Atain Specialty Insurance Company v. Dwyer Concrete Lifting of Lexington, Inc.
7:12-cv-00021
E.D. Ky.Jun 11, 2012Background
- Madisonian Compromise underpins federalism; state courts are primary forum for claims.
- Stumbos sued in Kentucky state court over foundation settlement after Dwyer installed a steel pier system.
- Atain Specialty Insurance seeks a federal declaratory judgment on coverage in the same dispute.
- State court proceedings include indemnity and bad-faith claims involving Atain, Dwyer, and third parties.
- Atain filed a federal DJ action before the state court resolved cross-claims; Dwyer sought dismissal/abstention in federal court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the federal court should exercise DJA jurisdiction given parallel state litigation | Atain seeks federal determination of coverage | Parallel state litigation warrants abstention/dismissal | Declined jurisdiction |
| Does the DJ action resolve the underlying controversy | DJ action would settle the dispute | Resolution remains incomplete; state court ongoing | Does not settle the ultimate controversy |
| Whether the DJ action would increase federal-state court friction | Limited friction; efficiency | Significant potential friction and encroachment | Friction factors weigh against jurisdiction |
| Whether there is a better alternative remedy in state court | Federal DJ is proper route | State court is expert forum and adequate remedy exists | Alternative remedy in state court preferable |
| Whether the DJ action is a pretext or race for res judicata | Neutral motive; clarifying relationship | Risk of procedural fencing and race to the courthouse | Neutral to unfavorable; overall view favors dismissal |
Key Cases Cited
- Wilton v. Seven Falls Co., 515 U.S. 277 (U.S. 1995) (declaratory judgments: discretion and avoid interfering with state proceedings)
- Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (U.S. 1942) (avoid gratuitous interference with state-court proceedings)
- Travelers Indem. Co. v. Bowling Green Prof’l Assocs., 495 F.3d 266 (6th Cir. 2007) (five-factor test for exercising jurisdiction)
- Manley, Bennett, McDonald & Co. v. St. Paul Fire & Marine Ins. Co., 791 F.2d 460 (6th Cir. 1986) (district courts should respect state court handling of related matters)
- Bituminous Cas. Corp. v. J & L Lumber Co., 373 F.3d 807 (6th Cir. 2004) (questions of state law and lack of need for federal declaratory relief)
- Scottsdale Ins. Co. v. Flowers, 513 F.3d 546 (6th Cir. 2008) (three sub-factors to assess potential friction with state court)
- Grange Mut. Cas. Co. v. Safeco Ins. Co. of Am., 565 F. Supp. 2d 779 (E.D. Ky. 2008) (clarifies usefulness of declaratory judgments when parallel state actions exist)
- AmSouth Bank v. Dale, 386 F.3d 763 (6th Cir. 2004) (neutral assessment of motive; declaratory action may be neutral)