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Certain Underwriterts at Lloyd's London v. Plaza Banqueut Centers, Inc.

United States District Court, E.D. Missouri, Eastern Division

February 11, 2015

CERTAIN UNDERWRITERTS AT LLOYD'S LONDON, SUBSCRIBING TO CERTIFICATE NO. LCL 004029, Plaintiffs/Intervenor Defendants,
v.
PLAZA BANQUEUT CENTERS, INC., d/b/a LIGHTS ON BROADWAY; ERIC GALLOWAY; P&B REAL ESTATE, LLC; and LATROYA ADAMS, Defendants. HARTFORD FIRE INSURANCE COMPANY, Intervenor Plaintiff.

MEMORANDUM AND ORDER

AUDREY G. FLEISSIG, District Judge.

This action seeks declaratory judgment with respect to the rights and obligations of the parties pursuant to a commercial general liability ("CGL") policy issued by Plaintiffs Certain Underwriters to Lloyd's London, Subscribing to Certificate No. LCL 004029 ("Underwriters") to Defendant Plaza Banquet Centers, Inc., d/b/a Lights on Broadway ("Plaza"), with Defendant P&B Real Estate, LLC ("P&B") as another named insured. The case arises out of the shooting death on December 25, 2010, of 16-year old Orlando Willis while he was an invitee at a night club owned/operated by Plaza and P&B. The matter is now before the Court on Defendants' motion to dismiss or stay this action in light of a garnishment action pending in Missouri state court involving substantially the same parties and issues as this action. For the reasons set forth below, Defendants' motion shall be granted to the extent that the Court, in the exercise of its discretion, will abstain from and stay this case.

BACKGROUND

On June 4, 2013 Defendant Latroyna Adams, Willis' mother, brought a wrongful death action in state court for negligence for the wrongful death of her son. On December 16, 2013, Adams filed a third amended petition that named Plaza, Galloway (an executive officer of Plaza), and P&B as defendants. On March 26, 2014, Underwriters received notice of the action from Adams' attorney. Plaza, Galloway, and P&B demanded that Underwriters defend and indemnify them pursuant to the CGL policy issued by Underwriters. The policy had a limit of $1, 000, 000 per occurrence.

On May 9, 2014, Underwriters confirmed their refusal to defend and indemnify their insureds, on the basis of the Assault and Battery Exclusion in the policy and on the basis that some of the damages sought by Adams were for emotional injuries and not "bodily injuries" covered by the policy. On May 12, 2014, Adams, Plaza, and Galloway entered into a settlement agreement pursuant to Mo. Rev. Stat. §537.065.[1] In the agreement, Adams relinquished all rights to levy judgment against Plaza and Galloway and agreed to pursue collection from Underwriters only.

The present action was filed by Underwriters on May 16, 2014. Underwriters seek to confirm that they did not have a duty to defend or indemnify Plaza, Galloway, or P&B in the wrongful death action. In June 2014, Adams settled the wrongful death action with P&B for $1, 000, 000, which was paid by P&B's insurer Hartford Fire Insurance Co. ("Hartford"), and P&B was dismissed from the wrongful death action. On July 10, 2014, a hearing was held on liability and damages against Plaza and Galloway, and on July 22, 2014, the state trial court entered judgment for $5, 000, 000 against them. On July 24, 2014, Adams' counsel informed Underwriters of the judgment and Adams' intent to file a garnishment action if Underwriters continued to deny indemnity.

On August 26, 2014, Adams filed an equitable garnishment action against Underwriters, Plaza, and Galloway, pursuant to Mo. Rev. Stat. §379.200, seeking to recover the $5, 000, 000 judgment entered in the wrongful death lawsuit. By order dated December 15, 2014, the state court granted P&B and Hartford leave to intervene, resulting in the filing of an intervenors petition against Underwriters in which P&B claimed breach of contract and Hartford sought equitable subrogation. (Doc. No. 71-2.)

Also on December 15, 2014, the state court denied Underwriters' motion to stay the garnishment action pending resolution of the present declaratory judgment action. The state court noted that all necessary and indispensable parties were now included in the garnishment action and that "as a matter of practicality, it may be more appropriate to stay the federal declaratory judgment action." (Doc. No. 75-1.)

In opposition to Defendants' motion to dismiss or stay this declaratory judgment action, Underwriters argue that the two actions are not parallel proceedings because the garnishment action may not be broad enough to resolve certain issues, such as whether "Hartford's subjugated claim is barred because P&B breached various conditions in the Policy." Underwriters also assert that the garnishment action can only address the CGL policy limit of $1, 000, 000, whereas the declaratory judgment action can address the parties' obligations as to the entire $5, 000, 000 judgment in the wrongful death action, and the $1, 000, 000 settlement with P&B. According to Underwriters, granting Defendants' motion to dismiss or stay would delay a comprehensive resolution of all coverage issues, and will improperly deny Underwriters their choice of forum.

DISCUSSION

Typically, "a federal district court must exercise its jurisdiction over a claim" absent "exceptional circumstances." Lexington Ins. Co. v. Integrity Land Title Co., 721 F.3d 958, 967 (8th Cir. 2013) (citation omitted). However, as Defendants recognize, when a lawsuit is filed pursuant to the Declaratory Judgment Act, a federal court's obligation to exercise jurisdiction yields "to practical considerations and substantial discretion." Id. When "a parallel" state court action is pending, the court's discretion is to be guided by considerations of judicial economy, "practicality and wise judicial administration, '" and avoiding "gratuitous interference' with state proceedings." Id. (quoting Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 495 (1942) & Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995)); see also Capitol Indem. Corp. v. Haverfield, 218 F.3d 872, 874 (8th Cir. 2000).

In the absence of parallel proceedings, a federal court still has discretion to abstain or stay, "but that discretion is less broad and is to be exercised according to a six factor test that [the Eighth Circuit] has adopted" in Scottsdale Insurance Co. v. Detco Industries, Inc., 426 F.3d 994 (8th Cir. 2005). Lexington Ins. Co., 721 F.3d at 968. The six 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 ...

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