Summary
In Deerbrook, the federal declaratory judgment action was filed after the resolution of a state court personal injury action, but before the judgment was final and before equitable garnishment was initiated.
Summary of this case from State Farm Fire Casualty Company v. K.ROpinion
Case No. 4-02-00779-W-RED
January 24, 2003
ORDER
This case involves a declaratory judgment action against the Defendants under 28 U.S.C. § 2201, seeking a determination of its obligations under an insurance policy. Pending before the Court are Defendants Bettie Rusher's ("Rusher") and Defendants Leslie and Anthony Rudds' (collectively the "Rudds") separately filed motions to dismiss (Doc. #9 and Doc #10), and Plaintiff Deerbrook Insurance Co.'s ("Deerbrook") Motion to Consolidate (Doc. #14). Because Rusher and the Rudds raise similar arguments in their motion, the Court considers the motions together. As explained below, the motions to dismiss will be granted and Deerbrook's motion to consolidate will be denied as moot.
I. Standard of Review.
When considering a motion to dismiss a complaint for lack of subject matter jurisdiction, the court must liberally construe the complaint in the light most favorable to the plaintiff. See Coleman v. Watt, 40 F.3d 255, 258 (8th Cir. 1994); Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). The Court must assume that the "well pleaded factual allegations in the complaint are true." Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990) (citing Morton v. Becker, 793 F.2d 185, 187, 187 (8th Cir. 1986)). The Court, however, will not "blindly accept the legal conclusions drawn by the pleader of facts." Westcott, 901 F.2d at 1488) (citing Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir. 1987)).
II. Factual Background.
Deerbrook is an insurance company incorporated in Delaware and with a principal place of business in Illinois. Rusher and the Rudds are all residents of Missouri. On April 28, 1999, Rushing suffered injuries from a motor vehicle collision in Johnson County, Missouri. Her vehicle was struck by another vehicle driven by Anthony Rudd, who at the time was only 15 years of age and driving without a license. Rusher submitted a claim for her injuries to Deerbrook as the insurer of the Rudds' vehicle. After Deerbrook declined to settle Rusher's claim for the Rudds' policy limits, Rusher initiated a lawsuit in the Circuit Court of Johnson County, Missouri.
On June 4 and 5, 2002, Rusher's case was tried before a jury and she ultimately received a verdict against the Rudds in the amount of $395,000.00 plus prejudgment interest in the amount of $97,984.40. No appeal was filed and the judgment became final on August 29, 2002. The next day, Rusher filed an equitable garnishment action against the Rudds and Deerbrook pursuant to Missouri Revised Statute § 379.200 in the Circuit Court of Johnson County, Missouri.
On August 13, 2002, approximately two weeks before the state court judgment became final and before Rusher's equitable garnishment action was filed, Deerbrook filed this federal declaratory judgment action. In its claim against Rusher, Deerbrook seeks a ruling that it does not have any obligation under the Rudds' policy to pay any sum in excess of the policy limits. In its claim against the Rudds, Deerbrook seeks a ruling that it did not act in bad faith in failing to settle Rusher's claim against the Rudds.
III. Discussion
In their pending motions to dismiss, Rusher and the Rudds each argue, inter alia, that Deerbrook's declaratory judgment action is inappropriate and should be dismissed because there is now pending a state court action involving the same parties. Defendants assert that Deerbrook's state equitable garnishment action provides an adequate remedy for Deerbrook to litigate any issues in its declaratory judgment action. See Glover v. State Farm Fire Cas. Co., 984 F.2d 259, 260 (8th Cir. 1993) (recognizing that in Missouri equitable garnishment actions, "[t]he rights of the injured party/judgment creditor are derivative, so the insurer may interpose defenses it would have against its insured"). Thus, Defendants submit that the Court should exercise its discretion and decide not to entertain Deerbrook's suit.
The Declaratory Judgment Act provides that a court " may declare the rights and other legal relations of any interested party seeking such declaration." Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995) (citing 28 U.S.C. § 2201(a) (1988 ed., Supp. V)). In Wilton, the Supreme Court resolved the standard under which district courts decide whether to dismiss or stay a federal declaratory judgment action during the pendency of a parallel state court proceeding. The Court adopted the discretionary standard set forth in its previous decision in Brillhart v. Excess Ins. Co. of America, 316 U.S. 491 (1942). See Wilton, 515 U.S. at 282-89 (rejecting the "exceptional circumstances" test developed in Colorado River Water Conservation Dist. v. United States, 242 U.S. 800 (1976) and Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983)). According to the Wilton Court, Brillhart requires that district courts consider the scope and nature of the pending state court proceeding to ascertain "`whether the questions in controversy between the parties to the federal suit, and which are not foreclosed under the applicable substantive law, can be better settled in the proceeding in the state court." Wilton, 515 U.S. at 282 (quoting Brillhart, 316 U.S. at 495). In Capitol Indemn. Corp. v. Haverfield, 218 F.3d 872, 874 (8th Cir. 2000), the Eighth Circuit ruled that where the federal proceeding can be better settled by the pending state court suit, the district court should dismiss the federal action because "it would be uneconomical as well as vexatious for a federal court to proceed in a declaratory judgment suit while another suit is pending in a state court presenting the same issues, not governed by Federal law, between the same parties." Id. (quoting Brillhart, 316 U.S. at 495); see also International Ass'n of Entrepreneurs of America v. Angoff, 58 F.3d 1266, 1270 (8th Cir. 1995) (citations omitted) ("The Declaratory Judgment Act is not to be used to bring to the federal courts an affirmative defense which can be asserted in a pending state action.").
This action involves only issues of Missouri insurance law. Deerbrook seeks a declaration concerning its obligation to Rusher under the insurance policy issued to the Rudds. The equitable garnishment action filed by Rushing is a statutory cause of action, though often called a garnishment action, "is no garnishment at all, but is a suit in equity against the insurance company to seek satisfaction of one's judgment under an insurance policy." Glover, 984 F.2d at 260 (citing Zink v. Employer's Mutual Liability Insurance Co., 725 S.W.2d 561, 564 (Mo.Ct.App. 1987)). The equitable garnishment action is Rushing's exclusive remedy against Deerbrook. See id. The statute requires that Rushing proceed against both the insurance company and its insured. See Mo. Rev. Stat. § 379.200. Deerbrook's instant suit raises claims against Rusher and the Rudds that would be defenses to Rusher's state court action and it therefore clearly has the ability to raise all such issues in the equitable garnishment action.
There is no dispute that Rushing's state court action involves the same subject matter and parties. In fact, Deerbrook, in its own Motion to Consolidate (Doc. #14), acknowledges that "the principle claim in both proceedings, namely, whether Plaintiff refused in bad faith to settle Defendant Rusher's personal injury claim within policy limits, involves the same parties and common questions of law and fact."
Deerbrook's only argument as to why this action should not be dismissed due to a pending state court proceeding is that the state court equitable garnishment action was removed to federal court and, therefore, the Brillhart factors should not apply. However, that argument is no longer valid as the equitable garnishment action has since been remanded to the state court. Thus, a parallel state court action is pending and Brillhart is applicable.
See Order Remanding Case to State Court, Rusher v. Deerbrook Insurance Co., et al., No. 02-949-CV-W-ODS (W.D. Mo. Oct. 17, 2002).
Furthermore, the fact that the instant action was filed prior to Rusher's equitable garnishment action is of no importance. In Wilton, the insurer refused to defend or indemnify its insured in connection with a suit against the insured over ownership and operation of certain oil and gas properties. 515 U.S. at 279. The suit was tried in state court resulting in a verdict against the insured. The insurer then brought an action for declaratory judgment in federal court. Significantly, the federal action was filed more than one month prior to a suit brought by the insured in state court. Id. at 280. `The insured sought to have the federal action dismissed or stayed. Id. The district court entered a stay, which was later affirmed by both the Fifth Circuit Court of Appeals and the Supreme Court. Id. at 281. In its decision, the Supreme Court noted that the fact "[t]hat the court here stayed, rather than dismissed, the action is of little moment in this regard, because the state court's decision will bind the parties under principles of res judicata." Wilton, 515 U.S. at 283. Thus, the fact that a declaratory judgment action may be filed before a state court action covering the same issues does not preclude a court from staying or dismissing the declaratory judgment action.
After considering the nature of the pending state court proceeding brought by Rusher and the issues in controversy between the parties to this suit, the Court finds that the dispute can be better resolved by the state court. The state court is in a better position to adjudicate these matters, and to exercise jurisdiction would be unnecessarily duplicative and uneconomical.
Although Defendants Rusher and the Rudds assert additional reasons to dismiss Plaintiff Deerbrook's complaint, because the Court finds that dismissal is warranted due to a pending state court proceeding, the Court will not consider the additional reasons set forth in their separate motions.
IV. Conclusion
Accordingly, it is hereby
ORDERED that Defendant Rusher and Defendant Rudds' separate motions to dismiss (Doc. #9 and Doc. #10) are GRANTED. It is further
ORDERED that Plaintiff Deerbrook's Motion to Consolidate (Doc. #14) is DENIED as moot. It is further
ORDERED that this case is dismissed with prejudice, with each party to pay their own costs.