Jillian Morrison, L.L.C. v. Sonia ( 2012 )

Case: 10-31150 Document: 00511875921 Page: 1 Date Filed: 06/04/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
June 4, 2012
No. 10-31150 Lyle W. Cayce
Clerk
In Re: In The Matter of the Complaint of Jillian Morrison, L.L.C., Et Al, as
Owners and Operators of the M/V Jillian Morrison, for Exoneration from or
Limitation of Liability
Jillian Morrison, L.L.C.; Et Al,
Petitioners
v.
William Sonia, etc.; Et Al
Claimants
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TRANSCANADA USA SERVICES, INCORPORATED,
Plaintiff - Appellant Cross-Appellee
v.
KESTREL ENGINEERING, INCORPORATED; HARTFORD LLOYDS
INSURANCE COMPANY,
Defendants - Appellees Cross-Appellants
Appeals from the United States District Court
for the Eastern District of Louisianna
USDC No. 2:08-CV-1255
Case: 10-31150 Document: 00511875921 Page: 2 Date Filed: 06/04/2012
No. 10-31150
Before GARZA, CLEMENT, and HIGGINBOTHAM Circuit Judges.
PER CURIAM:*
This case arises from a Limitation of Liability Action (Limitation Action),
instituted pursuant to the Shipowners’ Limitation of Liability Act (the Act), 46
§ U.S.C. 30505, et seq., by the owners of the M/V JILLIAN MORRISON, a vessel
which exploded off the coast of Louisiana. Transcanada USA Services, Inc.,
(TransCanada), sought a declaratory judgment from the district court that
Kestrel Engineering, Inc., (Kestrel) and Hartford Lloyds Insurance Company
(Hartford) were obligated to defend and indemnify TransCanada against claims
filed in the Limitation Action by Rickey and Darlene Richard. TransCanada also
sought damages from Kestrel for breach of contract. The district court dismissed
TransCanada’s claims as premature, and TransCanada now appeals. Kestrel
and Hartford cross-appeal. We agree that the proceedings by TransCanada were
brought prematurely, and affirm the district court’s dismissal without prejudice.
FACTS AND PROCEEDINGS
In order to limit their liability for claims arising from the explosion aboard
the M/V JILLIAN MORRISON, the vessel owners and operators, Jillian
Morrison, LLC; Chet Morrison Diving, LLC; Chet Morrison Contractors, Inc.;
Chet Morrison Services, LLC; and Chet Morrison Services, Inc.; (collectively,
Chet Morrison) instituted the underlying Limitation Action.1 In the Limitation
Action, Rickey Richard, who was aboard the vessel at the time of the explosion,
and his wife Darlene asserted a claim for personal injuries against Chet
Morrison. The Richards also filed an Admiralty Complaint for Damages, which
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
1
The Limitation of Liability Act was enacted by Congress to encourage the shipping
industry by limiting vessel owners’ liability in the event of disaster to the value of the vessel
and pending freight. See 46 U.S.C. § 30511.
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the district court consolidated with the Limitation Action (collectively, the
Richard Claims). Chet Morrison subsequently tendered the Richard Claims to
TransCanada pursuant to a Master Service Agreement (“MSA”), under which
TransCanada had assumed defense and indemnity obligations to Chet Morrison.
The Richard Claims were settled after a two-day bench trial.
TransCanada requested defense and indemnity from Kestrel, Rickey
Richard’s employer, pursuant to an Alliance Agreement between TransCanada
and Kestrel. The Alliance Agreement contained an indemnity provision which,
according to Transcanada, required Kestrel to defend and indemnify
TransCanada against any claims brought by Kestrel’s employees or growing out
of Kestrel’s negligence. TransCanada also claimed that the Alliance Agreement
required Kestrel to name TransCanada as an additional insured under Kestrel’s
insurance policy with Hartford (the “Policy”).
Kestrel in turn requested defense and indemnity from its insurer Hartford.
TransCanada also demanded from Hartford insurance coverage pursuant to the
terms of the Alliance Agreement. Hartford never responded to TransCanada’s
demand, but issued a “reservation of rights” letter to Kestrel, appointing counsel
to defend Kestrel and reserving its rights under the Policy.
TransCanada then initiated the declaratory judgment action which forms
the basis for this appeal, seeking a declaration from the district court that
TransCanada was an additional insured under the Policy as required by the
Alliance Agreement and that the Policy applied to the dispute. TransCanada
also sought damages from Kestrel for breach of the Alliance Agreement.
Hartford filed a motion to dismiss, arguing that, because the Richards had not
named TransCanada as a defendant an underlying lawsuit, TransCanada’s
request for indemnity and declaratory judgment action were premature. The
district court denied Hartford’s motion, and the parties engaged in discovery.
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At the close of discovery, Hartford and Kestrel each filed motions for
summary judgment, Hartford arguing that the Policy did not cover TransCanada
and Kestrel arguing that it did not breach its contractual obligation under the
Alliance Agreement. TransCanada opposed both motions and filed a cross motion
for partial summary judgment against Hartford and Kestrel, arguing again that
it qualified as an additional insured under the Policy and that Kestrel had
breached the Alliance Agreement by failing to defend and indemnify
TransCanada against the Richard Claims.
The district court granted Kestrel’s and Hartford’s motions for summary
judgment, denied TransCanada’s motion for summary judgment, and dismissed
TransCanada’s claims without prejudice. The district court’s order concluded
that “TransCanada’s claims against Kestrel and Hartford are premature” and
that “TransCanada seeks this Court’s advisory opinion on a hypothetical issue
that may arise in the future.” The district court stated that “[b]ecause there are
no current claims asserted against TransCanada, this Court will not abstractly
rule on the interpretation of TransCanada’s agreements with Kestel [sic] and on
the application of Hartford’s policy.” Dist. Ct. Order (Aug. 17, 2010).
TransCanada then filed a motion for reconsideration, requesting that the
district court amend its order, which had expressly granted Hartford’s and
Kestrel’s motions for summary judgment, to reflect that the district court had
not actually considered the parties’ contentions on the merits. TransCanada also
requested reconsideration of whether its claims were actually premature. The
district court granted TransCanada’s motion and issued a second order affirming
its prior decision that the claims were premature. The second order also stated
that “TransCanada’s claims have not been adjudicated on the merits” and that
“Kestrel’s and Hartford’s Motions for Summary Judgment were previously
granted only on the issue of Transcanada’s [sic] claims’ prematurity.” Dist. Ct.
Order (Oct. 7, 2010).
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TransCanada filed a timely notice of appeal from the district court’s
August 17 order denying its motion for summary judgment and from the October
7 order granting its motion for reconsideration. Hartford and Kestrel also filed
timely notices of cross appeal from both orders. Kestrel also filed a motion to
dismiss this appeal for lack of jurisdiction, which was carried with the case.
STANDARD OF REVIEW
The parties disagree over the proper standard of review based on their
different reading of the procedural posture of the case and the district court’s
orders. See Tex. Clinical Labs, Inc. v. Sebelius, 612 F.3d 771, 774 (5th Cir. 2010)
(reviewing a grant of summary judgment de novo); The Sherwin-Williams Co. v.
Holmes County, 343 F.3d 383, 389 (5th Cir. 2003) (reviewing the dismissal of a
declaratory judgment action for abuse of discretion). Because the district court’s
two orders amount to a jurisdictional decision on ripeness grounds that did not
reach the merits, the appropriate standard of review is de novo. See American
States Ins. Co. v. Bailey, 133 F.3d 363, 368 (5th Cir. 1998) (reviewing a district
court’s ripeness determination de novo).
DISCUSSION
We conclude that the district court’s dismissal for lack of ripeness was
proper despite the fact that none of the parties raised a ripeness argument in a
summary judgment motion. See United Transp. Union v. Foster, 205 F.3d 851,
857 (5th Cir. 2000). “Since standing and ripeness are essential components of
federal subject-matter jurisdiction, the lack of either can be raised at any time
by a party or by the court.” Sample v. Morrison, 406 F.3d 310, 312 (5th Cir. 2005)
(per curriam). See also Sommers Drug Stores Co. Emp. Profit Sharing Trust v.
Corrigan, 883 F.2d 345, 348 (5th Cir.1989); Cinel v. Connick, 15 F.3d 1338, 1341
(5th Cir. 1994). “Although the Declaratory Judgment Act, 28 U.S.C. § 2201, is
remedial in nature and is to be construed liberally to achieve its purposes, it is
designed to permit adjudication of claims only where there is an actual case or
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controversy and an adjudication would serve a useful purpose.” Americas Ins.
Co. v. Schlumberger Ltd., 111 F.3d 893, *1 (5th Cir. 1997) (unpublished) (citing
Allstate Ins. Co. v. Employers Liability Assurance Corp., 445 F.2d 1278, 1280
(5th Cir. 1971)). A case is ripe when it is no longer “abstract or hypothetical,”
and the key considerations are “the fitness of the issues for judicial decision and
the hardship to the parties of withholding court consideration.” Id. (citing New
Orleans Public Serv., Inc. v. Council of New Orleans, 833 F.2d 583, 586 (5th Cir.
1987)). “A case is generally ripe if any remaining questions are purely legal ones;
conversely, a case is not ripe if further factual development is required.” New
Orleans Public Serv., 833 F.2d at 587 (citing Thomas v. Union Carbide Agric.
Prod. Co., 473 U.S. 568, 581 (1985)).
Despite arguments to the contrary, there is undoubtedly further factual
development that must take place before the case will be ripe for review by the
district court. Because there are no claims by TransCanada yet, the court cannot
determine the scope of indefinity between the parties. The crux of this case is the
contracts and insurance agreements between the parties. This circuit uses the
eight corner rule when determining the scope of indemnity under an insurance
agreement—the four corners of the agreement, and the four corners of the
complaint itself. See, e.g., Columbia Cas. Co. v. Georgia & Florida RailNet, Inc.,
542 F.3d 106, 110-11 (5th Cir. 2008); Guaranty Nat’l Ins. Co. v. Azrock Indus.,
Inc., 211 F.3d 239, 243 (5th Cir. 2000) (“Under [the eight-corners rule], an
insurer’s duty to defend is determined by reference to the allegations in the
pleadings and the language of the insurance policy only.") overruled on other
grounds as recognized by OneBeacon Ins. Co. v. Don’s Bldg Supply Inc., 552 F.3d
901, 903 (5th Cir. 2008) (per curiam); Arceneaux v. Amstar Corp., 66 So.3d 438,
450 (La. 2011) (explaining that, under Louisiana law, “[t]he insurer’s duty to
defend suits brought against its insured is determined by the allegations of the
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injured plaintiff's petition, with the insurer being obligated to furnish a defense
unless the petition unambiguously excludes coverage”).
Despite the extensive discovery and depositions by the parties, there is
still no complaint against TransCanada upon which the district court could have
determined any indemnity obligations by Kestrel or Hartford. “[W]hereas the
duty to defend is based upon the allegations in the pleadings, the duty to
indemnify ‘is triggered by the actual facts that establish liability in the
underlying lawsuit.’” Columbia Cas. Co., 542 F.3d at 110-111 (5th Cir. 2008)
(emphasis added) (quoting Guar Nat’l Ins. Co. v. Azrock Indus. Inc., 211 F.3d at
243).
While it is likely that if TransCanada does not obtain a declaratory
judgment that it is covered by the Policy and in turn does not fulfill its
obligations to Chet Morrison, Chet Morrison will file a lawsuit against
TransCanada, that has not yet happened. TransCanada concedes that this
sequence of events has not yet taken place and we therefore must reach the
conclusion that the case is not ripe for review.
CONCLUSION
We AFFIRM the district court’s dismissal on ripeness grounds and DENY
Kestrel’s motion to dismiss the appeal for lack of jurisdiction.
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