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First Mercury Insurance Company v. Legends

December 13, 2012


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


I. Introduction

Plaintiff First Mercury Insurance Company ("Plaintiff") brought this declaratory judgment

action (the "Federal Action"), pursuant to 28 U.S.C. § 2201, over the terms of an insurance policy it issued to defendant Legends, Inc. ("Legends"). Defendants Legends and Jobin J. Granstrom ("Granstrom") (collectively, "Moving Defendants*fn1 ") filed a Motion to Dismiss (ECF 9) (the "Motion"), requesting that the Court decline to exercise its discretionary jurisdiction over this case, arguing that the same issues are also being litigated in a Pennsylvania state court action (the "State Action"), and that according to Third Circuit's ruling in State Auto. Ins. Cos. v. Summy, 234 F.3d 131 (3d Cir. 2000), the state forum should decide them. For the reasons that follow, the Court will GRANT the Motion and exercise its discretion not to maintain jurisdiction over the Federal Action.

II. Background

A. Factual and Procedural Background

Plaintiff issued an insurance policy to Legends that covered, among other things, various potential liabilities related to Legend's owning and operating a bar/restaurant (the "Policy"). The Policy contains a choice of law clause selecting Illinois law, as well as a non-exclusive forum selection clause that gives Plaintiff the option to litigate in Illinois.

During the effective period of the Policy, Granstrom, a Legends employee, allegedly roughed up and gruffly ejected from Legends's bar a man named Jordan Seyler ("Seyler"). Seyler, allegedly injured by Granstrom's manhandling, brought suit in the Berks County Pennsylvania state court of Common Pleas in 2011 (the "Underlying Action") against, among others, Legends and Granstrom, claiming that Granstrom was acting in his capacity as a Legends employee at the time he allegedly attacked Seyler.

Sometime before July 12, 2011, Legends requested that pursuant to the Policy, Plaintiff pay Legends's and Granstrom's defense costs and indemnify them for any liabilities resulting from the Underlying Action. By letter dated July 12, 2011, Plaintiff rejected Legends's request, stating that the nature of Seyler's claims triggered certain coverage exceptions in the Policy that relieved Plaintiff of any defense and indemnification obligations.

Plaintiff filed this Federal Action on March 27, 2012 claiming that certain coverage exceptions relieve it of any obligation to defend or indemnify Defendants in the Underlying Action. Moving Defendants filed their Answer (ECF 5) on May 18, 2012, asserting numerous affirmative defenses.

Moving Defendants filed the instant Motion to Dismiss on July 11, 2012 (ECF 9). Plaintiff responded on July 30, 2012 (ECF 21). The Court held oral argument on September 19, 2012. At oral argument counsel suggested that the Underlying Action was still pending in the Berks County Court of Common Pleas. However, exhibits to the briefs established that the underlying action had been dismissed without prejudice on January 13, 2012. By Order dated October 4, 2012 (ECF 37) this Court requested counsel to verify the status of the Underlying Action. Counsel submitted letters on October 16, 2012 and October 18, 2012 confirming that the Underlying Action had been dismissed without prejudice.

However, filings in this case also revealed that after plaintiff had filed the Federal Action in this Court, defendant had filed a separate suit in Berks County Court for a declaratory judgment seeking coverage from Plaintiff.

III. The Declaratory Judgment Act

The Declaratory Judgment Act grants federal district courts jurisdiction "to declare the rights and other legal relations of any interested party seeking such a declaration." 28 U.S.C. ยง 2201(a). The Act is somewhat unique, however, in that district courts have discretion whether to exercise that jurisdiction. Id. (providing that a court "may" declare such rights and legal relationships); Wilton v. Seven Falls Co., 515 U.S. 277, 287-88 (1995) ("In the declaratory judgment context, the normal principle that federal courts should adjudicate claims within their jurisdiction yields to considerations of practicality and wise judicial administration."); Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 494 (1942); Summy, 234 F.3d 131, 133 (3d Cir. 2000) ("The [Supreme] Court [in Brillhart] emphasized that the jurisdiction ...

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