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McCormack v. Scottsdale Ins. Co.

United States District Court, E.D. Michigan, Southern Division

September 10, 2015

JONATHAN MCCORMACK, Plaintiff,
v.
SCOTTSDALE INSURANCE COMPANY, Defendant

          For Jonathan McCormack, Plaintiff: David A. Dworetsky, LEAD ATTORNEY, Fieger Law, Southfield, MI; Geoffrey N. Fieger, LEAD ATTORNEY, Fieger, Fieger, Southfield, MI.

         For Scottsdale Insurance Company, Defendant: Jonathan L. Schwartz, Meghan Collins, Goldbert Segalla LLP, Chicago, IL.

Page 1070

         OPINION AND ORDER REMANDING CASE TO STATE COURT

         Honorable DAVID M. LAWSON, United States District Judge.

         This case comes to the Court in an unusual posture. The plaintiff, Jonathan McCormack has alleged in a lawsuit filed in the Lapeer County, Michigan circuit court that he was injured by employees of Fat Boys Bar & Grill. The Bar apparently had in effect a Comprehensive General Liability Insurance Policy (CGL policy) from Scottsdale Insurance Company. It appears that there may be a dispute over the extent of insurance coverage that might attach to the incident in which McCormack was allegedly injured. So McCormack filed a second action in Lapeer County seeking a declaratory judgment against Scottsdale that the larger of two possible coverage limits ($300,000 versus $25,000) applies to his underlying tort case. However, McCormick did not join the Bar as a defendant in the declaratory judgment action. And because the citizenship of the only parties to the declaratory judgment action is diverse, Scottsdale was able to remove that case to this Court under 28 U.S.C. § § 1441 and 1332(a)(1). It also filed a motion to dismiss.

         Because the exercise of jurisdiction under the Declaratory Judgment Act, 28 U.S.C. § 2201(a), is not mandatory, Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942), and at times the better exercise of discretion favors abstention, see Bituminous Cas. Corp. v. J & L Lumber Co., Inc., 373 F.3d 807, 812 (6th Cir. 2004), the Court ordered the parties to show cause why the Court should not decline jurisdiction and remand the case to the state court, where the underlying tort case is pending. McCormick responded that he has no objection to a remand. Scottsdale responded by acknowledging that ordinarily the applicable factors might favor abstention, but here the Court should exercise jurisdiction because it would be efficient to dismiss the plaintiff's declaratory judgment action now rather than having the state court do it on remand.

         However, the Sixth Circuit has " repeatedly held in insurance coverage diversity cases that 'declaratory judgment actions seeking an advance opinion on indemnity issues are seldom helpful in resolving an ongoing action in another court.'" Bituminous Cas., 373 F.3d at 812-13 (quoting Manley, 791 F.2d at 463); see also AM South Bank v. Dale, 386 F.3d 763, 786 (6th Cir. 2004) (citing 10B Wright, Miller & Mary Kay Kane § 2765 at 638 (3d ed. 1998) (" [I]t is not one of the purposes of the declaratory judgments act to enable a prospective negligence action defendant to obtain a declaration of nonliability." )). However, " [t]hat is not to say that there is a per se rule against exercising jurisdiction in actions involving insurance coverage questions." Bituminous Cas., 373 F.3d at 812-13. Instead, several factors have been articulated by the Sixth Circuit to be considered by a district court faced with a complaint seeking relief under the declaratory judgment act:

(1) whether the declaratory action would settle the controversy;

Page 1071

(2) whether the declaratory action would serve a useful purpose in clarifying the legal relations in issue;
(3) whether the declaratory remedy is being used merely for the purpose of " procedural fencing" or " to provide an arena for a race for res judicata" ;
(4) whether the use of a declaratory action would increase friction between our federal and state courts and improperly encroach upon state jurisdiction; and
(5) whether there is an alternative remedy which is better or more effective.

Grand Trunk W. RR. Co. v. Consol Rail Co., 746 F.2d 323, 326 (6th Cir. 1984); see alsoBituminous Cas., 373 F.3d at 814-15; Scottsdale Ins. Co. v. Roumph, 211 ...


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