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Endurance American Specialty Insurance Co. v. Dual Trucking and Transport, LLC

United States District Court, E.D. Louisiana

October 22, 2018

ENDURANCE AMERICAN SPECIALTY INSURANCE COMPANY, Plaintiff
v.
DUAL TRUCKING AND TRANSPORT, LLC ET AL., Defendants

         SECTION: “E” (3)

          ORDER AND REASONS

          SUSIE MORGAN UNITED STATES DISTRICT JUDGE

         Plaintiff Endurance American Specialty Insurance Company (“Endurance”) brings the instant suit against Defendants Dual Trucking and Transport, LLC (“DTT”) and Dual Trucking, Inc. (“DTI”), seeking a declaratory judgment of its obligations to DTI and DTT under insurance policies Endurance issued to them.[1] Before the Court are motions to dismiss on abstention grounds or, in the alternative, on forum non conveniens grounds, filed by DTT[2] and DTI.[3] Endurance opposes these motions.[4] For the reasons that follow, Defendants' motions to dismiss on abstention grounds are DENIED. Defendants' motions in the alternative to dismiss on forum non conveniens grounds are construed as motions to transfer venue pursuant to 28 U.S.C. 1404(a) and GRANTED. The Court orders that the above-captioned case is TRANSFERRED TO THE DISTRICT OF MONTANA, BILLINGS DIVISION.

         BACKGROUND

         Defendants DTI and DTT are defendants in two lawsuits in Montana state court alleging DTI and DTT operated a solid waste management system that introduced toxic and hazardous materials onto property they leased.[5] The lawsuits in Montana state court were commenced in 2014 and 2015.[6] DTI and DTT notified their insurer, Endurance, of the lawsuits pending against them, and Endurance is providing DTI and DTT a defense in both suits, subject to a reservation of rights.[7] Endurance is not a party to the lawsuits in Montana state court.[8]

         Endurance insured DTI and DTT under separate but “substantially identical” pollution liability policies.[9] The policies state Endurance will indemnify DTI and DTT from damages “result[ing] from a pollution condition at any site” where DTI and DTT perform “contracting or remediation operations, ” subject to certain conditions and exclusions.[10] The policy excludes, among other categories of claims,

1) claims “arising from any insured [party]'s intentional willful or deliberate noncompliance with any statute [or] regulation”;
2) claims “arising from an illegal, dishonest, fraudulent, criminal, or malicious act by any insured” party;
3) claims “arising out of any waste . . . transported, shipped or delivered, . . . to any location located beyond the boundaries of a site” where an insured party performs contracting or remediation; or
4) claims for “any property damage to any real or personal property that was owned . . . rented, occupied, or in the care, custody or control of any insured” party.[11]

         On February 14, 2017, Endurance filed the instant suit against DTI and DTT.[12]Endurance requests a declaratory judgment of its obligations to DTI and DTT under the insurance policies Endurance issued to them, and a judgment declaring Endurance owes them no defense or indemnity coverage in the lawsuits pending in Montana state court.[13]

         On April 13, 2017, DTI and DTT filed separate but substantially identical motions to dismiss for lack of jurisdiction or, alternatively, for lack of proper venue.[14] On April 11, 2018, the Court issued an order finding deficient Endurance's jurisdictional allegations, granting Endurance leave to amend its complaint, and denying Defendants' motions without prejudice.[15] Endurance filed an Amended Complaint on April 23, 2018, [16] and a Second Amended Complaint on May 17, 2018.[17]

         On July 9, 2018, DTI and DTT filed the instant motions, [18] in which they make arguments identical to those they made in their motions to dismiss of April 13, 2017.[19]Defendants argue abstention is warranted under Brillhart v. Excess Ins. Co. of Am.[20]because of the pending actions in Montana state court.[21] Defendants argue in the alternative that the Court should dismiss the case “for improper venue under the doctrine of forum non conveniens.”[22] In the portion of their motions dealing with venue and forum non conveniens, Defendants request the Court “dismiss this case (or at least transfer it to Montana), ” and cite 28 U.S.C. 1404(a), which governs venue transfer.[23] Several of the cases Defendants cite deal with venue transfer, not dismissal.[24] As a result, the Court construes Defendants' motions to dismiss on forum non conveniens grounds as motions to transfer venue pursuant to 28 U.S.C. 1404(a).

         On September 24, 2018, Endurance filed a Third Amended Complaint. On September 26, 2018, the Court ordered Endurance to amend its complaint to allege sufficiently the citizenship of DTT.[25] Endurance filed its Fourth Amended Complaint on October 3, 2018.[26] The claims in the Fourth Amended Complaint are substantially identical to the claims in the Second Amended Complaint.[27] As a result, the Court construes Defendants' motions to dismiss the claims in the Second Amended Complaint or, in the alternative, to transfer venue, as motions to dismiss the claims in the Fourth Amended Complaint or, in the alternative, to transfer venue.

         LAW AND ANALYSIS

         The Court finds abstention is not warranted in this case. The case is justiciable, and the Court has authority to grant Plaintiff's request for declaratory relief. There is no parallel state action involving the same parties, and deciding this case would not implicate principles of federalism and comity, fairness concerns, or issues of judicial economy. As a result, the Court does not abstain.

         The Court transfers this case to the District of Montana. The case could have been brought in Montana. Because the witnesses and evidence relevant to the factual issues in the case are in Montana, transfer serves the convenience of the parties and witnesses and the interests of judicial economy.

         I. Abstention is not warranted under Brillhart.

         The Declaratory Judgment Act[28] “is an enabling act, which confers discretion on the courts rather than an absolute right on a litigant.”[29] “The Declaratory Judgment Act has been understood to confer on federal courts unique and substantial discretion in deciding whether to declare the rights of litigants.”[30] “In the declaratory judgment context, the normal principle that federal courts should adjudicate claims within their jurisdiction yields to considerations of practicality and wise judicial administration.”[31]Although “the district court's discretion is broad, it is not unfettered.”[32]

         Courts in the Fifth Circuit engage in a three-step inquiry when considering a declaratory judgment suit. They determine: “(1) whether the declaratory action is justiciable; (2) whether the court has the authority to grant declaratory relief; and (3) whether to exercise its discretion to decide or dismiss the action.”[33]

         A. Because Louisiana law applies, this case is justiciable.

         The Court finds there is a justiciable case or controversy between the parties in this case. “Where the Declaratory Judgments Act is invoked[, ] the same jurisdictional requirements as to a case or controversy must be met as in other suits.”[34]

         In Ironshore Specialty Ins. Co. v. Tractor Supply Co., [35] the Fifth Circuit analyzed the justiciability of an insurer's declaratory judgment action under Texas law, which governed the insurance contract in the case.[36] Similarly, this Court turns to state law to determine whether the case is justiciable. The Court first addresses whether Montana or Louisiana law applies.

         A federal court sitting in diversity applies the conflicts of law rules of the state in which it sits.[37] This Court applies Louisiana's choice-of-law rules. In Champagne v. Ward, [38] which has been adopted by the Fifth Circuit, [39] the Louisiana Supreme Court held that courts applying Louisiana conflicts of law rules must first determine whether Louisiana law differs from the law of the foreign state, then conduct a choice-of-law analysis as codified at Articles 3515 and 3537 of the Louisiana Civil Code.[40]

         Montana and Louisiana law differ on whether this claim is justiciable. Under Montana law, an action by an insurer seeking a declaratory judgment on whether it owes an insured party a duty of indemnification is not justiciable before a finding of liability in the underlying suit.[41] Under Louisiana law, questions of indemnity may be determined before a finding of liability.[42] Because Montana and Louisiana law differ, the Court applies Louisiana's choice-of-law rules to determine which state's law applies.

         Louisiana's choice-of-law rules state that contracts are “governed by the law of the state whose policies would be most seriously impaired if its law were not applied to that issue.”[43] Article 3537, which governs conflicts of laws for conventional obligations, states a court should evaluate “the strength and pertinence of the relevant policies of all involved states in the light of: (1) the relationship of each state to the parties and the dispute; and (2) the policies and needs of the interstate and international systems, including the policies of upholding the justified expectations of parties and of minimizing the adverse consequences that might follow from subjecting a party to the law of more than one state.”[44] The Fifth Circuit has observed that “Louisiana courts generally choose the law of the state in which the insurance policy in question was issued to govern the interpretation of the terms of the policy.”[45]

         In Champagne, an insurance dispute relating to an automobile accident, the Louisiana Supreme Court weighed the interests of Louisiana, where the accident took place, against the interests of Mississippi, where the relevant insurance contract was negotiated and formed.[46] The court found Mississippi had “a more substantial interest in the uniform application of its laws governing insurance contracts” than Louisiana had in providing a remedy for accidents in Louisiana.[47]

         In this case, Endurance represents “it is uncontested . . . the policy was issued in Louisiana.”[48] As in Champagne, Louisiana has a substantial interest in the uniform application of its laws governing insurance contracts issued in this state. Montana has an interest in providing a remedy for torts that occur in Montana, but the particular dispute in this case involves the interpretation and enforcement of the policy issued in Louisiana. The Court finds Louisiana law applies. As a result, questions of indemnity may be determined before a finding of liability, and this case is justiciable.

         B. This Court has authority to grant Plaintiff declaratory relief.

         In its Fourth Amended Complaint, Plaintiff has sufficiently alleged the citizenship of the parties and the amount in controversy.[49] The parties are completely diverse, and the amount-in-controversy requirement is met. The Court has jurisdiction over this case pursuant to 28 U.S.C. § 1332.

         Even when a district court has jurisdiction over a case, it does not have authority to grant declaratory relief when

1) a declaratory defendant has previously filed a cause of action in state court against the declaratory plaintiff,
2) the state case involves the same issues as those involved in the federal case, and
3) the district court is prohibited from enjoining the state proceedings under the Anti-Injunction Act.[50]

         These factors do not apply in this case. Defendants DTI and DTT have not filed suit against Plaintiff Endurance in state court. The cases in Montana state court do not involve the scope of Endurance's insurance agreement with DTI and DTT, which is the issue involved here.

         The Anti-Injunction Act does not prevent the Court from granting declaratory relief in this case. The Anti-Injunction Act forbids district courts from “grant[ing] an injunction to stay proceedings in a State court.”[51] Issuing a declaratory judgment in this case would not enjoin the proceedings in Montana State Court. As a result, the Anti-Injunction Act does not apply, and the Court has authority to grant declaratory relief.

         C. The Trejo factors, which govern the Court's exercise of discretion to dismiss the action, weigh against dismissal.

         Because this case is justiciable and the Court has authority to grant declaratory relief, the Court must decide whether to exercise its discretion to abstain.[52] In a declaratory judgment action, a district court's decision to abstain is governed by the standard the Supreme Court announced in Brillhart v. Excess Ins. Co. of Am.[53] In St. Paul Ins. Co. v. Trejo, [54] the Fifth Circuit interpreted and restated the Brillhart standard, requiring district courts deciding whether to abstain to consider:

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 or to change forums exist,
5) whether the federal court is a convenient forum for the parties and witnesses,
6) whether retaining the lawsuit in federal court would serve the purposes of judicial economy, and
7) whether the federal court is being called on to construe a state judicial decree involving the same parties and entered by the court before whom the parallel state suit between the same parties is pending.[55]

         The Fifth Circuit has explained that the seven Trejo factors address the three aspects of the Brillhart standard: “the proper allocation of decision-making between state and federal courts, ” fairness, and efficiency.[56]

         In cases in which there is parallel litigation in state court, the first and seventh factors require a court to consider the concerns of federalism and comity.[57] In this case, Endurance is not a party to the actions pending in Montana state court, and those proceedings do not involve the insurance coverage disputes at issue in the instant action. The Montana state court cases are not parallel to the instant action. When there is no parallel state court litigation, a court considers the “impact of the absence of any pending state court action” between the parties as a “threshold issue.”[58] In Sherwin-Williams v. Holmes Cty., the Fifth Circuit held that although “[t]he lack of a pending parallel state proceeding should not automatically require a district court to decide a declaratory judgment action, . . . it is a factor that weighs strongly against dismissal.”[59] The absence of state court cases parallel to this action weighs strongly against dismissal.

         The Court turns to the second through fourth factors, which implicate fairness considerations.[60] Defendants do not argue that Endurance filed this suit in anticipation of a lawsuit filed by Defendants. Defendants' motions contain no allegation that Endurance's filing suit in a Louisiana federal court was unfair.[61] The fairness considerations weigh against dismissal.

         In considering the fifth factor, whether the federal court is a convenient forum for the parties and witnesses, the Fifth Circuit generally considers the distance between the federal district court and the defendants in the state.[62] The distance between the Defendants and the federal courthouse for the Eastern District of Louisiana is not an inconvenience in this case.[63] In their motions, Defendants argue the Eastern District of Louisiana is an inconvenient forum because the case should be litigated in Montana.[64]The alleged inconvenience of litigating in Louisiana, not Montana, has no bearing on the Trejo factor inquiry of whether litigating in federal court, rather than state court, inconveniences the parties and witnesses. This factor weighs against dismissal.

         The sixth factor, whether retaining the lawsuit in federal court would serve the purposes of judicial economy, also requires the Court to consider the interest of judicial efficiency.[65] “[E]fficiencies may result from litigating issues pertinent to multiple potential claims against a defendant in one federal forum, as opposed to a number of state courts.”[66] In this case, there are two pending state court cases in which the underlying factual issues are being litigated. The insurance coverage issues involve two substantially identical contracts and one factual situation. Deciding these issues in one federal forum instead of two state fora promotes judicial efficiency. This factor weighs against dismissal.

         The Court finds all the Trejo factors weigh against abstention. As a result, the Court denies Defendants' motions to abstain.

         II. The Court has discretion to transfer venue pursuant to 28 U.S.C. 1404(a).

         28 U.S.C. § 1404(a) provides, “For the convenience of the parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented.”[67] “[T]he purpose of the section is to prevent the waste ‘of time, energy and money' and ‘to protect litigants, witnesses and the public against unnecessary inconvenience and expense.'”[68] Courts applying § 1404(a) first determine “whether the judicial district to which transfer is sought would have been a district in which the claim could have been filed.”[69] The court then considers a “number of private and public interest factors, none of which are given dispositive weight, ” to determine whether transfer serves the convenience of the parties and witnesses.[70]

         A. This suit could have been brought in the United States District Court for the District of Montana.

         The Court first determines whether the District of Montana is a forum where the case “might have been brought.”[71] The Supreme Court has held this refers to federal laws about venue and jurisdiction, not to “laws of the transferee State concerning the capacity of [the plaintiffs] to bring suit.”[72] As a result, this Court need not determine whether this suit would have presented justiciable claims had it been brought it Montana. The Court need only determine whether the United States District Court for the ...


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