Opinion ID: 32178
Heading Depth: 2
Heading Rank: 3

Heading: Applying the Trejo Factors: The Fairness Concerns of Forum Selection

Text: 69 Sherwin-Williams acknowledged in its complaint that it brought its declaratory judgment action in response to the threat of future state court abatement cases filed by the declaratory judgment defendants, making the declaratory judgment action literally anticipatory. (Docket Entry No. 1, ¶¶ 62-67, Exs. A, B). A proper purpose of section 2201(a) is to allow potential defendants to resolve a dispute without waiting to be sued or until the statute of limitations expires. Texas Employers' Ins. Assoc. v. Jackson, 862 F.2d 491, 505 (5th Cir.1988). The mere fact that a declaratory judgment action is brought in anticipation of other suits does not require dismissal of the declaratory judgment action by the federal court. 70 Mission Ins. Co. v. Puritan Fashions Corp., 706 F.2d 599 (5th Cir.1983), is often cited for the proposition that a declaratory judgment action brought in anticipation of litigation should be dismissed. Plaintiff brought a declaratory judgment action in Texas federal court before the defendant could file suit in California state court. This court upheld the district court's dismissal of the declaratory judgment action, citing the pending parallel California case and the inequity of permitting [the declaratory judgment plaintiff] to gain precedence in time and forum by its conduct. 706 F.2d at 602. Because California and Texas had different choice of law rules, the difference in forum changed the law that applied. The substantive provisions of California and Texas law differed significantly. Id. at 602 n. 3. The Mission Ins. Co. court concluded that the declaratory judgment plaintiff used the federal declaratory judgment statute and the defendant's inability to file an earlier state court suit for the sole purpose of controlling the state law that would apply. The Mission Ins. Co. court cited this as improper procedural fencing undermining the wholesome purposes of declaratory actions. Id. at 602 n. 3. 7 71 Declaratory judgment actions often involve the permissible selection of a federal forum over an available state forum, based on the anticipation that a state court suit will be filed. In Kapiloff, 155 F.3d at 494, the plaintiff insurance company sought a declaratory judgment in federal court that it was not liable for certain losses suffered by the defendant. The defendant subsequently brought a similar action in state court. The federal district court declined to dismiss and the Fourth Circuit affirmed. The court noted that the declaratory judgment plaintiff properly invoked standard diversity jurisdiction to resolve issues traditionally resolved in declaratory judgment actions. Despite the fact that plaintiff may have predicted that there would be a related suit filed in state court (making the federal suit anticipatory), without more, we cannot say that [the declaratory plaintiff's] action is an instance of forum-shopping instead of a reasonable assertion of its rights under the declaratory judgment statute and diversity jurisdiction. Id. The Ninth Circuit similarly concluded that even if the insurer anticipated a state court declaratory judgment coverage action, we know of no authority for the proposition that an insurer is barred from invoking diversity jurisdiction to bring a declaratory judgment action against an insured on an issue of coverage. Dizol, 133 F.3d at 1225 (quoting Aetna Cas. & Sur. Co. v. Merritt, 974 F.2d 1196, 1199 (9th Cir.1992)). 72 Sherwin-Williams filed the federal suit in anticipation that school districts and counties would file a number of similar suits in Mississippi state courts. Although the two suits that school districts had filed in state courts had been removed based on fraudulent joinder, there was no assurance that all future cases could successfully be removed. Compare Kapiloff, 155 F.3d at 494 (where there was no way to know that the declaratory judgment defendants would name nondiverse parties in the related subsequent state court action, making it unremovable, court did not abuse its discretion by declining to dismiss the federal declaratory judgment action), with Robsac, 947 F.2d at 1372-73 (where nondiverse defendants were present in the state action, federal district court should dismiss the declaratory judgment action to avoid piecemeal litigation and to prevent de facto partial removal of the state court case). 8 73 This court's ruling in Travelers Ins. Co. v. Louisiana Farm Bureau Fed'n, 996 F.2d 774 (5th Cir.1993) supports Sherwin-Williams's argument that it was not engaged in impermissible procedural fencing. Travelers involved an insurance policy issued to numerous members of a farming organization. When the declaratory judgment plaintiff sought to terminate certain benefits in the policy, many policy enrollees retained counsel and threatened litigation. Three plaintiffs filed separate state court suits. Faced with the prospect of further similar lawsuits, the insurer filed a declaratory judgment action in federal court. This court held that plaintiff was not engaged in impermissible forum shopping: 74 Travelers explained in its original complaint that it brought suit so that one pertinent issue, which involved seventeen [members of defendant farming organization] who could have brought suit in multitudinous forums in Louisiana and Mississippi, could be resolved consistently in one, rather than multiple, forums. Such a goal, unlike that of changing forums or subverting the real plaintiff's advantage in state court, is entirely consistent with the purposes of the Declaratory Judgment Act. 75 Travelers, 996 F.2d at 777. In this case, Sherwin-Williams alleges that the declaratory judgment defendants had announced their intention to file and pursue lawsuits in a number of state courts in Mississippi. Sherwin-Williams alleged in its declaratory judgment complaint that it sought a resolution of certain issues of federal and state law that would be common to the threatened lawsuits, to avoid the repetitive litigation it would encounter if the state court suits were filed, as anticipated. (Complaint, ¶¶ 68-69). Travelers supports the use of the Declaratory Judgment Act to resolve issues pertinent to the suits in one, rather than multiple, forums. 996 F.2d at 777. 76 The district court justified its finding that Sherwin-Williams engaged in impermissible forum shopping by stating that Sherwin-Williams seeks declaratory relief against Mississippi counties that are frequently mentioned as being counties in which large jury verdicts are awarded and noting that federal forums in the State of Mississippi are sought by some manufacturers in an attempt to avoid the state court system. These factors are not mentioned in the complaint or in the parties' briefs on the motion to dismiss. Those factors do not remove the legitimate reason, recognized by this court in Travelers, for Sherwin-Williams's choice of federal forum for this declaratory judgment suit. See Travelers, 996 F.2d at 776-77, 779 (avoiding multiple lawsuits in multiple courts is a legitimate reason for bringing federal declaratory judgment action). The second reason the district court gave in support of its finding of forum shopping, the fact that federal forums are sought by some manufacturers in an attempt to avoid the state court system, does not necessarily demonstrate impermissible forum selection when the declaratory judgment out-of-state plaintiff invokes diversity. Rather, it states the traditional justification for diversity jurisdiction, to protect out-of-state defendants. See Chick Kam Choo v. Exxon Corp., 764 F.2d 1148, 1153 n. 3 (5th Cir. 1985). 77 The selection of the federal forum in this case did not change the law that would apply; Sherwin-Williams brought the suit in Mississippi federal court, against Mississippi defendants. Mississippi law would apply to the claims between the parties, whether in state or federal court. 9 There is no evidence that Sherwin-Williams brought its declaratory judgment action in search of more favorable law. There is also no evidence that the declaratory judgment defendants had been restricted from filing state court actions, averting the possibility that Sherwin-Williams was engaged in a race to res judicata.  Compare Aetna Cas. & Sur. Co., 139 F.3d at 423 (declaratory defendant barred from filing state court action because it had not exhausted state administrative remedies). 78 The record does not support a finding that Sherwin-Williams engaged in impermissible forum shopping by filing this declaratory judgment suit.