Venezie Sporting Goods, LLC v. Allied Ins. Co. of Am., 2:20-cv-1066

VENEZIE SPORTING GOODS, LLC, Plaintiff, v. ALLIED INSURANCE COMPANY OF AMERICAand NATIONWIDE INSURANCE COMPANY Defendants.

2:20-cv-1066

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

September 23, 2020

OPINION

Mark R. Hornak, Chief United States District Judge

Two motions are currently before the Court: (1) Defendants Allied Insurance Company of America's and Nationwide General Insurance Company's Motion to Dismiss for Failure to State a Claim pursuant to Federal Rule of Civil Procedure 12(b)(6); and (2) Plaintiff Venezie Sporting Goods, LLC's Motion to Remand this matter to the Court of Common Pleas of Lawrence County, Pennsylvania. This Court, in employing its discretion under the Declaratory Judgment Act (DJA), declines to exercise subject matter jurisdiction over this case. For the reasons that follow, the Court GRANTS Plaintiff's Motion to Remand (ECF No. 8) and further DENIES WITHOUT PREJUDICE AS MOOT Defendants' Motion to Dismiss. (ECF No. 4.)

I. BACKGROUND

The COVID-19 global pandemic and resulting government stay-at-home orders have presented significant economic impacts on Pennsylvania institutions, whereby businesses across the Commonwealth have been unable to use their premises and have subsequently sustained income losses. Across both federal and state courts in Pennsylvania, a question has been raised: whether commercial insurance contracts cover or exclude business interruption losses stemming from the COVID-19 pandemic. In resolving these motions, the Court takes the following facts from the Complaint.

Plaintiff Venezie Sporting Goods, LLC, a company located in Lawrence County, Pennsylvania, was forced to close its doors after sustaining losses amid the COVID-19 pandemic and related government shut-down orders. (ECF No. 1-1, at 15 ¶ 27.) For the time period relevant to this lawsuit, Plaintiff was (and remains) covered by two (2) "premier" business owners insurance policies issued by Defendants Allied Insurance of America and Nationwide General Insurance Company.¹ (Id. at 11 ¶ 7.) The insurance policies are "all risks" policies providing "coverage for losses, damages and expenses to the insured premises unless specifically excluded" (Id. at 12 ¶ 9) and are in effect for an aggregate period starting April 16, 2019 and ending April 16, 2021. (Id. at ¶ 8.) Because Plaintiff was "forced to close its business" in the response to the pandemic (Id. at 15 ¶ 27), Plaintiff alleges to have "suffered loss of business income and damages" covered by multiple provisions under the policies. (Id. at 16 ¶ 31.) Plaintiff made an insurance claim upon Defendants for "recovery of losses, damages and expenses caused by the COVID-19 pandemic and [ ] governmental orders[.]" (Id. at ¶¶ 31, 32.) Defendants, however, denied Plaintiff's claim, (Id. at 16 ¶ 33), on the basis that (1) Plaintiff's business interruption losses do not fall within the definition of any covered cause of loss, and (2) the policies' virus exclusions block coverage. (ECF No. 12, at 2-3 ¶¶ 2-5.)

Following Defendants' denial of coverage, Plaintiff initially brought this action in the Court of Common Pleas of Lawrence County, seeking a declaration of its rights under the two (2) insurance policies. (ECF No. 1-1.) Specifically, Plaintiff seeks a declaration that the insurancepolicies at issue cover the business interruption losses Plaintiff sustained as a result of the government shut-down orders issued to mitigate the spread of COVID-19. (Id. at 11.) Defendants timely removed this case to this Court (ECF No. 1) and thereafter filed a Motion to Dismiss for Failure to State a Claim. (ECF No. 4.) Plaintiff promptly filed a Motion to Remand this matter to state court, arguing that this Court should decline to exercise its jurisdiction by invoking its discretion to do so under the DJA. (ECF No. 8.) The thrust of Plaintiff's argument is that its "Complaint raises novel insurance coverage issues under Pennsylvania law which are best reserved for the state court to resolve in the first instance." (Id. at 5.) In response, Defendants argue that remand is inappropriate because (1) Plaintiff's Complaint seeks more than declaratory relief, so principles of declination of jurisdiction are not applicable here, and (2) even if the Court concludes that Plaintiff does not seek more than declaratory relief, the Reifer factors counsel in favor of the Court exercising jurisdiction under the DJA. (ECF No. 12.) The Court first considers Plaintiff's Motion to Remand, as the Court's conclusion regarding that Motion will impact whether the Court must then consider the merits of Defendants' Motion to Dismiss.

II. STANDARD OF REVIEW

The DJA provides that federal courts "may declare the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C. § 2201(a). This jurisdiction "is discretionary, rather than compulsory[.]" Allstate Fire & Cas. Ins. Co. v. Archer, No. 17-331, 2018 WL 2538859, at * 2 (W.D. Pa. June 4, 2018) (citing Reifer v. Westport Ins. Corp., 751 F.3d 129, 146 (3d Cir. 2014)). A motion to remand relying on the DJA is appropriately analyzed as a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1), whereby "a court must grant a motion to dismiss if it lacks subject matter to hear a claim." In re Schering Plough Corp. Intron/Temodar Consumer Class Action, 678 F.3d 235, 243 (3d Cir. 2012). Thus, taking "theallegations of the complaint as true," Davis v. Wells Fargo, 824 F.3d 333, 346 (3d Cir. 2016), the Court must determine whether the factors laid out by the Third Circuit in Reifer and further applied in Kelly point toward exercising subject matter jurisdiction or to remanding the matter to state court. Reifer, 751 F.3d at 134; see Kelly v. Maxum Specialty Ins. Grp., 868 F.3d 274, 283 (3d Cir. 2017).

III. DISCUSSION

In Reifer, the Third Circuit held that although a case may have originally been "brought in state court under Pennsylvania law, the question of whether to exercise federal jurisdiction to adjudicate the controversy [becomes] a procedural issue under federal law." 751 F.3d at 134 n.4. In Reifer, the Third Circuit further guided lower courts to consider eight (8) factors "when exercising DJA discretion." Id. at 140. These factors are:

(1) The likelihood that a federal court declaration will resolve the uncertainty of obligation which gave rise to the controversy;

(2) The convenience of the parties';

(3) The public interest in settlement of the uncertainty of the obligation;

(4) The availability and relative convenience of other remedies;

(5) A general policy of restraint when the same issues are pending in state court;

(6) Avoidance of duplicative litigation;

(7) Prevention of the use of the declaratory action as a method of procedural fencing or as a means to provide another forum in a race for res judicata; and

(8) (in the insurance context), an inherent conflict of interest between an insurer's duty to defend in a state court and its attempt to characterize the suit in federal courts as falling within the scope of a policy limitation.

Reifer, 751 F.3d at 146; State Auto Ins. Cos. v. Summy, 234 F.3d 131, 134 (3d Cir. 2000). In insurance coverage cases, "the fifth, sixth, and eighth factors are particularly relevant." Ewart v. State Farm Mut. Auto. Ins. Co., 257 F. Supp. 3d 722, 725 (E.D. Pa. 2017) (citing Summy, 234 F.3d at 134). The Third Circuit further cautions that if "state law is uncertain or undetermined, the proper relationship between federal and state courts requires district courts to 'step back' and be 'particularly reluctant' to exercise DJA jurisdiction." Reifer, 751 F.3d at 146 (quoting Summy, 234 F.3d at 135-36). Moreover, "[t]he fact that district courts are limited to predicting—rather than establishing—state law requires 'serious consideration' and is 'especially important in insurance coverage cases.'" Id. (quoting Summy, 234 F.3d at 136). In sum, where there are unsettled questions of state law, "it is counterproductive for a district court to entertain jurisdiction over a declaratory judgment[.]" Summy, 234 F.3d at 135.

The Court first addresses Defendants' argument that the Court need not engage in a discretionary jurisdiction analysis and then apply the Reifer factors because Plaintiff's Complaint seeks more than a declaratory judgment. (ECF No. 12, at 15-16.) Defendants assert that Plaintiff's Complaint seeks legal relief that is merely couched in the language of declaratory relief. (Id.) To support that proposition, Defendants primarily rely on two specific assertions in Plaintiff's Complaint: (1) where Plaintiff states that it seeks "coverage for [ ] losses, damages, and expenses" (ECF No. 1-1, at 18 ¶ 43); and (2) where Plaintiff employs language that it is "entitled to an order enjoining" Defendants from denying insurance coverage. (Id. at 17 ¶ 36.) Based on this language, Defendants argue that the "independent claims test," as outlined in Rarick v. Federated Services, Inc., 852 F.3d 223, 229 (3d Cir. 2017), should govern, and since there are "claims" asserted that are "independent" of any claim for declaratory relief, this Court is duty bound to exercisejurisdiction here. The Court disagrees and concludes that from the face of Plaintiff's Complaint, the relief sought is purely declaratory.

Based on a careful consideration of its allegations, Plaintiff's Complaint is not one that is masquerading as "a declaratory judgment to activate discretionary jurisdiction." Greg Promushkin, P.C. et al. v. Hanover Ins. Grp., No. 20-2561, 2020 WL 475498, at *3 (E.D. Pa. Aug. 14, 2020) (citing Reifer, 751 F.3d at 137); see also Dianoia's Eatery, LLC, d/b/a Dianoia's & Pizzeria Da Vide v. Motorists Mut. Ins. Co., No. 20-787, 2020 WL 5051459, at *2 (W.D. Pa. Aug. 27, 2020) (holding that the plaintiff's "single-count declaratory judgment action simply does not state a breach of contract action against [the defendant] seeking damages").

The Complaint's mentions of injunctive...