Court Opinion

ID: 38417
Source: CourtListenerOpinion
Date Created: 2010-04-25 20:07:47+00
Date Added: 2024-06-11T17:15:59.196574
License: Public Domain

United States Court of Appeals
                                                              Fifth Circuit
                                                           F I L E D
                  UNITED STATES COURT OF APPEALS
                       FOR THE FIFTH CIRCUIT                 May 20, 2005

                                                       Charles R. Fulbruge III
                                                               Clerk
                             No. 04-20450

                        RLI INSURANCE CO.,
     as Successor-in-Interest to Underwriters Indemnity Co.,

                                              Plaintiff-Appellant,

                                versus

          WAINOCO OIL & GAS CO. and FRONTIER OIL CORP.,

                                             Defendants-Appellees.

          Appeal from the United States District Court
               For the Southern District of Texas
                             (04-CV-553)

Before DAVIS, SMITH, and DeMOSS, Circuit Judges.

PER CURIAM*:

     Plaintiff-Appellant RLI Insurance Co. (“RLI”) appeals from the

district court’s decision to stay the federal declaratory judgment

action RLI brought against Defendants-Appellees Wainoco Oil & Gas

Co. (“Wainoco”) and Frontier Oil Corp. (“Frontier”) (together,

“Appellees”) pending the outcome of a related California state

court action.   We AFFIRM.

     *
      Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
                                   BACKGROUND

       RLI is the successor-in-interest to Underwriters Indemnity Co.

(“UIC”). In the 1980s, UIC sold four insurance policies to Wainoco

Oil Corp., the parent company of Wainoco and now known as Frontier.

These policies covered the period from October 1987 to October

1989.    Frontier is a Wyoming corporation with its principal place

of business in Texas.          UIC was both incorporated and located in

Texas, while RLI is both incorporated and located in Illinois.

       Between    1985   and    1995,   Appellees   operated      oil    and   gas

facilities on the campus of Beverly Hills High School.                   In June

2003 Appellees and other unrelated parties were named as defendants

in    numerous    California    state   court   tort     suits   for    allegedly

releasing toxic chemicals at Beverly Hills High School and causing

injuries to those exposed.

       During this time frame, Appellees had over 45 policies in

effect issued by at least 15 insurance groups.            Shortly after being

named    as   defendants,      Appellees    contacted    their   insurers      and

requested they provide defense and indemnity, if necessary. Having

not    received    any   definitive     response,   on    January      29,   2004,

Appellees’ counsel wrote to all of its clients’ insurers, asking

each to state its coverage position.             RLI did not respond, but

instead on February 12, 2004, filed the instant declaratory action

in federal court in Texas, seeking a declaration that RLI did not

owe Appellees a duty to defend or to indemnify in the California

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tort actions.       The next day, RLI informed Appellees by letter that

it was denying coverage.

     In response, on February 25, 2004, Appellees initiated an

action   in   California       state   court    against   all    their    primary

insurers, including RLI, requesting a declaratory judgment that all

of their primary insurers owe a duty to defend the California tort

suits, and alleging breach of contract against RLI and another

insurer which also expressly denied coverage.

     Appellees moved the federal district court to dismiss the

Texas case or, in the alternative, stay it pending the resolution

of the California state court coverage action.                    Based on the

discretion    afforded    to    district    courts   under      the   Declaratory

Judgment Act, 28 U.S.C. § 2201 (“DJA”), and the Brillhart v. Excess

Insurance Co. of America, 316 U.S. 491, 495 (1942), abstention

doctrine,     the   district    court   determined     that     abstention   was

appropriate and stayed the action.             RLI timely appealed.

                                  DISCUSSION

     We review a district court’s decision whether to exercise its

jurisdiction under the DJA and Brillhart for abuse of discretion.

Wilton v. Seven Falls Co., 515 U.S. 277, 289-90 (1995).                 “[U]nless

the district court addresses and balances the purposes of the

Declaratory Judgment Act and the factors relevant to the abstention

doctrine on the record, it abuses its discretion.”                St. Paul Ins.

Co. v. Trejo, 39 F.3d 585, 590 (5th Cir. 1994) (citation omitted).

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       The DJA provides that “[i]n 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(a).         The DJA “has been understood to confer on

federal    courts   unique    and   substantial       discretion    in   deciding

whether to declare the rights of litigants.”               Wilton, 515 U.S. at

286.    In Brillhart, the Supreme Court explained:

       Ordinarily it would be uneconomical as well as vexatious
       for a federal court to proceed in a declaratory judgment
       suit where another suit is pending in state court
       presenting the same issues, not governed by federal law,
       between the same parties. Gratuitous interference with
       the orderly and comprehensive disposition of a state
       court litigation should be avoided.

316 U.S. at 495.        Brillhart abstention is applicable when a

district court considers abstaining from exercising jurisdiction

over a declaratory judgment action.               Southwind Aviation, Inc. v.

Bergen Aviation, Inc., 23 F.3d 948, 950 (5th Cir. 1994) (per

curiam).

       This Court in Trejo identified seven nonexclusive factors for

a district court to consider in deciding whether to abstain from

adjudicating a declaratory judgment action:

       1) whether there is a pending state action in which all
       of the matters in controversy may be fully litigated, 2)
       whether the plaintiff filed suit in anticipation of a
       lawsuit filed by the defendant, 3) whether the plaintiff
       engaged in forum shopping in bringing the suit, 4)
       whether possible inequities in allowing the declaratory

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     plaintiff to gain precedence in time or to change forums
     exist, 5) whether the federal court is a convenient forum
     for the parties and witnesses, . . . 6) whether retaining
     the lawsuit in federal court would serve the purposes of
     judicial economy, and . . . [7)] whether the federal
     court is being called on to construe a state judicial
     decree involving the same parties and entered by the
     court before whom the parallel state suit between the
     same parties is pending.

39 F.3d at 590-91 (internal citation omitted).            The district court

operated under this exact Trejo framework when deciding to abstain

here.   RLI argues that the court misconstrued these factors in

numerous ways and thus abused its discretion.                Appellees contend

the district court properly exercised its discretion.

     As to the first Trejo factor, the district court found it to

weigh in favor of dismissal or stay because the California coverage

suit presented a parallel state proceeding in which all matters in

controversy here may be fully litigated.               As to the second and

third Trejo factors, the district court found them to be neutral

because both sides had engaged in “procedural fencing” in filing

their respective suits.             As to the fourth Trejo factor, the

district court found it to weigh in favor of dismissal or stay.

The court determined that little inequity to RLI would result from

requiring all the coverage determinations to occur in California

where the subject of the insurance is located. Moreover, the court

noted   that   RLI   is   not   a   Texas   company,   the    insureds   prefer

California as the litigation situs, and the vast majority of the

insurers involved in the underlying California tort suits are

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likewise defendants in the California coverage action.              As to the

fifth Trejo factor, the court found it to be neutral because of the

relative convenience of both forums, depending on whether just the

duty to defend or also the duty to indemnify was at issue.              As to

the sixth Trejo factor, the district court found it to weigh in

favor of dismissal or stay because deference to a pending state

action in which all of the primary insurers are joined would allow

one court to decide the issues in this case.            The district court

properly noted that the seventh Trejo factor is not implicated in

this case.    Because all the Trejo factors either weighed in favor

of yielding to the California coverage action, or were neutral, the

district    court    concluded     it   was   appropriate   to   exercise   its

discretion under the DJA and Brillhart and refrain from deciding

this case.    In an effort to assure the availability of a federal

forum should the California coverage action fail to resolve the

matter in controversy, the district court stayed, rather than

dismissed, the case.          See Wilton, 515 U.S. at 288 n.2.

     Here, the record reflects a reasoned memorandum and order by

the district court, which addressed and balanced the purposes of

the DJA and the factors relevant to the Brillhart abstention

doctrine.    See Trejo, 39 F.3d at 590.         Therefore, we find that the

district court did not abuse its discretion in choosing to stay the

federal action pending the outcome of the related California state

court action.       See id.

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                           CONCLUSION

     Having carefully reviewed the record of this case and the

parties’ respective briefing and arguments, for the reasons set

forth above, we AFFIRM the district court’s order.

AFFIRMED.

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