XL SPECIALTY INSURANCE CO. v. SUARD BARGE SERVICE, INC. (E.D.La. 2003)

JAY C. ZAINEY, Senior District Judge

Before the Court is a Motion for Summary Judgment (Rec. Doc. 5) filed on behalf of plaintiff XL Specialty Insurance Company and a Motion to Dismiss (Rec. Doc. 19) filed by intervenors Smithport Planting and Wetland Services, L.L.C. and Dixie Materials, Inc. Defendant Suard Barge opposes the Motion for Summary Judgment but consents to the Motion to Dismiss. The Motion for Summary Judgment, set for hearing on October 8, 2003, is before the Court on the briefs without oral argument. The Motion to Dismiss, set for hearing on October 22, 2003, is before the Court on the briefs without oral argument.

Plaintiff XL Specialty Insurance Company ("XL") provided Protection and Indemnity coverage to defendant Suard Barge Service, Inc. ("Suard") under Ocean Marine Policy TMM 1327 from March 9, 2002 to March 9, 2003. The policy limits were $1,000,000 for any one occurrence, with a $10,000 deductible for each occurrence. Smithport Planting and Wetland Services, LLC and Dixie Materials, Inc. ("Smithport") filed suit against defendant Suard in the 17th Judicial District Court for the Parish of Lafourche, State of Louisiana. Smithport is seeking reparations for damages to its privately-owned levee, which Smithport contends was caused by Suard's commercial boat and barge activity in the Company Canal southwest of Lockport, Louisiana. XL was not named in the Smithport suit until August of 2003 after this litigation had begun in this Court.

XL filed a Complaint for Declaratory Relief which now stands before this Court. On August 22, 2003, XL filed this Motion for Summary Judgment seeking a determination that there is no coverage under the subject PI policy for the alleged damages claimed in the Smithport state court lawsuit. On September 24, 2003, Smithport was allowed to intervene in this federal action by order of the federal magistrate. Smithport then filed an opposition to XL's Motion for Summary Judgment and then subsequently filed a Motion to Dismiss.

The Declaratory Judgment Act provides in pertinent part:

[A]ny 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. . . . Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.

The Supreme Court has interpreted the "may" language of the Act to mean that district courts have "unique and substantial" discretion in deciding whether to declare the rights of litigants. See Wilton v. Seven Falls Co., 515 U.S. 277, 287, 115 S.Ct. 2137, 2143, 132 L.Ed.2d 214 (1995). Moreover, the breadth of leeway suggested by the Act's language distinguishes the declaratory judgment context from other areas of the law in which discretion surfaces. Id.

In the Fifth Circuit, district courts consider a variety of factors when deciding whether to exercise their broad discretion under the Declaratory Judgment Act including (1) whether there is a pending state court action in which all of the matters in controversy may be fully litigated, (2) whether plaintiff has filed suit in anticipation of another suit and is being used for the purpose of forum shopping, (3) whether possible inequities exist in allowing the declaratory plaintiff to gain precedence in time and forum, and (4) the convenience/inconvenience of the federal forum to the parties and the witnesses. Torch. Inc. v. LeBlanc, 947 F.2d 193, 194 (5th Cir. 1991) (citing Rowan Companies. Inc. v Griffin. 876 F.2d 26 (5th Cir. 1989)).

Considering the factors enumerated above, the Court finds Smithport's motion persuasive. Factor number one is unarguably met because the coverage issue involved in this suit has also been raised in the state court proceeding. XL has been named a party in the Lafourche action. Thus, all issues raised in this declaratory action will be fully litigated in the state court proceeding. Further, XL's coverage defense is based on the nature of the activities that supposedly caused the harm to Smithport's property, whether the property was damaged by an "occurrence," if the damage to the state court's plaintiffs' property is of the nature covered in the policy, and if Suard's activities violated any law which would make coverage unavailable. Thus, the very same evidence necessary to the coverage defense will be involved in the state court action. It is difficult to envision a greater waste of judicial resources than trying the underlying case twice in two different forums. Of course, inherent in such a situation is the possibility of inconsistent factual findings.

Finally, the federal forum offers no advantage in the way of convenience to either the parties or the witnesses given that the state court action is pending in Lafourche Parish, which is closely located to Houma where this Court could have tried this case.

Moreover, XL can take no refuge in the fact that it filed this action prior to being named in the state court action. Where no substantial progress has been made in the federal forum, and the suits are filed relatively close in time, the declaratory plaintiff's suit is not entitled to any preference. Sec Torch, Inc. 947 F.2d at 194.

For the reasons stated above, and in the interest of comity and judicial economy, the Court declines to exercise jurisdiction over the instant declaratory judgment action. Thus, the plaintiffs dispositive Motion for Summary Judgment is moot.

Accordingly;

IT IS ORDERED that the Motion For Summary Judgment (Rec. Doc. 5) filed by plaintiff XL Speciality Insurance Company should be and is hereby DENIED as MOOT. IT IS ORDERED that the Motion to Dismiss (Rec. Doc. 19) filed by intervenors, Smithport Planting and Wetland Services, L.L.C. and Dixie Materials, Inc. should be and is hereby GRANTED. XL Specialty Insurance Company's complaint is DISMISSED.