United States District Court, D. New Mexico
PROPOSED FINDINGS AND RECOMMENDED
H. RITTER UNITED STATES MAGISTRATE JUDGE.
MATTER comes before the Court on Defendant's
Motion to Dismiss or, in the Alternative, to Stay
Proceedings, filed on September 22, 2017 (the
“Motion”). (Doc. 9). The Court has considered the
Motion and attached exhibits, Plaintiff International
Insurance Company of Hannover SE's Response Opposing
Defendant Connors & Son's Motion to Dismiss or, in
the Alternative, to Stay Proceedings, filed on October 6,
2017 (Doc. 14), and Defendant's Reply in Support of
Motion to Dismiss or, in the Alternative, to Stay
Proceedings, filed on October 30, 2017. (Doc. 18). Having
thoroughly considered the parties' submissions and the
relevant law, the undersigned recommends that the Court find
that the Motion is not well taken and should be denied.
to the Complaint, Plaintiff issued a commercial general
liability policy (CGL) to insure Defendant Connors & Sons
Classy Construction, LLC (“Connors & Sons”),
between May 1, 2013 - May 1, 2014. (Doc. 1 at ¶ 17).
Connors & Sons began general contracting work for a
custom home built by Defendants Blaine and Amanda Wiles in
August 2013. (Doc. 1 at ¶ 21). Connors & Sons
contracted Miller's Insulation & Fireproofing, Inc.
to install Icynene SPF, per the Wiles' request. (Doc. 9-1
at 2). After the Icynene SPF was installed and the Wiles
moved into the house, they complained that the Icynene SPF
was causing noxious and harmful fumes, gases, and odors to
fill the house. (Doc. 1-2 at 4-5). The Wiles then submitted a
demand letter to Connors & Sons, and IICH retained
counsel to represent Connors & Sons as their insured.
(Doc. 9 at 5). On November 3, 2016, Blaine and Amanda Wiles
filed a complaint against Icynene Corporation, Miller's
Insulation & Fireproofing, and Connors & Sons in
state court in the Thirteenth Judicial District of New
Mexico. (Doc. 1-2). IICH was not added as a defendant in the
state court case, and has not sought to intervene in that
August 11, 2017, IICH filed the instant Complaint for
Declaratory Judgment Relief, in which it seeks a declaration
from the Court pursuant to the Declaratory Judgment Act, that
the allegations in the Wiles' state court complaint are
not covered by Connors & Sons' insurance policy with
IICH. (Doc. 1 at 18-19). On September 21, 2017, Defendants
Blaine and Amanda Wiles filed their Answer to the Complaint.
September 22, 2017, Defendant Connors & Sons filed the
subject Motion to Dismiss, or in the Alternative, to Stay
Proceedings. (Doc. 9). Connors & Sons argues that this
Court should either dismiss, or abstain from hearing, this
case because unresolved factual issues regarding an
insurer's duty to defend and indemnify in the primary
state court case overlap with the factual issues that will
necessarily be at issue in this case. (Id. at 2).
IICH responds that federal courts are allowed to make factual
determinations in declaratory actions, and Defendant
“fails to identify overlapping factual issues that
would preclude this Court retaining declaratory judgment
jurisdiction.” (Doc. 14 at 2). Connors & Sons, in
its Reply, states that the “overlapping nature of the
factual issues is manifest, ” the Declaratory Judgment
Act is discretionary, and the state court case is the more
appropriate forum to address the issues of IICH's duties
to defend and indemnify. (Doc. 18 at 2, 3-8).
Complaint is governed by the Declaratory Judgment Act under
28 U.S.C. § 2201, which 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. Any such declaration shall have the force and effect
of a final judgment or decree and shall be reviewable as
Fed. R. Civ. P. 57 also provides that the Federal Rules of
Civil Procedure govern declaratory judgments under 28 U.S.C.
§ 2201, and states that “the existence of another
adequate remedy does not preclude a declaratory judgment that
is otherwise appropriate.”
decision to exercise jurisdiction over a declaratory judgment
action is discretionary. “While this statute vests the
federal courts with power and competence to issue a
declaration of rights, the question of whether this power
should be exercised in a particular case is vested in the
sound discretion of the district courts.” St. Paul
Fire & Marine Ins. Co. v. Runyon, 53 F.3d 1167, 1168
(10th Cir. 1995) (citing Public Affairs Assocs., Inc. v.
Rickover, 369 U.S. 111, 112 (1962) (per curiam)).
The Court has Subject Matter Jurisdiction to Hear
Connors & Sons emphasizes the discretionary nature of the
federal court's jurisdiction over declaratory judgments.
(Doc. 9 at 4; Doc. 18 at 2) (citing Brillhart v. Excess
Ins. Co. of America, 316 U.S. 491 (1942)). In
Brillhart, after setting forth the discretionary
standard under the Federal Declaratory Judgment Act, the
Supreme Court also noted that, “[o]rdinarily 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 a state court presenting the same issues, not
governed by federal law, between the same parties.” 316
U.S. at 495. The Supreme Court did not preclude jurisdiction
over such cases, but advised that federal courts should
“ascertain whether the questions in controversy between
the parties to the federal suit, and which are not foreclosed
under the applicable substantive law, can better be settled
in the proceeding pending in the state court.”
Id. In analyzing this question, Courts should
inquire “into the scope of the pending state court
proceeding and ...