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Secura Insurance v. Tfgbar, LLC

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

September 27, 2019

SECURA INSURANCE, A Mutu Company Plaintiff
TFGBAR, LLC, ET AL . Defendants


          Rebecca Grady Jennings, United States District Judge.

         This matter comes before the Court on Defendants’ Motions to Dismiss. [DE 8; DE 12; DE 19]. Briefing is complete, including briefing on supplemental law, and this matter is ripe. [DE 13; DE 14; DE 15; DE 23; DE 29; DE 30; DE 33]. For the reasons below, the Court declines to exercise its discretionary jurisdiction to entertain this declaratory judgment and will GRANT Defendants’ Motions to Dismiss.


         TFGBAR, LLC (“TFGBAR”) and F.A.O. Entertainment, LLC (“F.A.O.”) hosted a musical event in Louisville. [DE 1-5 at 186, ¶ 13]. At that event, several individuals were injured, and one was killed, by gunfire. [Id. at 186, ¶ 14; DE 1-6 at 194, ¶ 22]. In various suits brought in Kentucky state courts, the injured individuals, as well as the deceased’s estate (the “Kentucky Plaintiffs”), sued TFGBAR, F.A.O., and individuals associated with those entities (the “Kentucky Defendants”). The suits alleged that the Kentucky Defendants “knowingly operated or permitted to be operated an illegal entertainment venue which served alcohol in violation of law and or in excess of the permitted liquor license for the premises” and failed to “provide proper security, screening, or safety for persons present at their entertainment venue while hosing an event or rap concert.” [DE 1-4 at 178, ¶¶ 7–8; see also DE 1-5; DE 1-6; DE 1-7; DE 1-8]. The state court consolidated those suits into a single action (the “Kentucky suit”). [DE 11 at 325].

         Secura Insurance (“Secura”) then filed this complaint (the “Complaint”). Secura seeks a declaration that the general liability coverage policy it issued to TFGBAR (the “Policy”) (1) is void “based on TFGBAR’s material omissions in its application for the Policy”; and (2) Secura “has neither the duty to defend nor indemnify” the Kentucky Defendants in the Kentucky suit because the “alleged liability is excluded under the unambiguous terms of the Policy.” [Id. at 18].

         The Kentucky Defendants filed a third-party complaint in Kentucky state court against Secura, as well as their insurance agent and their insurance agency, joining those parties to the Kentucky suit. [DE 11-1]. The third-party complaint sought a declaration, under KRS 418.040, that Secura owes them a duty of defense and indemnification under the Policy. [Id. at 356–57, ¶¶ 49–53]. The Kentucky Defendants also assert that they had been misled about the extent of the coverage extended by the Policy. [Id. at 5–9, ¶¶ 17–32].

         Secura brought a counterclaim against the Kentucky Plaintiffs and Kentucky Defendants. The counterclaim seeks a declaration that “the Policy is void based on misrepresentations in the application for insurance” and that the Kentucky Defendants “are not entitled to coverage under the policy for any claims arising from the accident” because “pursuant to the express and unambiguous terms of the Policy, the Policy does not potentially cover the claims [at issue in the Kentucky suit] and Secura therefore does not owe a defense or indemnity the [Kentucky Defendants].” [DE 19-4 at 742–4].

         Several of the Kentucky Defendants have now moved to dismiss this complaint, and several of the Kentucky Plaintiffs moved to dismiss Plaintiff, Secura’s Complaint for Declaratory Relief, which the Kentucky Plaintiffs renewed and supplemented (collectively, the “Motions to Dismiss”). [DE 8; DE 12; DE 19]. The Motions to Dismiss assert that this Court should decline to exercise jurisdiction under the Declaratory Judgment Act; and that Secura failed to name indispensable parties that, once joined, would destroy diversity jurisdiction. [See DE 12-1 at 367– 77]. The parties filed timely Responses [DE 13; DE 23] and Replies [DE 14; DE 15; DE 29]. Secura also filed supplemental authority in support of its position that the Court should exercise discretionary jurisdiction based on the Sixth Circuit’s recent decision in United Specialty Ins. Co. v. Cole's Place, Inc., 936 F.3d 386 (6th Cir. 2019).[1] [DE 30]. The Kentucky Plaintiffs filed a Response to Secura’s supplemental authority. [DE 33].

         II. STANDARD

         In reviewing a motion to dismiss, the court must take the allegations of the complaint as true and grant dismissal only when the plaintiffs can prove no set of facts entitling them to relief. See Conley v. Gibson, 355 U.S. 41 (1957). In ruling on whether to grant a Federal Rule of Civil Procedure 12(b)(7) motion to dismiss for failure to join indispensable parties, the Court may consider “the allegations of the complaint and the affidavits and other proofs adduced in contradiction or support thereof.” Boling v. Prospect Funding Holdings, LLC, CIVIL ACTION NO. 1:14-CV-00081-GNS-HBB, 2015 WL 5680418, at *3 (W.D. Ky. Sept. 25, 2015) (quoting Esters v. Shell Oil Co., 234 F.2d 847, 849 (5th Cir. 1956)).


         A. Standing

         To begin, Secura argues that the Kentucky Plaintiffs lack standing to move for dismissal because they are “only nominal defendants with no actual or recognizable stake in this litigation.” [DE 23 at 932–33]. Even if Secura is correct, the issue is moot. The Kentucky Defendants have also moved to dismiss for lack of jurisdiction, [DE 8; DE 11], and joined in the Kentucky Plaintiffs’ Reply in support of the Kentucky Plaintiffs’ Motion to Dismiss, [DE 15]. Additionally, courts may raise jurisdiction under the Declaratory Judgment Act sua sponte. See Travelers Indem. Co. v. Bowling Green Prof’l Assocs., PLC, 495 F.3d 266, 271 (6th Cir. 2007).

         B. The Declaratory Judgment Act

         Under the Declaratory Judgment Act, a federal court “may declare the rights and other legal relations of any interested party seeking such declaration.” 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). The Act confers on the “federal courts unique and substantial discretion in deciding whether to declare the rights of litigants.” Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995). In general, courts should only exercise this discretionary jurisdiction when doing so would further the interests of justice or preserve the parties’ resources. Grange Mut. Cas. Co. v. Safeco Ins. Co. of Am., 565 F.Supp.2d 779, 785 (E.D. Ky. 2008) (citing Panhandle E. Pipe Line Co. v. Mich. Consol. Gas Co., 177 F.2d 942, 944 (6th Cir. 1949) (“A doctrine conditioning the exercise of discretion in granting a declaratory judgment that is to be derived from the cases, is that no declaration should be made unless it serves a useful, practical purpose.”)).

         This court considers five factors (the “Grand Trunk factors”) to determine whether the exercise of Declaratory Judgment Act jurisdiction is appropriate:

(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.

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. Instead, “[t]he relative weight of the underlying considerations of efficiency, fairness, and federalism will depend on facts ...

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