UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT

________________ _________________ STATE FARM FIRE AND CASUALTY CO., an Illinois corporation, Plaintiff - Appellee,

v. TELECOMM CONSU LTANTS, INC., an Oklahoma corporation; MYRON C. BUTLER, Defendants - Appellants, and IBALL INSTRUMENTS LLC, an Oklahoma limited liability company; CARL P. BRIGHT, Defendants. No. 18-6061 (D.C. No. 5:17-CV-00640-HE) (W.D. Okla.)

________________ _________________ ORDER AND JUDGMENT *

________________ _________________ Before LUCERO , KELLY , and PHILLIPS , Circuit Judges.

________________ _________________

* After examining the briefs and appellate record, this panel ha s determined unanimously to honor the parties ’ request for a decision on the briefs without oral argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). Th e case is therefore submitted without oral argument. T his order and judgment is no t binding precedent, except under the doctrines of la w of the case, res judicata, an d collateral estoppel. It may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1. FILED United States Court of Appeals Tenth Circuit 

### December 13, 2018
Elisabeth A. Shumaker Clerk of Court2 State Farm Fire and Casualty Com pany (“State Farm ”) obtained a declaration that it had no obligation to def end and indemnify Myron Butler, an individual sued for misappropriation of trade sec rets and breach of contract in Oklahoma state court. Butler and Telecomm Consultants , Inc. (“TCI”), the insured part y and company for which Butler was president, now appeal. Exercising jurisdictio n under 28 U.S.C. § 1291, we affirm.
I In 2007, Butler and Carl Bright formed iBall Instruments LLC ( “iBall”) to manufacture and market a gas det ection and monitoring system fo r use in oil and gas exploration. Disagreements dev eloped between the two about iBa ll’s operation. In December 2010, they reached sever al agreements to resolve their dispute. One agreement created a “Joint Serve r,” a computer on which company -related data was stored and to which both men would have access. In January 2011, Bright filed su it in Oklahoma state court, se eking a declaration concerning the owners hip and control of iBall. The court appointed David Rhoades to administer iBa ll’s business and assets while t he litigation was pending. Rhoades hired Butler’s son, Aaron Butler, and his son ’s company, The Computer Lab, to upgrade iBall’s computer facilities. Butler’s son-in-law, Mark Davis, was also affiliated with T he Computer Lab. As part of t he upgrade, Rhoades allegedly approved the transfer of data from the Joint Server t o new computers and the destruction of iBall’s Join t Server and other computers.3 In June 2013, Bright and Butle r executed a Settlement and Rele ase Agreement (“Settlement Agreement”) to res olve the 2011 lawsuit. That Agr eement granted Bright 100% ownership of iBall and assigned to him iBall’s inte llectual property. It further provided that Bright, M yron Butler, TCI, and Bright’s c ompany, Carl Bright, Inc. (“CBI”), assigned to iBall all intellectual and intangible property related to iBall or to its products and services offered to iBall’s customers. Before the scheduled closing date of the settlement, Bright hi red a forensic computer analyst to examine iBa ll’s computers. That examinatio n showed software was installed on iBall computer h ard drives to allow the user t o delete and remove information permanently from the computer, and that software wa s then uninstalled a month later, likely to evade d etection. The exa mination could not recover the deleted information. However, emails r eference documents not otherwise produced during the transfer of iBall’s inte llectual property to Bright. On November 8, 2013, Bright and iBall sued Aaron Butler and Da vis in Oklahoma state court. An amende d petition added Butler as a de fendant. The amended petition alleges that D avis and Aaron Butler caused the destruction of iBall’s physical and intellectua l property, including the possi ble destruction of the Joint Server. It also alleges th at Butler and Davis violated t he Settlement Agreement’s non-compete covenant by forming a company to active ly compete with iBall and to sell a device deve loped using iBall’s property. Prior to the initiation of the 2013 lawsuit, State Farm issued a businessowners policy and a commercial liability policy to TCI. Each policy n ames TCI as the4 insured. Butler is ins ured under the policies as an executive officer of TCI, “but only with respect to [h is] duties” as a corporate officer. State Farm initially defended Butler in the 2013 Oklahoma suit under a reservation of rights. Although he withdrew his request for de fense and indemnification in August 2014, B utler asked State Farm to reop en his claim and to defend and indemnify him in the Oklahoma action in January 2017 . State Farm agreed to defend him, again subj ect to a reservation of rights. It then filed this action in federal district court, seeki ng declaratory relief under the Declaratory Judgment Act, 28 U.S.C. § 2201, that it h ad no obligation to defend and indemnify Butler. Butler and TCI filed a motion to d ismiss or stay p roceedings co nsidering the underlying litigation, which was denied. The district court th en granted summary judgment in favor of State Farm , absolving it of any obligation to defend and indemnify Butler. Butler a nd TCI timely appealed.
II We review the denial of a moti on to dismiss or stay for abuse of discretion.
See Wilton v. Seven Falls Co., 515 U.S. 277, 288-90 (1995). Under the Declaratory Judgment Act, a district court “may declare the rights and othe r legal relations of [an] interested party seek ing [declaratory relief].” § 2201(a) (emp hasis added). We have identified five factors distric t courts should consider in dete rmining whether to exercise their discretion to hear and decide claims for declara tory judgment: [1] whether a declaratory acti on would settle the controversy; [2] whether it would serve a useful purpose in clarifying the legal relations at issue; [3] whether the declaratory remedy is being used merely for the purpose of5 procedural fencing or to provide an arena for a race to res jud icata; [4] whether use of a declaratory action would increase friction between our federal and state courts and improperly encroach upon state jur isdiction; and [5] whether there is an alte rnative remedy which is better or more effective. State Farm Fire & Cas. Co. v. M hoon, 31 F.3d 979, 983 (10th Cir . 1994) (citation and quotations omitted). In this case, the district cour t held all five factors support ed its exercise of jurisdiction over State Farm’s claim. On appeal, appellants di spute the district court’s conclusions with regard to the third and fourth factors . They assert that in resolving State Farm’s summary judgment motion, the district co urt determined that Butler’s actions did not involve a n “accident” as defined in th e policies, and that this determination may have preclusiv e effect in the state court pro ceedings. But appellants have not shown that the district court clearly erred in rejecting their argument that State Farm attempte d to use “the declaratory reme dy . . . merely for the purpose of procedural fencing or to provide an arena for a race to res judicata.” Id. (quotations omitted). State Far m could not be joined as a defe ndant in the state court proceedings, and it needed to obt ain a determination concerning its duty to defend and indemnify Butler. Nor have appellants demonstrated that the district court resol ved a “material factual dispute . . . in the face of ongoing stat e proceedings on the same subject.” Id. at 984. The need to determine if an “accident” occurred did no t require abstention in favor of state c ourt proceedings. See id. at 982, 984 (stating in a declaratory judgment action that a federal c ourt’s assessment of intention did not constitute6 “undue interference with the sta te proceeding,” even though the state court proceedings alleged intentional torts). The district court thu s did not abuse its discretion in resolving the third and fourth factors. Appellants also dispute the dist rict court’s evaluation of the first Mhoon factor—whether the declaratory judgment action will settle the parties’ dispute. The district court held that a declar atory judgment would conclusiv ely determine State Farm’s obligation, if any, to defend and indemnify Butler. App ellants now argue the district court did not completel y resolve the controversy becau se State Farm may be required to provide coverage to TCI or Butler in his capacity a s a TCI executive. They note that on April 23, 2018— after the district court enter ed final judgment in this action—the plaintiffs in th e underlying state court suit f iled a motion to add TCI as a defendant. But that fact w as not before the district cour t when it decided the abstention issue. Appellants have not shown the district court abused its discretion by failing to account for the pos sibility of a second amended p etition. See Henderson v. United States, 568 U.S. 266, 2 77 (2013) (“[W]e expect distri ct judges to be knowledgeable, not clairvoya nt.” (quotations omitted)). 1

1 Appellants argue that iBall and Bright warned the district cou rt in their response to State Farm’s motion fo r summary judgment that TCI m ay be added as a defendant to the underlying action . But that advisement was ma de after the district court denied appellants’ motion to dismiss or st ay. The distri ct court did not abuse its discretion by focusing on th e claims asserted in the first amended petition, rather than hypothetical claim s that might eventua lly be asserted in a second amended petition. See Mid-Continent Cas. Co . v. True Oil Co., 767 F.3d 1000, 1005 (10 th Cir. 2014) (noting insured not re quired “to preemptively [asser t coverage in the first action for] a claim not yet made”).7 III Appellants also appeal the distr ict court’s grant of summary j udgment in favor of State Farm. “We review summ ary judgment orders de novo, usi ng the same standards the district court a pplies.” Siloam Springs Hotel, L .L.C. v. Century Sur. Co., 906 F.3d 926, 930 (10th Cir . 2018) (quotations omitted). “We must determine whether there is a genuine issue of material fact and whether t he movant is entitled to judgment as a matter of law.” Id. (quotations omitted). In so doing, we draw reasonable inferences in the li ght most favorable to the non-mo ving party. Dullmaier v. Xanterra Parks & R esorts, 883 F.3d 1278 , 1283 (10th Cir. 201 8). Under Oklahoma law, which the p arties agree controls, “[a]n in surer providing liability coverage usually has t wo duties: the duty to defend and the duty to indemnify.” Automax Hyundai S ., L.L.C. v. Zurich Am. Ins. Co., 720 F.3d 798, 804 (10th Cir. 2013). The duty to d efend is broader than the duty to indemnify, and arises when the insurer “ascerta ins the presence of facts that give rise to the potential of liability under the policy.” Id. (emphasis a nd quotations o mitted). “The focus is on the facts of the incident not merely the allegations in the complaint.” Id. “An insurer’s duties to defend a nd indemnify arise from the ins urance policy.” Travelers Indem. Co. v. Accura te Autobody, Inc., 340 F.3d 1118, 1120 (10th Cir. 2003). TCI’s policies provide c overage only for Butler’s actio ns taken in his capacity as a corporate officer of TCI. The district court foc used on the allegations in the amended state court petiti on, holding that those allegat ions showed TCI is not a party to the underlying laws uit, Bright and iBall do not asse rt any claims against8 TCI, and they do not allege Butle r was acting at any time on TC I’s behalf. Our de novo review of the petition conf irms this characterization. Appellants argue that the distri ct court disregarded facts tha t Bright and iBall likely would discover and plead in a second amended petition, r esulting in Bright and iBall seeking recovery from TCI or Butler acting as a corporate officer. But as the district court observed, defenda nts cited no evidence to suppor t this theory. Arguments by counsel in briefs are not evidence. Florida v. Ge orgia, 138 S. Ct. 2502, 2545 (2018) (“[S]tatements in briefs are not evidence.”). The district court thus did not err in disregarding these statements in favor of t he actual allegations in the first amended petition. Appellants also argue that the following facts provide suffici ent evidence to infer there may be potential li ability under the policy, requir ing State Farm to tender a defense: (1) TCI’s status as a signatory to the Settlement A greement, (2) Butler’s service as an executive officer, and (3) Bright’s stated intent ion to add TCI as a named defendant. But in view of the plain language of the firs t amended petition, uncontradicted by other evidence , the first two factors did not establish a duty to defend or indemnify. And as we ha ve noted, the third factor wa s not substantiated with any evidence. 2

2 In response to State Farm’s mo tion for summary judgment, the B right defendants could have filed an a ffidavit or other evidence deta iling the terms of a proposed second amended petition th at might have established a duty to defend or indemnify under the policy. But they did not. Nor could we co nsider Bright’s proposed second amende d petition seeking to add TCI as a defend ant, even if it was (continued)9 Finally, appellants argue it wa s State Farm’s burden to show t hat Butler was

not acting in his executive capacity with TCI. This argument misst ates the allocation of burdens. When presented with State Farm’s properly supporte d motion, which included the policies, the fir st amended petition, and other pl eadings from the state court action showing there was no possibility of coverage, Butl er and TCI could not “rest upon the mere allegations o r denials of [their] pleading, but [were required to] set forth specific facts showing that there [was] a genuine iss ue for trial.” Schneider v. City of Grand Junction Police Dep’t, 717 F.3d 760, 767 (10th Cir. 2013) (quotations omitted). Because the y failed to do so, the distri ct court properly entered summary judgment in State Farm’s favor. 3
IV
We AFFIRM the district court’s judgment.

Entered for the Court

Carlos F. Lucero Circuit Judge

presented to us as part of the record, because it was not befor e the district court. Certain Underwriters at Lloyd’s London v. Garmin Int’l, Inc., 7 81 F.3d 1226, 1230 (10th Cir. 2015) (“[I]n reviewi ng a grant of summary judgment, we do not consider materials not before th e district court.”).

3 The district court provided tw o reasons for concluding there w as no coverage: (1) Butler was not a n insured under the policies bec ause he was not sued for actions he took as an office r or director of TCI; and (2) t he policies did not cover the damages sought in the underl ying action. Because the first reason is dispositive, we need not address the second.