260 So. 3d 823
Ala.2018Background
- Precision purchased a commercial general-liability policy from Nautilus through broker LFC covering 6/10/2015–6/10/2016. Precision was later sued by the Williamses for injuries allegedly occurring during that policy period. Precision demanded defense and indemnity; Nautilus agreed to defend under a reservation of rights.
- Nautilus filed a declaratory-judgment action in federal court seeking a declaration that an exclusion in the policy relieved it of defense/indemnity obligations (the federal action). That federal action was filed before Precision filed claims against Nautilus and LFC in state court.
- Precision then filed third-party claims in the state-court Williams action against Nautilus and LFC asserting declaratory relief, various bad-faith theories, fraud, and negligence (later amending to drop some claims against LFC). Nautilus moved to dismiss the state claims as compulsory counterclaims under Ala. Code § 6-5-440; LFC moved to dismiss under Rule 12(b)(6) and alternatively under Rule 19.
- The trial court denied both motions to dismiss. Nautilus and LFC separately petitioned the Alabama Supreme Court for writs of mandamus to vacate those denials.
- The Supreme Court reviewed de novo whether § 6-5-440 required dismissal of Precision’s state claims against Nautilus and whether mandamus was appropriate for LFC’s asserted grounds for dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 6-5-440 bars Precision from prosecuting state claims that were compulsory counterclaims to Nautilus’s first-filed federal declaratory action | Precision: Metropolitan controls where federal jurisdiction is uncertain; district court might decline to exercise discretionary jurisdiction, so federal action lacks clear priority | Nautilus: Federal action properly invoked diversity jurisdiction and was pending first; Precision’s state claims are compulsory counterclaims and thus barred by § 6-5-440 | Held: Nautilus. Federal action had priority and Precision’s claims against Nautilus are compulsory (logical-relationship test); § 6-5-440 requires dismissal of Nautilus from state action. |
| Whether Metropolitan v. precedent prevents § 6-5-440 dismissal when the federal court has not yet decided discretionary jurisdiction | Precision: Metropolitan shows dismissal is improper where first-filed federal action’s priority or jurisdiction is in doubt | Nautilus: Metropolitan is distinguishable; here federal complaint properly invoked diversity and there was no prior question of priority | Held: Metropolitan distinguishable; no jurisdictional doubt here, so § 6-5-440 applies. |
| Whether LFC’s Rule 12(b)(6) denial is reviewable by mandamus and thus subject to immediate appellate relief | LFC: State claims against it fail to state a claim; mandamus should issue | Precision: Denial of Rule 12(b)(6) is reviewable on appeal, not by mandamus | Held: Denial of Rule 12(b)(6) is not proper for mandamus; appellate review is adequate remedy, so mandamus denied on that ground. |
| Whether LFC was entitled to mandamus dismissal because Nautilus is an indispensable party (Rule 19) or Precision’s claims against LFC are unripe (subject-matter jurisdiction) | LFC: If Nautilus is necessary/indispensable, claims against LFC must be dismissed; alternatively, claims not ripe until coverage is denied/amount determined | Precision: Nautilus was a party to the state action at the time; ripeness challenges go to merits (Rule 12(b)(6)), not jurisdiction | Held: LFC failed to show an imperative duty by the trial court to dismiss for nonjoinder because Nautilus was a party when denial occurred; ripeness argument implicates merits, not subject-matter jurisdiction; mandamus denied. |
Key Cases Cited
- Wilton v. Seven Falls Co., 515 U.S. 277 (federal courts have discretion under the Declaratory Judgment Act)
- Ex parte Canal Ins. Co., 534 So.2d 582 (Ala. 1988) (insured’s state claims were precluded where insurer first filed declaratory action in federal court)
- Ex parte Cincinnati Ins. Cos., 806 So.2d 376 (Ala. 2001) (logical-relationship test for compulsory counterclaims applied to insurer–insured disputes)
- Ex parte Metropolitan Prop. & Cas. Ins. Co., 974 So.2d 967 (Ala. 2007) (priority of first-filed action matters when federal jurisdiction in initial complaint was deficient)
- Ex parte Brooks Ins. Agency, 125 So.3d 706 (Ala. 2013) (insured’s state claims barred by § 6-5-440 where insurer filed first in federal court)
- Ex parte Safeway Ins. Co. of Ala., 148 So.3d 39 (Ala. 2013) (ripeness arguments may go to merits; lack of established damages does not deprive court of subject-matter jurisdiction)
- Ex parte Caremark Rx, LLC, 229 So.3d 751 (Ala. 2017) (standards for issuance of mandamus)