CASES (2022)

JAMES RIVER INS. CO. V. RICH BON CORP.

United States Court of Appeals for the Eleventh Circuit

May 23, 2022, Filed

No. 20-11617

Reporter

2022 U.S. App. LEXIS 13851 *; __ F.4th __; 2022 WL 1616872

JAMES RIVER INSURANCE COMPANY, a foreign corporation, Plaintiff-Appellant, versus RICH BON CORP., a Florida corporation d.b.a. The Mint Lounge, MARQUELL SHELLMAN, an individual, DAINA HILBERT, as Personal Representative of the Estate of David Hilbert, Defendants-Appellees.

Prior History: [*1] Appeal from the United States District Court for the Southern District of Florida. D.C. Docket No. 1:16-cv-20273-JEM.

Core Terms

district court, state court, insured, declaratory, guideposts, nightclub, declaratory judgment action, cases, declaratory judgment, federal court, workers’ compensation, questions, policy limit, state law, lawsuit, overlapping, federal declaratory judgment, declaratory relief, duty to defend, federal claim, proceedings, concurrent, assault, battery, declare, factors, parties, comity, courts

Case Summary

Overview

HOLDINGS: [1]-The district court, in its application of the Ameritas factors, should not have focused on one of the federal claims almost to the exclusion of the other, and in doing so it failed to properly consider the totality of the circumstances; [2]-The district court should not have grafted a discrete, parallel-proceeding factor from abstention doctrine onto the Ameritas test; [3]-The district court overlooked the significant gains in efficiency the declaratory judgment action would generate.

Outcome

Judgment vacated and remanded.

LexisNexis® Headnotes

Civil Procedure > … > Declaratory Judgments > Federal Declaratory Judgments > Appellate Review

HN1 Federal Declaratory Judgments, Appellate Review

Ordinarily, federal courts have no margin for error on questions of the appellate court’s jurisdiction. But Declaratory Judgment Act cases are different, because that statute vests courts with discretion to say whether declaratory relief is appropriate in the underlying conflict.

Civil Procedure > Appeals > Standards of Review > Abuse of Discretion

Civil Procedure > … > Declaratory Judgments > Federal Declaratory Judgments > Appellate Review

Civil Procedure > … > Declaratory Judgments > State Declaratory Judgments > Discretionary Jurisdiction

HN2 Standards of Review, Abuse of Discretion

When a district court dismisses a declaratory judgment action, the appellate court reviews for abuse of discretion. A district court abuses its discretion (1) when it fails to consider a relevant and significant factor; (2) when it gives significant weight to an improper factor; or (3) when it commits a clear error of judgment in weighing the proper factors. A district court also abuses its discretion when it applies the wrong legal standard.

Civil Procedure > … > Federal Declaratory Judgments > Discretionary Jurisdiction > Factors

HN3 Discretionary Jurisdiction, Factors

When district courts decide whether to proceed with declaratory judgment actions that raise issues also disputed in state court proceedings, they are called to balance conflicting interests—to foster efficient dispute resolution while still preserving the States’ interests in resolving issues of state law in their own courts. Discerning the propriety of declaratory relief requires a circumspect sense of the whole affair.

Civil Procedure > … > Federal Declaratory Judgments > Discretionary Jurisdiction > Factors

HN4 Discretionary Jurisdiction, Factors

On one hand, a declaratory judgment action is often quite efficient, eliminating delays and uncertainty. It may enable, for example, a prospective defendant to ask the court to declare its rights and other legal relations, including whether it is liable to a prospective plaintiff for prior or planned future acts. 28 U.S.C.S. § 2201(a).

Insurance Law > … > Obligations of Parties > Insurers > Allegations in Complaints

Insurance Law > … > Property Insurance > Obligations > Duty to Defend

Insurance Law > Liability & Performance Standards > Good Faith & Fair Dealing > Duty to Defend

HN5 Insurers, Allegations in Complaints

Declaratory actions are especially helpful for third parties—insurance companies in particular. That is because a tort suit against an insured often generates distinct issues beyond whether the insured is liable for the tort, say, whether the insurer has a duty to defend, or whether the insured’s policy covers the liability alleged in the complaint. When the policy does not cover the liability even if all the facts alleged in the complaint are true, declaratory relief enables the insurance company to avoid the tort suit completely. And even when the policy does apply, a declaratory suit allows the insurance company to resolve its liability without waiting for every individual injured party to sue the insured. Declaratory judgments thus play a valuable role in this context, clarifying insurance companies’ liability quickly and directly.

Civil Procedure > … > Federal Declaratory Judgments > Discretionary Jurisdiction > Factors

Civil Procedure > … > Declaratory Judgments > Federal Declaratory Judgments > Scope of Declaratory Judgments

HN6 Discretionary Jurisdiction, Factors

After all, while the Declaratory Judgment Act enables a prospective defendant to sue in federal court, it does not prevent the party sued from initiating a concurrent state court proceeding, 28 U.S.C.S. § 2201. Nor does anything in the Act prevent a state court defendant from bringing a federal declaratory judgment suit. What’s more, when the issues and parties match, each plaintiff competes to be first to the finish, because whichever case is decided earliest will have preclusive effect on common questions in the other.

Civil Procedure > … > Declaratory Judgments > State Declaratory Judgments > Scope of Declaratory Judgments

HN7 State Declaratory Judgments, Scope of Declaratory Judgments

Of central concern in this federalism analysis are cases competing to resolve state law issues that are not foreclosed under the applicable substantive law. When a federal court decides an unresolved question of state law, issue preclusion prevents the creation of state court precedent on that issue in the companion case. That, in turn, delays the final resolution of the question as applied to future suits because state supreme courts are the ultimate authority on questions of state law. So declaratory judgments have the potential to leave important questions of state law unanswered by state authorities and impede a State’s general authority to dispose of state law issues.

Civil Procedure > … > Declaratory Judgments > Federal Declaratory Judgments > Scope of Declaratory Judgments

HN8 Federal Declaratory Judgments, Scope of Declaratory Judgments

The Declaratory Judgment Act thus is not a license to supplant state court litigation in every case. If it were, the byproducts—waste, delay, and needless competition—would mean the Act sometimes did more harm than good. As the Supreme Court cautioned in gratuitous interference with the orderly and comprehensive disposition of a state court litigation should be avoided. Nor can the benefits of a declaratory judgment suit be ignored—it is a remedial arrow in the district court’s quiver, fashioned by Congress to provide a new form of relief when the need arises.

Civil Procedure > … > Federal Declaratory Judgments > Discretionary Jurisdiction > Factors

Civil Procedure > … > Declaratory Judgments > Federal Declaratory Judgments > Scope of Declaratory Judgments

HN9 Discretionary Jurisdiction, Factors The Declaratory Judgment Act vests district courts with discretion to dismiss declaratory suits when, in their best judgment, the costs outweigh the benefits. Its language is spare, but direct: federal courts may declare the rights and other legal relations of any interested party seeking such declaration, 28 U.S.C.S. § 2201(a). The Act thus makes an explicit textual commitment to discretion. So while federal courts normally have an unflagging obligation to exercise our jurisdiction, where declaratory judgments are concerned this imperative yields to considerations of practicality and wise judicial administration.

Civil Procedure > … > Federal & State Interrelationships > Federal Common Law > Applicability

Insurance Law > Remedies > Declaratory Judgments > Discretionary Jurisdiction

Civil Procedure > … > Federal Declaratory Judgments > Discretionary Jurisdiction > Factors

Civil Procedure > Judgments > Preclusion of Judgments > Res Judicata

HN10 Federal Common Law, Applicability

There are guideposts for district courts to consider when deciding whether to dismiss a federal declaratory judgment action that overlaps with a state case: (1) the strength of the state’s interest in having the issues raised in the federal declaratory action decided in the state courts; (2) whether the judgment in the federal declaratory action would settle the controversy; (3) whether the federal declaratory action would serve a useful purpose in clarifying the legal relations at issue; (4) whether the declaratory remedy is being used merely for the purpose of procedural fencing—that is, to provide an arena for a race for res judicata or to achieve a federal hearing in a case otherwise not removable; (5) whether the use of a declaratory action would increase the friction between our federal and state courts and improperly encroach on state jurisdiction; (6) whether there is an alternative remedy that is better or more effective; (7) whether the underlying factual issues are important to an informed resolution of the case; (8) whether the state trial court is in a better position to evaluate those factual issues than is the federal court; and (9) whether there is a close nexus between the underlying factual and legal issues and state law and/or public policy, or whether federal common or statutory law dictates a resolution of the declaratory judgment action.

Civil Procedure > … > Federal Declaratory Judgments > Discretionary Jurisdiction > Factors

Governments > Courts > Judicial Comity

Civil Procedure > … > Declaratory Judgments > State Declaratory Judgments > Scope of Declaratory Judgments

HN11 Discretionary Jurisdiction, Factors

As a whole the guideposts account for the federalism and comity concerns generated by competing cases, as well as the comparative utility of the declaratory judgment action. To be sure, courts are not restricted to this set of factors—the list is not absolute, and no single factor is controlling. Indeed, we have characterized the inquiry as a totality-of-the-circumstances analysis.

Civil Procedure > … > Declaratory Judgments > Federal Declaratory Judgments > Scope of Declaratory Judgments

HN12 Federal Declaratory Judgments, Scope of Declaratory Judgments

The existence of a parallel proceeding is not a prerequisite to a district court’s refusal to entertain an action under 28 U.S.C.S. § 2201(a), the Declaratory Judgment Act. Courts possess unique and substantial discretion under the Act.

Civil Procedure > Preliminary Considerations > Federal & State Interrelationships > Abstention

Civil Rights Law > … > Procedural Matters > Federal Versus State Law > Abstention

HN13 Federal & State Interrelationships, Abstention

Consequently, and unlike some abstention doctrines that are more prudential in nature, a parallel proceeding is not a mandatory prerequisite to applying the guideposts.

Civil Procedure > Preliminary Considerations > Federal & State Interrelationships > Abstention

HN14 Federal & State Interrelationships, Abstention

While a concurrent state proceeding is still significant under Ameritas, it is not dispositive—in either direction.

Civil Procedure > … > Federal Declaratory Judgments > Discretionary Jurisdiction > Factors

Insurance Law > Remedies > Declaratory Judgments > Discretionary Jurisdiction

HN15 Discretionary Jurisdiction, Factors

Every claim matters, because Ameritas requires a totality-of-the-circumstances analysis. And a comprehensive analysis is impossible when a court only considers half of the federal claims. Regardless of the guideposts it applies, a district court must assess the claims raised in a federal declaratory judgment action evenhandedly. That means a court cannot cherry pick for its Ameritas analysis the claims that favor dismissing—or proceeding with—a federal action. If the court only considers issues raised in both the state and federal cases, it will always underestimate the need to resolve the issues unique to the declaratory action. And if it only assesses the unique federal claims, the opposite result will follow; the court will underestimate the federalism concerns raised by the overlapping issues. Both approaches are unreasonable. Instead, to appropriately assess the degree of similarity between concurrent state and federal proceedings, a district court needs to look at the cases as a whole.

Evidence > Relevance > Relevant Evidence

HN16 Relevance, Relevant Evidence

A totality-of-the-circumstances analysis only works when a court considers all of the relevant details. To do otherwise leaves weights that should be balanced off the scales, or, if used more nefariously, would tip them in favor of a result chosen in advance.

Counsel: For JAMES RIVER INSURANCE COMPANY, Plaintiff – Appellant: Eric A. Hiller, Junaid Savani, Kennedys Law, LLP, MIAMI, FL.

For RICH BON CORP., Defendant – Appellee: Meredith Chaiken, Whitelock & Associates, PA, FORT LAUDERDALE, FL; Tracy White, Law Office of Tracy White, JUPITER, FL; Thomas U. Graner, Graner Platzek & Allison, PA, BOCA RATON, FL.

For DAINA HILBERT, Defendant – Appellee: Anthony Murphy, Jermaine Thompson, Law Office of Jermaine O’Neill Thompson, PA, OAKLAND PARK, FL.

Judges: Before BRANCH, GRANT, and BRASHER, Circuit Judges. BRASHER, Circuit Judge, Concurring.

Opinion by: GRANT

HN1 Ordinarily, federal courts have no margin for error on questions of our jurisdiction. But Declaratory Judgment Act cases are different, because that statute vests courts with discretion to say whether declaratory relief is appropriate in the underlying conflict. Here that meant deciding whether the federal suit would interfere with a pending state action.

The district court chose to dismiss the federal case, concluding that it overlapped significantly with the one in state court. But in the process the court [*2] overstepped the bounds of its discretion because it fully assessed only one of the claims for declaratory relief, rather than both of them. We therefore vacate and remand.

Late one Miami summer night at the Mint Lounge, an argument between acquaintances escalated into a shootout. A guest at the nightclub, Marquell Shellman, was shot. So was club employee David Hilbert, who tragically died from his injuries.

The nightclub was insured by James River Insurance Company under a general liability policy, which covered “bodily injury and property damage liability.” The policy contained several restrictions on that coverage. To start, it excluded both worker’s compensation liability and employee-injury liability. The policy also imposed limits on coverage for bodily injuries “arising out of, resulting from, or in connection with” assault or battery. The limit per occurrence was $25,000, and the aggregate assault-and-battery limit was $50,000.

A few months after the shooting Shellman sued the nightclub in Florida state court, alleging that it was negligent for failing to provide adequate security; a lawsuit from Hilbert’s estate was expected too. So to determine the full extent of its liability [*3] under the policy, James River filed a federal declaratory judgment action against Mint, Shellman, and Hilbert’s estate.

The insurer raised two claims in its complaint. First, it contended that because the nightclub shooting was an assault and battery, the policy limited recovery for any and all injuries to $50,000. Second, it argued that the worker’s compensation and employee-injury exclusions barred Hilbert from recovery because he was an employee of the nightclub. The district court stayed the case pending resolution of Shellman’s state court suit. Soon after, James River settled the state suit on the nightclub’s behalf for $50,000 minus claim expenses and costs—the total amount available under the assault and battery cap.

Ten months later, Hilbert’s estate sued the nightclub in Florida state court. One wrinkle for the estate was that the Florida worker’s compensation statute generally prohibits employees from bringing tort claims against their employers. See Fla. Stat. § 440.11(1). To get around that problem, the estate argued that the nightclub’s actions triggered a statutory exception for intentional torts. It alleged that the nightclub had engaged in conduct that it “knew”—based on similar incidents [*4] in the past—”was virtually certain to result in injury or death to the employee.” See id. § 440.11(1)(b).

Both the estate’s tort action and James River’s federal declaratory judgment action thus required a decision on whether the Florida worker’s compensation statute applied to Hilbert. The tort suit, however, did not raise any questions about the insurance policy or its assault and battery limit. In fact, Florida law barred adding James River to that suit. See id. § 627.4136.

While its state court suit proceeded, Hilbert’s estate moved the federal district court to lift its stay of the declaratory action so that it could dismiss the case altogether. The court lifted the stay, but did not immediately dismiss the case. Meanwhile, James River amended its federal complaint to ask the court to declare not only that the $50,000 assault and battery limit applied, but also that the Shellman settlement had exhausted that coverage. In response, the estate again asked the court to exercise its discretion and dismiss the case in deference to the concurrent state court suit.

The district court considered whether to exercise jurisdiction in two steps. It first asked whether the two suits were parallel enough to compare at [*5] all, concluding they were for two reasons: the claims in both cases involved Florida’s worker’s compensation law, and the defendants in the federal suit were also parties in the state action. It then moved on to consider whether the federalism and comity concerns generated by the declaratory action outweighed the efficiency gains of resolving the claims in federal court, applying the guideposts this Court provided in Ameritas Variable Life Ins. Co. v. Roach, 411 F.3d 1328 (11th Cir. 2005). Relying primarily on the conflict between one of the federal claims and the state case, the district court dismissed the case. James River appeals.

II.

HN2 When a district court dismisses a declaratory judgment action, we review for abuse of discretion. Ameritas, 411 F.3d at 1330. A district court abuses its discretion (1) when it fails to consider a relevant and significant factor; (2) when it gives significant weight to an improper factor; or (3) when it “commits a clear error of judgment” in weighing the proper factors. Id. (quotation omitted). A district court also abuses its discretion when it applies “the wrong legal standard.” Id.

III.

HN3 When district courts decide whether to proceed with declaratory judgment actions that raise issues also disputed in state court proceedings, they are called to [*6] balance conflicting interests—to foster efficient dispute resolution while still preserving the States’ interests in resolving issues of state law in their own courts. Discerning “the propriety of declaratory relief” requires “a circumspect sense” of the whole affair. Wilton v. Seven Falls Co., 515 U.S. 277, 287, 115 S. Ct. 2137, 132 L. Ed. 2d 214 (1995) (quotation omitted).

HN4 On one hand, a declaratory judgment action is often quite efficient, eliminating delays and uncertainty. It may enable, for example, a prospective defendant to ask the court to declare its “rights and other legal relations,” including whether it is liable to a prospective plaintiff for prior or planned future acts. 28 U.S.C. § 2201(a). Without the chance to seek a declaratory judgment, a prospective defendant would often be stuck, waiting out statutes of limitations while watching for lawsuits. See 10B Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 2751 (4th ed. 2021). That waiting game can impose serious costs, whether financial or personal.

HN5 Declaratory actions are especially helpful for third parties—insurance companies in particular. See, e.g., Travelers Prop. Cas. Co. of Am. v. Moore, 763 F.3d 1265, 1267 (11th Cir. 2014); Ameritas, 411 F.3d at 1329-30; Admiral Ins. Co. v. Feit Mgmt. Co., 321 F.3d 1326, 1327 (11th Cir. 2003). That is because a tort suit against an insured often generates distinct issues beyond whether the insured is liable for the tort, say, whether [*7] the insurer has a duty to defend, or whether the insured’s policy covers the liability alleged in the complaint. See Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273, 61 S. Ct. 510, 85 L. Ed. 826 (1941); Advanced Sys., Inc. v. Gotham Ins. Co., 272 So. 3d 523, 527 (Fla. Dist. Ct. App. 2019) (an insurer’s duty to defend “is not determined by the insured’s actual liability”). When the policy does not cover the liability even if all the facts alleged in the complaint are true, declaratory relief enables the insurance company to avoid the tort suit completely. Cf. National Trust Ins. Co. v. S. Heating & Cooling, Inc., 12 F.4th 1278, 1290 (11th Cir. 2021). And even when the policy does apply, a declaratory suit allows the insurance company to resolve its liability without waiting for every individual injured party to sue the insured. Declaratory judgments thus play a valuable role in this context, clarifying insurance companies’ liability quickly and directly.

On the other side of the scale are federalism and comity concerns animated by our system of dual sovereignty. Competing state and federal actions are common. See, e.g., Wilton, 515 U.S. at 280; Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 492-94, 62 S. Ct. 1173, 86 L. Ed. 1620 (1942); Ameritas, 411 F.3d at 1329-30. HN6 After all, while the Declaratory Judgment Act enables a prospective defendant to sue in federal court, it does not prevent the party sued from initiating a concurrent state court proceeding. See 28 U.S.C. § 2201. Nor does anything in the Act prevent a state court defendant from bringing a federal declaratory judgment suit.

What’s more, when the issues and parties [*8] match, each plaintiff competes to be first to the finish, because whichever case is decided earliest will have preclusive effect on common questions in the other. See Empire Fire & Marine Ins. Co. v. J. Transp., Inc., 880 F.2d 1291, 1296 (11th Cir. 1989) (holding that declaratory judgments trigger collateral estoppel).

HN7 Of central concern in this federalism analysis are cases competing to resolve state law issues that “are not foreclosed under the applicable substantive law.” Brillhart, 316 U.S. at 495. When a federal court decides an unresolved question of state law, issue preclusion prevents the creation of state court precedent on that issue in the companion case. See, e.g., Mobil Oil Corp. v. Shevin, 354 So. 2d 372, 374 (Fla. 1977). That, in turn, delays the final resolution of the question as applied to future suits because state supreme courts are the ultimate authority on questions of state law. See Pincus v. Am. Traffic Sols., Inc., 986 F.3d 1305, 1310-11 (11th Cir. 2021). So declaratory judgments have the potential to leave important questions of state law unanswered by state authorities and impede a State’s general authority to dispose of state law issues.

These concerns and others need to be balanced with the obvious benefits of declaratory judgments. HN8 The Declaratory Judgment Act thus is not a license to supplant state court litigation in every case. If it were, the byproducts—waste, delay, and needless competition—would mean the Act sometimes [*9] did more harm than good. As the Supreme Court cautioned in Brillhart, “[g]ratuitous interference with the orderly and comprehensive disposition of a state court litigation should be avoided.” 316 U.S. at 495. Nor can the benefits of a declaratory judgment suit be ignored—it is “a remedial arrow in the district court’s quiver,” fashioned by Congress to provide “a new form of relief” when the need arises. See Wilton, 515 U.S. at 288.

That is where the Act’s unusual jurisdictional provision comes in. HN9 It vests district courts with discretion to dismiss declaratory suits when, in their best judgment, the costs outweigh the benefits. Its language is spare, but direct: federal courts “may declare the rights and other legal relations of any interested party seeking such declaration.” 28 U.S.C. § 2201(a) (emphasis added). The Act thus makes an explicit “textual commitment to discretion.” Wilton, 515 U.S. at 286. So while federal courts normally have an “unflagging obligation” to exercise our jurisdiction, where declaratory judgments are concerned this imperative “yields to considerations of practicality and wise judicial administration.” Id. at 284, 288 (quotation omitted).

Over time, precedents have developed to aid district courts in balancing the interests at stake. HN10 In Ameritas, this Court provided [*10] non-exclusive “guideposts” for district courts to consider when deciding whether to dismiss a federal declaratory judgment action that overlaps with a state case. 411 F.3d at 1331. These factors are intentionally broad, but still offer substantive guidance:

(1) the strength of the state’s interest in having the issues raised in the federal declaratory action decided in the state courts;

(2) whether the judgment in the federal declaratory action would settle the controversy;

(3) whether the federal declaratory action would serve a useful purpose in clarifying the legal relations at issue;

(4) whether the declaratory remedy is being used merely for the purpose of “procedural fencing”—that is, to provide an arena for a race for res judicata or to achieve a federal hearing in a case otherwise not removable;

(5) whether the use of a declaratory action would increase the friction between our federal and state courts and improperly encroach on state jurisdiction;

(6) whether there is an alternative remedy that is better or more effective;

(7) whether the underlying factual issues are important to an informed resolution of the case;

(8) whether the state trial court is in a better position to evaluate those factual [*11] issues than is the federal court; and

(9) whether there is a close nexus between the underlying factual and legal issues and state law and/or public policy, or whether federal common or statutory law dictates a resolution of the declaratory judgment action.

Id.

HN11 As a whole these guideposts account for the federalism and comity concerns generated by competing cases, as well as the comparative utility of the declaratory judgment action. To be sure, courts are not restricted to this set of factors—the list is not “absolute,” and no single factor is controlling. Id. Indeed, we have characterized the inquiry as a “totality-of-the-circumstances analysis.” National Trust, 12 F.4th at 1285. So whatever the district court decides to do, it must capture the breadth of the competing interests; without a complete understanding of those interests, it cannot properly balance them.

The question here is whether the court below appropriately followed this process. James River argues that the district court not only weighed the Ameritas guideposts incorrectly, but that because the state and federal cases were not truly parallel it never should have applied the guideposts in the first place.

We agree that the district court erred, but not for those [*12] reasons. For one, the district court was wrong to assess whether the federal and state cases were “parallel” as a prerequisite to considering the Ameritas guideposts. To be fair, that was less clear before our recent decision in National Trust. But the court did err in its application of the Ameritas factors too. It should not have focused on one of the federal claims almost to the exclusion of the other—in doing so it failed to properly consider the totality of the circumstances.

HN12 To begin, “the existence of a parallel proceeding is not a prerequisite to a district court’s refusal to entertain an action under § 2201(a),” the Declaratory Judgment Act. National Trust, 12 F.4th at 1284. Courts possess “unique and substantial discretion” under the Act. Wilton, 515 U.S. at 286 (contrasting this discretion with Colorado River abstention). And neither our precedents nor the Act itself give specific guidance on what constitutes a “parallel” case—whether the parties must be identical, for example, or whether the claims must overlap completely. That uncertain inquiry finds no home in the analysis.

HN13 Consequently, and unlike some abstention doctrines that are more prudential in nature, a parallel proceeding is not a mandatory prerequisite to applying the Ameritas guideposts.¹ On this point we have been explicit, albeit [*13] after the district court’s decision here: the guideposts themselves offer sufficient consideration of the challenges relating to concurrent proceedings. National Trust, 12 F.4th at 1286. One area of consideration under Ameritas, for example, is whether the federal action would resolve the parties’ dispute; that requires discerning whether the same issues and same parties are present in both cases. Another is whether declaratory relief would create friction between the federal and the state courts; unless the cases implicate the same facts or legal questions, friction is unlikely. Because the guideposts themselves account for the interests presented by competing state and federal lawsuits, we refuse to impose a duplicative inquiry.

The district court thus erred when it forced James River to clear this extra hurdle. It should not have grafted “a discrete, parallel-proceeding factor” from abstention doctrine onto the Ameritas test. Id. at 1285. HN14 While a concurrent state proceeding is still significant under Ameritas, it is not dispositive—in either direction. Id.

Once the district court moved on from its parallelism analysis, it made another serious misstep: it focused on one of the federal claims almost to the exclusion of the other. HN15 Every claim matters, [*14] because Ameritas requires a “totality-of-the-circumstances analysis.” National Trust, 12 F.4th at 1285. And a comprehensive analysis is impossible when a court only considers half of the federal claims. Regardless of the guideposts it applies, a district court must assess the claims raised in a federal declaratory judgment action evenhandedly.

That means a court cannot cherry pick for its Ameritas analysis the claims that favor dismissing—or proceeding with—a federal action. If the court only considers issues raised in both the state and federal cases, it will always underestimate the need to resolve the issues unique to the declaratory action. And if it only assesses the unique federal claims, the opposite result will follow; the court will underestimate the federalism concerns raised by the overlapping issues. Both approaches are unreasonable. Instead, to appropriately assess “the degree of similarity between concurrent state and federal proceedings,” a district court needs to look at the cases as a whole. See id. at 1282.

Here, the district court addressed each Ameritas guidepost as it analyzed the employee exclusions claim. It noted the “close nexus” between that claim and “Florida public policy” and relied on the state court’s better position to [*15] resolve the overlapping factual issues “given its familiarity with” the state tort suit. The policy limits claim, however, largely received the silent treatment. The court mentioned that both counts of the federal lawsuit concerned “issues of state law,” but said nothing further about the policy limits issue. That lopsided analysis was unreasonable.

For example, when discussing the fifth guidepost (potential friction between federal and state courts and improper encroachment on state jurisdiction), the district court only said that “[o]verlapping judicial effort is virtually certain to occur.” But that is not a complete analysis, at least for this lawsuit. Although the claim involving Florida’s worker’s compensation statute overlaps with the claims in the state case, the policy limits claim can only be resolved in the declaratory judgment action. See Fla. Stat. § 627.4136. That’s because the state suit is between Hilbert’s estate and the nightclub—meaning no insurance policy is directly at issue and James River cannot be added to the case. Id. Deciding whether James River has paid in full or still owes the nightclub for future liabilities thus creates no conflict with the state liability case.

Nor was that [*16] the only omission. When the court considered the third guidepost (whether the declaratory action would clarify the legal relations at issue), it failed to account for the fact that resolving the policy limits claim could clarify the relationship between James River and the nightclub. And when discussing the fourth and sixth guideposts (whether the declaratory action was merely “procedural fencing” and whether a better alternative remedy existed), the district court again failed to mention that James River was not party to the state suit and that the policy limits claim could only be resolved through the federal declaratory action.

The district court thus overlooked the significant gains in efficiency the declaratory judgment action would generate. These guideposts as applied to the policy limits claim strongly favor allowing the declaratory judgment action to go forward. If the district court had addressed that claim, as it must on remand, it could have included these efficiency interests in the balance against the federalism and comity interests that it did consider. The failure to do so was a clear error of judgment—and therefore an abuse of discretion.

* * *

HN16 A totality-of-the-circumstances [*17] analysis only works when a court considers all of the relevant details. To do otherwise leaves weights that should be balanced off the scales, or, if used more nefariously, would tip them in favor of a result chosen in advance. We do not suggest that any such artifice happened here. But we do think that the district court, by failing to consider the policy limits claim, missed the efficiency gains that it needed to balance against federalism and comity interests before deciding whether to proceed with the declaratory judgment action. We therefore VACATE the judgment and REMAND the case for further proceedings consistent with this opinion.

Concur by: BRASHER

Concur

Brasher, Circuit Judge, Concurring:

I concur in full in the Court’s opinion. As I said in my concurring opinion in National Trust Ins. Co. v. S. Heating & Cooling, Inc., 12 F.4th 1278 (11th Cir. 2021), insurers reasonably expect the federal courts to resolve run-of-the-mill disputes about their duties to defend and indemnify against claims made in an underlying tort action. In fact, allowing “a declaratory action by an insurer to establish nonliability under casualty insurance was one of the prime purposes of the Declaratory Judgment Act.” W. Cas. & Sur. Co. v. Teel, 391 F.2d 764, 766 (10th Cir. 1968).

In deciding whether to decline jurisdiction in a case like this one, I don’t think district courts should fixate [*18] on whether a related action is pending because one almost always is. Whenever a liability insurer sues its insured for a declaration of its duties to defend and indemnify (or vice versa), there will be a pending or threatened related lawsuit—often in state court—between the insured and a third party. After all, if a third party had not sued or threatened to sue the insured, then the liability insurer would not be asking for a declaratory judgment about its duties to defend and indemnify against that claim. Accordingly, the mere pendency or threat of such a related action is no justification for a district court to decline to adjudicate a federal lawsuit between an insurer and its insured.

In weighing the Ameritas factors in a dispute between a liability insurer and its insured, see Ameritas Variable Life Ins. Co. v. Roach, 411 F.3d 1328, 1331 (11th Cir. 2005), I suggest district courts focus on whether there is anything unique or extraordinary that differentiates their case from the mine run of liability insurance disputes. For example, one could ask: Does the State have a stronger interest in deciding this particular state-law issue in state court than it normally would in a state-law liability insurance dispute? Is there a state-specific public policy at play that [*19] is not present in most other insurance disputes? Is there some important factual dispute in the state litigation that would be unusually dispositive in the declaratory judgment action? We answered these questions in the affirmative in National Trust, where coverage first turned on an open question of state law that had split state courts (whether carbon monoxide was a “pollutant” under the policy’s pollution exclusion) and then on a difficult fact question that was being litigated in the underlying tort action (whether the fire that harmed the third parties was burning outside of its intended location, potentially triggering a “hostile fire” exception to the pollution exclusion).

But, as the Court’s opinion suggests, there is nothing special about this case that warrants declining jurisdiction. Far from it. The district court can resolve this dispute by interpreting the terms of the insurance contract—specifically, the policy’s bodily injury limits, a worker’s compensation exclusion, and an employer liability exclusion, which are all common features of commercial insurance policies. Federal courts routinely answer questions like these. See, e.g., Endurance Am. Specialty Ins. Co. v. United Constr. Eng’g, Inc., 343 F. Supp. 3d 1274, 1280, 1287-88 (S.D. Fla. 2018), aff’d, 786 F. App’x 195 (11th Cir. 2019) (employer’s liability exclusion and worker’s [*20] compensation exclusion); Scottsdale Ins. Co. v. GFM Operations, Inc., 789 F. Supp. 2d 1278, 1287-88 (S.D. Fla. 2011) (same). If the Ameritas factors weighed against exercising jurisdiction here, then they would justify that result in almost any liability-insurance-related declaratory judgment action. Accordingly, it was an abuse of discretion for the district court to decline to exercise jurisdiction.

End of Document

¹Colorado River abstention, for example, first requires asking whether the cases involve “substantially the same parties and substantially the same issues.” Gold-Fogel v. Fogel, 16 F.4th 790, 800 (11th Cir. 2021) (quotation omitted). Only then may a court consider several factors to decide whether the circumstances are “exceptional” enough to justify dimissing the “federal suit due to the presence of a concurrent state proceeding for reasons of wise judicial administration.” Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 818, 96 S. Ct. 1236, 47 L. Ed. 2d 483 (1976).

DAVIS V. ADEOYE

Superior Court of Connecticut, Judicial District of New Haven

May 10, 2022, Decided

DOCKET NO.: CV 20-6109798

Reporter

2022 Conn. Super. LEXIS 547 *; 2022 WL 1487530

ERIN DAVIS v. CHRISTINE ADEOYE, ET AL.

Notice: THIS DECISION IS UNREPORTED AND MAY BE SUBJECT TO FURTHER APPELLATE REVIEW. COUNSEL IS CAUTIONED TO MAKE AN INDEPENDENT DETERMINATION OF THE STATUS OF THIS CASE.

Core Terms

special defense, allegations, pleaded, quotation, marks, motion to strike, vicarious, renting

Judges: [*1] James W. Abrams, Judge.

Opinion by: James W. Abrams

Opinion

MEMORANDUM OF DECISION RE: PLAINTIFF’S MOTION TO STRIKE # 121

The plaintiff, Erin Davis, filed her original complaint on December 4, 2020, alleging negligence against the defendant, Christine Adeoye, arising from a car accident. On May 9, 2021, pursuant to Practice Book § 9-22, the plaintiff properly amended her complaint to cite ELRAC, LLC (ELRAC) as an additional party.¹ In the amended complaint, the plaintiff seeks vicarious liability against ELRAC for the accident under a theory of vicarious agency liability. The plaintiff relies on the rebuttable presumption under General Statutes § 52-183 to allege that Adeoye was ELRAC’s agent or servant and was acting within the course of her employment during the accident. In response, ELRAC filed an answer asserting the Graves Amendment, 49 U.S.C. § 30106 as a special defense. The sole allegation ELRAC pleaded to support its special defense was: “[a] rental car owner or affiliate cannot be held vicariously liable for harm to persons or property that arises out of the use, operation or possession of a rented motor vehicle during the period of the rental. Title 49 U.S.C. § 30106 (a).” The plaintiff seeks to strike ELRAC’S special defense by motion dated December 23, 2021 and ELRAC filed its [*2] memorandum in opposition dated January 24, 2022. The court heard oral argument on March 31, 2022. “A motion to strike shall be used whenever any party wishes to contest . . . the legal sufficiency of the allegations of any . . . counterclaim . . . .” Practice Book § 10-39 (a) (1). “A counterclaim [is] . . . a cause of action existing in favor of a defendant against a plaintiff which a defendant pleads to diminish, defeat or otherwise affect a plaintiff’s claim . . . .” (Internal quotation marks omitted.) Historic District Commission v. Sciame, 152 Conn. App. 161, 176, 99 A.3d 207, cert. denied, 314 Conn. 933, 102 A.3d 84 (2014). “Generally speaking, facts must be pleaded as a special defense when they are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action. . . . The fundamental purpose of a special defense, like other pleadings, is to apprise the court and opposing counsel of the issues to be tried, so that basic issues are not concealed until the trial is underway.” (Citations omitted; internal quotation marks omitted.) Almada v. Wausau Business Ins. Co., 274 Conn. 449, 456, 876 A.2d 535 (2005).

The plaintiff argues that ELRAC’s special defense is inadequate because it does not allege facts sufficient to overcome the rebuttable presumption that Adeoye was ELRAC’s servant or agent acting within the scope of employment at the [*3] time of the accident. Furthermore, the plaintiff argues that ELRAC fails to allege facts sufficient to sustain a Graves Amendment special defense. ELRAC argues that paraphrasing the Graves Amendment makes its application to the present case “necessarily implied and fairly provable under the allegations.” D. Mem. Opp’n, 3, quoting Forbes v. Ballaro, 31 Conn. App. 235, 239, 624 A.2d 389 (1993). ELRAC concludes that its sole allegation paraphrasing the Graves Amendment allows the court to “infer that ELRAC . . . is engaged in the business of renting cars and will establish that the collision occurred during the period of a rental to the defendant operator as set forth in the pleading under challenge.” D. Mem. Opp’n, 3.

The Graves Amendment preempts state law vicarious liability, in relevant part, “for harm to . . . property that results or arises out of the use, operation, or possession of the vehicle during the period of the rental or lease, if—(1) the owner (or an affiliate of the owner) is engaged in the trade or business of renting or leasing motor vehicles; and (2) there is no negligence or criminal wrongdoing on the part of the owner (or an affiliate of the owner).” 49 U.S.C. § 30106 (a). In dicta, the Connecticut Supreme Court implied that a plaintiff’s failure [*4] to allege negligence or a criminal violation when asserting a vicarious cause of action against a vehicle lessor is enough to satisfy 49 U.S.C. § 30106 (a) (2) without affirmative allegations. See Tannone v. Amica Mutual Ins. Co., 329 Conn. 665, 679 n.5, 189 A.3d 99 (2018). Because the plaintiff fails to allege ELRAC’s negligence or criminal wrongdoing, only the elements in 49 U.S.C. § 30106 (a) (1) are in dispute on this motion.

“Each pleading shall contain a plain and concise statement of the material facts on which the pleader relies . . . .” Practice Book § 10-1. “A material fact has been defined adequately and simply as a fact which will make a difference in the result of the case.” (Internal quotation marks omitted.) Buell Industries, Inc. v. Greater New York Mutual Ins. Co., 259 Conn. 527, 556, 791 A.2d 489 (2002).² A fact, inter alia, is “an event or circumstance”. Black’s Law Dictionary (5th Ed. 1983). “A motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged.” (Internal quotation marks omitted.) Santorso v. Bristol Hospital, 308 Conn. 338, 349, 63 A.3d 940 (2013). “[T]he total absence of any factual allegations specific to the dispute renders [the special defense] legally insufficient.” (Internal quotation marks omitted.) Smith v. Jackson, Superior Court, judicial district of Waterbury, Docket No. CV-14-6024411-S (August 21, 2015, Roraback, J.) (60 Conn. L. Rptr. 864, 865, 2015 Conn. Super. LEXIS 2191, *3).

The defendant’s [*5] Graves Amendment pleading lacks any factual allegations. The special defense contains no description of the “event or circumstance” that would “make a difference” in determining whether ELRAC “is engaged in the trade or business of renting or leasing motor vehicles.” Black’s Law Dictionary, supra; Buell Industries, Inc. v. Greater New York Mutual Ins. Co., supra, 259 Conn. 556; 49 U.S.C. § 30106. It contains only a statement of the law that the defendant seeks to raise as a special defense. Mere statements of law are inadequate because such pleadings do not “provide sufficient notice of the facts claimed and the issues to be tried . . . .” (Internal quotation marks omitted.) J.D.C. Enterprises, Inc. v. Sarjac Partners, LLC, 164 Conn. App. 508, 512, 137 A.3d 894, cert. denied, 321 Conn. 913, 136 A.3d 1274 (2016).

ELRAC argues that the court should infer from its citation to 49 U.S.C. § 30106 that there exists some set of facts that, if true, would indicate that ELRAC is engaged in the trade or business of renting or leasing motor vehicles. Practice Book § 10-1 makes clear that allegations consist of facts, not statements of legal issues that parties intend to assert later in litigation. At oral argument, ELRAC also argued that requiring factual allegations to establish a Graves Amendment defense is tantamount to a summary judgment standard “because [ELRAC would be] obligated to plead the statute has application here and prevents the [plaintiff’s] [*6] claim.” It is correct that fact pleading requires ELRAC to state facts that, if true, would show the statute has application here. However, that is not a summary judgment standard because it does not require the defendant to actually produce any evidence consistent with the facts it pleads to survive a motion to strike. See GMAC Mortgage, LLC v. Ford, 144 Conn. App. 165, 178, 73 A.3d 742 (2013) (“in order to successfully oppose a motion for summary judgment by raising an issue of material fact, the opposing party cannot rely solely on allegations that contradict those offered by the moving party . . . .”)

CONCLUSION

Because ELRAC has not pleaded any facts in its special defense that, if true, would entitle it to a Graves Amendment defense, the plaintiff’s motion to strike is hereby granted.

Juris No. 427017

James W. Abrams, Judge

End of Document

¹During the pendency of this motion, the plaintiff amended her complaint to include claims against another party not relevant to the analysis of her ELRAC claim. The operative complaint in this case is now the complaint filed March 1, 2022. The operative complaint contains allegations identical to those against ELRAC in the May 9, 2021 complaint and thus does not change the analysis on this motion to strike.

²Although Buell was defining “material fact” in the context of summary judgment, there is no reason to think Practice Book § 10-1 intended a different definition. Other trial courts have used this substantive definition of “material fact” when evaluating the sufficiency of pleadings. See, e.g., Talbot v. Kirkwood, Superior Court, judicial district of Litchfield, Docket No. CV-03-0091504-S, 2004 Conn. Super. LEXIS 1219 (May 4, 2004, Bryant, J.) (deciding whether an allegation was a “material fact that is dispositive of the plaintiff’s claims.”)