Thus, De Bothezat instructs that having alternatives open, even after a declaration by the Court, is not fatal to a claim for declaratory relief, and the Court finds that the present controversy is "of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maryland Casualty Co., 312 U.S. at 273.
Despite the above analysis, the Bank contends that De Bothezat is not controlling as it presents a factual situation markedly different from the case at bar. According to the Bank, De Bothezat was a case involving patent rights, not contract rights, and thus falls within the category of cases in which declaratory judgment jurisdiction is most liberally allowed. See Broadview Chemical Corp., v. Loctite Corp., 417 F.2d 998, 1001 (2d Cir. 1969), cert. denied, 397 U.S. 1064, 25 L. Ed. 2d 686, 90 S. Ct. 1502 (1970). This is clearly not the case. Although DeBothezat involves patents, patents were only discussed by the court in the context of the parties' contractual rights.
The Bank also contends that De Bothezat is distinguishable from the case at bar because in that case, the defendant was threatening to put plaintiff out of business if plaintiff terminated a contract that did not provide it with any commercial benefit, whereas here there has been no attempt to force a competitor out of business. In addition, according to the Bank, in this case, GSY is not alleging that the Lease provides it with no commercial benefit. Finally, the Bank contends that unlike the plaintiff in De Bothezat who was forced to pay an unspecified fee each year that depended on its total sales and was faced with open-ended and indefinite accrual of potential damages by remaining in business, GSY must pay a definite rental for a definite period of time and knows the outside limit of its potential liability.
The Bank is correct that the above factors distinguish the two cases, but its argument that these factors warrant a different result in the present case is untenable as the De Bothezat court did not rely on any of these factors in making its determination that there was a justiciable controversy.
Decisions of federal courts in other circuits also make clear that the present controversy is justiciable under Article III. See, e.g., Keener Oil & Gas Co. v. Consolidated Gas Utilities Corp., 190 F.2d 985, 989 (10th Cir. 1951) ("a party to a contract is not compelled to wait until he has committed an act which the other party asserts will constitute breach, but may seek relief by declaratory judgment and have the controversy adjudicated in order that he may avoid the risk of damages or other untoward consequence");
Fine v. Property Damage Appraisers, Inc., 393 F. Supp. 1304, 1310 (E.D. La. 1975) (party contemplating breach of covenant not to compete entitled to seek declaratory relief as to validity of covenant, since "otherwise plaintiff is left to test it only by his breach of contract, subjecting himself to the risk that the clause be held enforceable and that he suffer the severe consequences of being enjoined from working in a similar line of business for a matter of years").
2. Cases Relied Upon by the Bank
Almost all the cases relied upon by the Bank are inapposite to this case, and merely state blanket principles of declaratory judgment jurisdiction. See, e.g., Coffman v. Breeze Corp., Inc., 323 U.S. 316, 89 L. Ed. 264, 65 S. Ct. 298 (1945) (in preemptive suit to enjoin the enforcement of the Royalty Adjustment Act, based on the alleged unconstitutionality of the Act, the court declined to adjudicate as the complainant had not sought recovery of any royalties); M & M Transport Co. v. U.S. Industries, Inc., 416 F. Supp. 865 (S.D.N.Y. 1976) (court determined that dispute between two entities over a tax refund was not justiciable as Internal Revenue Service had not yet determined that a tax refund was due); People of the State of Illinois v. Archer Daniels Midland Co., 704 F.2d 935 (7th Cir. 1983) (prosecutor undecided as to whether to prosecute not entitled to declaratory judgment on constitutional question of federal preemption).
Further, although more similar to the case at bar, Perlberg v. Northwestern Mutual Life Ins. Co., 62 F. Supp. 76 (E.D. Pa. 1945), does not compel the conclusion that GSY has failed to allege a justiciable case or controversy. In that case, the plaintiff insured wrote to defendant requesting a calculation of the extended period of insurance in the event he defaulted on his premium payments. Defendant computed that, in the event of default, the insured would be entitled to term insurance for thirty-two days from the date of default. Plaintiff disputed defendant's method of computing the extended term insurance, and thus sought judicial interpretation of the relevant clauses in the policy and a declaration that defendant calculate the extended term insurance in accordance with plaintiff's interpretation of the policy. Id. at 77-78. As of the date of trial, however, the insured had not defaulted in the payment of premiums. The court found that no case or controversy existed and stated that "until plaintiff's hypothesis of default becomes an actuality, differences of the parties will not be ripe for adjudication and a petition for a declaration of rights would be premature." Id. at 78.
Despite the apparent similarities, the De Bothezat court specifically distinguished Perlberg. It stated that the plaintiff in Perlberg "would have been able even in the event of a default to reinstate his policy without penalty." De Bothezat, 166 F.2d at 537. By contrast, a default by plaintiff in De Bothezat, or by GSY in this case, would be irreversible and would subject the parties to significant financial hardship.
For the reasons stated above, the Court finds that the proposed amended complaint sufficiently alleges a justiciable controversy. Accordingly, amendment of the complaint would not be futile, and GSY's motion for leave to amend the complaint is granted. For the same reasons, the Bank's motion to dismiss for lack of subject matter jurisdiction is denied.
II. Discretion to Exercise Declaratory Jurisdiction
Even when justiciability is present in the form of an actual controversy, it is still within the discretion of the Court to decline to hear a declaratory judgment action. Brillhart v. Excess Ins. Co., 316 U.S. 491, 494, 86 L. Ed. 1620, 62 S. Ct. 1173, 1175 (1942); Great American Ins. Co. v. Houston General Ins. Co., 735 F. Supp. 581, 584 (S.D.N.Y. 1990). In deciding whether to render declaratory relief, a court should be guided by the criteria set forth in Broadview Chem. Corp. v. Loctite Corp., 417 F.2d at 998. In that case, the Second Circuit stated that "the two principal criteria guiding the policy in favor of rendering declaratory judgments are (1) when the judgment will serve a useful purpose in clarifying and settling the legal relations in issue, and (2) when it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding." Id. In addition, "if either of these objectives can be achieved the action should be entertained and the failure to do so is error." Id.
In this case, both objectives will be achieved if the Court issues a declaratory judgment. Declaratory relief will clearly terminate the uncertainty and insecurity giving rise to this proceeding by adjudicating the rights of both parties under Article 52 of the Lease, and it will serve a useful purpose in clarifying and settling the legal relations in issue as there will be no need for future litigation after the Court determines the effect of Article 52 of the Lease.
For the aforementioned reasons, GSY's motion for leave to amend the complaint is granted, and the Bank's motion to dismiss the complaint, pursuant to Rule 12(b)(1) and 12(c), is denied. The Bank shall respond to the amended complaint within twenty days of the date of this order. Further, in its discretion the Court shall proceed with the declaratory judgment action.
SHIRLEY WOHL KRAM
UNITED STATES DISTRICT JUDGE
Dated: New York, New York
March 6, 1992