United States District Court, E.D. Louisiana
LIBERTY INSURANCE UNDERWRITERS, INC. PLAINTIFF
GUSTAVE J. LABARRE, JR., et al. DEFENDANTS
MEMORANDUM OPINION AND ORDER
STARRETT UNITED STATES DISTRICT JUDGE
reasons provided below, the Court grants
Defendants' Motion to Dismiss  pursuant to Rules
12(b)(7) and 19(b). Plaintiffs' claims are dismissed
without prejudice. This case is closed.
case arises from a settlement agreement reached in a complex
tort case in Louisiana state court. In 2012, a sinkhole
damaged property owned by Defendants, who then filed suit
against numerous parties in state court, including Texas
Brine Company, LLC. Defendants alleged that an affiliate of
Texas Brine was partially responsible for the sinkhole.
Plaintiff provided excess liability coverage for Texas
Brine's affiliate from March 1, 2012, to March 1, 2013.
2017, Defendants entered into a Settlement Agreement with
Plaintiff, releasing it from any obligation to them under the
2012-2013 Texas Brine insurance policy. Defendants also
entered into a Tripartite Agreement with Plaintiff and Texas
Brine, in which Defendants assigned certain claims to
Plaintiff and agreed to pay Plaintiff a portion of any sums
received in satisfaction of certain claims. Plaintiff and
Texas Brine were dismissed from the state-court case pursuant
to the settlement. Plaintiff later filed this lawsuit,
claiming that Defendants were attempting to settle their
claims against Texas Brine's other insurers without
remitting payment to Plaintiff as required by the Tripartite
Agreement. Specifically, Defendants sought to amend their
state-court petition to seek a declaratory judgment that they
are not liable for any payment to Plaintiff under the
Tripartite Agreement. Plaintiff asserted a breach of contract
claim, alleging that Defendants and their counsel breached
the confidentiality provisions of the Settlement Agreement
and Tripartite Agreement. Plaintiff also seeks a declaratory
judgment in its favor regarding payment under the Tripartite
Agreement. Alternatively, Plaintiff seeks reformation of the
Tripartite Agreement and rescission of the Settlement
course, Defendants disagree with Plaintiff's
interpretation of the Tripartite Agreement. They contend that
the scope of claims assigned to Plaintiff was more limited.
Defendants filed a Motion for Abstention and to Dismiss ,
which the Court now addresses.
Abstention Standard of Review
argue that the Court should abstain from exercising
jurisdiction over this case because of the parallel
state-court proceeding. The Court applies one of two tests
when deciding whether to abstain from hearing a case because
of an ongoing parallel proceeding in state court. New
England Ins. Co. v. Barnett, 561 F.3d 392, 394 (5th Cir.
2009). First, “[w]hen a district court is considering
abstaining from exercising jurisdiction over a declaratory
judgment action, it must apply the standard derived from
Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491,
62 S.Ct. 1173, 86 L.Ed. 1620 (1942).” Id.
“However, when an action involves coercive relief, the
district court must apply the abstention standard set forth
in Colorado River Water Conservation District v. United
States, 424 U.S. 800, 817, 96 S.Ct. 1236, 47 L.Ed.2d 483
(1976).” Id. at 394-95. The Brillhart
standard “affords a district court broad discretion,
” id. at 394, but under Colorado
River, “the district court's discretion to
dismiss is ‘narrowly circumscribed' . . . .”
Id. at 395.
Court applies Colorado River “whenever an
action includes both declaratory and non-frivolous coercive
claims for relief.” Id. Therefore,
“[w]hen an action contains any claim for
coercive relief, the Colorado River abstention
doctrine is ordinarily applicable.” Id. The
“only two exceptions to application of the Colorado
River standard” are “if the claims for
coercive relief are frivolous or if the claims for coercive
relief were added as a means of defeating
Brillhart.” Id. at 395-96. Defendants
argue that the Brillhart standard applies because
Plaintiff's claims for coercive relief are frivolous and
were made to circumvent Brillhart. However, at least
one claim for coercive relief - Plaintiff's breach of
contract claim - is not frivolous.
the Tripartite Agreement provides: “This agreement is
strictly confidential.” Exhibit B to Response at 3-4,
Liberty Ins. Underwriters Inc. v. Labarre, No.
2:18-CV-8612-KS-CW (E.D. La. Apr. 12, 2019), ECF No. 117-2.
Next, the Settlement Agreement provides:
Settlement is strictly confidential, provided, however, that
LIUI shall be entitled to share this Agreement with its
reinsurers. In the event needed to prove exhaustion of the
2012 Policy, LIUI shall be entitled to disclose Paragraph 2,
but shall require the parties to whom Paragraph 2 is
disclosed to maintain confidentiality of Paragraph 2.
A to Motion for Partial Summary Judgment at 6, Liberty
Ins. Underwriters Inc. v. Labarre, No.
2:18-CV-8612-KS-CW (E.D. La. May 1, 2019), ECF No. 119-2.
Count One, Plaintiff alleges that Defendants violated these
provisions by publicly disclosing the existence and certain
terms of each contract on the public docket in the underlying
state-court case. Indeed, in Defendants' proposed
Thirteenth Supplemental and Amending Petition filed on the
public docket in the underlying proceeding, Defendants
disclosed that they had entered into the Tripartite
Agreement, and that they had assigned certain claims to
Plaintiff under the agreement. Exhibit A to Consent Motion
for Leave to File at 7, Liberty Ins. Underwriters, Inc.
v. Labarre, No. 2:18-CV-8612-KS-CW (E.D. La. Aug. 8,
2019), ECF No. 160-3.
argue that these disclosures do not constitute breaches of
the agreements because the state-court judge had already
publicly disclosed the existence of the Tripartite Agreement.
Defendants also argue that Plaintiff “cannot reasonably
believe that its assignment of subrogation and contribution
claims to the Labarres under the Tripartite Agreement is a
fact that would remain a secret.” Memorandum in Support
of Motion for Abstention at 9, Liberty Ins. Underwriters,
Inc. v. Labarre, No. 2:18-CV-8612-KS-CW (S.D.Miss. Oct.
29, 2018), ECF No. 19-3.
confidentiality provisions are quite broad. Beyond the
Settlement Agreement's brief reference to coinsurers,
they include no carve-outs for matters already disclosed by
third parties. That being the case, regardless of the state
court's actions or whether Plaintiff's expectation of
confidentiality was reasonable, its claim that disclosing the
existence and some terms of the agreements constitutes a
breach of the confidentiality provisions is not frivolous.
Defendants could have insisted on more precise language in
the agreements if they wanted to more clearly define the
scope of the parties' obligations. Of course,
Plaintiff's breach of contract claim may ultimately have
no merit, but based on what is currently before the Court it
is not frivolous.
as Plaintiff asserted a non-frivolous claim for coercive
relief, Colorado River applies, rather than
Brillhart. Barnett, 561 F.3d at 394-95.
Colorado River Analysis
Colorado River abstention analysis begins with a
heavy thumb on the scale in favor of exercising federal
jurisdiction, and that presumption is overcome only by
‘exceptional circumstances.'” Aptim Corp.
v. McCall, 888 F.3d 129, 135 (5th Cir. 2018) (quoting
Stewart v. W. Heritage Ins. Co., 438 F.3d 488, 491
(5th Cir. 2006)). Despite its “virtually unflagging
obligation” to exercise the jurisdiction it has been
granted, the Court may “choose to abstain, awaiting the
conclusion of state-court proceedings in a parallel case,
based on principles of ‘wise judicial administration,
giving regard to conservation of judicial resources and
comprehensive disposition of litigation.” Id.
(quoting Colorado River, 424 U.S. at 817).
Court considers the following factors to determine whether
“exceptional circumstances” are present:
(1) assumption by either court of jurisdiction over a res,
(2) relative inconvenience of the forums, (3) avoidance of
piecemeal litigation, (4) the order in which jurisdiction was
obtained by the concurrent forums, (5) to what extent federal
law provides the rules of decision on the merits, and (6) the
adequacy of the state proceedings in protecting the rights of
the party invoking federal jurisdiction.
Id. at 135-36 (quoting Stewart, 438 F.3d at
491). These factors are not applied as a “mechanical
checklist.” Id. at 135. Rather, the
Court's decision “rests ‘on a careful
balancing of the important factors as they apply in a given
case, with the balance heavily weighted in favor of the
exercise of jurisdiction.'” Id. (quoting
Moses H. Cone Mem'l Hosp. v. Mercury Const.
Corp., 460 U.S. 1, 16, 103 S.Ct. 927, 74 L.Ed. 765