Am. Modern Prop. & Cas. Ins. v. Pickett

676 F.Supp.3d 1175

AMERICAN MODERN PROPERTY AND CASUALTY INSURANCE COMPANY, Plaintiff, v. Fracine PICKETT, Defendant.¹

CIVIL ACTION 23-0073-WS-C

United States District Court, S.D. Alabama, Northern Division

Signed June 8, 2023

Lynn Etheridge Hare, Klasing, Williamson & Burke, PC, Birmingham, AL, for Plaintiff.

Amanda B. Cook, Cook and Associates, Attorneys at Law LLC, Montgomery, AL, for Defendant.

ORDER

WILLIAM H. STEELE, UNITED STATES DISTRICT JUDGE

This declaratory judgment action is before the Court on the motion of the defendant ("Pickett") to dismiss. (Doc. 12). The plaintiff ("Modern") filed a response and Pickett a reply. (Docs. 15, 16). Pickett filed as an attachment to her reply brief a copy of a state complaint she had just filed. (Doc. 16-1). Modern moved to strike this exhibit, on the grounds it would be prejudiced were the Court to decide the motion to dismiss based on a state complaint that Modern had had no opportunity to challenge. (Doc. 17). The Court denied the motion to strike, instead permitting both parties to file supplemental briefs addressing the impact of the state action. (Doc. 18). The parties have now done so, (Docs. 19, 20), and the motion to dismiss is ripe for resolution. After careful consideration, the Court concludes the motion is due to be granted.

BACKGROUND

According to the amended complaint, (Doc. 6), Modern issued to Pickett a policy of manufactured home insurance. The insured dwelling was damaged by fire, resulting in a claim for benefits. Modern asserts that the policy is void due to alleged misrepresentations made by Pickett in her application. Modern seeks a declaration of the duties, if any, it owes its insured.

Pickett asks the Court in its discretion not to exercise jurisdiction over this action. First, she says that, should her policy be void due to misrepresentations, she has viable claims against an insurance agency ("Davison") and against her prior insurer ("Bankers") for their role in creating that situation. Pickett maintains that her claims against these entities render them necessary parties under Rule 19(a),² and that their joinder would destroy complete diversity. Pickett also argues she has viable claims against Modern, which she would bring in state court, and Modern should not be rewarded for winning the race to the courthouse. (Doc. 12 at 3-5).³ Contemporaneously with filing her reply brief, Pickett filed an action in state court, against Modern, Davison, and Bankers. (Doc. 16-1). In her reply brief, Pickett relies on this Court's decision in Westchester Surplus Lines Insurance Co. v. Romar House Association, Inc., 2008 WL 5412937 (S.D. Ala. 2008), which applied the analysis set forth in Ameritas Variable Life Insurance Co. v. Roach, 411 F.3d 1328 (11th Cir. 2005). The parties' supplemental briefs more fully address the Ameritas factors.

DISCUSSION

"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 a declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201(a). To be "within [the] jurisdiction" of the Court, there must exist an independent fount of jurisdiction. E.g., Fastcase, Inc. v. Lawriter, LLC, 907 F.3d 1335, 1340 (11th Cir. 2018). Here, that fount is diversity of citizenship, with Modern being a citizen of Ohio and Pickett being a citizen of Alabama. (Doc. 6 at 1).

The statutory "actual controversy" requirement mirrors the constitutional "case or controversy" requirement of Article III, section 2. Provident Life & Accident Insurance Co. v. Transamerica-Occidental Life Insurance Co., 850 F.2d 1489, 1491 (11th Cir. 1988). In the statutory context, that requirement looks to " 'whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.' " GTE Directories Publishing Corp. v. Trimen America, Inc., 67 F.3d 1563, 1567 (11th Cir. 1995) (quoting Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941)). There is no question but that an actual controversy is presented in this action.

Even when an "actual controversy" exists that falls "within [the] jurisdiction" of the district court, a plaintiff has no absolute right to a federal forum. "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." Wilton v. Seven Falls Co., 515 U.S. 277, 288, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995). The Act "confer[s] unique and substantial discretion in deciding whether to declare the rights of litigants," and the district court's decision whether to exercise jurisdiction is reviewable on appeal only for abuse of that discretion. Id. at 286, 290, 115 S.Ct. 2137.

A. Necessary Party.

A party is necessary under Rule 19(a) only if, in its absence: (1) complete relief cannot be accorded among the existing parties; or (2) the party has an interest relating to the subject of the action and is so situated that disposing of the action may (i) impair or impede its ability to protect its interest or (ii) leave an existing party exposed to inconsistent obligations. Modern correctly notes that none of these circumstances have been shown to exist.

The claims that Pickett has brought against Davison and Bankers are merely derivative of the claims of the existing parties, relevant only after the existing parties' dispute vis-à-vis each other has been resolved, and resolved adversely to Pickett. Complete relief as between Modern and Pickett thus can be accorded absent the non-parties.

Nor does the absence of the non-parties expose Pickett to inconsistent obligations vis-à-vis Modern on the one hand and the non-parties on the other. If Pickett prevails in this lawsuit, her suit against the non-parties is mooted. If Modern prevails in this lawsuit, Pickett has simply lost her insurance benefits, for which she can seek recompense from the non-parties. In neither event is she exposed to inconsistent obligations.

Pickett does not address whether the non-parties are so situated that their ability to protect an interest relating to the subject of this action may be impaired or impeded. Their only evident interest is the same as that of Pickett: to defeat Modern's assertion of a voiding misrepresentation (success on this point would obviate her suit against them). Pickett has not, however, suggested that she is incompetent to protect her own interests in this litigation, such that only the non-parties can effectively argue against Modern's assertion of a voiding misrepresentation.

In summary, Bankers and Davison are not necessary parties to this action.

B. Ameritas Discretion.

" '[I]t 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, not governed by federal law, between the same parties.' " Ameritas, 411 F.3d at 1330 (quoting Brillhart v. Excess Insurance Co. of America, 316 U.S. 491, 495, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942)). " 'Gratuitous interference with the orderly and comprehensive disposition of a state court litigation should be avoided.' " Id. (quoting Brillhart, 316 U.S. at 495, 62 S.Ct. 1173). "Guided by these general principles expressed by the Supreme Court, as well as the same considerations of federalism, efficiency, and comity that traditionally inform a federal court's discretionary decision whether to abstain from exercising jurisdiction over state-law claims in the face of parallel litigation in the state courts, we provide the following [nine] factors for consideration to aid district courts in balancing state and federal interests." Id. at 1330-31 (internal quotes omitted).

At the Court's urging, the parties have addressed each of the nine Ameritas guideposts as relevant to this case. Modern criticizes Pickett for citing only this Court's opinion in Westchester as applying the Ameritas analysis, but Modern itself cites only three decisions, none of them appellate - one of which addressed no Ameritas issue at all, one of which used a different analysis not applicable in this Circuit, and one of which stopped its analysis after finding no "parallel action." (Doc. 19 at 6-7, 9). Neither party acknowledges a trio of recent Eleventh Circuit decisions addressing Ameritas: James River Insurance Co. v. Rich Bon Corp., 34 F.4th 1054 (11th Cir. 2022); Gold-Fogel v. Fogel, 16 F.4th 790 (11th Cir. 2021); and National Trust Insurance Co. v. Southern Heating and Cooling Inc., 12 F.4th 1278 (11th Cir. 2021). The Court considers all these sources, and Ameritas itself, as appropriate.

The dispute between Modern and Pickett involves a "first-party claim," that is, a "claim made by the insured on his own policy." Evans v. Mutual Assurance, Inc., 727 So. 2d 66, 68 (Ala. 1999). Modern wishes to deny coverage for a fire loss on the insured property based on alleged misrepresentations by Pickett, made in her application for insurance, that similar insurance had never been cancelled and that the insured property had never been uninsured. (Doc. 6 at 3). The application was signed on June 29, 2022. (Id.). Attached to the complaint is a notice of cancellation from Bankers, which is dated May 16, 2022 and which states that cancellation will become effective on May 26, 2022. (Id.; Doc. 6-3). The only parties to this action are Modern and Pickett, and the only relief sought is a declaration of Modern's duties, if any, owed Pickett vis-à-vis the loss. (Doc. 6 at 5).

Pickett's state complaint both mirrors the federal complaint and extends beyond it. Count III asserts a claim against Modern for breach of contract in...