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Scottsdale Indemnity Co. v. Collazos

United States District Court, D. New Jersey

October 20, 2017

SCOTTSDALE INDEMNITY COMPANY, Plaintiff,
v.
Jamie COLLAZOS, EC CRANES, and Ronald TORRES, Defendants.

          OPINION

          ROBERT B. KUGLER UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on Defendants' Motion to Dismiss Plaintiff's Complaint (Doc. No. 9), Plaintiff's Response (Doc. No. 15), Defendants' Reply (Doc. No. 16) and the Parties' sur-replies (Doc. Nos. 17, 20) thereto.

         This case concerns the application of Brillhart abstention, which places in this Court's discretion the authority to abstain from the exercise of its jurisdiction when, as alleged here, there is a pending, parallel proceeding in state court. See Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494-95 (1942). Because the state court proceedings are not parallel, however, this Court declines to abstain from exercising its jurisdiction. Defendants' motion is DENIED.

         I. BACKROUND

         On April 8, 2014, a crane carrying a 5, 000-lb load of steel plates collapsed and caused “severe, permanent and catastrophic lower torso and pelvic crush injuries” to Ronald Torres, who soon after filed suit against EC Cranes, Inc., and others on March 29, 2016, in the Superior Court of New Jersey, Law Division, Camden County. The Torres action deals with a question of potentially huge importance to Mr. Torres but of comparatively less importance for purposes of this decision: Is Jamie Collazos, doing business as EC Cranes, responsible for failing to inspect, service, or maintain the crane that injured Mr. Torres?

         Scottsdale Indemnity Company is, as befits its name, an insurance company. Scottsdale was insuring EC Cranes at the time of Mr. Torres's accident, and was sued in the Torres action. Shortly after the injury, Scottsdale sent Mr. Collazos a letter stating its intent to defend against Mr. Torres's allegations. There was one caveat: Scottsdale reserved the right to deny defense if in the course of its investigation it learned Mr. Collazos had “materially misrepresented the business of EC Cranes” in his application for insurance. On November 11, 2016, Scottsdale made good on that caveat, and filed a complaint in this Court under its diversity jurisdiction seeking rescission of the contract and a declaratory judgment to that effect. This case thus presents a different merits question than that of the Torres action: Is the Scottsdale insurance policy void because of misrepresentations by Mr. Collazos, or otherwise defective?

         That, then, is the status of proceedings between the parties-or was, as Scottsdale has since been dismissed without prejudice from the Torres suit and is no longer a party to the state proceedings. (See Doc. No. 17.) So the question we face today is of a different nature than the merits issues in the two proceedings: Should this Court abstain from exercising its jurisdiction over the declaratory judgment action when there is a related proceeding in New Jersey state court?

         II. DISCUSSION

         We begin with the text of the Declaratory Judgment Act (“DJA”), 28 U.S.C. § 2201, which provides that a court “may declare the rights and other legal relations of any interested party seeking such declaration.” The DJA's “may” has been read as granting broad discretion to federal courts. The statute has a “textual commitment to discretion” that inheres to a district court, and does not convey an “absolute right upon the litigant” to bring a declaratory judgment action in federal court. Wilton v. Sevan Falls Co., 115 S.Ct. 2137, 2142-43 (1995). “If a district court, in the sound exercise of its judgment, determines after a complaint is filed that a declaratory judgment will serve no useful purpose, it cannot be incumbent upon that court to proceed to the merits before staying or dismissing the action.” Id.

         “In the declaratory judgment context, the normal principle that federal courts should adjudicate claims within their jurisdiction yields to considerations of practicality and wise judicial administration.” Wilton, 515 U.S. at 288. The Third Circuit has held that district courts must consider several factors, “to the extent they are relevant, ” when deciding whether to abstain:

(1) the likelihood that a federal court declaration will resolve the uncertainty of obligation which gave rise to the controversy;
(2) the convenience of the parties;
(3) the public interest in settlement of the uncertainty of ...

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