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Acuity, A Mutual Insurance Co. v. Jade Enterprises

United States District Court, E.D. Kentucky, Central Division, Lexington

January 30, 2014



KARL S. FORESTER, Senior District Judge.

This matter is currently before the Court upon the motion of the Defendant, Harold Jolly, to dismiss this declaratory judgment action based on the holding in Grand Trunk Western Railroad Co. v. Consolidated Rail Corp., 746 F.2d 323 (6th Cir. 1984). For the reasons set forth below, the Court agrees that dismissal of the claims without prejudice is appropriate.


On May 4, 2013, the defendant, Harold Jolly, an employee of the co-defendant, Jade Enterprises, was involved in an automobile accident in Madison County, Kentucky. Both automobiles involved in Jolly's accident were owned by Jade Enterprises. Jade Enterprises contends that Jolly voluntarily agreed to pay for the property damage to the vehicles. After Jolly later refused to pay for the property damage, Jade Enterprises filed a property damage claim in Madison County District Court on July 26, 2013. Specifically, Jade Enterprises alleged breach of contract for payment of damages caused to two of its trucks in the amount of $3, 815.83. Jolly subsequently asserted a counterclaim against Jade Enterprises, alleging a number of employment-related claims against Jade Enterprises. As a result, the matter was transferred to Madison Circuit Court, where it is currently pending.

Acuity, a Mutual Insurance Company ("Acuity"), the plaintiff in this action, insures Jade Enterprises. However, due to the nature of the claims asserted against Jade Enterprises and the insuring agreement and exclusions in the policy, Acuity contends that Jade Enterprises is not entitled to any coverage for the losses and/or claims asserted in Jolly's Counterclaim. Acuity now petitions this Court pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, to adjudicate and determine the rights and responsibilities it has under the contract of insurance issued to Jade Enterprises [DE #1]. Although Acuity's Complaint names both Jolly and Jade Enterprises as defendants, the record does not reflect service upon Jade Enterprises, and there is no evidence that Jade Enterprises has been served with the summons or Complaint. Jolly, however, has filed this motion to dismiss, arguing that the Court should exercise its discretion to decline to decide this declaratory judgment action [DE #5].


There is no dispute that this case meets the basic standard for diversity jurisdiction under 28 U.S.C. § 1332. However, it is also well-settled that district courts have discretion "in determining whether and when to entertain an action under the Declaratory Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional prerequisites." Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995); see Aetna Cas. & Sur. Co. v. Sunshine Corp., 74 F.3d 685, 687 (6th Cir. 1996). As the Supreme Court has explained, the Act "confer[s] on federal courts unique and substantial discretion in deciding whether to declare the rights of litigants." Wilton, 515 U.S. at 286. It has been explained that the Declaratory Judgment Act "confers discretion on courts, not rights on litigants." Am. Home Assurance Co. v. Evans, 791 F.2d 61, 64 (6th Cir. 1986) (citing Green v. Mansour, 474 U.S. 64 (1985)) (noting that "the propriety of issuing a declaratory judgment may depend on equitable considerations"). "[W]here complex factual issues are present and the action parallels a state court action arising from the same facts and where alternative remedies are available, declaratory judgment is inappropriate." Id. Simply, even when the Court may otherwise exercise jurisdiction, it is "under no compulsion" to do so. Wilton, 515 U.S. at 278.

When considering whether to exercise discretionary jurisdiction under the Declaratory Judgment Act, the Sixth Circuit has identified five factors to be evaluated. These factors are:

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

Id. at 346. This list, however, is not exhaustive. Rather, "the Court must make a full inquiry into all relevant considerations." Brotherhood Mut. Ins. Co. v. United Apostolic ...

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