IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

WICHITA FALLS DIVISION

VICTORIA KLEIN, et al., §

 §

Plaintiffs, §

 § Civil Action No. 7:03-CV-102-D

VS. § (Consolidated with 

 § Civil Action No. 7:09-CV-094-D)

O’NEAL, INC., d/b/a O’NEAL, §

JONES & FELDMAN §

PHARMACEUTICALS, et al., §

 §

Defendants. §

MEMORANDUM OPINION

 AND ORDER 

In this class action alleging personal injury and death claims

arising from the manufacture and distribution of E-Ferol Aqueous

Solution (“E-Ferol”), defendants Federal Insurance Company

(“Federal”) and Westchester Fire Insurance Company

(“Westchester”)——insurers against whom the class plaintiffs seek a

declaratory judgment regarding insurance coverage——move to dismiss

under Fed. R. Civ. P. 12(b)(6). The court must decide whether it

has the authority under Texas law to render a declaratory judgment

that the insurers have a duty to indemnify in this class action.

Concluding that it does not, the court grants defendants’ motions

and dismisses the actions against Federal and Westchester without

prejudice.

I

The class plaintiffs’ declaratory judgment claim is a small

part of a product liability class action. The court recites only

those facts necessary to an understanding of its decision on the

 

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insurers’ motions to dismiss. In the underlying class action

lawsuit, the plaintiff class alleges that premature infants were

administered toxic doses of a vitamin E supplement known as E-Ferol

during the period December 1983 to April 1984, resulting in

personal injury or death. One of the defendants in the underlying

class action is the developer and manufacturer of E-Ferol, CarterGlogau Laboratories, a wholly-owned subsidiary of defendant CVS

Revco D.S., Inc. (collectively, “the CVS defendants” or “CVS”).

During the relevant period, the CVS defendants were insured under

various liability insurance policies, including excess commercial

general liability policies issued by Federal and Westchester.

Federal and Westchester maintain that they are not required to

defend or indemnify CVS in the class action because the injuries

caused by E-Ferol are not within the policies’ definition of

“occurrence,” and the class plaintiffs’ claims are not covered. In

2005, after the class action lawsuit was filed, Federal brought

suit against the CVS defendants in the Northern District of Ohio,

seeking a declaratory judgment that it had no duty to defend or

indemnify CVS. The class plaintiffs were neither involved in, nor

until recently even aware of, the Ohio suit. During that

litigation, Federal and CVS reached an agreement——confirmed by

court order——that Federal has no duty to defend CVS under its

policy, but they did not resolve whether Federal has a duty to

indemnify. After becoming aware of the Ohio suit, the class

 

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plaintiffs obtained the transfer of that case to this court.

Thereafter, this court granted an unopposed motion to consolidate

the Ohio declaratory judgment action with the class action.

Before the cases were consolidated, the class action

plaintiffs filed a second amended complaint that added this

request:

Defendants Federal and Westchester should be

joined, pursuant to Rule 19(a)(1)(A), or, in

the alternative, joined, pursuant to Rule

20(a)(2)(A) and (B), Fed. R. Civ. P., in that

Federal and Westchester are excess liability

insurance carriers of Defendants Carter and

Revco, who are claiming that Carter and

Revco’s actions are not covered by their

liability insurance contracts.

2d Am. Compl. 27-28. The class plaintiffs seek a declaratory

judgment under the federal Declaratory Judgment Act (“DJA”), 28

U.S.C. §§ 2201, 2202, and Rule 57 that Federal and Westchester are

obligated under their policies to indemnify CVS for any liability

for injury or death resulting from the administration of E-Ferol.

Before the class plaintiffs filed the second amended complaint,

Federal and Westchester were not parties to the class action, and

there is no allegation that either defendant directly injured any

member of the plaintiff class. Furthermore, the class plaintiffs

assert that adding Federal and Westchester will not defeat

diversity of citizenship, which is the jurisdictional basis for the

underlying class action.

The class plaintiffs allege that they are third-party

 

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1

The case is otherwise largely settled, and proceedings have

been scheduled to consider court approval of the proposed class

action settlement. The proceeds of the Federal and Westchester

insurance policies represent a comparatively small percentage of

the available insurance to fund the settlement, and the court has

concluded that the unresolved dispute involving their insurance is

insufficient to prevent convening a fairness hearing to consider

the proposed settlement. 

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beneficiaries of the insurance contracts, and that they are the

true parties in interest regarding any assertion by Federal and

Westchester that there is no coverage. They allege in the second

amended complaint that there is a true case and controversy between

them and Federal and Westchester because the refusal of these

defendants to engage in settlement negotiations affects other

insurers who are above them in the insurance structure. They also

posit that a determination of the indemnity issue is essential for

settlement negotiations to proceed.1

Federal and Westchester move to dismiss the class plaintiffs’

declaratory judgment action, contending that they have failed to

state a claim upon which relief can be granted. The class

plaintiffs oppose the motion.

II

A

In deciding defendants’ Rule 12(b)(6) motion to dismiss, the

court construes the class plaintiffs’ second amended complaint in

the light most favorable to them, accepts as true all well-pleaded

factual allegations, and draws all reasonable inferences in their

 

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favor. See, e.g., Lovick v. Ritemoney Ltd., 378 F.3d 433, 437 (5th

Cir. 2004). To survive the motion, plaintiffs must plead “enough

facts to state a claim to relief that is plausible on its face,”

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007), and the

“[f]actual allegations must be enough to raise a right to relief

above the speculative level,” id. at 555. “A claim has facial

plausibility when the plaintiff pleads factual content that allows

the court to draw the reasonable inference that the defendant is

liable for the misconduct alleged.” Ashcroft v. Iqbal, ___ U.S.

___, 129 S.Ct. 1937, 1949 (2009).

The court here applies the Rule 12(b)(6) standard to a

declaratory judgment claim brought under the DJA. The DJA states:

“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.” 28 U.S.C. § 2201. It is well

established that the DJA is procedural only, and does not create a

substantive cause of action. See Lowe v. Ingalls Shipbuilding, A

Div. of Litton Sys., Inc., 723 F.2d 1173, 1179 (5th Cir. 1984)

(“The federal Declaratory Judgment Act . . . is procedural

only[.]”) (citing Skelly Oil Co. v. Phillips Petroleum Co., 339

U.S. 667, 671 (1950)). A declaratory judgment action is merely a

vehicle that allows a party to obtain an “early adjudication of an

 

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actual controversy” arising under other substantive law. Collin

County, Tex. v. Homeowners Ass’n for Values Essential to

Neighborhoods, 915 F.2d 167, 170 (5th Cir. 1990). Federal courts

have broad discretion to grant or refuse declaratory judgment.

Torch, Inc. v. LeBlanc, 947 F.2d 193, 194 (5th Cir. 1991). “Since

its inception, the [DJA] has been 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 (1995). The DJA is “an authorization, not a

command.” Pub. Affairs Assocs., Inc. v. Rickover, 369 U.S. 111,

112 (1962). It gives federal courts the competence to declare

rights, but it does not impose a duty to do so. Id.

B

“In this declaratory judgment action, in which subject matter

jurisdiction is based solely on diversity, federal law governs

whether a justiciable controversy exists within the purview of the

[DJA].” Standard Fire Ins. Co. v. Sassin, 894 F. Supp. 1023, 1025-

26 (N.D. Tex. 1995) (Sanders, J.). But the DJA “does not exempt

federal district courts from the constitutional requirement that

there be an actual controversy between the parities.” Id. at 1026

(citing Aetna Life Ins. Co. v. Hayworth, 300 U.S. 227, 239-41

(1937)). Furthermore, “where, as here, the declaratory judgment

involves an insurer [and] tort Plaintiffs[,] . . . the state law

which defines the substantive rights of the parties will ‘play a

 

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large role’ in the determination of whether a case or controversy

exists.” Cincinnati Ins. Co. v. RBP Chem. Tech., Inc., 2008 WL

686156, at *2 (E.D. Tex. Mar. 6, 2008) (quoting Standard Fire Ins.,

894 F. Supp. at 1026). 

A declaratory judgment action among an insurer, an insured,

and a plaintiff in a pending lawsuit against the insured

constitutes a “controversy” within the meaning of the DJA and

Article III of the Constitution. Md. Cas. Co. v. Pac. Coal & Oil

Co., 312 U.S. 270, 272-74 (1941). Merely satisfying the minimum

standards of Article III, however, does not entitle a party to a

declaratory judgment. In a diversity case, where the claims are

based on state law, the relief sought must be available under state

law. “[S]ince a federal court adjudicating a state-created right

solely because of the diversity of citizenship of the parties is

for that purpose, in effect, only another court of the State, it

cannot afford recovery if the right to recover is made unavailable

by the State.” Westport Ins. Corp. v. Atchley, Russell, Waldrop &

Hlavinka, L.L.P., 267 F.Supp.2d 601, 630 (E.D. Tex. 2003). In a

prejudgment declaratory action regarding the duty of an insurer to

indemnify, state law controls the federal court’s decision. See

Northfield Ins. Co. v. Loving Home Care, Inc., 363 F.3d 523, 537

(5th Cir. 2004); see also Nautilus Ins. Co. v. Country Oaks

Apartments Ltd., 566 F.3d 452, 458 (5th Cir. 2009) (applying Texas

law in declaratory judgment action concerning insurer’s duty to

 

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2The court rejects the class plaintiffs’ reliance on Maryland

Casualty, 312 U.S. 270, and Agora Syndicate, Inc. v. Robinson

Janitorial Specialists, Inc., 149 F.3d 371 (5th Cir. 1998), both of

which addressed only whether prejudgment declaratory judgment

actions met minimum federal standards of discretion and

justiciability. While federal justiciability is a necessary

showing in a declaratory judgment action, it is not of itself

sufficient. The class plaintiffs’ declaratory action must also

present a viable question under Texas law. Neither Maryland

Casualty nor Agora addresses the central question presented here:

whether Texas law authorizes the court to render the declaratory

judgment that they seek. 

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defend and indemnify). In a declaratory judgment action, where

“the substantive law governing the rights of the parties is

relevant to the Court’s analysis, state law applies.”2 Hunt v.

State Farm Mut. Auto Ins. Co., 655 F. Supp. 284, 286 (D. Nev. 1987)

(citing St. Paul Fire & Marine Ins. Co. v. Weiner, 606 F.2d 864,

867 (9th Cir. 1979)).

III

A

It is well established that, in Texas, “a party injured by the

insured is a third party beneficiary of a liability insurance

policy. However, he cannot enforce the policy directly against the

insurer until it has been established, by judgment or agreement,

that the insured has a legal obligation to pay damages to the

injured party.” State Farm County Mut. Ins. Co. of Tex. v. Ollis,

768 S.W.2d 722, 723 (Tex. 1989) (per curiam). Therefore, the class

plaintiffs’ assertion that they are “third-party beneficiaries of

the indemnity insurance contract” is, in the context relevant here,

 

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only partially correct. They may be third-party beneficiaries, but

absent the required judgment or agreement, their rights are not

enforceable against the insurer.

B 

In addition to the rule barring prejudgment “direct actions”

by a third-party beneficiary against an insurer, Texas imposes

specific limits on what declaratory relief is available before a

determination of liability. In declaring an insurer’s obligations,

“Texas recognizes that the duty to defend and the duty to indemnify

are distinct and separate duties.” Westport, 267 F.Supp.2d at 625.

The default rule is that a court cannot grant declaratory judgment

regarding the insurer’s duty to indemnify before the underlying

lawsuit between the injured party and the insured defendant is

resolved. See Firemen’s Ins. Co. of Newark, N.J. v. Burch, 442

S.W.2d 331 (Tex. 1968). In Burch the Texas Supreme Court held

that, although prejudgment determinations of an insurer’s duty to

defend are proper, “attempts to declare the liability of the

insurance company upon any judgment which may hereafter be rendered

in the [underlying lawsuit] is purely advisory in nature and beyond

the power and jurisdiction of the [state] district court to

render.” Id. at 332-33. 

The Supreme Court of Texas later modified the Burch rule in

Farmers Texas County Mutual Insurance Co. v. Griffin, 955 S.W.2d 81

(Tex. 1997). Griffin held that, in limited circumstances, courts

 

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can render declaratory judgments regarding the duty to indemnify in

a pending lawsuit.

We now hold that the duty to indemnify is

justiciable before the insured’s liability is

determined in the liability lawsuit when the

insurer has no duty to defend and the same

reasons that negate the duty to defend

likewise negate any possibility the insurer

will ever have a duty to indemnify.

Id. at 84 (emphasis in original). Therefore, in Texas,

“[g]enerally speaking, the duty to indemnify is decided only after

the underlying liability case is concluded. However, where an

exclusion that precludes the duty to defend would also preclude

indemnity, courts are permitted to decide the duty to indemnify in

advance of the underlying liability lawsuit’s end.” Nautilus Ins.,

566 F.3d at 458.

Under Griffin, before a determination of liability is made in

the underlying lawsuit, a declaratory judgment is available only to

negate a duty to indemnify, not to affirmatively establish such a

duty. Stated in common parlance, the Griffin exception allows only

a one-directional determination: the action must be brought by the

insurer seeking a declaratory judgment that it has no duty to

indemnify. That this is the meaning and effect of Griffin is found

in its holding: when “the same reasons that negate the duty to

defend likewise negate any possibility the insurer will ever have

a duty to indemnify,” a court can decide the indemnity question.

Griffin, 955 S.W.2d at 84 (some emphasis omitted). If Griffin

 

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created a so-called bi-directional exception to the Burch rule,

that is, if it allowed a third-party plaintiff to seek a

declaratory judgment that the insurer has a duty to indemnify, it

would be expected that the Supreme Court of Texas in Griffin or in

a later decision would have said so. That is, the court would also

have permitted the rendition of a declaratory judgment where “the

same reasons that establish the duty to defend likewise establish

that the insurer has a duty to indemnify.” 

A federal court applying Texas law can determine the indemnity

issue, however, “only when the duty to defend analysis, which looks

exclusively to the eight corners of the state court petition and

the policy, indicates that no set of alleged facts would provide

coverage, and because of the very same reasons, no duty to

indemnify could arise.” Westport, 267 F.Supp.2d at 626. If a

court determines that a duty to defend does apply, it cannot take

the next step and declare that there is also a duty to indemnify.

“[W]hen the court determines that there is a duty to defend, a

ruling on the duty to indemnify is premature.” Gehan Homes, Ltd.

v. Employers Mut. Cas. Co., 146 S.W.3d 833, 846 (Tex. App. 2004,

pet. denied). In such a case, a federal district court exercising

diversity jurisdiction “not only ha[s] discretion to refuse to

decide the duty-to-indemnify issue, but Texas law clearly

indicate[s] that it would err by doing so because the underlying

litigation was not completed.” Northfield Ins., 363 F.3d at 537.

 

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The holdings of these cases confirm what this court concludes

today: the authority to render a declaratory judgment arises in

cases that follow one direction alone——an insurer seeking a

declaratory judgment that it has no duty to indemnify, not the

other way around. 

Although the Supreme Court of Texas has not yet explicitly

applied its prohibition on third-party “direct actions” to the

context of declaratory judgment claims against insurers, given the

Burch rule and the holding of Griffin, it is difficult to discern

how such a suit could ever be maintained. Under Griffin,

prejudgment determinations of a duty to indemnify can only be

rendered in combination with decisions addressing the duty to

defend, and then only after it has been determined that there is no

duty to defend. A third-party plaintiff is hardly likely to seek

a declaratory judgment that an insurer has no duty to defend, and,

for the same reasons that negate that duty, no duty to indemnify.

Such an action would seem to run counter to a third-party

plaintiff’s usual interests.

C

The class plaintiffs attempt to support their declaratory

judgment claim by relying on a Texas Court of Appeals’ memorandum

opinion in Richardson v. State Farm Lloyds Insurance, 2007 WL

1018651 (Tex. App. Apr. 5, 2007, pet. denied) (mem. op.). In

Richardson the court held: 

 

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[F]ollowing the holding of the Texas Supreme

Court in Griffin that a declaratory judgment

action is permissible when brought by an

insurance company against a third party

seeking to have the insurance company defend

or indemnify for the conduct of its insured,

we conclude that a declaratory judgment action

is permissible when brought by a third party

seeking to have the insurance company defend

or indemnify for the conduct of its insured.

Richardson, 2007 WL 1018615, at *5 (emphasis added). Despite this

holding, Richardson then rejected the plaintiffs’ claim after

concluding that “the pleadings establish that [the insurer] will

never have a duty to defend or indemnify [the insured] for the

injuries resulting from his use of a motor vehicle to injure [the

third-party plaintiff].” Id. at *6. 

The class plaintiffs rely on Richardson to argue that Texas

law permits them to bring their declaratory judgment action

directly against Federal and Westchester. This reliance is

misplaced because Richardson appears to misapply Griffin in

reaching the merits of the plaintiff’s declaratory judgment action.

As discussed above, Griffin is one-directional: it authorizes

prejudgment determinations that there is no duty to indemnify, but

it does not allow a court to affirmatively declare that there is

such a duty. By allowing third-party plaintiffs to bring

declaratory judgment actions (seeking to establish, rather than to

negate, a duty to indemnify), Richardson turns the Griffin

exception around to proceed, so to speak, in the opposite

direction. The Richardson court’s dismissal of the claim on other

 

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grounds allowed it to overlook this problem in its holding, but it

is clear that Griffin provides no mechanism for a court to

affirmatively determine, in the context of a third-party

plaintiff’s prejudgment declaratory judgment action, that an

insurer has a duty to indemnify.

Apart from Richardson, the parties have cited——and the court

has found——little or no Texas precedent for allowing a third-party

plaintiff to bring a declaratory judgment action for indemnity

against an insurer before an underlying liability judgment in

Texas. There are, to be sure, cases holding that third-party

plaintiffs are “proper parties” to declaratory suits brought by

insurers under Griffin. See, e.g., Atl. Cas. Ins. Co. v. Ramirez,

___ F.Supp.2d ___, 2009 WL 2842901, at *3 (N.D. Tex. Sept 2, 2009)

(Furgeson, J.) (“[A]n injured party, who is a plaintiff in state

court litigation against an insured party . . . is a proper party

to a declaratory judgment action.”). But the conclusion that being

a “proper party” to litigation brought by an insurer against its

insured grants a third-party plaintiff the right to bring a

declaratory judgment action against an insurer——and in the process

completely reverse the direction of the Griffin framework——finds no

support in Texas law except, perhaps, in Richardson. But

Richardson is not controlling. When making an Erie-guess, this

court’s task is to determine how the Supreme Court of Texas would

decide the question. See, e.g., Batts v. Tow-Motor Forklift Co.,

 

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66 F.3d 743, 749 (5th Cir. 1995) (addressing Erie prediction

concerning Mississippi law). “While decisions of intermediate

state appellate courts provide guidance, they are not controlling.

If a state’s highest court has not ruled on the issue in question,

a federal court must determine, to the best of its ability, what

the highest court of the state would decide.” United Teacher

Assocs. Ins. Co. v. Union Labor Life Ins. Co., 414 F.3d 558, 565-66

(5th Cir. 2005) (citations omitted). Here, the court is confident

that the Supreme Court of Texas would not adopt a declaratory

judgment right that varies so fundamentally from the limited

exception to Burch recognized in Griffin. 

Furthermore, Richardson is distinguishable from the present

case because it involved both the duty to indemnify and the duty to

defend. See Richardson, 2007 WL 1018615, at *5. As discussed in

more detail below, the class plaintiffs’ declaratory judgment claim

does not allege that Federal and Westchester have a duty to defend

CVS in the liability action; it only addresses a duty to indemnify.

Therefore, even if, contrary to the court’s analysis, a third-party

plaintiff in Texas could bring a prejudgment declaratory judgment

action, Griffin clearly requires that the indemnification decision

rest upon a preliminary resolution concerning the duty to defend.

Indemnity can only be determined when “the same reasons that negate

the duty to defend likewise negate any possibility the insurer will

ever have a duty to indemnify.” Griffin, 955 S.W.2d at 84. The

 

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class plaintiffs’s claim does not address the duty to defend and

therefore falls outside the Griffin exception, further undermining

their reliance on Richardson.

D

 Because, in Texas, a court cannot determine an insurer’s duty

to indemnify until it has been established, by judgment or

agreement, that the insured has a legal obligation to pay damages

to the injured party, federal courts in diversity cases apply the

same rule to claims brought under the DJA. See, e.g., Nautilus

Ins., 566 F.3d at 458; Northfield Ins., 363 F.3d at 537; Atl. Cas.

Ins., 2009 WL 2842901, at *10-*13; Cincinnati Ins., 2008 WL 686156,

at *2; Nat’l Am. Ins. Co. v. Breaux, 368 F.Supp.2d 604, 619-21

(E.D. Tex. 2005); Standard Fire Ins., 894 F. Supp. at 1025-28. As

Judge Sanders explained in Standard Fire Insurance:

The Fifth Circuit, recognizing that the

prohibition on direct actions enforces the

substantive relationship between the insurer

and the tort plaintiff, has long regarded the

availability of a direct action against an

insurer as a question of substantive law that

requires a court sitting in diversity

jurisdiction to apply state law.

 

Standard Fire Ins., 894 F.Supp at 1027. “For this reason, the

Court would be unlikely to entertain a declaratory action in which

the parties’ positions were reversed——that is, in which the

plaintiff in a pending state case sought a declaration regarding an

insurer’s duty to defend or indemnify.” Id. at 1027 n.5. 

This adherence to Texas law in federal declaratory judgment

 

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3The cases that the court cites in this opinion that interpret

or apply Texas law largely (if not exclusively) address whether a

declaratory judgment can be rendered while the underlying liability

suit is still pending in state court. Given Burch’s rationale

that attempts to declare liability on a judgment that may later be

rendered in the underlying lawsuit are purely advisory and beyond

the state district court’s power and jurisdiction, Burch, 442

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actions is based on sound policy:

To allow the insurer to accomplish in the

federal forum what the state courts would deny

the insurer goes against the teachings in

[Erie R.R. Co. v. Tompkins, 304 U.S. 64

(1938)]. This is because to do so would

change materially the nature of the risks that

Texas law imposes on an insurer in deciding

whether to admit coverage, to provide a

defense or to pay a claim. In some instances,

an early declaration of rights could disturb

the balance achieved by Texas law. Therefore,

the insurer should not be able to achieve in

this action prematurely what it would be

denied in the state courts under state law.

Westport, 267 F.Supp.2d at 632. Having determined that the case

before it could not be maintained under Texas law, the Westport

court concluded:

Texas state law precludes this Court from

deciding the duty to indemnify before the

conclusion of the state court proceedings.

State law, based on interpretation of the

state constitution, does not view these

determinations as they are presented in this

case as justiciable, regardless of whether

they would be considered a “case or

controversy” for the purposes of Article III.

Therefore, while the Court has jurisdiction by

way of diversity to decide the duty to defend,

state law will not allow it to decide the

insurer’s duty to indemnify at this time in

this case.

Id. at 633.3

 

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S.W.2d at 332-33, this fact does not affect the court’s analysis.

4

Furthermore, although in deciding a Rule 12(b)(6) motion the

court can consider only the second amended complaint and certain

other documents, it is notable that the class plaintiffs admit in

a letter to the court that “[t]he Transit insurance policy that

was ‘followed’ by Federal and Westchester is an excess policy

requiring no duty to defend.” Letter to the Court, September 3,

2009, at 3. Given that the typical excess liability insurance

policy does not include a duty to defend, the Griffin exception

would seem to apply only infrequently (if at all) in the context of

excess insurance policies.

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IV

The court now turns to the question whether the class

plaintiffs’ declaratory judgment claim seeks relief that the court

can render under Texas law. The court concludes that, because the

duty to defend is absent from the claim, and because the class

plaintiffs seek a declaratory judgment that affirmatively

establishes a duty to indemnify, it cannot grant this relief. 

In their second amended complaint, the class plaintiffs

request a declaratory judgment “that Federal and Westchester are

required by the terms of their insurance contracts with Revco D.S.,

Inc. to indemnify CVS for any liability for injury or death

resulting from E-Ferol.” 2d Am. Compl. 34. The second amended

complaint does not seek any relief regarding the duty to defend and

in fact does not even mention this duty.4 The Griffin exception is

therefore inapposite because the court is not being asked to

conduct a duty-to-defend analysis. In addition, even if the duty

to defend were included, Griffin does not provide any method for a

 

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court to declare that the duty to indemnify does apply, prior to a

judgment or agreement in the underlying suit. Griffin operates

only in one direction: it allows insurers in certain circumstances

to negate the duty to indemnify, but does not offer the reverse

opportunity to third-party plaintiffs.

Because Texas law would treat this declaratory judgment claim

as nonjusticiable, this court, applying Texas law under its

diversity jurisdiction, cannot issue the declaratory judgment that

the class plaintiffs seek. Accordingly, the class plaintiffs have

failed to state a claim on which relief can be granted with regard

to their request for declaratory judgment against Federal and

Westchester.

V

Before dismissing the class plaintiffs’ claim against Federal

and Westchester, the court must decide whether to grant them leave

to amend.

[I]n view of the consequences of dismissal on

the complaint alone, and the pull to decide

cases on the merits rather than on the

sufficiency of pleadings, district courts

often afford plaintiffs at least one

opportunity to cure pleading deficiencies

before dismissing a case, unless it is clear

that the defects are incurable or the

plaintiffs advise the court that they are

unwilling or unable to amend in a manner that

will avoid dismissal. 

In re Am. Airlines, Inc., Privacy Litig., 370 F.Supp.2d 552, 567-68

(N.D. Tex. 2005) (Fitzwater, J.) (internal quotation marks omitted)

 

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5The court is dismissing this claim without prejudice so that

the class plaintiffs will not be barred from seeking relief against

Federal and Westchester should they later have grounds to do so.

The court in denying the relief they seek in this suit is holding

under Texas law that their claim is nonjusticiable. Such

dismissals are typically without prejudice. Cf. Cain v. Jackson,

2008 WL 2717185, at *1 (N.D. Tex. July 19, 2008) (Fitzwater, C.J.)

(order) (adopting magistrate judge recommendation and dismissing

case without prejudice based on Younger abstention in order to

permit refiling after state cases concluded).

- 20 -

(quoting Great Plains Trust Co. v. Morgan Stanley Dean Witter &

Co., 313 F.3d 305, 329 (5th Cir. 2002)). Here, it is clear, for

the reasons explained above, that the defects in the class

plaintiffs’ second amended complaint are incurable. There is no

factual scenario under which they can seek a prejudgment

declaratory judgment (i.e., prior to a finding of liability in the

underlying lawsuit) that Federal and Westchester have a duty to

indemnify. The court is therefore dismissing their claim without

granting them leave to amend. 

* * *

For the foregoing reasons, the court grants Federal and

Westchester’s motions to dismiss and dismisses the class

plaintiffs’ actions against Federal and Westchester without

prejudice by Rule 54(b) judgment filed today.5

 

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- 21 -

SO ORDERED.

October 30, 2009.

_________________________________

SIDNEY A. FITZWATER

CHIEF JUDGE

 

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