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Frederick Mutual Insurance Co. v. Target Corp.

United States District Court, E.D. Pennsylvania

March 19, 2018

TARGET CORPORATION, et al., Defendants.


          Rufe, J.

         Plaintiff Frederick Mutual Insurance Company initiated this declaratory judgment action, seeking a determination that it has no duty to defend or indemnify Defendants Target Corporation and Target Store #1196 (collectively “Target”) in connection with a personal injury lawsuit pending in state court. Target moves to dismiss the complaint, arguing that the Court should decline jurisdiction pursuant to the Declaratory Judgment Act (“DJA”)[1] and that Plaintiff failed to join an indispensable party. For reasons set forth below, the Court will decline jurisdiction and grant the motion to dismiss.

         I. Background

         This declaratory judgment action seeks a declaration of Plaintiff's coverage obligations for a third-party suit brought by Ross Smith and his wife in the Court of Common Pleas for Bucks County, Pennsylvania.[2] The Smiths initiated the underlying state court personal injury suit after Mr. Smith slipped and fell on ice in a Target parking lot, and seek to hold various entities, including Target, liable for their acts or omissions in causing his injuries.[3]

         At the time of Mr. Smith's fall, Target had contracted with Brickman Facility Solutions, LLC (“BFS”) to provide snow and ice management services at the Target store.[4] BFS in turn subcontracted snow and ice removal to Groundtec, Inc.[5] According to Target, in the subcontract, Groundtec agreed to name both BFS and BFS's customer (i.e., Target) as additional insureds in its liability insurance policy and agreed to defend and indemnify Target against third-party claims for injury.[6] Groundtec obtained a commercial general liability policy from Plaintiff.[7]

         On September 22, 2017, Plaintiff disclaimed coverage for Target and initiated a declaratory judgment action in the Court of Common Pleas for Philadelphia County, Pennsylvania.[8] Plaintiff then filed suit in this Court pursuant to the DJA and terminated the state court action.[9] A few weeks later, Target Corporation sued Frederick Mutual, Groundtec, and BFS in the Court of Common Pleas for Bucks County, Pennsylvania, seeking to enforce its right to defense and indemnification for liability in the Smiths' personal injury suit.[10] Frederick Mutual removed the Bucks County action to this Court; however, because removal was improper based on the presence of forum defendants and their failure to join in the removal, the action was remanded.[11]

         Target now moves to dismiss Plaintiff's complaint in the instant case, arguing that Plaintiff failed to join Groundtec as an indispensable party and that the Court should decline jurisdiction over this action pursuant to the DJA.

         II. Legal Standard

         Federal Rule of Civil Procedure 12(b)(1) allows a party to move for dismissal of any claim wherein the district court lacks subject matter jurisdiction.[12] When considering a 12(b)(1) motion, the court “review[s] only whether the allegations on the face of the complaint, taken as true, allege facts sufficient to invoke the jurisdiction of the district court.”[13] When subject matter jurisdiction is challenged under 12(b)(1), the plaintiff bears the burden of persuasion.[14]

         III. Analysis

         Target contends this action must be dismissed under Rule 12(b)(1) for lack of jurisdiction. But this Court has diversity jurisdiction over Plaintiff's claims pursuant to 28 U.S.C. § 1332, because the amount in controversy exceeds $75, 000 and the suit is between citizens of different states.[15] Therefore, Target alternatively argues that the Court should decline to exercise jurisdiction pursuant to the DJA.

         “The Declaratory Judgments Act authorizes district courts to ‘declare the rights and other legal relations of any interested party seeking such declaration;'”[16] however, the Act “does not itself create an independent basis for federal jurisdiction.”[17] Instead, actions seeking only declaratory relief are discretionary and are not “subject to the ‘normal principle that federal courts should adjudicate claims within their jurisdiction.'”[18] Courts may therefore decline jurisdiction and abstain from entertaining them.[19]

         In Reifer v. Westport Insurance Company, [20] the United States Court of Appeals for the Third Circuit established that district courts must consider a number of factors when determining whether to exercise jurisdiction, and often initially ask whether there is a parallel state proceeding.[21] Though not dispositive, “the existence of a parallel state proceeding militates significantly in favor of declining jurisdiction.”[22]

         A state court proceeding is parallel if it “involv[es] the same parties and present[s] [the] opportunity for ventilation of the same state law issues.”[23] Germane factors include “the scope of the pending state court proceeding[, ] the nature of the defenses open there, ” and whether necessary parties have been joined.[24] However, “[p]roceedings are not parallel merely because they have the potential to dispose of the same claims.”[25] In other words, the potential for the issues raised in the declaratory action to arise in the state action is insufficient.[26]

         After determining whether there is a parallel state court proceeding, courts consider the following Reifer factors, to the extent they are relevant:

(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 obligation;
(4) the availability and relative convenience of other remedies;
(5) a general policy of restraint when the same issues are pending in a 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 that suit in federal court as falling within the scope of a policy exclusion.[27]

         The Court analyzes Target's motion to dismiss within this framework.

         A. The Existence of a State Parallel Proceeding

         Here, the parties dispute whether the remanded Bucks County declaratory judgment action should be considered a parallel proceeding to this federal case. Plaintiff and Target are parties in both actions.[28] In the state declaratory judgment action, Target named Frederick Mutual, Groundtec, BFS, and the Smiths as defendants, seeking to enforce its right to defense and indemnification for liability in the Smiths' personal injury suit. In this federal declaratory judgment action, Frederick Mutual named only Target, seeking a declaration that it has no duty to defend or indemnify Target in the Smiths' suit.

         Plaintiff contends that because it presented a narrower issue in this federal action than the state coverage action-that is, whether the scope of coverage provided to Target in the commercial general liability policy “Additional Insured Endorsement” language encompasses coverage for the Smiths' underlying personal injury suit-the two cases should not be considered parallel.[29] Despite this contention, “[b]oth cases as a threshold matter require a comparison of the Smiths' [underlying personal injury suit] to the [Frederick Mutual] policy to determine the duty to defend.”[30] The fact that the state declaratory judgment action includes other parties and claims relevant to Target's coverage dispute, including BFS and Groundtec, does not preclude a finding that the state action is parallel to this federal case. Moreover, all matters in controversy between the parties in this case can be “fully adjudicated” in the state declaratory judgment action.[31] ...

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