RLI Insurance Co v. Wainoco Oil & Gas Co , 131 F. App'x 970 ( 2005 )

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT May 20, 2005
Charles R. Fulbruge III
Clerk
No. 04-20450
RLI INSURANCE CO.,
as Successor-in-Interest to Underwriters Indemnity Co.,
Plaintiff-Appellant,
versus
WAINOCO OIL & GAS CO. and FRONTIER OIL CORP.,
Defendants-Appellees.
Appeal from the United States District Court
For the Southern District of Texas
(04-CV-553)
Before DAVIS, SMITH, and DeMOSS, Circuit Judges.
PER CURIAM*:
Plaintiff-Appellant RLI Insurance Co. (“RLI”) appeals from the
district court’s decision to stay the federal declaratory judgment
action RLI brought against Defendants-Appellees Wainoco Oil & Gas
Co. (“Wainoco”) and Frontier Oil Corp. (“Frontier”) (together,
“Appellees”) pending the outcome of a related California state
court action. We AFFIRM.
*
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this opinion should not be published and is not precedent except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.
BACKGROUND
RLI is the successor-in-interest to Underwriters Indemnity Co.
(“UIC”). In the 1980s, UIC sold four insurance policies to Wainoco
Oil Corp., the parent company of Wainoco and now known as Frontier.
These policies covered the period from October 1987 to October
1989. Frontier is a Wyoming corporation with its principal place
of business in Texas. UIC was both incorporated and located in
Texas, while RLI is both incorporated and located in Illinois.
Between 1985 and 1995, Appellees operated oil and gas
facilities on the campus of Beverly Hills High School. In June
2003 Appellees and other unrelated parties were named as defendants
in numerous California state court tort suits for allegedly
releasing toxic chemicals at Beverly Hills High School and causing
injuries to those exposed.
During this time frame, Appellees had over 45 policies in
effect issued by at least 15 insurance groups. Shortly after being
named as defendants, Appellees contacted their insurers and
requested they provide defense and indemnity, if necessary. Having
not received any definitive response, on January 29, 2004,
Appellees’ counsel wrote to all of its clients’ insurers, asking
each to state its coverage position. RLI did not respond, but
instead on February 12, 2004, filed the instant declaratory action
in federal court in Texas, seeking a declaration that RLI did not
owe Appellees a duty to defend or to indemnify in the California
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tort actions. The next day, RLI informed Appellees by letter that
it was denying coverage.
In response, on February 25, 2004, Appellees initiated an
action in California state court against all their primary
insurers, including RLI, requesting a declaratory judgment that all
of their primary insurers owe a duty to defend the California tort
suits, and alleging breach of contract against RLI and another
insurer which also expressly denied coverage.
Appellees moved the federal district court to dismiss the
Texas case or, in the alternative, stay it pending the resolution
of the California state court coverage action. Based on the
discretion afforded to district courts under the Declaratory
Judgment Act, 28 U.S.C. § 2201 (“DJA”), and the Brillhart v. Excess
Insurance Co. of America, 316 U.S. 491, 495 (1942), abstention
doctrine, the district court determined that abstention was
appropriate and stayed the action. RLI timely appealed.
DISCUSSION
We review a district court’s decision whether to exercise its
jurisdiction under the DJA and Brillhart for abuse of discretion.
Wilton v. Seven Falls Co., 515 U.S. 277, 289-90 (1995). “[U]nless
the district court addresses and balances the purposes of the
Declaratory Judgment Act and the factors relevant to the abstention
doctrine on the record, it abuses its discretion.” St. Paul Ins.
Co. v. Trejo, 39 F.3d 585, 590 (5th Cir. 1994) (citation omitted).
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The DJA provides that “[i]n a case of actual controversy
within its jurisdiction . . . any court of the United States, upon
the filing of an appropriate pleading, may declare the rights and
other legal relations of any interested party seeking such
declaration, whether or not further relief is or could be sought.”
28 U.S.C. § 2201(a). The DJA “has been understood to confer on
federal courts unique and substantial discretion in deciding
whether to declare the rights of litigants.” Wilton, 515 U.S. at
286. In Brillhart, the Supreme Court explained:
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 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.
316 U.S. at 495. Brillhart abstention is applicable when a
district court considers abstaining from exercising jurisdiction
over a declaratory judgment action. Southwind Aviation, Inc. v.
Bergen Aviation, Inc., 23 F.3d 948, 950 (5th Cir. 1994) (per
curiam).
This Court in Trejo identified seven nonexclusive factors for
a district court to consider in deciding whether to abstain from
adjudicating a declaratory judgment action:
1) whether there is a pending state action in which all
of the matters in controversy may be fully litigated, 2)
whether the plaintiff filed suit in anticipation of a
lawsuit filed by the defendant, 3) whether the plaintiff
engaged in forum shopping in bringing the suit, 4)
whether possible inequities in allowing the declaratory
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plaintiff to gain precedence in time or to change forums
exist, 5) whether the federal court is a convenient forum
for the parties and witnesses, . . . 6) whether retaining
the lawsuit in federal court would serve the purposes of
judicial economy, and . . . [7)] whether the federal
court is being called on to construe a state judicial
decree involving the same parties and entered by the
court before whom the parallel state suit between the
same parties is pending.
39 F.3d at 590-91 (internal citation omitted). The district court
operated under this exact Trejo framework when deciding to abstain
here. RLI argues that the court misconstrued these factors in
numerous ways and thus abused its discretion. Appellees contend
the district court properly exercised its discretion.
As to the first Trejo factor, the district court found it to
weigh in favor of dismissal or stay because the California coverage
suit presented a parallel state proceeding in which all matters in
controversy here may be fully litigated. As to the second and
third Trejo factors, the district court found them to be neutral
because both sides had engaged in “procedural fencing” in filing
their respective suits. As to the fourth Trejo factor, the
district court found it to weigh in favor of dismissal or stay.
The court determined that little inequity to RLI would result from
requiring all the coverage determinations to occur in California
where the subject of the insurance is located. Moreover, the court
noted that RLI is not a Texas company, the insureds prefer
California as the litigation situs, and the vast majority of the
insurers involved in the underlying California tort suits are
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likewise defendants in the California coverage action. As to the
fifth Trejo factor, the court found it to be neutral because of the
relative convenience of both forums, depending on whether just the
duty to defend or also the duty to indemnify was at issue. As to
the sixth Trejo factor, the district court found it to weigh in
favor of dismissal or stay because deference to a pending state
action in which all of the primary insurers are joined would allow
one court to decide the issues in this case. The district court
properly noted that the seventh Trejo factor is not implicated in
this case. Because all the Trejo factors either weighed in favor
of yielding to the California coverage action, or were neutral, the
district court concluded it was appropriate to exercise its
discretion under the DJA and Brillhart and refrain from deciding
this case. In an effort to assure the availability of a federal
forum should the California coverage action fail to resolve the
matter in controversy, the district court stayed, rather than
dismissed, the case. See Wilton, 515 U.S. at 288 n.2.
Here, the record reflects a reasoned memorandum and order by
the district court, which addressed and balanced the purposes of
the DJA and the factors relevant to the Brillhart abstention
doctrine. See Trejo, 39 F.3d at 590. Therefore, we find that the
district court did not abuse its discretion in choosing to stay the
federal action pending the outcome of the related California state
court action. See id.6
CONCLUSION
Having carefully reviewed the record of this case and the
parties’ respective briefing and arguments, for the reasons set
forth above, we AFFIRM the district court’s order.
AFFIRMED.
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