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Norcal Mutual Insurance Co. v. Dishman

United States District Court, W.D. Missouri, St. Joseph Division

June 17, 2019

NORCAL MUTUAL INSURANCE COMPANY, Plaintiff,
v.
ANTHONY DISHMAN, JEANETTE DISHMAN, PAYTON DISHMAN, BLAKE DONALDSON, D.O., BEVERLY BOATRIGHT, PRIMARY CARE PROPERTIES, LLC, PRIMARY CARE NORTH KANSAS CITY, LLC, Defendants.

          ORDER DENYING DEFENDANTS' MOTION TO DISMISS, OR IN THE ALTERNATIVE, MOTION TO STAY

          ROSEANN A. KETCHMARK, JUDGE.

         Before the Court is Blake Donaldson, D.O., Primary Care North Kansas City, LLC, Primary Care Properties, LLC (“the Donaldson parties”)' Motion to Dismiss, or in the Alternative, Stay Plaintiff's Complaint for Declaratory Judgment (“the Motion”). (Doc. 6.) The Motion is fully briefed. (Docs. 7, 18, 20.) After careful consideration and for the reasons below, the Motion is DENIED.

         Background

         A. State Action

         On October 18, 2017, Anthony Dishman, Jeanette Dishman, and Payton Dishman (“the Dishmans”) filed suit against Blake Donaldson, Beverly Boatright, Primary Care Properties, LLC, and Primary Care North, LLC in the Circuit Court of Platte County, Missouri (“the State Court Action”). (Doc. 1). See Anthony Dishman et al v. Blake Donaldson, et al., No. 17AE-CC00361. The Dishmans amended their Petition on June 19, 2018. (Doc. 1-1.) The State Action alleges that Dr. Blake Donaldson, at the time a licensed physician, engaged in sexual conduct with Payton Dishman while Payton was a minor, causing damage to the Dishmans at Primary Care North Kansas City, LLC. (Id.) NORCAL Mutual Insurance Company (“NORCAL”) issued a Medical Professional Liability Policy to Blake Donaldson bearing Policy Number 715633-N, effective from May 25, 2015, through May 25, 2016 (“the Policy”). (Doc. 1-2.) By virtue of endorsement END04-001 to the Policy, Primary Care North Kansas City, LLC is also an Insured. (Id.)

         B. Declaratory Judgment Action

         On March 18, 2019, NORCAL filed a Motion for Declaratory Judgment in this Court pursuant to 28 U.S.C. § 2201, the Declaratory Judgment Act, and diversity jurisdiction (“the Declaratory Judgment Action”). (Doc. 1.) NORCAL seeks the following declarations from this Court: (1) “NORCAL shall have the right to reimbursement of all costs incurred in the past and future defending Blake Donaldson and Primary Care North Kansas City, LLC in the matter Anthony Dishman et al v. Blake Donaldson, et al., No. 17AE-CC00361 in the Circuit Court of Platte County;” and (2) “neither Primary Care Properties, LLC or Beverly Boatright are insureds as defined by the Policy and therefore are not entitled to defense or indemnity.” The issue in the State Action is whether Blake Donaldson engaged in impermissible sexual misconduct with Payton Dishman, and if so, what damages are the Dishmans entitled to. In this declaratory judgment action, the issues are whether Donaldson's alleged actions are covered by the Policy and if NORCAL is entitled to reimbursement for defense costs. The Donaldson parties seek dismissal of the Declaratory Judgment Action pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. Alternatively, the Donaldson parties ask this Court to stay the Declaratory Judgment Action until a final judgment is rendered in t he State Action. The immediate issue before this Court is whether dismissal or a stay of this case is appropriate considering the pending State Action.

         Legal Standard

         The Federal Declaratory Judgment Act provides district courts with discretion to accept or decline jurisdiction over declaratory judgment actions. 28 U.S.C. § 2201(a). The Declaratory Judgment Act “gave the federal courts competence to make a declaration of rights; it did not impose a duty to do so.” Public Affairs Associates, Inc. v. Rickover, 369 U.S. 111, 112 (1962). Relief under the Declaratory Judgment Act is procedural in nature; therefore, federal law governs whether relief may be granted under this Act and whether a motion to dismiss, or in the alternative, motion to stay shall be granted. Hinkel Excavation & Constr., Inc. v. Constr. Equip. Int'l, 2000 U.S. Dist. LEXIS 22176, at *9 (N.D. Iowa Nov. 20, 2000).

         If a suit in state court and a federal declaratory judgment action are parallel, a federal court should abstain from adjudicating the declaratory judgment action. Scottsdale Ins. Co. v. Detco Indus., Inc., 426 F.3d 994, 997 (8th Cir. 2005) (internal quotation marks and citation omitted). If the court determines the proceedings are not parallel, the court must still determine whether abstention by the federal court is proper. Safe Auto Ins. Co. v. Escabusa, 2016 U.S. Dist. LEXIS 35004, at *8 (W.D. Mo. Mar. 18, 2016). “The Eighth Circuit has adopted a six-factor test . . . to guide district courts in determining whether to exercise jurisdiction over a declaratory judgment action related, but not parallel, to an action pending in state court.” Id. These factors are:

(1) whether the declaratory judgment sought will serve a useful purpose in clarifying or settling the legal relations at 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 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 achieve a federal hearing in a case otherwise not removable.

Scottsdale Ins. Co., 426 F.3d at 998-99.

         Discussion

         A. ...


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