Opinion
CIVIL ACTION NO. 03-0065, SECTION "K"(1)
March 25, 2003
ORDER REASONS
Before the Court is a Motion to Dismiss Complaint for Declaratory Judgment for Lack of Subject Matter Jurisdiction and Pursuant to the Court's Discretion under Federal Rule of Civil Procedure 12(b)(1) (Doc.2) filed by Mickey O'Connor General Contractor, Inc. ("MOC") (Doc. No. 2). Having reviewed the pleadings, memoranda, exhibits and the relevant law, the Court finds merit in the motion.
BACKGROUND
MOC entered into a contract in 1997 with the Orleans Parish School Board ("OPSB") to provide roofing, waterproofing, and other site work for the Edna Karr Magnet School. MOC entered into a subcontract with Tri Star Construction Co., Inc. ("Tri Star") to furnish all labor, material and equipment to complete the roofing scope of the work in connection with that contract. Universal Surety of America ("Universal Surety") provided a subcontractor labor and material payment bond and a performance bond in which Tri Star was the principal and MOC was the obligee.
Tri Star allegedly completed the work. After a May, 1999 rainstorm, it became apparent that the roof leaked. The architect on the project sent a letter to MOC appraising him of the situation and providing a "punch list" of action required. MOC attempted to have Tri Star remedy the problems; however, by August 3, 1999, Tri Star was put on notice that it would have to contact its bonding company. Again, from the correspondence attached to the memorandum in opposition to this motion, Tri Star was apparently paid in full for its job on December 20, 1999.
The OPSB allegedly notified MOC that the work done by Tri Star was not in accordance with the plans and specifications in the contract, resulting in water damages and other problems, in September 2001. MOC apparently requested that Tri Star take action to bring their services into compliance with the plans and specifications, but Tri Star failed to respond. Universal Surety was subsequently notified of this claim as the surety under Tri Star's subcontractor bonds. MOC and Universal Surety unsuccessfully attempted to amicably resolve the claims arising out of the deficient work performed by Tri Star. By letter dated October 17, 2002, MOC informed Universal Surety of the School Board's intention of suing Tri Star in the event that Tri Star did not bring the roof detail and gravel guard into compliance with the requirements of the plans and specifications.
On January 8, 2003, Universal filed the instant suit seeking declaratory judgment regarding the validity and enforceability of the performance bond issued to Tri Star. Universal Surety did not include Tri Star or the OPSB as a party. MOC filed a Petition for Breach of Contract, To Enforce Bond, and for Declaratory Judgment in Louisiana Civil District Court on January 21, 2003 against Universal Surety, OPSB, Tri Star, and Glynn Durand, as the principle and alter ego of Tri Star. In February 2003, OPSB cross-claimed against Tri-Star and Universal Surety in state court for costs of repairs and additional work necessary to bring the work into compliance with the plans and specifications.
Before the Court is a motion to dismiss the declaratory judgment by MOC in which it prays that the complaint be dismissed (1) for lack of subject matter jurisdiction or, alternatively, (2) pursuant to the Court's discretion under the Declaratory Judgment Act. Pretermitting the issue of joinder, the Court finds that it must exercise its discretion and dismiss this suit.
DISCRETION UNDER THE DECLARATORY JUDGMENT ACT
As noted, Universal filed this action pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201. "Since its inception, the Declaratory Judgment Act has been understood to confer on federal courts unique and substantial discretion in deciding whether to declare the rights of litigants." Westport Ins. Corp. v. Warner, 2001 WL 1012238 (E.D.La. Aug. 31, 2001) citing Agora Syndicate, Inc. v. Robinson Janitorial Specialists, Inc., 149 F.3d 371 (5th Cir. 1998) (quoting Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995)). As such, "[i]t is well settled . . . that the granting of a declaratory judgment rests in the sound discretion of the trial court exercised in public interest." Id. citing Wright, Miller Kane, Federal Practice and Procedure, Civil 3d § 2759; Mission Ins. Co. v. Puritan Fashions Corp., 706 F.2d 599, 604 (5th Cir. 1983). Thus, the Declaratory Judgment Act "created an opportunity, rather than a duty, to grant a new form of relief to qualifying litigations[; therefore,] . . . a district court is authorized in the sound exercise of its discretion, to stay or to dismiss an action seeking a declaratory judgment before trial. . . ." Wilton v. Seven Falls Co., 515 U.S. 277 (1995).
This Court recently noted concerning the exercise of that discretion:
This Court has applied the Wilton doctrine in several cases. See Ruth's Chris v. Brown, 1996 WL 39406, *3 (E.D.La. 1/31/96); La Casa Castro v. Latin Am. Energy Dev., Inc, 1999 WL 239575, *3 (E.D.La. 4/22/99); Westport Ins. Corp. v. Warner, 2001 WL 1012238, (E.D.La. 8/31/01). These cases applied the Wilton factors, which are guideposts that assist the federal district court in its decision of whether to exercise its discretion to abstain from entertaining a declaratory judgment action and defer to a pending, parallel proceedings. The Wilton factors which the Court must consider, but are not limited to are:
1) Whether there is a pending state action in which all of the matters in controversy may be fully litigated;
2) Whether the plaintiff filed suit in anticipation of a lawsuit filed by the defendant;
3) Whether the plaintiff engaged in forum shopping in bringing the suit;
4) Whether possible inequities in allowing the declaratory plaintiff to gain precedence in time or to change forums exist;
5) Whether the federal court is a convenient forum for the parties and witnesses;
6) Whether retaining the lawsuit in federal court would serve the purposes of judicial economy.Pertuit v. Youthspan, Inc., 2003 WL 356021 (E.D.La. Feb. 13, 2003),citing La Casa Castro v. Latin Am. Energy Dev., Inc., 1999 WL 239575, *3 (E.D.La. 4/22/99).
As to the first factor with respect to this case, there is a pending state action in which all of the matters in controversy may be fully litigated. All of the actors, Tri Star, OPSB, Universal and MOC are parties to that action. Furthermore, there is a serious question that this Court might not have jurisdiction should it determine that Tri Star is a necessary party to this action. Courts have found that the issue of whether there is a pending state court action in which all matters in controversy can be litigated is of paramount concern. American Fidelity Ins. Co. v. Acadian Geophysical Services, Inc., 1997 WL 786233 (E.D.La. 1997). As Professors Wright, Miller and Kane have summarized:
Unnecessary interference with state court litigation should be avoided. The Declaratory Judgment Act was not intended to enable a party to obtain a change in tribunal from a state to federal court, and it is not the function of the federal declaratory action merely to anticipate a defense that would be presented in a state action.
Wright, Miller Kane, Federal Practice and Procedure, Civil 3d, §§ 2758. To put it another way, "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 [entertaining the declaratory judgment action] might be indulging in `[gratuitous interference.'" Wilton v. Seven Falls Co., 515 U.S. 277, 283 (1995) (citing Brillhart v. Excess Insurance Co. of America, 316 U.S. 491 (1942)).
In the instant matter, Universal Surety seeks a declaratory judgment that the "any obligation of Universal Surety of America under the bond made the subject of this Action is null and void pursuant to the subject bond's conditions, conditions precedents, and/or limitations." Indeed, under the terms of the bond, in the event Tri Star has performed its obligation properly, the bond is void. Thus, the facts and circumstances of the performance and acceptance of the work is critical to the determination of whether the bond is valid. In the case filed in Civil District Court, MOC sued Tri Star, Universal, and OPSB seeking to recover all costs and expenses incurred in bringing Tri Star's work into compliance with the plans and specifications and seeking a declaratory judgment that it has no further obligation to OPSB under the contract. OPSB has also filed a cross-claim in state court against Tri-Star and Universal Surety for costs of repairs and additional work necessary to bring the work into compliance with the plans and specifications. Thus, the on-going state proceeding envelopes the issues at bar in this declaratory judgment action.
"Declaratory judgment relief may be denied . . . because of a pending state court proceeding in which the matters in controversy may be fully litigated . . ." Torch, Inc. v. LeBlanc, 947 F.2d 193, 194 (5th Cir. 1991); see e.g. Omega Protein, Inc. v. Briscoe, 2000 WL 777910 (E.D.La 2000) (existence of a pending state court proceeding weighs heavily in favor of dismissal); First Financial Insurance Co. v. Delta Contracting Enterprises, Inc., 1999 WL 1021440 (E.D.La. 1999) (declaratory judgment action dismissed when all matters can be fully litigated in state court proceedings). As such, this factor militates substantially against this Court exercising jurisdiction over this matter.
As to the second factor, it is a fair to say that Universal Surety has filed this suit in anticipation of a lawsuit being filed against it. The person who has been harmed, the true plaintiff in this matter, is the New Orleans School Board, whose contract for repairs was allegedly done improperly by Tri Star under a subcontract with MOC. MOC was the beneficiary of a performance bond issued in its favor for Tri Star's work. To entertain this declaratory judgment is in essence having the tail wag the dog.
Furthermore, as to the third facto, forum shopping, it is clear that Universal Surety, a foreign corporation, would prefer to be in federal court as a litigant rather than state court. It must be remembered that Universal Surety is only liable on the bond if it is proven that Tri Star was in defalcation of its duties under the subject contract. Furthermore, Universal Surety may pursue any time based defense with equal freedom in the state court. It appears that Universal is attempting to use the federal court to shortstop a full blown inquiry into all aspects of this case.
As to the fourth factor, it would seem that because one of the defenses to the validity of the bond is the quality of performance by Tri Star, this Court's determination of that factual issue could have an inequitable effect on the state court proceeding. The federal court is as convenient a forum as state court — both are located in New Orleans, Louisiana.
Finally, with respect to the sixth factor, the purposes of judicial economy present yet another compelling reason for this Court to decline to exercise its discretion to hear this action. As made plain, there is another suit pending in which all of the parties involved in this matter can be joined and have been joined. As such, the "[e]xercise of federal jurisdiction in such a situation risks unnecessary commitment of scarce judicial resources, multiplicative expenditures on legal services, inconsistent ruling at numerous litigation junctures, and the appearance of disregard for the state trial court's authority and expertise in violation of basic norms of federal and state comity." United States Fidelity Guaranty Co. v. Algernon-Blair, Inc., 705 F. Supp. 1507, 1514 (M.D.Ala. 1988).
Thus, considering all of these factors, the Court finds that it will not entertain this Declaratory Judgment action. Accordingly,
IT IS ORDERED that Mickey O'Connor General Contractor, Inc.'s Motion to Dismiss is GRANTED.