Progressive Preferred Ins. Co. v. Reagor, Civil No. 15-3272 (JRT/SER)

189 F.Supp.3d 850

Progressive Preferred Insurance Company, Plaintiff,

v.Pauline L. Reagor and Rolayne Renstrom, Defendants.

Metropolitan Property and Casualty Insurance Company, Plaintiff,

v.Pauline L. Reagor and Rolayne Renstrom, Defendants.

Civil No. 15-3272 (JRT/SER)

Civil No. 15-4590 (JRT/JSM)

United States District Court, D. Minnesota.

Signed May 17, 2016

Stephen M. Warner, ARTHUR, CHAPMAN, KETTERING, SMETAK & PIKALA P.A., Minneapolis, MN, for plaintiff Progressive Preferred Insurance Company.

Timothy J. O'Connor, LIND JENSEN SULLIVAN & PETERSON, PA, Minneapolis, MN, for plaintiff Metropolitan Property and Casualty Insurance Company.

J. Drew Ryberg, RYBERG LAW FIRM, S.C., Eau Claire, WI, for defendant Pauline L. Reagor.

Mark J. Gherty, GHERTY & GHERTY, Hudson, WI, and Thomas Guelzow, GUELZOW LAW OFFICES, LTD., Eau Claire, WI, for Defendant Rolayne Renstrom.

MEMORANDUM OPINION AND ORDER

JOHN R. TUNHEIM, Chief Judge, United States District Court

These motions present questions of abstention and federalism in the context of actions brought pursuant to the Declaratory Judgment Act. Plaintiff insurance companies seek declaratory judgments stating their rights and liabilities with respect to an accident involving Defendants Pauline Reagor and Rolayne Renstrom. But Renstrom has also filed a highly similar action in Wisconsin state court. In circumstances like these, where parallel state and federal cases are pending, and the federal case involves questions of state law and a request for a declaratory judgment, federal courts typically dismiss or stay the federal action due to concerns of federalism and judicial economy. The wrinkle in this case, however, is that the state court has stayed its case to wait for this Court to act. Nonetheless, the Court finds that the policies counseling in favor of abstention in similar circumstances ring true in this case too, in spite of the state court stay. The Court will therefore consolidate the Plaintiffs' respective cases and stay them both while the state court case is pending.

BACKGROUND

Reagor is partial owner of a cabin in Medford, Wisconsin, and hosted Renstrom at the cabin in November 2013. On November 3, Reagor, Renstrom, and another guest were using a mechanical log-splitter on Reagor's property and Renstrom sustained a serious injury to her right hand. Renstrom made a demand to Reagor for damages arising from the incident. Reagor is insured by policies issued by Progressive and Metropolitan, as well as another insurer, Little Black Insurance Company.

These incidents then spawned three court actions: On August 13, 2015, Progressive filed a complaint with this Court requesting a declaratory judgment stating the parties' respective rights, duties, and obligations under Progressive's policy with Reagor. On October 1, 2015, Renstrom filed a complaint in Dunn County Circuit Court in Wisconsin, naming Progressive, Metropolitan, Little Black, and three other businesses as defendants. Renstrom's state court complaint did not name Reagor as a defendant, but instead sought to again determine the extent of the various parties' coverage. And on December 30, 2015, Metropolitan filed its own complaint with this Court, naming Reagor and Renstrom as defendants and requesting a declaratory judgment, just as Progressive did.

Reagor and Renstrom then filed motions with this Court to dismiss Progressive and Metropolitan's federal complaints or, in the alternative, to consolidate the two cases. On February 10, 2016, a Wisconsin state court judge issued an order staying Renstrom's state court case "pending resolution of the declaratory judgment action commenced in the United States District Court for the District of Minnesota." (Aff. of Timothy J. O'Connor, Ex. 1, Apr. 7, 2016, Case No. 15–4590, Docket No. 32.)

ANALYSIS

I. ABSTENTION

A. Brillhart Abstention

Reagor and Renstrom invoke Brillhart v. Excess Insurance Co. , 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942), to argue that the Court should abstain from exercising jurisdiction over these cases.

Federal courts have a "virtually unflagging obligation" to decide cases within the scope of their jurisdiction. Mata v. Lynch , ––– U.S. ––––, 135 S.Ct. 2150, 2156, 192 L.Ed.2d 225 (2015) (quoting Colo. River Water Conservation Dist. v. United States , 424 U.S. 800, 817, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976) ); see also Sprint Comm'ns, Inc. v. Jacobs , ––– U.S. ––––, 134 S.Ct. 584, 588, 187 L.Ed.2d 505 (2013) ("In the main, federal courts are obliged to decide cases within the scope of federal jurisdiction."). The Supreme Court has, however, established certain exceptions to this general rule. Sprint , 134 S.Ct. at 589. Brillhart exemplifies one such exception: because of the text of the Declaratory Judgment Act, abstention is at times permissible for actions brought in pursuit of a declaratory judgment. MedImmune, Inc. v. Genentech, Inc. , 549 U.S. 118, 136, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007). "The Declaratory Judgment Act provides that a court ‘may declare the rights and other legal relations of any interested party,’ not that it must do so." Id. (quoting 28 U.S.C. § 2201(a) ). This statutory grant of authority has "long been understood ‘to confer on federal courts unique and substantial discretion in deciding whether to declare the rights of litigants.’ " Id. (quoting Wilton v. Seven Falls Co. , 515 U.S. 277, 286, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995) ).

Accordingly, federal courts possess broad discretion to abstain from exercising jurisdiction over declaratory judgment lawsuits. See Wilton , 515 U.S. at 289, 115 S.Ct. 2137 (stating district court Brillhart abstention decisions are reviewed only for abuse of discretion). And where there exists a "parallel" state court action to the federal declaratory judgment action, and the federal case involves questions of state law, the district court's discretion is at its peak due to principles of federalism and comity. See Lexington Ins. Co. v. Integrity Land Title Co. , 721 F.3d 958, 967–68 (8th Cir.2013) (detailing the difference in court discretion when there is a parallel state court proceeding). When deciding whether to abstain, the Court must consider principles of judicial economy, Brillhart , 316 U.S. at 495, 62 S.Ct. 1173, "practicality and wise judicial administration," Wilton , 515 U.S. at 288, 115 S.Ct. 2137, "the desirability of avoiding piecemeal litigation," Colo. River , 424 U.S. at 818, 96 S.Ct. 1236 (citing Brillhart , 316 U.S. at 495, 62 S.Ct. 1173 ), and the Court must avoid "[g]ratuitous interference" with state proceedings, Brillhart , 316 U.S. at 495, 62 S.Ct. 1173.

While the decision to abstain is a matter of discretion, it is of course possible for a court to abuse that discretion. For example, in certain instances a court may abuse its discretion if it chooses to move forward and hear a declaratory judgment lawsuit involving disputed state law when a parallel state court proceeding is pending. The Eighth Circuit reversed a district court for doing just that in Capital Indemnification Corp. v. Haverfield , where the district court chose to decide disputed questions of Missouri law rather than allow the state court to resolve those questions itself in a parallel proceeding already pending. 218 F.3d 872, 875 (8th Cir.2000). And as mentioned briefly above, the Supreme Court has "indicated that, at least where another suit involving the same parties and presenting opportunity for ventilation of the same state law issues is pending in state court, a district court might be indulging in ‘[g]ratuitous interference’ if it permitted the federal declaratory action to proceed." Wilton , 515 U.S. at 283, 115 S.Ct. 2137 (alteration in original) (quoting Brillhart , 316 U.S. at 495, 62 S.Ct. 1173 ). In these instances, "[o]rdinarily it would be uneconomical as well as vexatious for a federal court to proceed." Brillhart , 316 U.S. at 495, 62 S.Ct. 1173.¹

Here, these cases are precisely the type for which Brillhart abstention is warranted: Progressive and Metropolitan each request declaratory judgments, the Wisconsin case is a parallel state court proceeding also involving the incident at Reagor's cabin and Reagor's insurance policies, and the parties all appear to agree that the substantive law at issue is state law—Wisconsin tort law, Wisconsin choice-of-law principles, and either Wisconsin or Minnesota contract law. Additionally, Renstrom's Wisconsin court case contains four additional parties not named as party to either of the federal actions before this Court.

The lone factor cutting against abstention in this case is the state court's stay of the state court proceedings. Unfortunately, the state court's written order staying the case provided no reasoning. At the hearing before this Court, the parties indicated that the state case was stayed because Progressive's federal action was filed prior to the Renstrom's Wisconsin case, and that there were already motions pending in the federal case. But while the stay of the state court case does reduce the likelihood of duplicative litigation, it may only do so in the short term. For example, if the Court were to move ahead with the federal cases while the state court case is stayed, it is possible if not likely that the Court might only determine Progressive's responsibility as the excess insurer, or only Progressive and Metropolitan's responsibilities, and in those cases litigation somewhere would still be necessary to resolve, for example, Little Black's obligations, as well as those of Blue Cross—another party in the Wisconsin action not present here. This type of "piecemeal litigation" is exactly the type the Court can and must seek to avoid. The state court's stay therefore does not do away with the Court's concerns for judicial economy.

All of this is not to mention that contract law, tort law, and choice of law principles are the traditional province of the states, a fact that counsels the Court to refrain from unnecessarily deciding...