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Markel American Insurance Co v. Stark

United States District Court, W.D. Washington, Seattle

November 9, 2017

MARKEL AMERICAN INSURANCE COMPANY, a foreign insurer, Plaintiff,
v.
GREG STARK, an individual, Defendant.

          ORDER STAYING CASE

          RICARDO S. MARTINEZ, CHIEF UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         This matter comes before the Court on Defendant Greg Stark's Motion to Dismiss or Stay Action (Dkt. #7), Plaintiff Markel American Insurance Company (“Markel”)'s Motion to Consolidate Cases (Dkt. #16), Markel's Counter-Motion for Declaration of Jurisdiction (Dkt. #18), and Mr. Stark's Motion for Relief from Deadlines (Dkt. #23). The Court has determined that oral argument is unnecessary. For the reasons below, the Court agrees with Mr. Stark that a stay of this case is warranted, GRANTS his Motion to Dismiss or Stay Action, and DENIES as moot all other pending Motions.

         II. PROCEDURAL BACKGROUND

         This case concerns a dispute over an insurance policy issued by Plaintiff Markel to Defendant Stark, covering a 1960 Chris Craft vessel that was destroyed in a fire on May 21, 2017. Dkt. #1 at 2; see also Dkt #9-1.

         On September 5, 2017, Mr. Stark initiated a state court action in King County Superior Court against Markel and another defendant, Degginger McIntosh & Associates, Inc. (“DMA”) for reformation of the Markel Policy. See Dkt. #9-1.

         Two days after Mr. Stark filed suit in state court, Markel filed the instant action, seeking declaratory judgment that there is no coverage under the Markel Policy and that the policy should not be equitably reformed. Dkt. #1. On October 5, 2017, Markel removed Mr. Stark's state court action to this Court in Case No. 2:17-cv-1498-RSM. Mr. Stark filed a Motion to Remand in that case, which the Court granted. See Case No. 2:17-cv-1498-RSM, Dkt. #19. That Order sets forth additional factual background and addresses many of the same legal issues raised by the parties in this case. See id.

         In this action, meanwhile, the parties have filed several motions. The Court will first address Defendant Stark's Motion to Dismiss or Stay Action, Dkt. #7.

         III. DISCUSSION

         A. Motion to Dismiss or Stay Action

         “Although courts usually avoid duplicative litigation when similar cases are pending in two different federal courts, ‘[g]enerally, as between state and federal courts, the rule is that the pendency of an action in the state court is no bar to proceedings concerning the same matter' in a federal court.” R.R. St. & Co. v. Transp. Ins. Co., 656 F.3d 966, 974-975, (9th Cir. 2011) (quoting Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976)) (internal quotation marks omitted) (emphasis in original). A district court has discretion to dismiss or stay a federal declaratory judgment action when “the questions in controversy… can better be settled in” a pending state court proceeding. Brillhart v. Excess Insurance Co. of America, 316 U.S. 491, 495, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942). The Court reaffirmed this principle in Wilton v. Seven Falls Co., 515 U.S. 277, 290, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995), holding that a district court may decline to entertain a federal declaratory judgment action when state court proceedings “present[] opportunity for ventilation of the same state law issues.” The Ninth Circuit has allowed district courts broad discretion on this issue “as long as it furthers the Declaratory Judgment Act's purpose of enhancing judicial economy and cooperative federalism.” R.R. St. & Co., 656 F.3d at 975. In Brillhart, the Court articulated three factors that courts should consider when examining the propriety of entertaining a declaratory judgment action: “avoiding needless determination of state law issues; discouraging forum shopping; and avoiding duplicative litigation.” Id.

         Defendant Stark argues that the issue in this case, whether the Policy should be reformed, is governed exclusively by state law. Dkt. #7 at 6 (citing Washington Mut. Sav. Bank v. Hedreen, 125 Wn.2d 521, 886 P.2d 1121 (1994) (setting forth one standard for reforming a contract under Washington law); Schmidt v. Am. Commerce Ins. Co., No. C11-1457 MJP, 2011 WL 5570306, at *2 (W.D. Wash. Nov. 16, 2011) (“[E]specially in the area of insurance law, the scales tip in favor of state court determination.”); Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310, 321 (1955) (holding that marine insurance contracts are governed by state law); and Cont'l Cas. Co. v. Robsac Indus., 947 F.2d 1367, 1371 (9th Cir. 1991) (abstaining where “this case involves insurance law, an area that Congress has expressly left to the states through the McCarran-Ferguson Act”)). Mr. Stark argues that his other claims brought in the parallel state court action arise exclusively under Washington law. Mr. Stark also argues that Markel is engaging in forum shopping, citing communication between the parties prior to filing and the fact that the state court action is not properly removable to federal court. Id. at 7-8. Mr. Stark argues that litigating this declaratory judgment action will result in duplicative and piecemeal litigation. Id. at 8-9.

         In Response, Plaintiff Markel argues that this action is based on exclusive federal jurisdiction and is neither reactive nor duplicative. Dkt. #18 at 15.[1] Markel discusses how communications between counsel prior to Mr. Stark's state court action indicate that Markel intended to file suit, and that it is really Mr. Stark who has been reactive or duplicative. Id. Markel repeats arguments about exclusive federal jurisdiction that the Court has addressed in the Order remanding the state court action in Case No. 2:17-cv-1498-RSM. Id. at 16 - 17. Markel addresses the Brillhart factors above. Markel argues that even if this action required the Court to determine major issues of state law, it “should be retained to avoid piecemeal litigation.” Id. at 18. Markel discusses the prejudice it faces by being forced to try the instant claims before a jury in state court. Markel argues that the Court should enter a stay, rather than a dismissal, arguing that it would be prejudiced “as the state court does not have jurisdiction over the maritime contract reformation claim.” Id. at 25.

         On Reply, Mr. Stark discusses the duplicative nature of this case, stating, “[n]ot only is the reformation claim presented in Markel's Declaratory Judgment Action the mirror image of Mr. Stark's claim for reformation, every other claim Mr. Stark presents in his State Court Action arises from the same series of transactions or occurrences.” Dkt. #33 at 3. Mr. Stark argues that it would be inefficient and prejudicial to require him to proceed in federal court on the reformation claim while at the same time “leaving to the state court the related issues of Markel's liability under the CPA and [DMA]'s liability for breaches of its professional and fiduciary obligations.” Id. at 3-4. Mr. Stark argues that where his State Court Action can afford more complete relief against the parties than Markel's single duplicative reformation claim, abstention is particularly appropriate. Id. at 4 (citing John Deere Ins. Co. Through Int'lSpecialty v. Smith Lighterage Co., 948 ...


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