United States District Court, Southern District of New York
July 17, 2000
COMMERCIAL UNDERWRITERS INSURANCE COMPANY, PLAINTIFF,
GLOWMASTER CORPORATION, DEFENDANT.
The opinion of the court was delivered by: Stein, District Judge.
Plaintiff insurance company seeks a declaratory judgment that
it has no duty to defend or indemnify defendant policyholder in
an underlying personal injury action due to the policyholder's
failure to notify plaintiff of the claim in a timely fashion.
The policyholder has moved to dismiss the complaint and the
insurance company has cross-moved for summary judgment. A
parallel proceeding is pending in New Jersey state court. For
the reasons set forth below, this Court declines to exercise
jurisdiction over this declaratory action pursuant to
28 U.S.C. § 2201 and the complaint is dismissed.
In September 1997, plaintiff Commercial Underwriters Insurance
Company ("Commercial"), a California corporation with its
principal place of business in that state, issued a commercial
general liability insurance policy to Glowmaster Corporation, a
New Jersey corporation with its principal place of business in
New Jersey. Glowmaster sells portable stoves and butane fuels at
wholesale. Commercial's New York office handled the underwriting
and issuance of that policy.
On October 11, 1997, during the term of the policy, Elizabeth
Dicenso was injured in Virginia when a propane heating unit
allegedly manufactured by Glowmaster exploded, severely injuring
her. Almost two years later — in August 1999 — Dicenso filed a
personal injury action against Glowmaster and others in Virginia
state court, seeking $1.5 million in compensatory damages.
On November 22, 1999 — approximately three months after the
personal injury action was started — Commercial filed this
action in the Southern District of New York, seeking a
declaratory judgment that it has no duty to defend or indemnify
Glowmaster with respect to the underlying Dicenso action.
Commercial contends that Glowmaster failed to provide adequate
and timely notice of Dicenso's injury and claim as required by
One month later, on December 21, 1999, Glowmaster filed a
complaint in the Superior Court of New Jersey, Bergen County,
("New Jersey action") against Commercial seeking a declaratory
judgment and damages for breach of the duty of good faith and
fair dealing and breach of fiduciary duty.
Glowmaster has moved to dismiss this action on four grounds:
that (i) this Court should abstain from exercising its
jurisdiction pursuant to 28 U.S.C. § 2201; (ii) this Court
should dismiss the complaint for lack of personal jurisdiction
pursuant to Fed.R.Civ.P. 12(b)(2); (iii) venue is improper
pursuant to Fed.R.Civ.P. 12(b)(3); and (iv) this Court is an
inconvenient forum pursuant to 28 U.S.C. § 1404(a). Commercial
has cross moved for summary judgment.
For the reasons set forth below, this Court declines to
exercise its jurisdiction
over this action pursuant to 28 U.S.C. § 2201.
A district court derives its power to decide a declaratory
action from the Declaratory Judgment Act. See
28 U.S.C. § 2201(a). The U.S. Supreme Court has "repeatedly characterized
the Declaratory Judgment Act as `an enabling Act, which confers
a discretion on the courts rather than an absolute right upon
the litigant.'" Wilton v. Seven Falls Co., 515 U.S. 277, 287,
115 S.Ct. 2137, 132 L.Ed.2d 214 (1995) (quoting Public Service
Com'n of Utah v. Wycoff Co., Inc., 344 U.S. 237, 241, 73 S.Ct.
236, 97 L.Ed. 291 (1952)). The U.S. Supreme Court has cabined
the issue of when district courts should accept jurisdiction
where a parallel state proceeding is pending:
Ordinarily it would be uneconomical as well as
vexatious for a federal court to proceed in a
declaratory judgment suit where another suit is
pending in a state court presenting the same issues,
not governed by federal law, between the same
parties. Gratuitous interference with the orderly and
comprehensive disposition of a state court litigation
should be avoided.
Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 495, 62
S.Ct. 1173, 86 L.Ed. 1620 (1942); see also Wilton, 515 U.S. at
282-83, 115 S.Ct. 2137.
"Federal and state proceedings are `concurrent' or `parallel'
for purposes of abstention when the two proceedings are
essentially the same; that is, there is an identity of parties,
and the issues and relief sought are the same." National Union
Fire Ins. Co. v. Karp, 108 F.3d 17, 22 (2d Cir. 1997). In
considering its discretion, the district court "should examine
the scope of the pending state court proceeding and the nature
of defenses open there." National Union Fire Ins., 108 F.3d at
22. A non-exclusive list of factors includes: (1) whether the
claim of all parties in interest can be adjudicated in the
parallel state proceeding; (2) whether necessary parties have
been joined; (3) whether those parties are amendable to process
in that proceeding; (4) whether the case involves any federal
questions of law; (5) avoiding duplicative proceedings; and (6)
forum shopping. See Wilton, 515 U.S. at 282-83, 115 S.Ct.
2137; National Fire Ins. Co., 108 F.3d at 22; Reliance Ins.
Co. of Illinois v. Multi-Financial Securities Corp., 94 Civ.
6971, 1996 WL 61763, at *2 (S.D.N.Y. Feb. 13, 1996); Fireman's
Fund Ins. Co. v. Chris-Craft Indus., Inc., 932 F. Supp. 618, 620
(S.D.N.Y. 1996); James Wm. Moore et al., Moore's Federal
Practice ¶ 57.82 (3d ed. 2000).
The case at hand warrants abstention. The New Jersey action is
a parallel proceeding involving the same issues and the same
parties. The claims in both actions involve no questions of
federal law, and insurance regulation is a matter of particular
concern to state governments. See Reliance Ins. Co., 1996 WL
61763, at *3. The fact that this action was filed first does not
alter that conclusion. "[A] declaratory judgment is not a prize
to the winner of a race to the courthouse." Wilkinson v.
Caronia Corp., 95 Civ. 5668, 1995 WL 653374, at *1 (S.D.N.Y.
Nov. 7, 1995) (quoting Perez v. Ledesma, 401 U.S. 82, 119 n.
12, 91 S.Ct. 674, 27 L.Ed.2d 701 (1971)).
Plaintiff seeks to litigate this case in a federal court in
New York because it seeks a friendlier forum for its
lack-of-notice defense: in New York, unlike in California or New
Jersey, an insurance company need not show prejudice when
raising a lack-of-notice defense. Commercial contends — and
Glowmaster disputes — that pursuant to the New York choice of
law rules applicable in this district, New York law applies to
the dispute rather than the law of either New Jersey or
California (the domiciles of the parties). Commercial has not
indicated whether a New Jersey court, applying its own choice of
law rules, would refuse to apply New York law, so it is unclear
whether this forum is in fact friendlier to plaintiff.
This Court need not sort out the choice of law issues because,
regardless of which
law applies, Commercial can raise its notice defense in the New
Jersey action and the issue is resolvable by the New Jersey
Similarly unavailing is plaintiffs argument that judicial
efficiency merits resolving the action since it is ripe for
summary judgment. Even if Commercial is correct that no material
factual matters are in dispute and no discovery is needed (a
contention Glowmaster denies), this matter can then be quickly
resolved by the court better suited to adjudicate it: the New
Jersey state court.
Having decided to abstain from exercising jurisdiction, the
Court will not address Glowmaster's personal jurisdiction,
improper venue or forum non conveniens contentions.
The courts of the State of New Jersey are better able to
adjudicate this state law matter. Accordingly, this Court
declines to exercise its jurisdiction over this declaratory
judgment action pursuant to 42 U.S.C. § 2201. Defendant's motion
to dismiss the complaint should be granted and plaintiffs motion
for summary judgment should be dismissed as moot.
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