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Maxum Indemnity Company v. Broken Spoke Bar & Grill, LLC

United States District Court, W.D. Kentucky, Louisville Division

September 27, 2019

MAXUM INDEMNITY COMPANY Plaintiff
v.
BROKEN SPOKE BAR & GRILL, LLC, ET AL . Defendants

          MEMORANDUM OPINION AND ORDER

          REBECCA GRADY JENNINGS, DISTRICT JUDGE UNITED STATES DISTRICT COURT

         This matter is before the Court on Plaintiff Maxum Indemnity Company’s Motion for Summary Judgment. [DE 62]. Briefing is complete [DE 78, DE 79] and this matter is ripe. For the reasons below, the Court will GRANT IN PART and DENY IN PART Maxum Indemnity Company’s Motion.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         Maxum Indemnity Company (“Maxum”) issued Defendant Chris Gribbins, doing business as Raywick Bar & Grill, a commercial insurance policy (the “Policy”). [DE 64-4 at 547]. Gribbins shot and killed David Litsey, Jr. outside the Raywick Bar & Grill (the “Incident”). [DE 64-2 at 515].

         Defendant David Litsey, Sr. sued Gribbins, the Raywick Bar & Grill, and Defendant Broken Spoke LLC dba Raywick Bar & Grill (“Broken Spoke”) in Kentucky court, alleging that Gribbins had either negligently or willfully caused Litsey, Jr.’s death (the “Kentucky Suit”). [[DE 64-1 at 511]. Maxum notified Gribbins that it would defend against the suit under a full reservation of rights and that it intended to seek a declaration of its rights the Policy. [DE 64-6 at 636–37].

         Maxum then brought a declaratory action in this Court, seeking a declaration that the Policy did not cover the shooting of Litsey, Jr. and that Maxum need not defend or indemnify Gribbins or Broken Spoke in the Kentucky Suit. [DE 1 at 2]. Maxum named Gribbins, Broken Spoke, and Litsey, Sr. as defendants in this suit. [Id. at 1].

         A Kentucky jury later convicted Gribbins of the wanton murder of Litsey, Jr. Gribbins v. Commonwealth, 483 S.W.3d 370, 373 (Ky. 2016); see also [DE 64-3 at 545]. During Mr. Gribbins’s criminal trial, the jury heard sworn testimony from several eyewitnesses to the shooting. Several witnesses testified that Gribbins confronted Litsey in a crowd outside the bar where Gribbins “pistol whipped” Litsey. [DE 64-2 at 516-17]. “During that assault, the gun discharged killing Litsey.” [Id. at 516]. In his defense, Gribbins testified that Litsey confronted him outside the bar in an aggressive manner. [Id. at 517]. Gribbins stated that he drew his handgun to protect himself. [Id.]. He admitted that the gun was in his right hand when he placed his right hand on Litsey’s chest. [Id.]. While the handgun was aimed at Litsey it discharged, killing him. [Id.]

         After weighing all the testimony and physical evidence, the jury found Gribbins guilty of “Wanton Murder.” The instructions provided to the jury on the elements of Intentional/ Wanton Murder stated:

A. That on or about November 9, 2012, Gribbins killed David Litsey, Jr. by shooting him; and
B. That in so doing, he was wantonly engaging in conduct which created a grave risk of death to another and thereby caused the death of David Litsey, Jr. under circumstances manifesting an extreme indifference to human life; and
C. He was not privileged to act in self-protection. [DE 64-3 at 537].

         The jury instructions defined “wantonly” as follows:

A person acts wantonly with respect to a result or to a circumstance when he is aware of and consciously disregards a substantial and unjustifiable risk that the result will occur or that the circumstance exists. The risk must be of such nature and degree that disregard thereof constitutes a gross deviation from the standard of conduct that a reasonable person would observe in the situation.

[DE 64-3 at 534].

         The court also instructed the jury on the use of force in self-defense under Kentucky law and the jury found that Gribbins had not acted in self-defense. [DE 64-3 at 536]. Maxum now moves for summary judgment. [DE 62].

         II. JURISDICTION

         Maxum brings this action under the Declaratory Judgment Act. [DE 1 at 2; 28 U.S.C. § 2201(a)]. While the Act authorizes district courts to exercise jurisdiction, it does not mandate or impose a duty to do so. Bituminous Cas. Corp. v. J & L Lumber Co., Inc., 373 F.3d 807, 812 (6th Cir. 2004). While neither party has addressed the Court’s jurisdiction, the Court will first determine whether the exercise of jurisdiction is appropriate under the circumstances of this case.

         This court considers five factors (the “Grand Trunk factors”) to determine whether the exercise of Declaratory Judgment Act jurisdiction is proper. Grand Trunk W.R.R. Co. v. Consol. Rail Co., 746 F.2d 323, 326 (6th Cir. 1984) (internal quotation marks omitted). Although the Court must balance the five factors, the Sixth Circuit has never clarified the relative weights of the factors. Id. at 563.

         The first two Grand Trunk factors assess “(1) whether the declaratory action would settle the controversy” and “(2) whether the declaratory action would serve a useful purpose in clarifying the legal relations in issue.” Grand Trunk, 746 F.2d at 326. Because “it is almost always the case that if a declaratory judgment will settle the controversy, . . . it will clarify the legal relations in issue, ” the inquiries required by these two factors often overlap substantially. United Specialty Ins. Co. v. Cole's Place, Inc., No. 18-5545, 2019 WL 3955847, at *6 (6th Cir. Aug. 22, 2019) (citing Flowers, 513 F.3d at 557; Bituminous, 373 F.3d at 814; and Northland Ins. Co. v. Stewart Title Guar. Co., 327 F.3d 448, 454 (6th Cir. 2003)).

         There are two lines of cases in the Sixth Circuit. United Specialty Ins. Co. v. Cole’s Place, Inc., 2018 WL 1914731 at 4 (W.D. Ky. 2018) (citing Flowers, 513 F.3d at 555). “One line of cases approved of declaratory actions because they can ‘settle the insurance coverage controversy, ’ while a second line of cases disapproved of declaratory actions because while they ‘might clarify the legal relationship between the insurer and the insured, they do not settle the ultimate controversy.’” Id. (quoting Flowers, 513 F.3d at 555).

         This action falls into the first line of cases. Maxum asserts that (1) the Policy does not cover the Incident because Gribbins assaulted Litsey, Jr.; and (2) the Broken Spoke is not a named insured on the Policy, and therefore not covered by the Policy. [DE 64 at 495–505]. The first allegation requires determination of whether an assault occurred, which a Kentucky jury already definitively resolved in the underlying criminal matter. Gribbins, 483 S.W.3d at 373; see also [DE 64-2 at 517]. There are thus no fact-bound issues of state law awaiting resolution in the state-court litigation. See Bituminous, 373 F.3d at 813–14. The second allegation is a technical issue of law requiring no determination of disputed fact. As a result, this declaratory judgment action will “settle the controversy, ” as it resolves the dispute between the insurer and insured over who will pay for the state-court litigation. See, e.g., W. World Ins. Co. v. Hoey, 773 F.3d 755, 760–61 (6th Cir. 2014). The first two Grand Trunk factors therefore support the exercise of jurisdiction.

         The third factor considers “whether the use of the declaratory judgment action is motivated by ‘procedural fencing’ or [is] likely to create a race for res judicata.” Flowers, 513 F.3d at 558. The Sixth Circuit seldom finds procedural fencing if the declaratory-plaintiff filed after the start of litigation in state court. United Specialty Ins. Co. v. Cole's Place, Inc., No. 18-5545, 2019 WL 3955847, at *8 (6th Cir. Aug. 22, 2019). Maxum notified Gribbins, when it provided its reservation of rights, that it intended to seek a declaration of its rights the Policy. [DE 64-6 at 636–37]. There is no competing state court declaratory action. Thus, the third Grand Trunk factor is neutral.

         The fourth Grand Trunk factor addresses “whether accepting jurisdiction would increase friction between federal and state courts” and is broken into three sub-factors. Flowers, at 559. The first sub-part “focuses on whether the state court’s resolution of the factual issues in the case is necessary for the district court’s resolution of the declaratory judgment action.” Flowers, 513 F.3d at 560. Here, any factual determinations the Court may have to make will not overlap with those at issue in the State Court Action. To determine whether the Policy applies or whether the exclusions apply, the Court must survey the allegations in the underlying complaint and determine whether those allegations fall within the Policy or the cited exclusions. See Westfield Ins. Co. v. Tech Dry, Inc., 336 F.3d 503, 507 (6th Cir. 2003) (“Under Kentucky law, a court should determine at the outset of litigation whether an insurance company has a duty to defend its insured by comparing the allegations in the underlying complaint with the terms of the insurance policy.”). All the factual issues necessary for resolution of this matter have been definitively determined in the state court criminal case. This issue is purely legal and does not require factual findings as any factual issues have already been resolved by the criminal matter. See Cole’s Place, 2018 WL 1914731, at *7. Accordingly, this sub-factor supports exercising jurisdiction.

         The second sub-part examines “which court, federal or state, is in a better position to resolve the issues in the declaratory action.” Id. The Sixth Circuit has “found that ‘issues of insurance contract interpretation are questions of state law with which the Kentucky state courts are more familiar and, therefore, better able to resolve.’” Id. (quoting Travelers Indemnity Co. v Bowling Green Prof. Assoc., 495 F.3d 266, 273 (6th Cir. 2007)). The questions that would arise here do not, however, do not involve novel issues of Kentucky law. See Cole’s Place, Inc., 2018 WL 1914731, at *8. The second sub-factor therefore counsels against exercising jurisdiction, even if less strongly than if the issues involved novel or unsettled questions of state law.

         The third sub-part “focuses on whether the issue in this federal action implicates important state policies and is, thus, more appropriately considered in state court.” Flowers, 513 F.3d at 561. Kentucky state courts are “more familiar and, therefore, better able to resolve” interpretation of insurance contracts. Id. Even when the state law is not difficult to apply, the Sixth Circuit has usually found “that the interpretation of insurance contracts is closely entwined with state public policy.” Cole’s Place, 2019 WL 3955847, at *10, citing e.g., Flowers, 513 F.3d at 561 and Travelers, 495 F.3d at 273. Because this action involves an interpretation of a Kentucky insurance contract, the third sub-factor counsels against exercising jurisdiction.

         The fifth and final factor asks “whether there is an alternative remedy which is better or more effective” than federal declaratory relief. Grand Trunk, 746 F.2d at 326. Kentucky law provides a declaration of rights procedure, under KRS § 418.040. Mass. Bay Ins. Co. v. Christian Funeral Dirs., Inc., No. 18-5267, 2018 WL 6787945, at *8 (6th Cir. Dec. 26, 2018). The Sixth Circuit has held that, “[i]n many ways, this alternative would have been better.” Flowers, 513 F.3d at 562. Specifically, “[t]he Kentucky courts are in a superior position to resolve undecided questions of state law, ” and “Kentucky courts might also have been able to combine the two actions so that all issues could be resolved by the same judge.” Id.

         On the other hand, “given that Kentucky precedent provides clear guidance as to the resolution of the legal issue presented, it cannot be said that the district court [is] a clearly inferior forum to resolve the issue” in this case. Id. This is because Maxum would have needed to join the underlying state action and then wait until a resolution of liability before determining its obligations toward Defendants. “Such a delayed alternative would be worse, not better, than seeking a federal declaratory judgment.” Id. When faced with the same conflicting alternative remedies in Flowers, the Sixth Circuit held that this factor ‚Äúcounsel[s] against exercising jurisdiction . . . [h]owever, it does not counsel so strongly against exercising jurisdiction ...


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