STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. A & D BROWN ENTERPRISES, INC., et al.
Case No. CIV-20-00436-PRW
IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA
February 03, 2021
PATRICK R. WYRICK, UNITED STATES DISTRICT JUDGE
The
This litigation traces back to a tragic, fatal car accident. On January 15, 2020, H.S., a minor, went for a driving lesson with her instructor, George A. Voss of Brown‘s Driving School. At the conclusion of her lesson, the pair picked up A.R., another minor and student driver. At the direction of Voss, A.R. took the wheel with instructions to bring H.S. back to her home before continuing with her own driving lesson.
With A.R. at the wheel, Voss in the front passenger seat, and H.S. in the backseat, the trio headed westbound on I-240 before taking the 3B exit to S.E. 74th Street. According to Defendant Cheekia Rogers, A.R.‘s parent and legal guardian, as they approached the end of the exit ramp, Voss instructed A.R. to bring the vehicle to a complete stop despite the absence of a stop or yield sign, and A.R. dutifully complied.
As she did so, Sammual Pace exited the ramp immediately behind them. While Pace saw the stopped vehicle and applied his brakes, it was too late: He slammed into the rear of the student-driven car. H.S., seated in the backseat of the vehicle, was killed.
For reasons that will be made clear, the precise sequence of the events that followed is critical to the disposition of these motions. On January 29, 2020, H.S.‘s parents, Nick and Charla Shaffer (“the Shaffers“), sent a letter to Brown‘s Driving School‘s insurance carrier, State Farm Insurance Mutual Automobile Insurance Company (“State Farm“), notifying it of potential insurance claims arising from the accident and requesting copies of any relevant insurance policies.2 Anticipating possible litigation, the Shaffers also sent
Meanwhile, on March 6, 2020, the Shaffers sued Brown‘s Driving School, Sammual Pace, George Voss, and A.R. in the District Court of Oklahoma County,4 asserting an assortment of state law tort claims.5 At the initiation of that state action, State Farm had not yet responded to the Shaffer‘s request for copies of the relevant insurance policies.
Then, on March 13, 2020, State Farm produced a Confirmation of Coverage.6 It disclosed that Brown‘s Driving School had one million dollars ($1,000,000.00) in liability coverage and one hundred thousand dollars ($100,000.00) per person, per incident, up to three hundred thousand dollars ($300,000.00) total per incident (i.e., regardless of the number of individuals involved in the incident), in uninsured/underinsured (“UM“) coverage for each of its twenty-five vehicles.7 The Confirmation of Coverage did not contain the entirety of the insurance policy, however.
In response to the Confirmation of Coverage, the Shaffers demanded that State Farm pay them two and a half million dollars ($2,500,000.00).8 In their view, the total amount available to satisfy their claim was the one hundred thousand dollars ($100,000.00) per
On April 6, 2020, State Farm responded that it was evaluating the Shaffers’ demand.12 Then, four days later, on April 10, 2020, State Farm paid the Shaffers one hundred thousand dollars ($100,000.00) pursuant to the coverage for the vehicle that H.S. was in at the time of the accident.13 State Farm neither provided an answer as to the balance of the amount demanded (i.e., whether the policies “stack“) nor sent the complete insurance policy. However, State Farm did acknowledge the potentially forthcoming claims against it.14
The complete insurance policy wasn‘t conveyed until a month later, on May 11, 2020.15 And the day after that, on May 12, 2020, State Farm told the Shaffers that the policy
- “[t]he [UM] coverage provided by the Policy may not be stacked . . . and therefore, the maximum limit of [UM] coverage available for the fatal injuries sustained [by] H.S. is the Each Person limits of $100,000.00,”
- “[t]he Policy does not provide coverage for punitive damages,”
- “[t]o the extent Underlying Plaintiffs seek to recover from Brown‘s Driving School for damages that do not constitute ‘bodily injury’ or ‘property damage’ caused by an ‘accident’ involving an insured vehicle, the Policy does not provide Liability Coverage for such damages,” and
- “State Farm has no duty to satisfy any judgment entered in the Underlying Action to the extent that judgment is for damages that do not constitute ‘bodily injury’ or ‘property damage’ caused by an ‘accident’ involving an insured vehicle.”18
On May 14, 2020, based on State Farm‘s denial of their demand, the Shaffers filed their Second Amended Complaint in the state action, adding State Farm as a defendant and alleging state law claims for breach of contract and related damages, including punitive damages.19
Now, the Shaffers, individually and as parents and next of friends of H.S., and Cheekia Rogers, as parent and legal guardian of A.R., move this Court to dismiss or, in the alternative, to stay the declaratory action in deference to the state action. They argue that that such a dismissal or stay is proper because there is a pending state court action between similar parties, presenting similar issues, all of which are governed by state law, and also because this declaratory action was filed in an effort to unfairly deprive the would-be plaintiffs of their forum of choice.23 They point out that “since State Farm is a party in the state court case, it can have all of its relief requested and claims against it resolved” through that action, whereas the declaratory action “would not resolve all the claims against State Farm.”24 Indeed, the state action, they continue, can resolve all claims against all parties
State Farm disagrees, of course. It believes this declaratory action “is the most efficient and expeditious route to resolution of the insurance coverage issues presented,” and that a decision by this Court would not interfere with the state action.27 It emphasizes that it brought the declaratory action before it was brought into the state action and stresses that the declaratory action presents only a narrow, legal question.28 As such, it asks this Court to allow the declaratory action to proceed.
Legal Framework
Typically, the “federal courts have a ‘virtually unflagging obligation’ to exercise the jurisdiction conferred on them by Congress.”29 But in the context of actions for declaratory relief brought pursuant to the
To assist the district courts in determining whether to exercise their discretion to hear a particular action for declaratory judgment, the Tenth Circuit has identified some factors (known as the Mhoon factors) for the district court to consider:
- whether a declaratory action would settle the controversy;
- whether it would serve a useful purpose in clarifying the legal relations at issue;
- whether the declaratory remedy is being used merely for the purpose of procedural fencing or to provide an arena for a race to res judicata;
- whether use of declaratory action would increase friction between our federal and state courts and improperly encroach upon state jurisdiction; and
- whether there is an alternative remedy which is better or more effective.32
If, after considering the Mhoon factors, the district court determines in its sound discretion that it should entertain the declaratory judgment action, then that is the end of the inquiry for present purposes. But if the district court declines to exercise jurisdiction over a declaratory judgment action, there is another step: The district court must determine whether to stay the action or dismiss it and must state the reasons for that decision.33 To
Discussion
I. Whether to Exercise Jurisdiction: The Mhoon Factors
a. First and Second Mhoon Factors: Settling the Controversy & Clarifying the Legal Relations
The first two Mhoon factors are (1) “whether a declaratory action would settle the controversy” and (2) “whether it would serve a useful purpose in clarifying the legal relations at issue.”36 These factors are “designed to shed light on the overall question of whether the controversy would be better settled in state court.”37
As to the first factor, the state action can resolve all claims and defenses, tort and contract alike, between all parties arising from the car accident, whereas the federal declaratory action would resolve only a narrow, antecedent question to the current and prospective breach of contract claims, namely the scope of the contractual coverage.
In Connor Roofing, Chief Judge Eagan did indeed conclude that the declaratory action in that case would “fully resolve the issue of insurance coverage between United and Conner Roofing” and found that to be “the relevant ‘controversy’ for the purpose of ruling on [the] motion to dismiss.”39 But she also found as relevant to that inquiry that “the state court lawsuit w[ould] not resolve the insurance coverage issue” and that, “[i]n any event, [the declaratory judgment plaintiff was not named] as a party in the state court lawsuit and . . . ha[d] no opportunity to raise th[e] issue in state court.”40 Of course, that is not the case here. State Farm is a party to the underlying state action and has raised its defenses there.41
In fact, the state action will necessarily or, at the very least, likely resolve all issues presented in the declaratory action. The state court must necessarily resolve whether the
b. Third Mhoon Factor: Procedural Fencing
The third Mhoon factor concerns whether the declaratory remedy is being used merely for the purpose of “procedural fencing” or to provide an arena for a race to res judicata. The anticipatory timing and defensive nature of a declaratory action are telltale signs of procedural fencing,44 and this case is a paradigmatic example. As recounted earlier,
In short, this case is a clear example of procedural fencing: State Farm brought its federal declaratory action here, in its forum of choice, in anticipation of an imminent state court action against it concerning the same subject matter. Accordingly, the third Mhoon factor weighs in favor of declining jurisdiction over this declaratory action.45
c. Fourth and Fifth Mhoon Factors: Friction between State and Federal Courts and Improperly Encroaching Upon State Jurisdiction & Better or More Effective Alternative Remedy
The fourth Mhoon factor directs the Court to consider whether exercising jurisdiction in this matter would cause unnecessary entanglement and friction between the state and federal courts.46 The Court finds that this declaratory action invites just such entanglement and friction. In effect, State Farm asks this Court to determine questions of state law for a state court that would have necessarily made those determinations itself but for the intervention of the federal court.
As to the fifth factor, the Court finds that the state action provides the best remedy. As discussed earlier, the state action will provide a comprehensive and efficient resolution to all claims arising from the car accident and is better suited to decide the questions of state law at issue. And while State Farm complains that it will be dragged through a wide-ranging litigation involving a plethora of fact-intensive tort claims, if it wants to opt out of that potentially protracted and costly litigation, and its legal arguments are sound, it can move to have the claims against it dismissed for failure to state a claim as a matter of law.
For these reasons, the fourth and fifth Mhoon factors weigh in favor of declining jurisdiction over the declaratory action as well.
d. The Mhoon Factors Weigh in Favor of Declining Jurisdiction
In sum, all five Mhoon factors point in favor of declining jurisdiction over this declaratory action. Accordingly, the Court will exercise its discretion to decline jurisdiction.
II. The Proper Remedy: to Dismiss or to Stay
Having decided to decline jurisdiction over this declaratory action, the Court must next determine whether to stay the action or dismiss it. To that end, the Court “considers such questions as whether the state proceedings will likely adjudicate the claims of the federal parties and whether the federal proceeding will serve any useful purpose considering the likely scope of the state proceeding.”47 In other words, the functional question is whether the district court anticipates a later need to resolve a dispute raised by the declaratory action.
All aspects of coverage for which declarative relief is sought are before the state court in the state action. The state court must resolve whether the coverage “stacks” and whether punitive damages are available in a breach of contract claim to adjudicate the breach of contract claim. State Farm has also asserted as an affirmative defense that “Plaintiffs’ claims against [it] are not covered and are expressly excluded by the terms and conditions of the applicable insurance policy,” raising the issue of whether it may be liable for damages that do not constitute “bodily injury” or “property damage” caused by an “accident” involving an insured vehicle. There is no reason, then, to stay this action in
Conclusion
The Court has broad discretion to hear cases brought pursuant to the
Defendants Nick and Charla Shaffer‘s Motion to Dismiss or, in the Alternative, to Stay the Second Amended Complaint (Dkt. 19) and Defendant Cheekia Rogers‘s Motion to Dismiss or, in the Alternative, to Stay the Second Amended Complaint (Dkt. 30) are hereby GRANTED and the case is DISMISSED WITHOUT PREJUDICE.
IT IS SO ORDERED this 3rd day of February 2021.
PATRICK R. WYRICK
UNITED STATES DISTRICT JUDGE