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Geovera Specialty Insurance Co. v. Cantin

United States District Court, E.D. Louisiana

May 3, 2019

GEOVERA SPECIALTY INSURANCE COMPANY
v.
STEPHEN CANTIN, ET AL.

         SECTION: “J” (4)

          ORDER AND REASONS

          CARL J. BARBIER UNITED STATES DISTRICT JUDGE.

         Before the Court is a Motion to Dismiss Under Rule 12(b)(6) or Stay on Grounds of Abstention (Rec. Doc. 11) filed by defendant, the City of Kenner (“Kenner Defendant”). Also before the Court is a Motion to Dismiss Declaratory Judgment Action (Rec. Doc. 12) filed by defendant, Sondra Cantin, the natural tutrix of the minor, R.C. (“Cantin Defendants”). Plaintiff, GeoVera Specialty Insurance Company (“Plaintiff”), opposes both motions (Rec. Doc. 13). Cantin Defendants filed a reply (Rec. Doc. 17). Having considered the motions and legal memoranda, the record, and the applicable law, the Court finds that the motions should be GRANTED.

         FACTS AND PROCEDURAL HISTORY

         This litigation arises out of a fire that occurred on February 19, 2018 at the abandoned Kenner High School owned by Kenner Defendant. Plaintiff alleges that news reports indicate that Stephen and Sondra Cantin's minor son, R.C., and other minors intentionally started a fire that demolished the interior of the first and second floors of the high school. The Kenner Police Department subsequently charged R.C. with simple arson in violation of La. R.S. 14:52. Kenner Defendant contends that the cost to restore the building will exceed $475, 000.

         Prior to the fire, Plaintiff issued a homeowners' policy numbered FL00001131 with a policy period of September 9, 2017 to September 9, 2018 to Stephen Cantin and Sondra Cantin as the named insureds. Following the fire incident, the Cantins' insurance agent notified Plaintiff of Kenner Defendant's damages claim on June 11, 2018. On June 12, 2018, Plaintiff issued a reservation of rights letter to the Cantins through their attorney, advising that information discovered during the investigation indicated that the fire was caused by arson and that certain limitations and exclusions may apply to exclude coverage for the loss.

         After additional investigation, on September 13, 2018, Plaintiff filed the instant declaratory judgment action in this Court to determine an actual case and controversy between the parties regarding their respective rights and obligations under the Cantins' homeowners' policy. Plaintiff seeks a judgment declaring that it has no duty to provide coverage and no duty to defend or indemnify the Cantins under their homeowners' policy with respect to the claims asserted by Kenner Defendant against the Cantins.

         Three weeks after Plaintiff filed the instant declaratory judgment action, Kenner Defendant filed suit in the 24th Judicial District Court for the Parish of Jefferson against the Cantins and Plaintiff, the other minors involved in the fire, and several insurers of the other minor defendants. The insurers, including Plaintiff, are joined in the state suit under the Louisiana Direct Action Statute. The state court petition asserts that the insurers are liable in solido for all damages sustained by Kenner Defendant. Both Kenner Defendant and Cantin Defendants filed motions asking this Court to exercise its discretion to dismiss Plaintiff's declaratory judgment action due to the pendency of the state court suit.

         LEGAL STANDARD

         The Declaratory Judgment Act provides, in relevant part: “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). In Wilton v. Seven Falls Co., 515 U.S. 277 (1995), the United States Supreme Court made clear that, because the Declaratory Judgment Act is “‘an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant, '” the district court has “unique and substantial discretion in deciding whether to declare the rights of litigants.” Id. at 287-88. Even when a declaratory judgment action is justiciable and within the Court's authority to decide, the Court must still determine whether to exercise its discretion to decide or dismiss the action. Sherwin-Williams Co. v. Holmes Cnty., 343 F.3d 383, 387 (5th Cir. 2003) (citing Orix Credit All., Inc. v. Wolfe, 212 F.3d 891, 895 (5th Cir. 2000)).

         The United States Court of Appeals for the Fifth Circuit has identified a three-step inquiry for determining whether to decide or dismiss a complaint for declaratory relief. Orix, 212 F.3d at 895; see also Sherwin-Williams Co., 343 F.3d at 387. The first step requires a determination of whether the declaratory judgment action is justiciable. Id. (citing Rowan Cos. v. Griffin, 876 F.2d 26, 27-28 (5th Cir. 1989)). “Second, if it has jurisdiction, then the district court must resolve whether it has the ‘authority' to grant declaratory relief in the case presented.” Orix, 212 F.3d at 895 (citing Travelers Ins. Co. v. La. Farm Bureau Fed'n, Inc., 996 F.2d 774, 776 (5th Cir. 1993)). “Third, the court has to determine how to exercise its broad discretion to decide or dismiss a declaratory judgment action.” Id. (citing Travelers, 996 F.2d at 778). At issue in the present case is the third step of this inquiry.

         The Fifth Circuit employs the Brillhart standard when a district court is considering whether to abstain from exercising jurisdiction over an action solely for declaratory relief. Woodward v. Sentry Select Ins. Co., No. 03-2481, 2004 WL 834634, at *2 (E.D. La. Apr. 16, 2004) (Berrigan, J.) (citing Black Sea Inv., Ltd. v. United Heritage Corp., 204 F.3d 647, 6452 (5th Cir. 2000)). Under the Brillhart standard, a federal court has discretion to stay or dismiss a declaratory judgment action where there is a pending state court suit between the same parties that presents the same issues, and where that state court suit could adequately settle the dispute. Id. (citing Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 495 (1942)). The district court has “no compulsion to exercise [its] jurisdiction, ” and the court has discretion to grant a motion to dismiss the declaratory judgment action. See Brillhart, 316 U.S. at 495.

         In determining whether to abstain under Brillhart, the district court “should ascertain whether the questions in controversy between the parties to the federal suit, and which are not foreclosed under the applicable substantive law, can better be settled in the proceeding pending in the state court.” Id. The district court must look to three broad categories of factors: (1) the proper allocation of decision-making between state courts and federal courts; (2) fairness and improper forum shopping; and (3) efficiency. Sherwin-Williams Co. v. Holmes Cnty., 343 F.3d 383, 390-91 (5th Cir. 2003). To evaluate each of these broad categories, the Fifth Circuit uses the seven Trejo factors:

(1) whether there is a pending state action in which all of the matters in controversy ...

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