IN THE UNITED STATES DISTRICT COURT 

FOR THE SOUTHERN DISTRICT OF OHIO 

EASTERN DIVISION 

HARTFORD CASUALTY INS. CO., : Case No. 2:12-CV-00369 

 : 

 Plaintiff, : JUDGE ALGENON L. MARBLEY 

 : 

 v. : 

 : 

BLUEMILE, INC., : Magistrate Judge Elizabeth Deavers 

 : 

 Defendant. : 

 

ORDER 

This matter is before the Court on Defendant Bluemile, Inc.’s (“Defendant” or 

“Bluemile”) Motion to Dismiss Plaintiff’s Complaint for Declaratory Judgment. (Doc. 8.) For 

the foregoing reasons, Defendant’s Motion is GRANTED and this action hereby DISMISSED. 

I. BACKGROUND 

1. Factual History 

Defendant Bluemile owns a Columbus data center that provides clients with cloud 

services, network services, data hosting, and voice (phone) services. (Complaint, Doc. 1, ¶ 8.) 

Plaintiff Hartford Casualty Insurance Company (“Plaintiff or “Hartford”) issued Defendant an 

insurance policy, Policy No. 33 SBA VH9257 (the “Policy”), covering business interruption 

(“BI”) and extended business interruption (“EBI”) losses for the period of July 8, 2010 to July 8, 

2011. (Id. at ¶¶ 6, 11.) 

On February 10, 2011, Bluemile hired Atlas Industrial Contractors, Ltd. (“Atlas”) to 

perform electrical services at its data center, an insured location under the Policy. (Id. at ¶ 9.) At 

approximately 7:30 a.m., an action by the Atlas employee on site caused an electrical surge that 

created a short in Bluemile’s power distribution system, causing Bluemile’s computer 

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networking services to fail temporarily. Bluemile’s business operations were restored 

approximately two hours later, at 9:45 a.m. Bluemile alleges, however, that the power surge 

created unstable memory in its network devices and other lingering problems. (Id.; Bluemile 

State Court Complaint, Doc. 8, Att. 1.) 

Bluemile submitted a claim to Hartford for income losses resulting from the business 

interruption. (Doc. 1 at ¶ 10.) Bluemile and Hartford disagree about the recovery to which 

Bluemile is entitled under the Policy. Bluemile asserts that it experienced extended business 

interruption losses in an undetermined amount in excess of seven million dollars, and is entitled 

to recovery up to the policy limit of $5,213,000. As Defendant interprets the Policy, the contract 

does not restrict the duration of EBI coverage. (Doc. 8 at 4.) Hartford, in contrast, asserts that the 

Policy limits EBI coverage to a period of 90 days after business operations resume. Hartford 

paid Bluemile $514,898 for the 90 day period for which it did not dispute coverage. (Doc. 1 at ¶ 

7.) The parties agreed that this payment would not prejudice the rights or defenses of either 

insurer or insured. (Id.) Bluemile does not concede that that its coverable losses in the 90-day 

period were limited to the $514,898 already paid. (Doc. 8 at 6.) 

2. Procedural History 

Bluemile asserts that, on March 5, 2012, after several attempts to resolve the dispute over 

the duration of EBI coverage through mediation and other informal communications, counsel for 

Bluemile sent Harford’s counsel notice that it would file suit if Hartford did not pay Bluemile’s 

claim within forty-five days. (Rutter Dec., Doc. 13, Exhibit 1, ¶¶ 2-4.) Bluemile further asserts 

that counsel for Bluemile and Hartford subsequently had several conversations regarding 

possible ways to resolve the dispute between their clients. (Id. at ¶ 5.) In late April, counsel for 

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Bluemile attests that he informed Hartford’s counsel that Bluemile would “probably” file its state 

court suit against Hartford and Atlas sometime after April 24, 2012. (Id. at ¶ 6.) 

On April 27, 2012, Hartford filed a Complaint against Bluemile in this Court, seeking 

declaratory judgment as to the duration of EBI coverage under the Policy. (Doc. 1.) Atlas is not 

party to this action. 

On May 1, 2012, Bluemile filed suit against Hartford and Atlas in the Court of Common 

Pleas for Franklin County, Ohio (the “State Court Action”). (See Bluemile State Court 

Complaint, Doc. 8, Att. 1.)1

 In the State Court Action, Bluemile asserted a negligence claim 

against Atlas and brought declaratory relief, breach of contract, and lack of good faith claims 

against Hartford. On May 4, 2012, apparently not realizing that it had already been sued by 

Bluemile, Atlas sued Bluemile, also in the Court of Common Pleas for Franklin County, for 

unpaid fees.2

 Atlas’s case was later consolidated with the earlier State Court Action. 3 

 Bluemile now moves to dismiss Hartford’s federal Complaint for lack subject matter 

jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). (Doc. 8.) Bluemile argues 

that, in light of the pending State Court Action, the principles governing discretionary 

jurisdiction in a Declaratory Judgment Action, as well as the principles of abstention, dictate 

against exercising federal jurisdiction in this case. Hartford opposes the Motion to Dismiss. 

(Doc. 12.) 4 

 

1

 The State Court Action is captioned Bluemile, Inc. v. Atlas Industrial Contractors, Ltd., et al., Case No. 12 CV 

005597. 

2

 Atlas’s action was initially filed in the Franklin County Court of Common Pleas as Case No. 12 CV 005768. 3

 There is no dispute that service and notice of all pending actions and pleadings was proper. 

4

 Hartford moved to dismiss or alternatively sever the claims against it in the State Court Action in light of 

Hartford’s declaratory judgment filing in this Court. Common Pleas Judge Stephen McIntosh denied Hartford’s 

Motion and stayed the claims against Hartford pending this Court’s decision on Bluemile’s Motion to Dismiss. 

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 II. LAW AND ANALYSIS 

The Declaratory Judgment Act (the “Act”) 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. 

The Supreme Court has indicated that the Act “confer[s] 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 (1995). Thus, “Congress ‘created an opportunity, rather than a duty, to grant a new 

form of relief to qualifying litigants.’” Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 554 (6th Cir. 

2008) (quoting Wilton, 515 U.S. at 288). Moreover, “[t]his language affords the district court 

‘discretion in determining whether and when to entertain an action under the Declaratory 

Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional prerequisites.’” 

Travelers Indem. Co. v. Bowling Green Prof’l Assocs., 495 F.3d 266, 271 (6th Cir. 2007) 

(quoting Adrian Energy Assocs. v. Michigan Pub. Serv. Comm'n, 481 F.3d 414, 421 (6th Cir. 

2007)). 

In determining whether to exercise jurisdiction pursuant to the Declaratory Judgment Act, 

courts in the Sixth Circuit consider the five factors articulated in Grand Trunk W. R.R. Co. v. 

Consol. Rail Co., 746 F.2d 323, 326 (6th Cir. 1984): 

(1) whether the declaratory action would settle the controversy; 

(2) whether the declaratory action would serve a useful purpose in clarifying the 

legal relations in issue; 

(3) whether the declaratory remedy is being used merely for the purpose of 

“procedural fencing” or “to provide an arena for a race for res judicata;” 

(4) whether the use of a declaratory action would increase friction between our 

federal and state courts and improperly encroach on state jurisdiction; and 

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(5) whether there is an alternative remedy which is better or more effective. 

Travelers, 495 F.3d at 271 (formatting altered in original) (quoting Grand Trunk, 746 F.2d at 

326). See also Scottsdale, 513 F.3d at 554. The Court examines each of these factors in turn. 

1. Settlement of the Controversy 

The first Grand Trunk factor considers whether the declaratory judgment action would 

settle the controversy. Here, Bluemile argues that a declaratory judgment in the present case will 

not settle the entire controversy between Bluemile and Hartford because, even if the Court were 

to grant the requested declaratory relief limiting the duration of EBI coverage, the amount owed 

by Hartford will remain in dispute. Hartford counters that the dispute between Bluemile and 

Hartford will be resolved in its entirety because the Policy permits any disagreement regarding 

the amount of a loss to be resolved through third-party appraisal. (Doc. 12 at 5 n.1). 

The Sixth Circuit has developed “[t]wo lines of precedent ... in [its] jurisprudence 

regarding the consideration of this first factor in the context of an insurance company’s suit to 

determine its policy liability.” Scottsdale, 513 F.3d at 555. One line of cases “has concluded 

that a declaratory relief action can settle the insurance coverage controversy not being addressed 

in state court, even though it will not help resolve the underlying state court action.” Id. (citing 

West Am. Ins. Co. v. Prewitt, 208 Fed.Appx. 393, 396 (6th Cir. 2006) (unpublished); Northland 

Ins. Co. v. Stewart Title Guar. Co., 327 F.3d 448, 454 (6th Cir. 2003); Allstate Ins. Co. v. Green,

825 F.2d 1061, 1066 (6th Cir. 1987); State Farm Fire & Cas. Co. v. Odom, 799 F.2d 247, 250 n. 

1 (6th Cir. 1986)). A second line of cases “has found that, while such declaratory actions might 

clarify the legal relationship between the insurer and the insured, they do not settle the ultimate 

controversy between the parties which is ongoing in state court.” Scottsdale, 513 F.3d at 555 

(citing Travelers, 495 F.3d at 272 (“Granting the declaratory relief sought by Evanston and 

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Travelers settles the scope of the insurance coverage under the respective policies and clarifies 

their obligation to defend Bowling Green in the state court action, but it does nothing to ‘clarify 

the legal relationship’ between the other parties.”); U.S. Fire Ins. Co. v. Abex Aluminum, Inc.,

161 Fed.Appx. 562, 565 (6th Cir. 2006) (unpublished); Bituminous Cas. Corp. v. J & L Lumber 

Co., 373 F.3d 807, 814 (6th Cir. 2004); Omaha Prop. & Cas. Ins. Co. v. Johnson, 923 F.2d 446, 

448 (6th Cir. 1991); Odom, 799 F.2d at 251 (Merritt, J. dissenting); Grand Trunk, 746 F.2d at 

326 (“The instant action does not involve an independent dispute because it arises from and 

affects a pending Illinois lawsuit. It would not clear up the legal issues in that case.”)). 

Here, the facts of this action comfortably situate the dispute between Hartford and 

Bluemile with this second line of cases. Although a declaratory judgment from this Court would 

settle the duration of the EBI period, it would not establish the amount of liability, a question that 

is at issue in the State Court Action. And while the Policy permits disputes over the amount of 

business income losses to be settled by appraisal, Atlas – which has a compelling interest in any 

determination of damages given the negligence and potential indemnification claims against 

them – would not be party to that process. Thus, at best, proceeding with a declaratory judgment 

action to which Atlas is not a party will result in piecemeal litigation; at worst, it will prejudice 

Atlas’s ability to litigate its own rights and obligations. In contrast, the more comprehensive 

State Court Action permits a single decision maker to resolve all questions of liability and 

damages in their entirety, without prejudice to any party. The first factor, therefore, weighs 

heavily against the exercise of jurisdiction by this Court. 

2. Clarification of the Legal Relations at Issue 

The second Grand Trunk factor considers whether the district court's judgment would 

clarify the legal relations at issue. Analysis of this factor “is closely related to the first factor and 

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is often considered in connection with it[;] [i]ndeed it is almost always the case that if a 

declaratory judgment will settle the controversy, then it will clarify the legal relations in issue.” 

Scottsdale, 513 F.3d at 557. The question is slightly more complicated where, as here, the 

declaratory judgment action does not entirely settle the underlying controversy. In this Circuit, 

“a split has developed in [appellate] precedent concerning whether the district court's decision 

must only clarify the legal relations presented in the declaratory judgment action or whether it 

must also clarify the legal relations in the underlying state action.” Id. (comparing Prewitt, 208 

Fed.Appx. at 397 (affirming exercise of jurisdiction where “declaratory action would clarify only

the legal relationship between the insured and the insurer, and would not clarify the legal 

relationships in the state action”) (emphasis in original); Northland, 327 F.3d at 454, Green, 825 

F.2d at 1066; and Odom, 799 F.2d at 250 n.1 with Travelers, 495 F.3d at 272; Abex, 161 

Fed.Appx. at 565; and Bituminous, 373 F.3d at 814 (finding factor two to weigh against exercise 

of jurisdiction where “declaratory judgment would clarify the legal relationship between 

[insurer] and [the insured employer]” but “would not clarify the legal relationship between [an 

injured worker] and [the employer] in the underlying state action” and the state court judgment 

would implicate insurer’s liability) ). 

If the relevant question is whether this Court’s decision would clarify the legal relations 

presented in the declaratory judgment action, this factor is relatively neutral. A judgment in this 

Court as to the scope of EBI coverage will clarify the legal relationship between Bluemile and 

Hartford only in part. As discussed above, a declaratory judgment would not be sufficient to 

resolve definitively what monies are owed to Bluemile by Hartford. Thus, although this Court’s 

decision would be of some use in clarifying the legal relationship between insurer and insured, it 

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would not resolve the ultimate controversy between the two – and would certainly not be of 

greater use than Bluemile’s parallel request for declaratory judgment in the State Court Action. 

If the relevant question, however, is whether this Court’s decision would clarify legal 

relations in the underlying state action, this factor weighs against the exercise of jurisdiction in 

this case. A federal declaratory judgment would not clarify the relationship between Bluemile 

and Atlas. Nor would it clarify whether Hartford has any right of subrogation against Atlas. 

Thus, even if Hartford were to win in this Court, all three entities would likely remain involved 

in litigation arising this same set of facts in a different forum. 

Accordingly, the second Grand Trunk factor does not weigh in favor of granting 

jurisdiction in either formulation of the relevant standard. 

3. Procedural Fencing 

 The third Grand Trunk factor considers whether the declaratory remedy is being used 

merely for the purpose of “procedural fencing” or “to provide an arena for a race for res 

judicata.” Travelers, 495 F.3d at 271. Here, each party has accused the other of improper 

procedural maneuvering. Hartford filed its action in this Court on Friday, April 27, 2012. 

Bluemile filed its State Court Action the following Tuesday, May 1, 2012. Hartford points to the 

later filing of the State Court Action as evidence of Bluemile’s intent to undercut Hartford’s right 

to seek federal declaratory relief. Bluemile argues that it was Hartford who raced to the 

courthouse when Bluemile informed Hartford that the State Court Action filing was imminent. 

Bluemile offers a supporting attorney affidavit detailing a series of mediation attempts and 

discussions among opposing counsel in the months prior to the parties’ filings. 

 The third factor “is meant to preclude jurisdiction for ‘declaratory plaintiffs who file their 

suits mere days or weeks before the coercive suits filed by a ‘natural plaintiff’ and who seem to 

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have done so for the purpose of acquiring a favorable forum.’” Scottsdale, 513 F.3d at 558 

(quoting AmSouth Bank v. Dale, 386 F.3d 763, 788 (6th Cir. 2004)). Thus, “[t]he question is ... 

whether the declaratory plaintiff has filed in an attempt to get her choice of forum by filing first.” 

Id. (quoting AmSouth, 386 F.3d at 789). Nonetheless, the Sixth Circuit has warned that courts 

should be “reluctant to impute an improper motive to a plaintiff where there is no evidence of 

such in the record.” Id. Moreover, a “district court should not deny jurisdiction to a plaintiff who 

has not ‘done any more than choose the jurisdiction of federal rather than state court, a choice 

given by Congress.’” Id. (quoting Odom, 799 F.2d at 250 n.1). 

Here, there is evidence in the record to support Bluemile’s claim that Hartford 

intentionally engaged in procedural fencing. Bluemile’s attorney affidavit indicates that, as early 

as March 5, 2012, Hartford had notice of Bluemile’s intent to file suit against both Hartford and 

Atlas if the coverage dispute was not resolved. The fact that Hartford and Blumile’s respective 

actions were filed within two business days of each other also supports an inference of a race to 

choose the forum. Contrast Scottsdale, 513 F.3d at 558 (finding no evidence of improper motive 

in filing where the federal declaratory judgment action was initiated several years after the 

initiation of a related state court action to which the insurance company was not a party). While 

not definitive, the proffered evidence that Hartford knew it would have the opportunity to 

adjudicate its claims in state court makes it difficult to conceive of a motive for filing the instant 

action other than procedural fencing. The third factor therefore also weighs against this Court’s 

exercise of jurisdiction over this matter. 

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4. Increased Friction between Federal and State Courts 

With regard to the fourth Grand Trunk factor, the Sixth Circuit has articulated three subfactors to consider in determining whether the exercise of jurisdiction would increase friction 

between federal and state courts and improperly encroach on state jurisdiction. These are: 

(1) whether the underlying factual issues are important to an informed resolution 

of the case; 

(2) whether the state trial court is in a better position to evaluate those factual 

issues than is the federal court; and 

(3) whether there is a close nexus between underlying factual and legal issues and 

state law and/or public policy, or whether federal common or statutory law 

dictates a resolution of the declaratory judgment action. 

Scottsdale, 513 F.3d at 560 (quoting Bituminous, 373 F.3d at 814-15). 

In this case, resolution of the factual issues in this case is not necessary to the 

resolution of the declaratory judgment action. Rather, the question before this Court is 

whether an alleged drafting error in the Policy affecting the durational limits on EBI 

coverage should be read out of the contract to avoid what Hartford characterizes as an 

absurd result. Nevertheless, the very same question has been presented in the State Court 

Action, creating the potential for inconsistent judgments. The Sixth Circuit has 

recognized that “the issue of the interpretation of [an] insurance contract [is a] question of 

state law with which the [] state courts are more familiar and therefore better able to 

resolve.” Bituminous, 373 F.3d at 815. Moreover, “[s]tates regulate insurance companies 

for the protection of their residents, and state courts are best situated to identify and 

enforce the public policies that form the foundation of such regulation.” Id. (quoting 

Allstate Ins. Co. v. Mercier, 913 F.2d 273, 279 (6th Cir. 1990)). Therefore, although 

there is no “per se rule against exercising jurisdiction in actions involving insurance 

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coverage questions,” id. at 812-13, this factor also weighs slightly in favor of declining 

jurisdiction in this case. 

5. Availability of Alternative Remedy 

The final Grand Trunk factor asks whether there exists an alternative remedy that 

is better or more effective than the requested federal declaratory judgment. As discussed 

above, Bluemile’s pending State Court Action includes a claim for declaratory judgment 

that raises precisely the same questions of contract interpretation presented to this Court. 

Therefore, Hartford can obtain the same declaratory relief in that action that it seeks here. 

Furthermore, as discussed above, state courts are best positioned to decide such questions 

of state law, particularly when they implicate the state regulatory province of insurance 

contracting. 

Moreover, “[t]here is no reason to suppose that the alternate remedies available in 

state court would not adequately protect [Hartford’s] interests.” Id. at 816. Indeed, the 

Sixth Circuit has repeatedly “question[ed] the need for ...declaratory judgments in 

federal courts when the only question is one of state law and when there is no suggestion 

that the state court is not in a position to define its own law in a fair and impartial 

manner.” Id. at 816-17 (quoting Am. Home Assur. Co. v. Evans, 791 F.2d 61, 63 (6th Cir. 

1986)). Given that there has been no suggestion that the Franklin County Court of Pleas 

would be incapable of fairly deciding the declaratory judgment questions presented in the 

pending State Court Action, this factor too weighs against this Court’s exercise of 

jurisdiction. 

In light of the facts and procedural posture of this case, all five Grand Trunk

factors weigh, in varying degrees, against federal jurisdiction over Hartford’s declaratory 

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judgment action. This Court therefore, in its discretion, declines to exercise such 

jurisdiction. 

III. CONCLUSION 

 For the foregoing reasons, this Court GRANTS Defendant Bluemile’s Motion 

and declines to exercise jurisdiction over this matter. Plaintiff Hartford’s declaratory 

judgment action is hereby DISMISSED. 

IT IS SO ORDERED. 

s/Algenon L. Marbley_________ 

 Algenon L. Marbley 

 United States District Court Judge 

DATE: March 15, 2013

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