Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alsd-2_15-cv-00054/USCOURTS-alsd-2_15-cv-00054-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

NORTHERN DIVISION

EMPLOYERS MUTUAL 

CASUALTY COMPANY,

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Plaintiff,

v. Civil Action No. 2:15-00054-

CG-B

KENNY HAYES CUSTOM 

HOMES, LLC.,

KENNY HAYES, individually,

DAVID CHANCELLOR, 

individually, 

JOE NELSON, individually, 

TAMMY NELSON, individually. 

Defendants.

ORDER

This matter is before the Court on the motions to dismiss or, in the 

alternative, to stay this action filed by Defendants Kenny Hayes Custom 

Homes, Kenny Hayes, David Chancellor (the “Builders”) (Doc. 11) and Joe 

and Tammy Nelson (“Nelsons”) (Doc. 18) as well as Plaintiff Employers 

Mutual Casualty Company’s (“EMCC”) response in opposition (Doc. 21), the 

Builders’ reply (Doc. 22) and EMCC’s supplemental response (Doc. 23). For 

the reasons stated below, the motions to dismiss or, in the alternative, stay 

are due to be denied.

BACKGROUND

The underpinnings of this insurance coverage declaratory judgment 

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action lie in a breach of contract and tort claim suit filed on May 19, 2014, in 

the Circuit Court of Wilcox County, Alabama (the “underlying action”), 

Docket No. 14-900046,. (Doc. 11 Exh. A). In the underlying action, Joe and 

Tammy Nelson sued the Builders for breach of contract, fraud, negligence, 

and wantonness arising from the construction of the Nelsons’ home. (Doc. 1 p. 

4). According to the complaint in the underlying action, the Nelsons entered 

into a contract for the construction of their home with the Builders. (Doc. 11 

Exh. A). Throughout the construction process and subsequent to completion, 

the Nelsons allege numerous failures of the Builder to adequately supervise 

the construction resulting in serious latent defects with the home, including 

water intrusion. (Id.) The Builders’ insurance company, EMCC, filed a motion 

for limited permissive intervention in the underlying action on October 28, 

2014. (Id.) All parties in the underlying action objected to EMCC’s 

intervention, arguing the insurance company’s presence was prejudicial. 

(Doc. 1 Exhs. 1, 2). On January 8, Judge Meigs denied EMCC’s intervention 

at the hearing on the underlying action. (Doc. 1). EMCC then filed a 

complaint for declaratory judgment in this Court on February 2, 2015. Id. 

After receipt of service for the present action, the Builders filed a Third 

Party Complaint against EMCC in the underlying action. The Builders (Doc. 

11) filed a motion to dismiss or stay this action citing the Wilton/Brillhart

abstention doctrine, arguments which the Nelsons adopted by reference (Doc. 

18). On March 18, 2015, the judge in the underlying action allowed EMCC to 

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be added as a third party, “in order that Employers Mutual may participate 

in discovery.” However, the judge limited this addition by stating “[t]he Court 

may, subject to motion or on its own motion, subsequently disallow the third 

party complaint to avoid injection of insurance into the underlying case. No 

party will be prejudiced by allowing this third party complaint at this point in 

the proceedings.” (Doc. 23-1). 

II. Wilton/Brillhart Abstention

It is well settled that the Declaratory Judgment Act is properly 

“understood to confer on federal courts unique and substantial discretion in 

deciding whether to declare the rights of litigants.” Wilton v. Seven Falls Co.,

515 U.S. 277, 286, 115 S. Ct. 2137, 132 L. Ed. 2d 214 (1995). Indeed, the 

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.” Id. at 287 (citations omitted). As the 

Eleventh Circuit Court of Appeals has observed, the Act “only gives the 

federal courts competence to make a declaration of rights; it does not impose 

a duty to do so.” Ameritas Variable Life Ins. Co. v. Roach, 411 F.3d 1328, 

1330 (11th Cir. 2005); see also Prudential Ins. Co. of Am. v. Doe, 140 F.3d 

785, 789 (8th Cir. 1998) (“The Supreme Court's decision in Wilton ... vests the 

district courts with broad discretion in deciding whether to hear a declaratory 

judgment action.”). “The desire of insurance companies ... to receive 

declarations in federal court on matters of purely state law has no special call 

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on the federal forum.” Westchester Surplus Lines Ins. Co. v. Romar House 

Ass'n, Inc., 2008 WL 5412937, *2 (S.D. Ala. Dec. 29, 2008) (quoting State 

Auto Ins. Co. v. Summy, 234 F.3d 131, 136 (3rd Cir. 2000)).

Over seventy years ago, the Supreme Court opined that it would be 

both “uneconomical” and “vexatious” for a federal district court to hear a 

declaratory judgment action, concurrently with ongoing proceedings involving 

the same parties and same legal issues (not arising under federal law) in 

state court. Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 495, 62 S. Ct. 

1173, 86 L. Ed. 1620 (1942). Brillhart admonished lower courts to avoid 

“[g]ratuitous interference with the orderly and comprehensive disposition of a 

state court litigation.” Id. In the wake of Brillhart, courts in this Circuit have 

long recognized that they have discretion to “decline to entertain a 

declaratory judgment action on the merits when a pending proceeding in 

another court will fully resolve the controversy between the parties.” Ven–

Fuel, Inc. v. Dep’t of the Treasury, 673 F.2d 1194, 1195 (11th Cir. 1982); see 

also Fed. Reserve Bank of Atlanta v. Thomas, 220 F.3d 1235, 1247 (11th Cir.

2000) (“A court may exercise its discretion to dismiss a declaratory judgment 

action in favor of a pending state court proceeding that will resolve the same 

state law issues.”).

In Ameritas Variable Life Ins. Co. v. Roach, 411 F.3d 1328 (11th Cir.

2005), the Eleventh Circuit guided district courts on how to wield their 

Wilton/Brillhart discretion under the Declaratory Judgment Act in the 

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presence of parallel state proceedings. Ameritas emphasized that district 

courts must balance the interests of federalism, comity, and efficiency in 

determining whether to hear a declaratory judgment action in those 

circumstances, and promulgated a non-exhaustive set of nine “guideposts” to 

be considered. Id. at 1330–31.1

III. ANALYSIS

In moving for dismissal, both the Builders and the Nelsons cast their 

motions entirely in terms of Ameritas principles. Specifically, the parties urge 

the Court to apply the multifactor test from Ameritas and to conclude from 

those considerations that Wilton/Brillhart abstention is warranted here. 

An important threshold question is whether Ameritas even applies in 

this case. Notably, the Supreme Court in Brillhart addressed the 

circumstance “where another suit is pending in a state court presenting the 

same issues, not governed by federal law, between the same parties.” 

 

1 The guideposts are: “(i) the state's interest in deciding the matter; (ii) 

whether a judgment in the federal action would completely resolve the 

controversy; (iii) whether the declaratory judgment action would clarify the 

parties' legal relations; (iv) whether the federal action is a form of procedural 

fencing being utilized to provide an arena for a race for res judicata or to 

achieve a federal hearing in a case not otherwise removable; (v) whether a 

ruling in the declaratory judgment action would increase friction between 

federal and state courts or otherwise encroach on state proceedings; (vi) 

whether a superior alternative remedy exists; (vii) whether underlying facts 

are important to informed resolution of the matter; (viii) whether the state 

court is better situated than the federal court to evaluate those facts; and (ix) 

the nexus (if any) between the underlying issues and state law/policy, and 

whether federal common or statutory law requires resolution of the 

declaratory judgment action.” Lexington Ins. Co. v. Rolison, 434 F.Supp.2d 

1228, 1234 (S.D. Ala. 2006) (citation and internal quotation marks omitted).

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Brillhart, 316 U.S. at 495 (emphasis added). Ameritas itself applied the 

guidepost analysis where there is “parallel litigation in the state courts.” 411 

F.3d at 1331.

The first determination before an Ameritas analysis is whether there 

is parallel litigation in state court. For purposes of Wilton/Brillhart

abstention, “[s]uits are parallel if substantially the same parties litigate 

substantially the same issues in different forums.” Scottsdale Ins. Co. v. 

Detco Indus., Inc., 426 F.3d 994, 997 (8th Cir. 2005) (citations omitted); see 

also Tyrer v. City of S. Beloit, Ill., 456 F.3d 744, 752 (7th Cir. 2006) 

(“Generally, a suit is parallel when substantially the same parties are 

contemporaneously litigating substantially the same issues in another 

forum.”) (internal quotation marks omitted); Indian Harbor Ins. Co. v. 

Republic Serv., Inc., 2010 WL 3701308, *2 (N.D. Ill. Sept. 10, 2010) (“Two 

actions are deemed to be parallel actions when substantially the same parties 

are contemporaneously litigating substantially the same issues in two fora.”) 

(citation and internal quotation marks omitted). When a declaratory 

judgment action is brought by an insurer against an insured, there are no 

parallel proceedings if “(1) the insurer was not a party to the suit pending in 

state court; and (2) the state court actions involved issues regarding the 

insured's liability, whereas the federal suit involved matters of insurance 

coverage.” Cont’l Cas. Co. v. Advance Terrazzo & Tile Co., 462 F.3d 1002, 

1006 (8th Cir. 2006) (citation omitted). 

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As to the issue of the parties, EMCC asked the state court if it could 

intervene, a motion opposed by both the Nelsons and the Builder. Upon 

denial of that motion in the underlying action, EMCC filed this declaratory 

judgment action. Then in an act of procedural maneuvering, the Builder filed 

a Third Party Complaint against EMCC in the underlying action, which the 

court granted with substantial limitations. In the underlying action, EMCC is 

allowed to participate in discovery, but the court reserved the right to 

disallow the third party complaint to prevent the “injection of insurance” in 

the case. (Doc. 23-1). The state judge’s ruling is clear that insurance coverage 

issues are not to be joined in that case. Id. Thus, the judge in the underlying 

action will make no conclusive determinations about the contract provisions 

of the Builder’s insurance policy. The core issue in this case is insurance 

coverage and not the Builder’s liability.

The factual questions requiring resolution in this declaratory judgment 

action do not include the Builders’ failure to adequately construct the 

Nelsons’ home. The Builders’ assertion that the federal and state court 

proceedings are parallel, while supported by the fact that the parties involved 

in the case are the same, fails on account of the distinct factual questions 

involved in the federal and state proceedings. What exists here are not 

parallel state court proceedings, but merely related state court proceedings. 

See Essex Ins. Co. v. Foley, 2011 WL 290423, at *2 (S.D. Ala. Jan. 27, 2011).

This lack of parallelism weighs strongly against this Court's dismissal of the 

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declaratory judgment action. “In such circumstances, courts have shown 

marked reluctance to exercise their discretion to stay or dismiss the 

declaratory judgment action.” State Farm Fire & Cas. Co. v. Knight, 2010 WL 

551262, *3 (S.D. Ala. Feb. 11, 2010). Some Circuits hold that in the absence 

of parallel proceedings the broad Wilton discretion is narrowed. See e.g.,

Scottsdale Ins. Co. v. Detco Indus., Inc., 426 F.3d 994, 998 (8th Cir. 2005) (“A 

number of our sister courts agree that the broad discretion granted in Wilton

does not apply when there are no parallel state court proceedings.”); 

Maryland Cas. Co. v. Knight, 96 F.3d 1284, 1289 (9th Cir. 1996) (cases “in 

which there are no parallel state court proceedings[ ] lie at the outer 

boundaries of the district court's discretion under the Declaratory Judgment 

Act”). An alternative approach considers the dissimilarities between the state 

and federal lawsuits as essential to the Wilton/Brillhart analysis. See e.g., 

Sherwin-Williams Co. v. Holmes Cnty., 343 F.3d 383, 394 n. 5 (5th Cir. 2003) 

(where there is a related, but not parallel, state court action, “the federal 

district court properly considers the extent of similarity between the pending 

state court and federal court cases” in deciding whether to hear the 

declaratory judgment action). 2 It appears that the Eleventh Circuit has not 

 

2 See also United States v. City of Las Cruces, 289 F.3d 1170, 1182 (10th Cir. 

2002) (degree of similarity between two cases should be considered in making 

Brillhart abstention determination); Atlantic Cas. Ins. Co. v. GMC Concrete 

Co., 2007 WL 4335499, *3 (S.D. Ala. Dec. 7, 2007) (applying Wilton/Brillhart

factors and remarking that the bulk of them “only favor abstention when 

both the state and federal courts are asked to decide the same legal or factual 

issues”); Standard Fire Ins. Co. v. Gordon, 376 F.Supp.2d 218, 230-31 

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had the opportunity to consider or adopt one of these approaches. 

At a minimum, however, the absence of parallel proceedings is a 

substantial factor bearing on the Wilton/Brillhart analysis. See e.g., Med. 

Assur. Co. v. Hellman, 610 F.3d 371, 379 (7th Cir. 2010) (“One factor 

supporting a decision to stay an action is the existence of adequate parallel 

proceedings.”).

Even if the Ameritas analysis were fully applicable in the absence of 

actual parallel litigation in state court, the Court finds dismissal or a stay is 

unwarranted here. While there are (or may be) common facts between the 

two cases, the legal issues presented are entirely distinct. As such, the 

interests of federalism, comity and efficiency on which Wilton/Brillhart

abstention are founded are not directly implicated here. Stated in terms of 

Ameritas guideposts, it does not appear that adjudicating EMCC's 

declaratory judgment action would in any way encroach on the state 

proceedings or cause friction between federal and state judiciaries. If 

anything, the opposite is true since a definitive ruling by this Court 

concerning whether EMCC has a duty to defend or indemnify the Builders in 

the underlying action may facilitate disposition of those state court 

proceedings by eliminating uncertainty as to EMCC’s duties owed to the 

Builders. Moreover, the declaratory judgment action would clarify the 

 

(D.R.I.2005) (explaining that “the absence of parallel proceedings does not 

compel the district court to entertain the action” and that the presence or 

absence of parallel proceedings in state court is simply one relevant 

consideration).

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parties' legal relations in a manner that the underlying action cannot and 

will not (at least as between the Nelsons and the Builders). Furthermore, it is 

clear that EMCC did not improperly multiply the proceedings or bring this 

action in an act of “procedural fencing” to race for res judicata; to the 

contrary, EMCC appears to have brought this action in the proper forum for a 

proper purpose to resolve issues not joined in the underlying action. 

In any event, staying this case pending the outcome of the underlying 

action would be unproductive (and would not preserve judicial or litigant 

resources) because the coverage issues would remain undecided in this case 

after the underlying action was completed. What's more, the duty-to-defend 

component of this declaratory judgment action would almost certainly be 

rendered moot by a stay pending resolution of the underlying action, thereby 

needlessly frustrating EMCC's efforts to obtain a ruling on the merits as to 

that issue. 

This declaratory judgment action does not amount to gratuitous 

interference with the orderly and comprehensive disposition of the pending 

state court litigation between the Nelsons and the Builders. It does not foster 

tension between federal and state courts. It will not breed redundancy or 

waste judicial or litigant resources by raising the specter of inconsistent 

rulings or duplication of effort. And it does not run afoul of considerations of 

practicality and judicial administration. In short, it does not implicate any of 

the fundamental policy considerations that prompted creation of the judicial 

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doctrine of Wilton/Brillhart abstention in the first place. Accordingly, the 

Court will not exercise its discretion under the Wilton/Brillhart line of 

authorities to stay this declaratory judgment action pending resolution of the 

underlying case pending in state court.

CONCLUSION

After due consideration of all matters presented and for the reasons set 

forth herein, the Court finds that the Builders’ and the Nelsons’ motions to 

dismiss, or in the alternative to stay, (Docs. 11 & 18) are DENIED. 

DONE and ORDERED this 22nd day of April, 2015.

/s/ Callie V. S. Granade 

UNITED STATES DISTRICT JUDGE

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