not exist at the time of the federal filing because the relevant medical records showed treatment limited to an approximate six month period with a discharge and a "fair prognosis." Rec. Doc. 23-1 at 6.

Discretion

The parties appear to agree as to the law that applies in determining whether the Court should exercise its discretion to entertain this declaratory action. Under the Declaratory Judgment Act, 28 U.S.C. ยง 2201, courts have discretion to decline jurisdiction. This discretion "is broad, " but "not unfettered." St. Paul Ins. Co. v. Trejo, 39 F.3d 585, 590 (5th Cir. 1994) (quoting Travelers Ins. Co. v. Louisiana Farm Bureau Fed'n, Inc., 996 F.2d 774, 778 (5th Cir. 1993)). For example:

in the declaratory judgment context, the Supreme Court instructs that district courts are vested with greater discretion in determining whether to stay or dismiss the declaratory judgment suit in light of a pending state proceeding, observing that "the normal principle that federal courts should adjudicate claims within their jurisdiction yields to considerations of practicality and wise judicial administration."

U.S. Fire Ins. Co. v. Hous. Auth. of New Orleans, 917 F.Supp.2d 581, 587 (E.D. La. 2013) (quoting Wilton v. Seven Falls Co., 515 U.S. 277, 289 (1995)).

In considering whether to dismiss a declaratory judgment action, the relevant, nonexclusive factors as identified in Trejo include:

(1) whether there is a pending state action in which all of the matters in controversy may be fully litigated;
(2) whether the plaintiff filed suit in anticipation of a lawsuit filed by the defendant;
(3) whether the plaintiff engaged in forum shopping in bringing the suit;
(4) whether possible inequities in allowing the declaratory plaintiff to gain precedence in time ...

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