United States District Court, D. Rhode Island
ARBELLA PROTECTION INSURANCE COMPANY, INC. Plaintiff,
REGAN HEATING AND AIR CONDITIONING, INC., Defendant.
MEMORANDUM AND ORDER
WILLIAM E. SMITH, Chief District Judge.
the Court is Defendant's Motion to Dismiss Pursuant to
Rule 12(b)(6) and/or in the Alternative to Stay
("Motion"). (ECF No. 5.) For the reasons that
follow, this Court GRANTS IN PART and DENIES IN PART
Defendant's Motion. Specifically, the Court declines to
dismiss this action, but grants Defendant's request for a
stay pending resolution of the related state court action.
Regan Heating and Air Conditioning, Inc. ("Regan")
is a Rhode Island corporation that sells and services
residential and commercial heating and air conditioning
systems. Plaintiff Arbella Protection Insurance Company, Inc.
("Arbella") is a Massachusetts corporation
authorized to issue insurance policies in the State of Rhode
Island. Between December 1, 2014 and December 1, 2015,
Arbella insured Plaintiff under a Commercial Package Policy
bearing policy number XXXXXXXXXX (the "Policy"). On
May 12, 2015, Defendant was performing work at a residence in
Gloucester, Rhode Island, owned by Robert O'Donnell.
After removing an oil-fired burner, but prior to the
installation of a new unit, home heating oil leaked into the
basement and the residence suffered damage to its interior.
result, O'Donnell made demands upon Defendant to
remediate the alleged damage. Regan then made a demand upon
Plaintiff seeking defense and indemnification for the damage.
In a letter dated June 11, 2015, Plaintiff disclaimed and
denied coverage for the claim. Between June 12 and September
16, 2015, Defendant sought reconsideration of Defendant's
position, but the parties could not come to an agreement. On
September 16, Defendant made a final demand upon Plaintiff
seeking defense and indemnification, stating that it would
take action if Plaintiff failed to indemnify. In response,
Plaintiff filed this action on October 21, 2015; the
Complaint seeks a declaratory judgment stating that there is
no coverage for the alleged loss because coverage is
precluded by the Total Pollution Exclusion Endorsement under
November 3, 2015, Defendant filed suit in Providence County
Superior Court against Plaintiff for breach of contract,
common law bad faith, statutory bad faith, specific
performance, and declaratory judgment. The suit also contains
claims against the insurance agency that advised Regan on the
policy, Christian and Regan Insurance ("C&R
Insurance"), for professional negligence and breach of
contract. Defendant claims that Plaintiff filed this action
in anticipation of the coercive state action, but Plaintiff
maintains that the action was filed in good faith, according
to the normal procedures of this type of dispute.
December 24, 2015, Defendant filed its Motion to Dismiss. In
its Motion, Defendant argues that this Court should exercise
its discretion under the Declaratory Judgment Act as
interpreted by the Supreme Court in Wilton v. Seven Falls
Co., 515 U.S. 277, 283 (1995) and Brillhart v.
Excess Ins. Co. of Am., 316 U.S. 491 (1942), and abstain
from this action, or in the alternative, stay this action
pending the outcome of the state court action.
the Declaratory Judgment Act, "any 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, whether or not
further relief is or could be sought." 28 U.S.C. § 2201.
"[D]istrict courts possess discretion in determining
whether and when to entertain an action under the Delcaratory
Judgment Act...." Wilton, 515 U.S. at 282.
Wilton and Brillhart direct the Court to examine "the
scope of the pending state court proceeding and the nature of
defenses open there, " considering "whether the
claims of all parties in interest can satisfactorily be
adjudicated in that proceeding, whether necessary parties
have been joined, whether such parties are amenable to
process in that proceeding, etc." Id. at 283
(quoting Brillhart, 316 U.S. at 495). "As the
First Circuit has noted, [i]n the declaratory judgment
context, the normal principle that federal courts should
adjudicate claims within their jurisdiction yields to
considerations of practicality and wise judicial
administration.'" Standard Fire Ins. Co. v.
Gordon, 376 F.Supp.2d 218, 224 (D.R.I. 2005) (quoting
DeNovellis v. Shalala, 124 F.3d 298, 313 (1st Cir.
cases "where parallel proceedings... presenting
opportunity for ventilation of the same state law issues
[are] underway in state court, ' the Court has held that
these considerations clearly support' a district's
court's decision to stay or dismiss a declaratory
judgment action." Id . (quoting
Wilton, 515 U.S. at 290). The determination of
whether or not there is a parallel proceeding is made at the
time the federal action is filed. See OHI Asset (CT)
Lender, LLC v. Woodland Manor Improvement Ass'n ex
rel. Shine, 687 F.Supp.2d 12, 23 (D.R.I. 2010). In
determining whether the actions are parallel, the Court
examines whether "the same parties [are] involved in
both proceedings, " whether "all claims [can] be
adjudicated in state court, " and whether the outcome of
"both proceedings depend[s] on resolution of common
factual questions." Standard Fire, 376
F.Supp.2d at 226-27. In this case, because the state
proceeding was filed after the federal action, there is
technically no parallel action. However, it is worth
noting that had the state action been filed first, all three
factors would weigh toward abstention. First, the same
parties are involved in both cases, with the exception of C&R
Insurance, who is a party in the state action, but not this
action; however, C&R Insurance's position in the state
court case is dependent on the outcome of the issue of
coverage. Second, the claims made in this action can be
adjudicated in the state court action, as the primary issue
in both cases is whether Defendant's insurance policy
covers the May 12, 2015 loss. Third, the resolution of the
declaratory judgment action turns on the same factual
questions that will be litigated in the state court action,
namely, the extent of coverage of the policy with regard to
the May 12, 2015 loss.
lack of a parallel action "does not mean that
abs[t]ention under Wilton/ Brillhart is precluded." OHI,
687 F.Supp.2d at 24. "Where there are no parallel state
proceedings, the decision to adjudicate a declaratory
judgment action remains discretionary." Standard
Fire, 376 F.Supp.2d at 231. In deciding whether to
exercise their discretion, courts also consider whether the
issues presented are governed by state or federal law, and
what effect the declaratory judgment action is likely to have
on potential conflicts of interest between the insurer and
the insured. See id. at 231-33. The first of these factors
supports abstention: the issues presented are clearly issues
of state and not federal law. The second is neutral: as in
Standard Fire, "the underlying  case presents no
conflict of interest to be remedied, and because adjudication
of the declaratory judgment action creates no conflict of
interest to be avoided, this factor weighs neither in favor
of nor against this Court's dismissal of the declaratory
judgment action." Id. at 233.
balancing these factors, despite the weight that this court
gives a lack of parallelism, it is appropriate to abstain;
the lack of parallelism - particularly given that the actions
were filed very close in time - is not sufficient to outweigh
the overwhelming considerations on the other side. The two
actions rely on the same facts, will apply the same law, and
will largely fall away based on the determination of coverage
under the policy. See Aetna Cas. & Sur. Co. v.
Kelly, 889 F.Supp. 535, 539-40 (D.R.I. 1995) ("When
all parties have a fair opportunity to litigate their claims
in the state court action, the initial inquiry in determining
whether the federal declaratory judgment action should be
stayed is whether answering the declaratory judgment
questions requires resolution of factual issues presented in
the state court case.... [I]f the declaratory judgment action
presents the same factual issues that are the subject of the
state court case, a stay may be appropriate.").
Furthermore, the issues presented are governed by state, not
federal, law. However, because the federal action was filed
first, the Court will stay, rather than dismiss, this action.
foregoing reasons, Defendant's Motion is hereby GRANTED
IN PART and DENIED IN PART. Specifically, the Motion to
Dismiss is DENIED, and the Motion to Stay is GRANTED.
Accordingly, this action will ...