Bits & Pieces

Emmert Industrial Corp. v. Artisan Associates

Emmert Indus. Corp. v. Artisan Associates, Inc.


United States Court of Appeals,Ninth Circuit.

EMMERT INDUSTRIAL CORPORATION, an Oregon corporation, Plaintiff-Appellant,


ARTISAN ASSOCIATES, INC., a Michigan corporation, Defendant-Appellee.


Argued and Submitted July 12, 2007.

Filed Aug. 13, 2007.



Appeal from the United States District Court for the District of Oregon; Anna J. Brown, District Judge, Presiding. D.C.





GOODWIN, Senior Circuit Judge:

Emmert Industrial Corporation (“ Emmert” ) appeals a summary judgment in favor of Artisan Associates, Incorporated (“ Artisan” ) on Emmert’s three contract claims arising from the parties’ agreement for the transportation of industrial metal-stamping presses and press components. We affirm in part, reverse in part, and remand to the district court for further proceedings.




An Oregon corporation, Emmert is an engineering and transportation company that specializes in transporting objects weighing in excess of 100,000 pounds. Artisan is a Michigan corporation and transportation broker engaged primarily in coordinating complex “ heavy haul”  projects on behalf of its clients, a business in which Artisan routinely contracts with carriers such as Emmert.  In May 1996 Artisan, under a broker’s contract with General Motors (“ GM” ), solicited bids for the “ Press Project,”  a complex undertaking that involved the transportation and delivery of six industrial metal-stamping presses from Japan to GM plants in Georgia, Michigan, and Missouri. Emmert submitted the winning bid for transporting the major components of six presses, subsequently receiving a 46-word notification letter from Artisan stating that Emmert would serve as “ the primary carrier”  on the Press Project for transportation of “ all components that weigh more than 100,000 pounds.”  Upon receipt of this letter, which also instructed Emmert to “ proceed with the necessary planning,”  Emmert took a number of actions. Emmert sent employees to Japan to inspect the goods to be moved, surveyed port facilities, prepared a pre-moving analysis and route survey, and put together route plans for the Georgia phase of the project. Emmert assigned personnel and equipment to the Press Project, and paid a third party to monitor and detect “ strain”  on bridges over which loaded Emmert vehicles would pass.


The term “ broker”  is statutorily defined as “ a person, other than a motor carrier or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for compensation.”  49 U.S.C. § 13102(2).


Under Artisan’s master operating agreement with GM, the “ volume of business tendered to [Artisan] is contingent upon GM’s requirements for such Heavy Haul, Rigging, and Flatbed services.”  Although GM retained control over the flow of work to Artisan in the first instance, once a move had been authorized, Artisan became primarily responsible for on-the-ground oversight and management. Specifically, the Artisan-GM contract provided that Artisan “ is required to select and manage a network of certified and permitted carriers and riggers … to meet the needs of GM,”  and that Artisan “ shall arrange transportation for GM, including the hiring of carriers and riggers….”  The GM contract also provided that:

Operational Control. [Artisan] shall have sole and exclusive control over the manner in which [Artisan] and its employes [sic] and/or sub-contractors perform their Services. [Artisan] shall engage and employ and/or sub-contract with, such individuals or carriers as it may deem necessary in connection therewith. Such individuals shall be considered employes [sic] or sub-contractors of [Artisan] only and shall be subject to employment, discharge, discipline and control solely and exclusively by [Artisan].


Emmert completed two phases of the Press Project, transporting and delivering press components to GM plants in Georgia and Missouri, and invoiced Artisan approximately $4.9 million for this work and for services in preparation for a third project phase involving transportation to GM plants in Michigan. However, before Emmert performed any further Press Project work, GM reminded Artisan in writing that Artisan was scheduled to broker the move of another press in early 1998, and requested a quote for this move “ using carriers other than Emmert.”  GM’s logistics liaison also instructed Artisan orally not to engage Emmert on any further Press Project moves. At that point, the remaining Press Project moves consisted of (1) parts of two presses to be moved to Michigan; (2) one press to be moved to Missouri; and (3) various press component shipments.


On the same day it received GM’s letter, Artisan notified Emmert that Emmert did not receive the contract to transport the remaining press parts to Michigan and Missouri, moves that Artisan ultimately brokered through another carrier. Artisan also notified Emmert that Artisan did not receive the contract from GM to broker the remaining component shipments, which GM eventually awarded to a different broker.


Artisan objected to numerous individual charges contained in the approximate $4.9 million claimed due by Emmert. After protracted negotiations, Artisan paid Emmert approximately $4.2 million and advised Emmert in October 1997 that it would make no further payments.


Emmert brought this action in June 2003. In its amended complaint Emmert (1) claimed that Artisan breached the contract by failing to pay the remaining balance; (2) attempted to state a claim in quantum meruit for the same amount; and (3) claimed that Artisan’s failure to broker any further work to Emmert in the wake of GM’s letter constituted an additional, independent breach of the contract. The district court granted Artisan’s motion for summary judgment with respect to all three claims, reasoning that Emmert’s first two claims were time-barred under the Interstate Commerce Commission Termination Act (“ ICCTA” ), and that because Emmert had no exclusive contractual right to handle the Press Project moves, Artisan did not breach the parties’ contract by ceasing to funnel work to Emmert after July 31, 1997. Emmert now appeals, invoking our jurisdiction under 28 U.S.C. § 1291.




This is a diversity action in which none of Emmert’s affirmative claims presents a federal question, and Emmert contends the district court erred on two grounds in concluding that its first two claims are barred by the ICCTA limitations period codified at 49 U.S.C. § 14705(a). Emmert first argues that the statute applies solely to a carrier’s claims against a shipper for charges owed under a filed tariff. Because Emmert has no filed tariff, it asserts that § 14705(a) is inapplicable to its first two claims as a matter of law. Alternatively, Emmert contends that because the statute’s substantive elements are not satisfied on the facts of this case, § 14705(a) cannot bar its first two claims. Emmert also argues that the district court erred in dismissing its third claim for breach of contract. Each assignment of error is taken up below.


Applicability and Operation of the ICCTA Limitations Period


Emmert’s contention that § 14705(a) is inapplicable to its first two claims as a matter of law was never argued or briefed in the district court. As Artisan correctly points out, we generally will not consider issues raised for the first time on appeal. Cold Mountain v. Garber, 375 F.3d 884, 891 (9th Cir.2004) (citation omitted). However, in our discretion we may consider an issue raised for the first time on appeal under several recognized circumstances, including where the issue presents a pure question of law that does not depend on the factual record developed below, or the relevant record is fully developed. Id.; see also United States v. Carlson, 900 F.2d 1346, 1349 (9th Cir.1990). This appeal fits comfortably within that exception. The question whether § 14705(a) applies solely to claims for charges owed under a filed tariff is purely one of law, resolution of which requires no further development of the factual record in this case. Further, notwithstanding Artisan’s argument that it has been prejudiced by Emmert’s failure to raise this issue below, this court has already determined that when, as here, an appellee has a full and fair opportunity to address an issue raised for the first time on appeal in its appellate briefing, there is no prejudice. Dream Palace v. County of Maricopa, 384 F.3d 990, 1005 (9th Cir.2004); United States v. Nukida, 8 F.3d 665, 669 (9th Cir.1993). Because Emmert’s argument to this court presents statutory interpretation questions of first impression, and because resolution of those questions is likely to broadly impact entities engaged in transporting goods in interstate commerce, we choose to address Emmert’s argument.


Turning to the substance of this issue, there is no merit to Emmert’s contention that the time limitation in § 14705(a) applies only when a carrier seeks to recover charges owed under a filed tariff. Although neither this circuit nor any of our sister circuits appears to have directly addressed the issue, there are several reasons to reject Emmert’s proposed construction of § 14705(a). Before evaluating those reasons, we briefly consider the broader statutory framework.


As originally enacted, the Interstate Commerce Act (“ ICA” ) was a wide-ranging statutory scheme that imposed substantial regulations on the transportation of goods and persons between the states. See Verizon Commc’ns, Inc. v. FCC, 535 U.S. 467, 478 n. 3 (2002); Munitions Carriers Conference, Inc. v. United States, 147 F.3d 1027, 1029-30 (D.C.Cir.1998). The ICA contained a number of rate regulation provisions, including a requirement that most road carriers file tariffs defining the prices and terms under which they would transport persons and property. See Munitions Carriers, 147 F.3d at 1029-30. Enactment of the ICCTA in 1995 largely rolled back this pervasive scheme of federal regulation. Id. The new legislation deregulated most sectors of road transport, and relieved most road carriers of having to file tariffs describing their rates in detail. Id. Despite the many changes implemented by the ICCTA, Congress retained the ICA’s statute of limitations governing claims brought by carriers against shippers. See 49 U.S.C. § 14705(a). That statute lies at the heart of the district court’s summary judgment on Emmert’s first two claims, and in determining whether the statute should be construed as Emmert argues, we must begin “ with the plain meaning of the statute’s language.”  Molski v. M.J. Cable, Inc., 481 F.3d 724, 732 (9th Cir.2007) (quoting Botosan v. Paul McNally Realty, 216 F.3d 827, 831 (9th Cir.2000)). The statute at issue in this appeal reads, in full:


Road carriers still must file tariffs in two specialized categories of transportation: household goods and noncontiguous domestic trade. Munitions Carriers, 147 F.3d at 1029. Neither category is implicated by this appeal.


A carrier providing transportation or service subject to jurisdiction under chapter 135 must begin a civil action to recover charges for transportation or service provided by the carrier within 18 months after the claim accrues.

49 U.S.C. § 14705(a).


“ Where the statutory language is clear and consistent with the statutory scheme at issue, the plain language of the statute is conclusive and the judicial inquiry is at an end.”  Molski, 481 F.3d at 732. (citations and internal quotation marks omitted). Additionally, where a statute is complete and unambiguous on its face, additional terms should not be read into the statute. See Burlington N. R.R. v. Okla. Tax Comm’n, 481 U.S. 454, 463 (1987). Finally, unless statutory terms are otherwise defined, they are “ generally interpreted in accordance with their ordinary meaning.”  BP Am. Prod. Co. v. Burton, 127 S.Ct. 638, 643 (2006).


As relevant to Emmert’s tariff filing argument, the statute’s plain language requires a carrier to bring a claim “ to recover charges for transportation or service”  within 18 months of the claim’s accrual. Emmert, however, argues that “ charges”  should be read to mean “ charges owed under a filed tariff.”  This contention is problematic for several reasons. First, there is no tariff requirement on the face of the statute. Because the statute is complete and unambiguous-a conclusion Emmert does not challenge-we will not read such a requirement into the statute. See Burlington N. R.R., 481 U.S. at 463. Second, because the term “ charges”  is not statutorily defined, it should be interpreted according to its ordinary, everyday meaning. Burton, 127 S.Ct. at 643. The common meaning of “ charges”  does not necessarily relate to debt owed pursuant to a tariff, but also includes a price, cost, expense, or debt owed under contractual obligation. Simply, the plain and clear language of § 14705(a) includes no tariff requirement, and Emmert presents no sound reason why we should construct one.


Emmert accurately points out that to determine the meaning of § 14705(a) we must consider the particular language at issue in context of the overall statutory scheme. See McCarthy v. Bronson, 500 U.S. 136, 139 (1991) (citation omitted). However, consideration of the broader legislative context belies Emmert’s position. First, under basic principles of statutory interpretation, identical words used in different parts of the same statute are presumed to have the same meaning. Sullivan v. Stroop, 496 U.S. 478, 484 (1990). Other sections of the ICCTA use the term “ charges”  to refer to the price payable for transportation services provided by both carriers subject to a tariff requirement, and those who are not. See, e.g., 49 U.S.C. § 13708 (describing billing and collection requirements for all carriers subject to jurisdiction under 49 U.S.C. § 13501, which includes carriers that must file a tariff, and those that need not). Accordingly, because the word “ charges”  as used in other sections of the ICCTA includes both tariff and non-tariff charges, the same meaning should apply to the word “ charges”  in § 14705(a).


A separate consideration of the broader statutory context bolsters our conclusion. The House Report on the ICCTA emphasized the need for consistent federal commercial rules “ to ensure that all interstate transportation is subject to the same rules and procedures.”  H.R.Rep. No. 104-311, at 85 (1995), reprinted in 1995 U.S.C.C.A.N. 793, 797. The intent to create uniform regulation is evident throughout the ICCTA, which establishes various requirements that apply equally to all carriers, including the limited class subject to the tariff requirement. See, e.g., 49 U .S.C. §§ 13708 (billing and charge collection); 13707(a) (transfer of possession upon payment); 14101(a) (provision of safe and adequate service, equipment, and facilities). Given this clear intent to create a uniform regulatory scheme, we are not persuaded that Congress would, sub silentio, simultaneously create different limitations periods for claims by tariff filing and non-tariff filing carriers.


It is true that Congress intended some exceptions to a truly uniform regulatory scheme, as evidenced by the tariff filing requirement that applies only to “ noncontiguous domestic trade”  and “ the movement of household goods.”  See 49 U.S.C. § 13702(a). We note, however, that while the ICCTA largely does away with the tariff requirement, it also requires non-tariff filing carriers, upon request, to disclose the same information contained in a filed tariff. See 49 U.S.C. 13710(a)(1).


Emmert’s primary argument to the contrary-that no federal question jurisdiction exists over a carrier’s claims absent a filed tariff, and therefore a filed tariff is necessary to invoke § 14705(a)-can be disposed of quickly. Simply, nothing in the text or context of § 14705(a) indicates that the eighteen-month limitations period is restricted to claims seeking charges under a filed tariff, or even to claims arising under federal law. We accordingly reject Emmert’s proposed statutory construction, and conclude instead that because § 14705(a) applies to the first two claims in this “ civil action to recover charges for transportation or service provided,”  Artisan may, as a matter of law, assert the statute’s limitations period as an affirmative defense to Emmert’s first two claims.


We next consider whether § 14705(a) bars those claims on the facts of this case. As noted, § 14705(a) requires carriers subject to United States Code Title 49, Subtitle IV, Chapter 135 to bring an action to recover charges owed for transportation or service performed within eighteen months after the claim accrues. Emmert does not contest that it is subject to Chapter 135,  nor does it challenge the district court’s conclusion that it is a “ carrier”  within the meaning of the ICCTA. Instead, Emmert contends that the district court erred in concluding that its first two claims are time-barred because at least some of the charges it seeks to recover are not for “ transportation”  within the meaning of the statute, because they are expenses relating to engineering, research, mobilizing and demobilizing, stand-by time, and fees paid for engineering services provided by third parties.


Nor can Emmert mount such a challenge. See 49 U.S.C. § 13501.


The ICCTA defines “ transportation”  to include:

(A) a motor vehicle, vessel, warehouse, wharf, pier, dock, yard, property, facility, instrumentality, or equipment of any kind related to the movement of passengers or property, or both, regardless of ownership or an agreement concerning use; and

(B) services related to that movement, including arranging for, receipt, delivery, elevation, transfer in transit, refrigeration, icing, ventilation, storage, handling, packing, unpacking, and interchange of passengers and property.


49 U.S.C. § 13102(23).


In light of this expansive statutory definition of “ transportation,”  the district court concluded that the term encompasses all services rendered incident to the carriage and delivery of an item. And, despite Emmert’s efforts to characterize the services at issue as engineering-or consulting-related, the district court determined that “ they actually arise out of the transportation of goods.”  Accordingly, the district court concluded that Emmert’s first two claims sought reimbursement for services governed by the ICCTA, and therefore determined those claims were untimely under the eighteen-month limitations period of § 14705(a).


This circuit has never directly addressed this issue, and there is scant case law on point. However, the extant authority supports the district court’s ruling. Considering the statutory predecessor to § 13102(23), the First Circuit determined that “ transportation … includes all of a motor carrier’s services incident to carriage and delivery.”  PNH Corp. v. Hullquist Corp., 843 F.2d 586, 590 (1st Cir.1988) (citations omitted). The Fifth Circuit reached a similar conclusion when construing former 49 U.S.C. § 1(3)(a), yet another statutory predecessor to current § 13102(23), which defined transportation as “ all services in connection with the receipt, delivery, elevation, and transfer in transit, ventilation, refrigeration or icing, storage and handling of property transported.”  Centraal Stikstof Verkoopkantoor, N.V. v. Ala. State Docks Dep’t, 415 F.2d 452, 455-56 (5th Cir.1969). Emphasizing the statute’s breadth, the Fifth Circuit concluded that all “ services rendered by a common carrier in connection with transportation of goods shall be covered by the Act.”  Id. at 456 (emphasis added). While the other circuits do not appear to have considered the reach of the term “ transportation,”  the First and Fifth Circuits’ reading of the statute is consistent with longestablished Supreme Court jurisprudence. For example, considering an early statutory definition of “ transportation”  similar to current § 13102(23), the Court determined that Congress intended to define the term broadly enough so that a carrier’s duty to the public “ included the performance of a variety of services that, according to the theory of the common law, were separable from the carrier’s service as carrier,”  and therefore defined the term so that “ the entire body of such services should be included together under the single term ‘ transportation.’  “  Cleveland, Cincinnati, Chi. & St. L. Ry. Co. v. Dettlebach, 239 U.S. 588, 593-94 (1916); see also S. Ry. Co. v. Reid, 222 U.S. 424, 440 (1912).


Former 49 U.S.C. § 10102(26) was a near-verbatim forebear to § 13102(23). That definition of “ transportation”  was somewhat more restrictive, however, as it did not include the “ arranging for”  clause contained in current § 13102(23).


Taking the evidence in the light most favorable to Emmert, each of the services for which it seeks reimbursement-engineering, research, and operational costs-is directly related and incidental to the actual transportation of press components, and each was aimed at furthering that purpose. Although not every service directly involved the physical shipment of goods, each was undertaken specifically as a means toward that end. Given the expansive statutory definition of “ transportation”  in § 13102(23) we follow the broad construction our sister circuits have applied to similar definitions, and we conclude that the district court did not err by ruling that Emmert’s services were at the very least undertaken while “ arranging for”  the carriage and delivery of the presses. Accordingly, the services for which Emmert seeks to recover charges constitute “ transportation”  within the meaning of the ICCTA, and § 14705(a) required that Emmert bring an action to recover any charges related to those activities within 18 months after the claim accrued, which is the date on which Emmert delivered, or tendered delivery, of the goods. 49 U.S.C. § 14705(g). Because Emmert last provided services for Artisan in May 1997, its eighteen-month window within which to seek relief had long since closed when it filed its complaint in June 2003, and § 14705(a) necessarily pre-empts any state law providing for a longer limitations period. See Credit Suisse First Boston Corp. v. Grunwald, 400 F.3d 1119, 1128 (9th Cir.2005); Cal. Fed. Savings & Loan Ass’n v. Guerra, 479 U.S. 272, 280-81 (1987). We hold that Emmert’s first two claims are time-barred under 49 U.S.C. § 14705(a), and accordingly affirm the summary judgment granted to Artisan with respect to those two claims.


Emmert’s Third Claim


Emmert’s third claim alleged an independent breach of contract arising from Artisan’s refusal to award Emmert further Press Project work in the wake of GM’s letter, and sought to recover both out-of-pocket expenses and lost profits related to carriage that Artisan brokered to other carriers.


As noted, the parties’ short contract identifies Emmert as “ the primary carrier”  for Press Project moves “ on all components that weigh more than 100,000 pounds.”  Considering the disputed “ primary carrier”  term, the district court looked to the dictionary meaning of the word “ primary,”  which includes “ first in order of time or development,”  and “ of first rank, importance, or value.”  The district court concluded on that basis that the parties’ contract unambiguously contemplated Artisan’s use of other carriers for the Press Project. Accordingly, it held that Artisan was within its rights to utilize other carriers, and granted summary judgment on this claim.


We agree with the district court that the parties’ contract did not expressly grant Emmert an exclusive right to Press Project moves. However, it is not clear precisely what rights Emmert was granted. The contract is ambiguous in that respect and summary judgment was not appropriate. Moreover, even if Emmert did not possess exclusive rights, it would not necessarily follow that Artisan did not breach Emmert’s undisputed contractual right to serve as “ the primary carrier”  on certain Press Project moves when it refused altogether to broker further Press Project work to Emmert. The district court did not address this point. Nor did the district court determine what the parties intended by denominating Emmert as “ the primary carrier”  on certain Press Project moves, other than concluding, prematurely at the least, that the parties did not intend “ primary”  to mean “ exclusive.”  Finally, the district court made no finding regarding the amount of work necessary for Emmert to perform to be considered “ the primary carrier”  on moves of components weighing in excess of 100,000 pounds. Because these material questions of fact regarding the nature and scope of the parties’ agreement remain in dispute, summary judgment on Emmert’s third claim was error. See Leisek v. Brightwood Corp., 278 F.3d 895, 898 (9th Cir.2002). We therefore reverse the summary judgment with respect to count three in Emmert’s amended complaint, and remand that claim for further proceedings.


AFFIRMED in part, REVERSED and REMANDED in part. Neither party to recover costs on this appeal.


C.A.9 (Or.),2007.

Emmert Indus. Corp. v. Artisan Associates, Inc.


Cherokee Insurance Co. v. Babin

Cherokee Ins. Co. v. Babin ex rel. Rogers


United States District Court,S.D. Mississippi,Jackson Division.



Sarajean BABIN, Individually, for and on Behalf of All Heirs of Britt ROGERS and the Estate of Britt Rogers; Emerald Transport, Inc., Successor in Interest to Three Rivers Trucking, Inc.; Bobby G. Morris, Jr.; and Kathy Gustavis, Defendants.

No. 3:06cv00612-DPJ-JCS.


Aug. 17, 2007.




DANIEL P. JORDAN, III, United States District Judge.

This declaratory judgment action brought by Plaintiff Cherokee Insurance Company (“ Cherokee” ) seeks a determination of insurance coverage regarding claims asserted in the Copiah County Circuit Court against Cherokee policyholder Three Rivers Trucking Company (“ Three Rivers” ) and its employee, Bobby G. Morris, Jr. (“ Morris” ). Defendants Sarajean Babin and Kathy Gustavis have each moved to dismiss on abstention grounds, and Cherokee has responded in opposition. The Court, having considered the parties’ submissions and the relevant authorities, concludes that the motions to dismiss should be granted.


I. Facts/Procedural History


The underlying state court tort action arose from a multi-vehicle collision that occurred on Highway 55 in Copiah County, Mississippi, on July 21, 2005. Britt Rogers died as a result of the accident, and on November 2, 2005, Babin filed suit, individually and on behalf of Rogers’ estate and heirs, against Gustavis (the driver of the car in which Rogers was riding), Morris, Three Rivers, a second tractor-trailer driver also involved in the collision and his employer. Gustavis then filed a cross-claim against Morris and Three Rivers.


At the time of the accident, Three Rivers held two insurance policies with Cherokee, a general auto liability (“ GL” ) policy and a commercial general liability (“ CGL” ) policy. When Babin and Gustavis filed their initial claims against Morris and Three Rivers, no coverage dispute was apparent, and the claims sounded in negligence. The coverage issue came to the forefront, however, in mid-October 2006 when Babin and Gustavis received copies of Three Rivers’ GL and CGL policies and were notified by Cherokee that only the GL policy provided coverage.


On October 18, 2006, Gustavis filed a motion seeking leave to amend and assert a claim for declaratory relief, seeking coverage under the Cherokee CGL policy. The motion was heard on October 20, 2006, Cherokee’s coverage counsel was present, and Cherokee filed the present suit for declaratory relief on October 31st.


On November 14, 2006, the parties informed the state court that a settlement had been reached as to Defendants Three Rivers and Morris . The parties also informed the state court of Cherokee’s federal declaratory judgment action. The state court granted both Defendants leave to amend and add a declaratory judgment claim against Cherokee, and Babin did so on November 17, 2006, seventeen days after Cherokee filed this suit. Gustavis did not amend to assert a claim for declaratory judgment until June 15, 2007.


The settlement caps coverage under the CGL policy to $800,000 should a court rule that coverage exists.


II. Analysis


Cherokee argues that under Colorado River Water Conservation District v. United States, 424 U.S. 800, 817-19, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), this Court has a “ virtually unflagging obligation”  to exercise jurisdiction that cannot be abandoned except when faced with “ exceptional circumstances.”  While this statement is generally true, “ [i]f the federal suit seeks only a declaration of rights, the district court’s discretion to stay or dismiss the suit is governed by a standard derived from Brillhart v. Excess Insurance Co. of America, 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942).”  American Guar. & Liab. Ins. Co. v. Anco Insulations, Inc., 408 F.3d 248, 250 (5th Cir.2005). Thus, “ [i]n 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.”  Wilton v. Seven Falls Co., 515 U.S. 277, 288, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995). As explained in Brillhart, it would be “ uneconomical as well as vexatious for a federal court to proceed in a declaratory judgment suit where another suit is pending in a state court presenting the same issues … between the same parties.”  Brillhart, 316 U.S. at 495 (cited in AXA Re Prop. & Cas. Ins. Co. v. Day, 162 F. App’x 316, 319, (5th Cir.2006)).


The Declaratory Judgment Act, 28 U.S.C. § 2201(a), “ has been understood to confer on federal courts unique and substantial discretion in deciding whether to declare the rights of litigants.”  Wilton, 515 U.S. at 286. “ The ultimate issue in deciding how the court should exercise its discretion is ‘ whether the questions in controversy between the parties to the federal suit … can better be settled in the proceeding pending in state court.’  “  Burlington Ins. Co. v. Mother’s Land, Inc., No. 3:06cv533-TSL-JCS, 2007 WL 188655,(S.D.Miss. Jan. 23, 2007) (citing Brillhart, 316 U.S. at 495). A Court’s decision regarding whether or not to exercise its discretion involves three inquiries: (1) is it justiciable; (2) does the court have the authority to grant such relief; and (3) should it exercise its discretion to decide the action based on the factors stated in St. Paul Insurance Co. v. Trejo, 39 F.3d 585 (5th Cir.1994). Sherwin-Williams Co. v. Holmes County, 343 F.3d 383, 387 (5th Cir.2003) (citing Orix Credit Alliance, Inc. v. Wolfe, 212 F.3d 891, 895 (5th Cir.2000)). The parties do not dispute that a justiciable controversy has been presented. Therefore, the Court must consider whether authority exists to resolve this controversy and, if so, should the Court nevertheless abstain.


“ 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.”  28 U.S.C. § 2201(a).


A. The Court’s Authority


Whether the Court has authority to grant the relief Cherokee seeks involves three additional issues. A “ district court may not consider the merits of the declaratory judgment action 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.”  Travelers Ins. Co. v. La. Farm Bureau Fed’n, Inc., 996 R2d 774, 776 (5th Cir.1993) (cited in AXA RE Prop. & Cas. Ins. Co., 162 F. App’x at 320).


Because all three conditions must exist before a federal court is stripped of the authority to consider the merits of a request for declaratory relief, the Court will address the first and second requirements in tandem. At the time suit was filed, the declaratory defendant must have filed a state case involving the same issues as those involved in the federal case. That did not occur in this case. Although Defendants eventually filed complaints for declaratory relief in state court, at the time this suit was filed, Cherokee was not named in any state court action, and there was no state court action for declaratory relief. See Burlington Ins., 2007 WL 188655 at(“ At the time this suit was brought by Burlington, Hill City had not filed its complaint against Burlington in the state court suit” ); Fireman’s Fund Ins. Co. v. Hlavinka Equip. Co., No. Civ. A. H-052515, 2005 WL 2792383 at(S.D.Tex. Oct. 26, 2005) (“ The most straight-forward interpretation of the phrase [‘ previously filed’ ] requires that the state court action be commenced before the federal declaratory judgment action.” ). Because neither of the first two inquires have been satisfied, the Court need not consider the third and finds that it possesses the authority to consider the merits of the declaratory action.


B. Whether the Court Should Exercise its Discretion to Decide the Case


In Trejo, the Fifth Circuit Court of Appeals defined seven nonexclusive factors for district courts to consider when deciding whether to abstain under Brillhart:

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.


39 F.3d at 590-91; see also Sherwin-Williams, 343 F.3d at 387. In Sherwin-Williams, the Fifth Circuit extensively discussed these Trejo factors. The court noted that Trejo represents this circuit’s version of the various tests that have been adopted to address the three primary considerations found in Brillhart: 1) proper allocation of decision-making between state and federal courts; 2) fairness; and 3) efficiency. Sherwin-Williams, 343 F.3d at 390. The Court will examine the Trejo factors as they relate to these three concerns.


The first Trejo factor-whether there is a pending state action in which all of the matters in controversy may be fully litigated-relates first to the allocation of decision-making. 343 F.3d at 390. “ When a pending state court suit raises the same issues as a federal declaratory judgment action, the central question for a district court under Brillhart and Wilton is whether the controversy is better decided in state or federal court.”  Id. at 391. As to this factor, Sherwin-Williams notes that as in Trejo, “ [e]ach circuit’s test emphasizes that if the federal declaratory judgment action raises only issues of state law and a state case involving the same state law issues is pending, generally the state court should decide the case and the federal court should exercise its discretion to dismiss the federal suit.”  Id. at 390-91. “ Gratuitous interference with the orderly and comprehensive disposition of a state court litigation should be avoided.”  Brillhart, 316 U.S. at 495; see also RLI Ins. Co. v. Wainoco Oil & Gas Co., 131 F. App’x 970, 973 (5th Cir.2005) (affirming decision to abstain).


In this case, Cherokee’s primary argument in opposition to the motion to dismiss is that it won the race to the courthouse. However, the first-to-file rule is not applicable in this context. In American Bankers Life Assurance Co. of Florida v. Overton, 128 F. App’x 399, 403 (5th Cir.2005), the insurer filed a federal declaratory judgment action a little more than two weeks before the insured filed a state court complaint. Although this abstention case was remanded for other reasons, the Fifth Circuit Court of Appeals observed that the first-to-file rule has no application unless both actions are in federal courts:

We find no indication from case law that the “ first-to-file”  rule plays a part in the circumstance that we face today-two actions pending, but one is in state court and the other in federal court. As American Bankers correctly points out in its reply brief, the ‘ first-to-file’  rule applies only when two similar actions are pending in two federal courts, which is not the case have here [sic]….


Id.; see also Canal Ins. Co. v. Morgan, 961 F.Supp. 145, 149 (S.D.Miss.1996) (refusing to base abstention decision on filing dates); Days Inns of Am., Inc. v. Reno, 935 F.Supp. 874, 878 (W .D.Tex.1996) (“ [F]ederal declaratory judgment is not a prize to the winner of a race to the courthouses.” ) (citing Perez v. Ledesma, 401 U.S. 82, 119 n. 12, 91 S.Ct. 674, 694 n. 12, 27 L.Ed.2d 701 (1971) (Brennan, J. dissenting)); Great Lakes Dredge & Dock Co. v. Ebanks, 870 F.Supp. 1112, 1118 (S.D.Ga.1994) (abstaining despite fact that federal claim filed first). Application of the first-to-file rule in this context would be inconsistent with the policy considerations raised in Brillhart, Wilton, and Trejo where district courts were directed to consider issues of “ practicality and wise judicial administration.”  Wilton, 515 U .S. at 289.


Cherokee argues alternatively that even if the subsequent state court complaint could be considered, Defendants never properly presented a declaratory judgment action in state court because the “  ‘ declaratory action’  filed in state court consists of one paragraph, randomly inserted into an amended complaint.”  Defendant’s Memorandum in Opposition to Motion to Dismiss at 5. The subject amended complaint reads as follows:

Plaintiffs bring this Declaratory Action, pursuant to Rule 57 of the Rules of the Mississippi Rules of Civil Procedure, against Cherokee Insurance Company to determine the rights of all parties under various insurance contracts issued by Cherokee to Three Rivers Trucking Company, Thomas F. Crutchers, Jr. and Randy T. Crutcher: and otheres [sic], for a period of time commencing in July 2005, through January 31, 2006.


This amended complaint brought Cherokee into the state court action and sought declaratory relief under Rule 57. The state court complaint raises the same issues as those asserted before this Court by Cherokee. Both suits seek interpretation of the same CGL policy and a declaration of all rights under that policy. Moreover, because Cherokee is now a party to the state court proceedings, it has full opportunity to raise any defenses it may have to coverage in that case. Finally, neither suit raises a federal question.


“ Rule 57(b) was amended in 2000 to authorize an injured party, where an insurer has indicated that it may deny coverage of the injured party’s claim, to seek a declaratory judgment establishing coverage. The traditional rule in Mississippi barred any type of direct action by an injured party against an insurer, Crum v. Mississippi Mun. Serv. Co., Inc., 1998 WL 378333 (N.D.Miss.1998).”  Miss. R. Civ. Pro. 57 (comments).


Additional facts weigh in favor of abstention under the first Trejo factor. As the state court case progressed, the underlying suit as to Cherokee’s insureds settled. Thus, as to the Three Rivers’ portion of the case, only the declaratory judgment action remains to be decided by the state court judge. Moreover, due to the terms of Three Rivers’ settlement with Babin and Gustavis (which fixes a settlement amount in the event a court finds coverage under the CGL policy), a declaration of rights under the CGL policy will finally resolve the dispute as to Cherokee and its insureds.


A final fact weighs heavily in favor of abstention under the first Trejo factor. After its insureds settled, Cherokee moved to dismiss the state court case due to its declaratory judgment action in this Court. In denying Cherokee’s motion, the state court judge noted that he was particularly well situated to consider the declaratory action in that this matter has been pending before this Court for quite some time and the Court is familiar with the issues, the settlement of other aspects of the case is tied to the declaratory action, and it would promote judicial economy.


The state court judge clearly intends to rule on the very issues now before this Court. A ruling from this Court would create the potential for conflicting orders which would not promote comity or efficiency in the present context. See Wilton, 516 U.S. at 289 (“ 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.” ); Sherwin-Williams, 343 F.3d at 391 (“ Duplicative litigation may also raise federalism or comity concerns because of the potential for inconsistent state and federal court judgments, especially in cases involving state law issues.” ).


Agora Syndicate, Inc. v. Robinson Janitorial Specialists, Inc ., 149 F.3d 371, 372 (5th Cir.1998) offers a good example of a declaratory judgment action that would not require abstention. In that case, the Fifth Circuit noted that the federal court’s ruling on the insurance company’s obligations would have no direct bearing on the underlying state case, nor would the state court’s ruling on the defendant’s liability have a direct bearing on the insurance company’s obligations because the insurer was not a party to the state court proceedings. Id. at 373. Here, Cherokee is a party to both declaratory judgment actions seeking interpretation of the same policy as it relates to the same insureds.


Trejo factors two through four “ analyze whether the plaintiff is using the declaratory judgment process to gain access to a federal forum on improper or unfair grounds.”  Sherwin-Williams, 343 F.3d at 392. Defendants sued Cherokee’s insureds in state court well before this declaratory judgment action was brought and also moved to amend their complaints to bring a declaratory judgment action against Cherokee before Cherokee filed this action. Cherokee obviously anticipated that a suit would be filed in state court, but the Court cannot say that Cherokee attempted to obtain a federal forum on unfair grounds or engaged in forum shopping. Id. at 391 (“ Merely filing a declaratory judgment action in a federal court with jurisdiction to hear it, in anticipation of state court litigation, is not in itself improper anticipatory litigation or otherwise abusive “ forum shopping.” ); AXA Re Prop. & Cas. Ins. Co., 162 F. App’x at 320-21 (“ [A] court is more likely to find a plaintiff engaged in impermissible forum shopping where the federal action would change the applicable law.” ) (citing Sherwin-Williams, 343 F.3d at 397, 399; Mission Ins. Co. v. Puritan Fashions Corp., 706 F.2d 599, 602 n. 3 (5th Cir.1983)). Finally, the fourth Trejo factor is neutral as the Court finds that Cherokee would gain no unfair advantage regarding precedence in time or change of forums.


The third aspect of the Brillhart analysis is efficiency. This aspect implicates the first Trejo factor, discussed above, as well as factors five and six-whether the federal court is a convenient forum for the parties and witnesses and whether retaining the lawsuit in federal court would serve the purposes of judicial economy. Sherwin-Williams, 434 F.3d at 392. In this case, the convenience factor is neutral as the two venues geographically overlap, the courthouses are less than 40 miles apart, the parties can be found in various states, and the venues are equally convenient. See RLI Ins. Co., 131 F. App’x at 973 (affirming decision to abstain and noting as to fifth Trejo factor, “ the court found it to be neutral because of the relative convenience of both forums” ).


Factor seven has no application in this case.


The more general judicial economy issue, however, favors abstention for the reasons stated more fully above with respect to the first Trejo factor regarding allocation of decision making. The state court judge has indicated that he will rule on the same declaratory judgment issue Cherokee asserts in this action. “ Ordinarily it would be uneconomical as well as vexatious for a federal court to proceed in a declaratory judgment suit where another suit is pending in state court presenting the same issues, not governed by federal law, between the same parties. Gratuitous interference with the orderly and comprehensive disposition of a state court litigation should be avoided.”  Brillhart, 316 U.S. at 495. Compare AXA Re Prop. & Cos. Ins. Co., 162 F. App’x at 320-21 (“ [J]udicial economy is not contravened by retaining the action because no other proceeding is able to consider the coverage dispute.” ) with RLI, 131 F. App’x at 973 (affirming abstention and noting as to the sixth Trejo factor that “ the district court found it to weigh in favor of dismissal or stay because deference to a pending state action in which all of the primary insurers are joined would allow one court to decide the issues in this case” ).


It should be noted that the Fifth Circuit does not require a mechanical or mathematical weighing of the nonexclusive Trejo considerations. Trejo, 39 F.3d at 589 (citing Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 16, 103 S.Ct. 927, 937, 74 L.Ed.2d 765 (1983)). In this case, the Court finds that the Trejo factors, especially when viewed through the prism of the three Brillhart considerations, weigh in favor of abstention. Even assuming the fairness factors weighed entirely in favor of deciding the case on the merits, those factors are outweighed by concern for the proper allocation of decision-making, federalism, comity, and efficiency.


ACCORDINGLY, IT IS HEREBY ORDERED that Defendants’ motions to dismiss are granted; Cherokee’s motion for summary judgment is denied as moot; and this matter is dismissed without prejudice.





Cherokee Ins. Co. v. Babin ex rel. Rogers


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