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Hartford Casualty Insurance Co. v. American Recycling Systems

August 25, 2010

HARTFORD CASUALTY INSURANCE COMPANY, PLAINTIFF,
v.
AMERICAN RECYCLING SYSTEMS, INC. ET AL., DEFENDANTS.



The opinion of the court was delivered by: Slomsky, J.

OPINION AND ORDER

I. INTRODUCTION

This is a declaratory judgment action in which Plaintiff Hartford Casualty Insurance Company ("Hartford") seeks a declaration of its obligations under an insurance policy entered into between Hartford and Defendant American Recycling Systems, Inc. ("ARS"). Hartford's Complaint was filed pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201, et seq., seeking a declaration that Hartford has no obligation under the policy to defend or indemnify Defendant ARS in an underlying state court action brought by Defendant Alcibiades Galan. Before the Court are two outstanding motions which are ripe for decision: (1) Defendant ARS's Motion to Dismiss the Complaint (Doc. No. 18), and (2) Defendant Alcibiades Galan's Motion to Set Aside Entry of Default Pursuant to Federal Rule of Civil Procedure 55(c) (Doc. No. 25). For the reasons that follow, the Court will grant Defendant ARS's Motion to Dismiss and grant Defendant Galan's Motion to Set Aside Entry of Default.

II. STATEMENT OF FACTS

This declaratory judgment action arises from claims asserted by Defendant Galan against Defendant ARS in an underlying state case in the Philadelphia County Court of Common Pleas. (Compl. ¶¶ 10-11.) In this underlying suit, Galan alleged that he was injured on October 7, 2007 while working with a defective baling machine. (Id. at ¶ 12.) According to Galan's complaint, he was cleaning debris from inside the baling machine when the top drive plate of the baler's crush mechanism detached and pinned Galan's arms beneath it. (Id.) Galan alleges that the baling machine at issue was designed and manufactured by ARS. (Id. at ¶ 13.) Galan also named American International Co., an alleged predecessor of ARS, as a defendant. (Id. at ¶ 21.)

In the underlying suit, Galan filed a three-count complaint against ARS alleging negligence, breach of warranty, and strict liability. (Id. at ¶ 14.) Hartford is defending ARS in the underlying suit because it issued a general liability insurance policy to ARS on October 1, 2007. (Id. at ¶¶ 18-20.)

Hartford brought the instant declaratory judgment action, alleging that the insurance policy it issued to ARS "expressly excludes coverage for 'bodily injury' or 'property damage' ... within the 'products-completed operations hazard.'" (Id. at ¶ 23.) In other words, Hartford alleges that the claims in the underlying suit fall within an exclusion under the policy. According to Hartford, it is not obligated to defend or indemnify ARS in the underlying state suit. (Id. at ¶ 29.) Additionally, Hartford alleges that American International Co. is not named in the insurance policy, is not a predecessor to ARS, and is not in any way related to ARS. (Id. at ¶¶ 21, 33.) Therefore, American International Co. is not an insured under the policy and Hartford is not obligated to defend or indemnify American International Co. in the underlying suit. (Id. at ¶ 34.)

III. DISCUSSION

Defendant ARS asks the Court to exercise its discretion under the Declaratory Judgment Act, 28 U.S.C. § 2201(a), and decline to decide this matter because it contains no issues of federal law either directly or by implication. (Def.'s Mot. to Dismiss ¶¶ 6-8.)

The Declaratory Judgment Act provides, in pertinent part, that:

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 declaration, whether or not further relief is or could be sought.

28 U.S.C. § 2201(a) (emphasis added); see also Atlantic Mutual Ins. Co. v. Gula, 84 Fed. App'x 173, 174 (3d Cir. 2003); State Auto Ins. Cos. v. Summy, 234 F.3d 131, 133 (3d Cir. 2000). The United States Supreme Court has interpreted this language as providing federal courts with broad discretion in determining whether to entertain a declaratory judgment action. Wilton v. Seven Falls Co., 515 U.S. 277, 286-87 (1995); see also Gula, 84 Fed. App'x at 174 (noting that "jurisdiction conferred by this act is discretionary and district courts are 'under no compulsion to exercise it.'") (quoting Summy, 234 F.3d at 133).

The Court is mindful that this discretion is not open-ended. Summy, 234 F.3d at 134. The Third Circuit has placed limits on a district court's discretion to decline jurisdiction where "the issues include[] federal statutory interpretation, the government's choice of a federal forum, an issue of sovereign immunity or inadequacy of the state proceeding." United States v. Dep't of Envtl. Res., 923 F.2d 1071, 1075 (3d Cir. 1991); Summy, 234 F.3d at 134. However, where, as here, none of these issues are present, district courts maintain broad discretion in determining whether to retain jurisdiction over declaratory judgment actions.

In exercising this discretion, there are several factors the Court must consider: (1) the likelihood that a federal court declaration will resolve the uncertainty of the 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, and (4) the availability and relative convenience of other remedies. Dep't of Envtl. Res., 923 F.2d at 1075. In Summy, the Third Circuit suggested several additional considerations a district court may take into account when determining whether ...


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