3:04-CV-2531-P

Order GRANTING Plaintiffs’ Motion to Dismiss Defendant’s Counterclaim

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

ALBRITTON PROPERTIES and §

JANICE ALBRITTON, §

 §

Plaintiffs, §

 § CIVIL ACTION NO.

v. § 3:04-CV-2531-P

 §

AMERICAN EMPIRE SURPLUS LINES, §

INSURANCE COMPANY, §

 §

Defendant. §

MEMORANDUM OPINION AND ORDER

Now before the Court is Plaintiffs’ Motion to Dismiss Defendant’s Counterclaim as

Untimely Filed, or, in the Alternative, for Failure to State a Claim, filed March 8, 2005. 

Defendant filed its Response and Motion for Leave to Amend on March 16, 2005, and Plaintiffs

filed their Reply on March 24, 2005. After considering the parties’ briefs and arguments, as well

as the applicable law, the Court GRANTS Plaintiffs’ Motion to Dismiss Defendant’s

Counterclaim for Failure to State a Claim. 

Background Facts and Procedural History

Janice Albritton owns several properties in full or in part under the assumed name

Albritton Properties. (Pls.’ First Am. Compl. at 1.) Both Albritton and Albritton Properties are

the Plaintiffs in this suit. Id. American Empire Surplus Lines Insurance Company (“Defendant”)

issued several insurance policies on one of Plaintiffs’ properties, Arawak-Granada Apartments

 

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(the “Property”). (Def.’s Answer to Pls.’ First Am. Compl. & Countercl. at 1 [hereinafter “Def.’s

Answer & Countercl.”].) This opinion addresses a dispute involving policy number 4 CP 18889

(the “Policy”), which covers June 1, 2004 to June 1, 2005. Id.

On June 1, 2004, a severe thunderstorm damaged the Property’s exterior. (Def.’s Answer

& Countercl. at 8.) The Property also sustained interior damages because the shingles had been

removed while the roofs were being replaced, and water entered through the exposed decking. 

Id. Plaintiffs also claim lost business income due to the damages. Id.

Plaintiffs notified Defendant of the loss on June 7, 2004, and sought recovery for the

exterior and interior damages as well as the lost business income. (Def.’s Answer & Countercl.

at 3; Pls.’ First Am. Compl. at 4.) In response, Defendant sent out a reservation of rights letter

on June 11, 2004. (Def.’s Answer & Countercl. at 3.) Plaintiffs thereupon filed a sworn proof of

loss on August 25, 2004, but Defendant denied their claim on September 14, 2004. Id.

Plaintiffs subsequently filed suit on October 15, 2004, in the 298th District Court of

Dallas County, TX, cause no. 04-10563-M. (Pls.’ Orig. Pet. at 1.) On November 23, 2004,

Defendant removed the suit to this Court on the basis of diversity of citizenship pursuant to 23

U.S.C. § 1332(a)(3). (Def.’s Notice of Removal at 1-2.)

Plaintiffs filed their First Amended Complaint in this Court on the pleading amendment

deadline of February 18, 2005. (Def.’s Resp. Pls.’ Mot. Dismiss Def.’s Countercl. at 1

[hereinafter “Def.’s Resp.”].) Plaintiffs assert claims for breach of contract and violation of

Article 21.55 of the Texas Insurance Code for Defendant’s alleged failure to pay for the damages

and lost business income. (Pls.’ First Am. Compl. at 5-9.) Plaintiffs also bring several other

 

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claims for deceptive trade practices and violations of the duties of good faith and fair dealing. Id.

Defendant subsequently filed its Answer to Plaintiffs’ First Amended Complaint and

Counterclaim for Declaratory Judgment on February 28, 2005, ten days after the pleading

amendment deadline. (Def.’s Resp. at 1.) In its Answer, Defendant sets forth three affirmative

defenses. (Def.’s Answer & Countercl. at 5-6.) First, it asserts that the Policy it issued to

Plaintiffs does not provide coverage for the interior damages sustained on June 1, 2004. Id. at 5. 

Second, Defendant claims the Policy likewise does not cover Plaintiffs’ lost business income that

resulted from the damages. Id. Defendant’s third affirmative defense asserts that although the

Policy does in fact provide coverage for the exterior damages, those damages did not meet the

Policy’s deductible. Id. at 6.

In its Counterclaim, Defendant seeks a declaratory judgment pursuant to Texas Civil

Practice and Remedies Code § 37.00 et seq. (Def.’s Answer & Countercl. at 7.) First, it requests

the Court to declare that the Policy’s limiting provisions exclude coverage for the interior

damages. Id. at 10-11. Second, Defendant asks the Court to declare that the Policy likewise

excludes any coverage for Plaintiffs’ alleged lost business income. Id. Although Defendant

originally sought attorney’s fees as well under the counterclaim, it withdrew that claim. Id. at 4.

On March 8, 2005, Plaintiffs filed a Motion to Dismiss Defendant’s Counterclaim as

Untimely Filed, or, in the Alternative, for Failure to State a Claim pursuant to Federal Rule of

Civil Procedure 12(b)(6). Defendant filed its Response and Motion for Leave to Amend on

March 16, 2005, and Plaintiffs filed their Reply on March 24, 2005. The Court first considers

Plaintiffs’ alternative contention that Defendant’s counterclaim should be dismissed for failure to

 

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state a claim.

Rule 12(b)(6) Legal Standard

Rule 12(b)(6) authorizes dismissal of a pleading for failure to state a claim upon which

relief can be granted. Fed. R. Civ. P. 12(b)(6). A motion to dismiss for failure to state a claim is

viewed with disfavor and should rarely be granted. See Kaiser Aluminum & Chem. Sales, Inc. v.

Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982). Such a motion should be granted

only if it appears beyond doubt that the nonmoving party could prove no set of facts in support of

its claims that would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Leffall v.

Dallas Indep. Sch. Dist., 28 F.3d 521, 524 (5th Cir. 1994).

In determining whether dismissal should be granted, the Court must accept all wellpleaded facts as true and view them in the light most favorable to the party against whom

dismissal is sought. See Capital Parks, Inc. v. Southeastern Adver. and Sales Sys., Inc., 30 F.3d

627, 629 (5th Cir. 1994); Norman v. Apache Corp., 19 F.3d 1017, 1021 (5th Cir. 1994). The

Court limits its inquiry to whether the nonmoving party is entitled to offer evidence to support its

claims and does not address whether the party will ultimately prevail on the merits. Jones v.

Greninger, 188 F.3d 322, 324 (5th Cir. 1999). Dismissal is proper when "even the most

sympathetic reading of [the] pleadings uncovers no theory and no facts that would subject the

[moving party] to liability." Jacquez v. Procunier, 801 F.2d 789, 791-92 (5th Cir. 1986). 

Defendant’s Counterclaim for Declaratory Judgment

Generally, a declaratory judgment is unavailable to resolve disputes already pending

 

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before the court. BHP Petroleum Co. v. Millard, 800 S.W.2d 838, 841 (Tex. 1990). However, a

defendant’s counterclaim for declaratory judgment may be proper if it has greater ramifications

than the original suit. Id. at 842. In other words, the counterclaim must do more than merely

deny the plaintiff’s claim; it must instead seek affirmative relief. Id. A counterclaim constitutes

a claim for affirmative relief if the defendant asserts that it has an independent cause of action,

such that even if the plaintiff abandoned or failed to establish its cause of action, the defendant

could still recover benefits, compensation, or relief on the counterclaim. Id. at 841; Howell v.

Mauzy, 899 S.W.2d 690, 706 (Tex. App.–Austin 1994, writ denied). Thus, a defendant’s

declaratory judgment counterclaim must do more than simply restate its defenses to the

plaintiff’s cause of action. BHP Petroleum, 800 S.W.2d at 842.

The Court finds that because a declaratory judgment is unavailable to settle the matters on

which Defendant seeks declaration, the counterclaim fails to state a claim upon which relief can

be granted. First the parties’ dispute regarding their rights and obligations under the Policy is

already pending before the Court. In their pleadings, Plaintiffs claim a right to payment under the

Policy for the damages and lost business income. Defendant, however, responds in its

affirmative defenses that it has no duty under the Policy to cover those losses. The Court,

therefore, must establish the parties’ rights and duties under the Policy in order to settle the

breach of contract cause of action. Thus, this dispute is already pending before the Court.

Furthermore, the Court finds no evidence that Defendant’s counterclaim for declaratory

judgment would have greater ramifications than the original suit. Defendant makes no showing

that its counterclaim is an independent action that would entitle it to affirmative relief. Although

 

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Defendant attempts to distinguish the declaratory judgment counterclaim from Plaintiffs’ bad

faith claims, it still fails to establish that the counterclaim is independent of Plaintiffs’ breach of

contract claim. (Def.’s Answer & Countercl. at 4.) Thus, Defendant has failed to show that it

could recover benefits, compensation, or other relief on the counterclaim even if Plaintiffs failed

to establish their breach of contract cause of action. 

Moreover, the two grounds on which Defendant requests declaratory judgment are

essentially identical in substance to two of its three affirmative defenses. In addressing the

parties’ pleadings, the Court must necessarily determine the parties’ rights and duties under the

Policy in order to decide the breach of contract action. As such, a declaratory judgment would

simply duplicate this determination. Thus, Defendant’s declaratory judgment counterclaim

merely restates its defenses and has no greater ramifications than the original suit. Accordingly,

a declaratory judgment is unavailable to settle the dispute over the parties’ rights and duties

under the Policy, and the Court GRANTS Plaintiffs’ Motion to Dismiss Defendant’s

Counterclaim for Failure to State a Claim.

The Court, therefore, does not reach the first ground on which Plaintiffs seek dismissal of

the counterclaim for untimely filing.

IT IS SO ORDERED.

Signed this 25 day of April 2005. th

_________________________________

JORGE A. SOLIS

UNITED STATES DISTRICT JUDGE

 

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