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Colony Insurance Co. v. Schlup Investment Inc.

United States District Court, W.D. Missouri, Central Division

August 1, 2014

COLONY INSURANCE CO., Plaintiff,
v.
SCHLUP INVESTMENT INC., et al., Defendants.

ORDER

NANETTE K. LAUGHREY, District Judge.

Defendants Schlup Investment, Inc. and Michael Schlup (the Schlup defendants) move to stay this declaratory judgment action pending the resolution of a related case that is being heard in the Circuit Court of Camden County, Missouri. [Doc. 11]. Defendant Plaza Gardens on the Lake Condominium Owners' Association, Inc. joins in this motion. [Docs. 16, 22]. For the reasons set forth below, Defendants' motion to stay is DENIED.

I. Background

Plaintiff Colony Insurance Co. filed this action under the Declaratory Judgment Act on April 14, 2014. It concerns whether coverage exists under a commercial general liability insurance policy that Colony issued to Schlup Investment for a separate, civil action that is pending in the Circuit Court of Camden County (the Camden County suit). Colony seeks a declaratory judgment that it does not owe the Schlup defendants, or their officers or agents, a duty to defend or indemnify them in the Camden County suit or in any prior, similar actions.

The Camden County suit was filed on January 9, 2014 and is set for trial in early-to mid-July 2014. That case involves a number of claims brought by the Association against the Schlup defendants arising out of the allegedly defective construction of a condominium complex. Specifically, the Association has asserted claims for negligence; negligent misrepresentation or non-disclosure; negligent hiring, retention, and supervision; breach of warranty; violations of the Missouri Merchandising Practices Act; and violations of the Missouri Uniform Condominium Act.

II. Discussion

Defendants move to stay this case pending the resolution of the Camden County suit. With respect to cases brought under the Declaratory Judgment Act, district courts possess "unique and substantial discretion" in determining whether to hear the case, "even when the suit otherwise satisfies subject matter jurisdictional prerequisites." Wilton v. Seven Falls Co., 515 U.S. 277, 282, 286 (1995). This discretion is at its most broad when there is a parallel case pending in state court involving questions of state law. Lexington Ins. Co. v. Integrity Land Title Co., Inc., 721 F.3d 958, 967 (8th Cir. 2013). The parties to this action agree, however, that the Camden County suit is not a parallel case, as it does not involve substantially the same parties or issues. [Docs. 12 at 5; 17 at 4; 22 at 2]; see also Lexington Ins. Co., 721 F.3d at 968.

Consequently, although the Court still has discretion to stay this case, "that discretion is less broad and is to be exercised according to a six factor test." Lexington Ins. Co., 721 F.3d at 968. The relevant factors are:

(1) whether the declaratory judgment sought will serve a useful purpose in clarifying and settling the legal relations in issue;
(2) whether the declaratory judgment will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the [federal] proceeding;
(3) the strength of the state's interest in having the issues raised in the federal declaratory judgment action decided in the state courts;
(4) whether the issues raised in the federal action can more efficiently be resolved in the court in which the state action is pending;
(5) whether permitting the federal action to go forward would result in unnecessary entanglement between the federal and state court systems, because of the presence of overlapping issues of fact or law; and
(6) whether the declaratory judgment action is being used merely as a device for procedural fencing-that is, to provide another forum in a race for res judicata or to achiev[e] a ...

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