United States District Court, W.D. Kentucky, Louisville Division
MEMORANDUM OPINION AND ORDER
Rebecca Grady Jennings, United States District Judge.
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.
FACTUAL AND PROCEDURAL BACKGROUND
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].
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].
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].
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].
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). [DE 30]. The Kentucky Plaintiffs filed a
Response to Secura’s supplemental authority. [DE 33].
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)).
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).
The Declaratory Judgment Act
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,
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
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 ...