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, Oklahoma, for DefendantsAppellants.

Robert P. Coffey, LaCourse, Davis, Coffey & Gudgel, P.L.C., Tulsa, Oklahoma

for Plaintiff-Appellee.
* After examining the briefs and appellate record, this panel has determined

unanimously that oral argument would not materially assist the determination of

this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is

therefore ordered submitted without oral argument.

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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.*

BACKGROUND

Nautilus Insurance Company sued Greg Bayouth, Deana Hastings, and its

insured, 8160 South Memorial Drive, LLC (doing business as Banana Joe’s), for

declaratory relief in federal district court, alleging 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 Banana Joe’s employee and for

Banana Joe’s negligent hiring, training, and supervision of that employee. 

Nautilus’s policy excludes from coverage bodily injury caused by “any alleged

assault and battery” or the “negligent hiring, placement, training or supervision

arising from actual or alleged assault or battery.” Aplt. App. at 53.
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Bayouth and Hastings answered Nautilus’s complaint and were deposed. 

Banana Joe’s also answered, but later joined with Nautilus 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 incident as described in” Bayouth and

Hastings’ lawsuit. Id. Banana Joe’s and Nautilus submitted a proposed order

along with the application. Bayouth and Hastings filed an objection, summarily

stating that the proposed order “deprives them of due 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 answer and granting Nautilus a

declaratory judgment that it had no duty to defend or indemnify Banana Joe’s.

Bayouth and Hastings appeal.

DISCUSSION

The Declaratory Judgment Act provides, in relevant part:

In 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. 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 reviewed just like any other

district court decision: “legal questions are reviewed 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 our review.

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28 U.S.C. § 2201. A district court’s decision to exercise its discretion and issue a

declaratory judgment “will not be overturned absent a 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 District 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 presented a justiciable controversy for

the injured parties even though the insured tortfeasor 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 litigation of coverage issues between

the insurer, the “omnibus insured,” and the injured party where the insurer had

previously litigated those issues to a default judgment 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 in dismissing the injured party

from the insured’s declaratory relief action based on a default judgment entered
2 Bayouth and Hastings state in a heading of their brief that they were denied

“an opportunity to be heard.” Aplt. Br. at 9. They also mention in the text that

there is an issue as to “whether all necessary parties 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).

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against the insured and the insured’s tortfeasor son). We will not indulge such an

assumption for two reasons. First, Bayouth and Hastings 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 that 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 an actual controversy

between an insurer and the party injured by the insured), 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 any default judgment. 

Consequently, Rauscher, Harris, and Schulte do not apply here.2

Bayouth and Hastings next contend that there “was not enough of a factual

record developed to enable the [c]ourt to issue a declaratory judgment.” Aplt. Br.
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at 17. But they do not identify any missing facts necessary to resolve coverage

issues, such as the applicability of the policy’s assault and battery exclusions. 

While district courts should “refrain from giving a declaration unless there is a

full-bodied record developed through adequate adversary 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 presume that a

declaratory judgment rests on an inadequate record without some suggestion how

a more fully developed record would compel a different result.

Bayouth and Hastings’ final argument is not entirely clear. They state that

“[o]nce Banana Joe’s withdrew its answer, it no longer had a personal stake in the

outcome of the case,” and therefore, “that makes the 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 District Court did

not have subject matter jurisdiction under the Declaratory Judgment

Act’s “actual controversy” requirement to enter [the declaratory

judgment]. If Bayouth and Hastings were not parties at the time the

Court entered its [judgment], then the proper course of the Court

would have been to dismiss the action.

Id. at 21-22 (quoting 28 U.S.C. § 2201). Initially, we question the premise that

Bayouth and Hastings were somehow absent from the proceedings below. They

both appeared and filed an answer. That fact did not change once Banana Joe’s

withdrew its answer. Bayouth and Hastings’ further characterization of the action
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below as “collusive,” id. at 19, is similarly unavailing. A collusive action is “[a]n

action between two parties who have no actual controversy, being merely for the

purpose of determining a legal question or receiving 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 answer, simultaneous to the district

court’s grant of a declaratory judgment, meant that there was no bona fide

controversy over which the district court could have exercised jurisdiction. 

Banana Joe’s appeared in the action, filed an answer, 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 supplied 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. Accordingly, the judgment of the

district court is AFFIRMED.