## F I L E D United States Court of Appeals Tenth Circuit 

### February 2, 2006
Elisabeth A. Shumaker Clerk of Court PUBLISH
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

NAUTILUS INSURANCE COMPANY, Plaintiff-Appellee,

v. 8160 SOUTH MEMORIAL DRIVE, LLC, doing business as Banana Joe’s, Defendant, and GREG BAYOUTH; DEANA HASTINGS. Defendants-Appellants. No. 05-5076

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OKLAHOMA

(D.C. No. 04-CV-448-K)

Submitted on the briefs: A. Laurie Koller, Carr & Carr, Attorneys, Tulsa, Ok lahoma, for DefendantsAppellants. Robert P. Coffey, LaCourse, Davis, Coffey & Gudgel, P.L.C., Tulsa, Oklahoma for Plaintiff-Appellee.* After examining the briefs and appellate record, th is panel has determined

unanimously that oral argument would not materiallyassist the determination of this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). T he case is therefore ordered submitted without oral argument.

-2- Before McCONNELL , ANDERSON , and BALDOCK , Circuit Judges.

McCONNELL , Circuit Judge.

This is an appeal from a declaratory judgment in an insurance dispute founded on diversity jurisdiction. We affirm. *
B ACKGROUND Nautilus Insurance Company sued Greg Bayouth, DeanaHastings, and its insured, 8160 South Memorial Drive, LLC (doing busi ness as Banana Joe’s), for declaratory relief in federal district court, alleg ing that its duty to defend and indemnify was not triggered by Bayouth and Hastings ’ state lawsuit against Banana Joe’s. Nautilus indicated that Bayouth and Hastings were seeking damages in state court for being struck by a BananaJoe’s employee and for Banana Joe’s negligent hiring, training, and superv ision of that employee. Nautilus’s policy excludes from coverage bodily inj ury caused by “any alleged assault and battery” or the “negligent hiring, plac ement, training or supervision arising from actual or alleged assault or battery.” Aplt. App. at 53.-3-

Bayouth and Hastings answered Nautilus’s complaint and were deposed. Banana Joe’s also answered, but later joined with N autilus in filing an “Application to Withdraw Answer and Stipulation of the Parties,” id. at 72. In the application, Banana Joe’s and Nautilus “agree[d ] that with the Withdrawal of [Banana Joe’s] answer, [Nautilus] is entitled to a declaratory judgment” finding that Nautilus’s policy “does not cover the incidentas described in” Bayouth and Hastings’ lawsuit. Id. Banana Joe’s and Nautilus submitted a proposed or der along with the application. Bayouth and Hastings f iled an objection, summarily stating that the proposed order “deprives them of d ue process,” “represents collusion between [Nautilus] and [Banana Joe’s],” and lacks “a factual basis upon which to base a Declaratory Judgment.” Id. at 74. The district court entered the order, allowing Banana Joe’s to withdraw its answerand granting Nautilus a declaratory judgment that it had no duty to defend or indemnify Banana Joe’s. Bayouth and Hastings appeal.
D ISCUSSION The Declaratory Judgment Act provides, in relevant part: In a case of actual controversy within its jurisdic tion, . . . any court of the United States, upon the filing of an appropr iate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further re lief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.1 But the substance of a declaratory judgment is revi ewed just like any other

district court decision: “legal questions are revi ewed de novo, and findings of fact are reviewed with a more deferential standard. ” 12 James Wm. Moore, Moore’s Federal Practice § 57.101[2] (3d ed. 2005). Because Bayouth and Hastings tender no challenge to the accuracy of the district court’s insurance policy interpretation, coverage issues are beyond o ur review. -4- 28 U.S.C. § 2201. A district court’s decision to e xercise its discretion and issue a declaratory judgment “will not be overturned absenta showing of clear abuse of . . . discretion.” Kunkel v. Cont’l Cas. Co. , 866 F.2d 1269, 1273 (10th Cir. 1989). 1 Bayouth and Hastings urge us to “assume that the Di strict Court decided that [they] were not necessary parties,” Aplt. Br. at 11, and to then follow Federal Kemper Insurance Co. v. Rauscher , 807 F.2d 345, 353-54 (3d Cir. 1986) (holding that the insurer’s declaratory relief action presen ted a justiciable controversy for the injured parties even though the insured tortfea sor had suffered a default judgment), Harris v. Quinones , 507 F.2d 533, 536-37 (10th Cir. 1974) (concluding that res judicata did not bar the litig ation of coverage issues between the insurer, the “omnibus insured,” and the injured party where the insurer had previously litigated those issues to a default judg ment against the “named insured”), and Hawkeye-Security Insurance Co. v. Schulte , 302 F.2d 174, 177 (7th Cir. 1962) (holding that the district court erred i n dismissing the injured party from the insured’s declaratory relief action based on a default judgment entered2 Bayouth and Hastings state in a heading of their br ief that they were denied

“an opportunity to be heard.” Aplt. Br. at 9. The y also mention in the text that there is an issue as to “whether all necessary part ies were ever joined in the present case,” given that the Banana Joe’s employee who allegedly battered them “was not named in the federal court action.” Id. at 14. But we do not reach issues unaccompanied by any argument. Phillips v. Calhoun , 956 F.2d 949, 953-54 (10th Cir. 1992). -5- against the insured and the insured’s tortfeasor so n). We will not indulge such an assumption for two reasons. First, Bayouth and Has tings said nothing about necessary parties when they objected to Nautilus’s proposed order for a declaratory judgment. See Hill v. Kansas Gas Serv. Co. , 323 F.3d 858, 866 (10th Cir. 2003) (stating that we generally do not consider arguments raised for the first time on appeal). Second, to the extent t hat the insurance coverage issue between Nautilus and Banana Joe’s created an actual controversy between Nautilus and Bayouth and Hastings, see Maryland Cas. Co. v. Pacific Coal & Oil
Co. , 312 U.S. 270, 274 (1941) (holding that there is a n actual controversy between an insurer and the party injured by the ins ured), that controversy was resolved by the declaratory judgment. Nowhere did the district court suggest that Bayouth and Hastings were not necessary parties or that their interests were merely derivative of Banana Joe’s. Nor was there a ny default judgment. Consequently, Rauscher , Harris , and Schulte do not apply here. 2 Bayouth and Hastings next contend that there “was n ot enough of a factual record developed to enable the [c]ourt to issue a d eclaratory judgment.” Aplt. Br.-6-

at 17. But they do not identify any missing facts necessary to resolve coverage issues, such as the applicability of the policy’s a ssault and battery exclusions. While district courts should “refrain from giving adeclaration unless there is a full-bodied record developed through adequate adver sary proceedings with all interested parties before the court,” 10B Charles A . Wright et al., Federal Practice & Procedure § 2759, at 551-52 (3d ed. 1998), we will not presu me that a declaratory judgment rests on an inadequate record without some suggestion how a more fully developed record would compel a differ ent result. Bayouth and Hastings’ final argument is not entirel y clear. They state that “[o]nce Banana Joe’s withdrew its answer, it no lon ger had a personal stake in the outcome of the case,” and therefore, “that makes th e action taken below collusive.” Aplt. Br. at 19. They then explain:

When Banana Joe’s withdrew its Answer, there was no longer a justiciable controversy between Nautilus and Banana Joe’s. Thus, without the presence of Bayouth and Hastings, the D istrict Court did not have subject matter jurisdiction under the Decl aratory Judgment Act’s “actual controversy” requirement to enter [th e declaratory judgment]. If Bayouth and Hastings were not partie s at the time the Court entered its [judgment], then the proper cours e of the Court would have been to dismiss the action. Id. at 21-22 (quoting 28 U.S.C. § 2201). Initially, w e question the premise that Bayouth and Hastings were somehow absent from the p roceedings below. They both appeared and filed an answer. That fact did n ot change once Banana Joe’s withdrew its answer. Bayouth and Hastings’ furthercharacterization of the action-7-

below as “collusive,” id. at 19, is similarly unavailing. A collusive actio n is “[a]n action between two parties who have no actual contr oversy, being merely for the purpose of determining a legal question or receivin g a precedent that might prove favorable in related litigation.” Black’s Law Dictionary 32 (8th ed. 2004). We fail to see how Banana Joe’s withdrawal of its answ er, simultaneous to the district court’s grant of a declaratory judgment, meant thatthere was no bona fide controversy over which the district court could hav e exercised jurisdiction. Banana Joe’s appeared in the action, filed an answe r, and apparently remained defiant until after the depositions of Bayouth and Hastings. And even if this were a case in which Banana Joe’s “has had no active participation, over which [it] has exercised no control, and the expense of which [it] has not borne,” so as to indicate collusion, see United States v. Johnson , 319 U.S. 302, 305 (1943), Bayouth and Hastings’ participation would have supp lied sufficient adversity to compensate for any adversity lost when Banana Joe’s withdrew its answer. We conclude that the district court did not clearly abuse its discretion in granting Nautilus a declaratory judgment. Accordin gly, the judgment of the district court is AFFIRMED.