United States District Court, S.D. New York
H.I.S. JUVENILES, INC., a New York corporation, Plaintiff,
TOKIO MARINE SPECIALITY INSURANCE COMPANY, a Delaware corporation; and GREAT AMERICAN INSURANCE E&S INSURANCE COMPANY, an Ohio corporation, Defendants.
MEMORANDUM OPINION & ORDER
VALERIE CAPRONI, District Judge.
Plaintiff H.I.S. Juveniles, Inc., brings this declaratory judgment action against Tokio Marine Specialty Insurance Company and Great American E&S Insurance Company. Plaintiff is defending a lawsuit in Colorado, Gold, Inc. v. H.I.S. Juveniles, Inc., No. 14-CV-2298 (D. Colo.); it alleges that Defendants owe a duty to defend Plaintiff in the Colorado action. Defendants acknowledge their duty to defend (subject to reservations of rights); they argue, therefore, that the Court lacks subject matter jurisdiction because there is no case or controversy. Because any disagreement between the parties pertains only to the speed with which Defendants must remit payment, the Court finds that there is not a sufficient amount in controversy to invoke the Court's subject matter jurisdiction. Accordingly, Plaintiff's case is DISMISSED without prejudice.
At all times relevant to this action, Plaintiff maintained insurance policies with the Defendants providing for indemnification for personal and advertising injury and promising defense of suits seeking damages caused by such injury. See First Am. Compl. ("FAC") ¶¶ 16-18. Plaintiff is currently defending a trade dress infringement and unfair competition action in the United States District Court for the District of Colorado, id. Ex. 1; neither Defendant contests the applicability of Defendants' policies to the Colorado action (although both insurers agreed to defend subject to reservations of rights).
Prior to initiating this action, Plaintiff submitted invoices to both Defendants, seeking to recoup defense costs incurred to date in the Colorado action. Pl. Letter of Apr. 23, 2015 at 3; see also Gauntlett Decl. Exs. 8 and 9. While the Defendants both acknowledge that they owe a duty to defend Plaintiff, neither paid any of the invoices that Plaintiff submitted. Accordingly, Plaintiff initiated this action, apparently in an effort to secure the expeditious repayment to which it believed it was entitled.
After this action was initiated, Great American issued Plaintiff a check in the total amount of legal expenses incurred to that point (approximately $56, 000). Pl. Ex. 12, Dkt. 29-1. Plaintiff's defense in Colorado has continued to generate costs; in May, Plaintiff submitted additional invoices to both Defendants, seeking to recover an additional $30, 000. Pl. Ex. 14, Dkt. 29-3.
At the Court's Initial Pretrial Conference, the Defendants raised the possibility that the Court lacked subject matter jurisdiction. The Court ordered the parties to file letter briefs on the issue and, finding that there is no case or controversy over which the Court can exercise its subject matter jurisdiction, dismisses Plaintiff's suit without prejudice.
The parties brief two potential threshold obstacles preventing the Court from exercising jurisdiction - the "cases or controversies" requirement of Article III and the minimum "amount in controversy" threshold of the statute that provides for diversity jurisdiction. As to both issues, "[t]he party asserting jurisdiction bears the burden of proof." Penn. Public Sch. Emps. Ret. Sys. v. Morgan Stanley & Co., 772 F.3d 111, 118 (2d Cir. 2014). While the Court is dubious about the existence of a case or controversy, there is clearly no controversy that satisfies the amount in controversy requirement of the Court's diversity jurisdiction; accordingly, Plaintiff's case is dismissed.
I. Case or Controversy
"[N]o principle is more fundamental to the judiciary's proper role in our system of government than the constitutional limitation of federal-court jurisdiction to actual cases or controversies.'" ACLU v. Clapper, ___ F.3d ___, ___, No. 14-42-cv, slip op. at 26 (2d Cir. May 7, 2015) (quoting Clapper v. Amnesty Int'l USA, 568 U.S. ___, ___, 133 S.Ct. 1138, 1146 (2013)). The Declaratory Judgment Act, 28 U.S.C. § 2201, which furnishes the basis for this action, incorporates the requirement of an "actual controversy" before the federal courts can issue a declaratory judgment. The determining inquiry in gauging whether a lawsuit meets that requirement is "whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.'" MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (quoting Md. Cas. Co. v. P. Coal & Oil Co., 312 U.S. 270, 273 (1941)). Defendants advance two arguments in support of their claim that this actions presents no case or controversy - they claim that it was mooted by Great American's paying the money that had been sought to that point and by the Defendants' recognition that they owe a duty to defend. Together, they argue, those facts result in the absence of an actual controversy.
A. This Case Is Not Moot
A case is moot pursuant to Article III's Case or Controversy requirement when "it is impossible for a court to grant any effectual relief whatever to the prevailing party.'" Tanasi v. New Alliance Bank, ___ F.3d ___, ___, No. 14-1389-cv, slip op. at 8 (2d Cir. May 14, 2015) (quoting Knox v. Serv. Emps. Int'l Union, Local 1000, 567 U.S. ___, ___, 132 S.Ct. 2277, 2287 (2012) (alterations omitted)). "A justiciable claim becomes moot, and thus beyond the jurisdiction of a federal court, when subsequent events deprive the parties of any practical interest in the outcome of the litigation." Republic Ins. Co. v. Masters, Mates & Pilots Pension Plan, 77 F.3d 48, 51 (2d Cir. 1996).
Here, Defendants point to two "subsequent events" that could render the case moot: first, Defendants' concessions that they owe a duty to defend; and second, Great American's payment of the invoices that had been submitted. By carefully crafting its pleadings, Plaintiff has avoided these potential pitfalls. Instead of seeking a declaration that both Defendants owe a duty to defend, Plaintiff seeks a declaration that Defendants are "obligated to provide H.I.S. a prompt, immediate, and complete defense in the Gold Bug action, " FAC ¶¶ 48-49; and that they "breached [their] ...