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State Farm Fire and Casualty Co. v. Aberdeen Enterprizes, II, Inc.

United States District Court, N.D. Oklahoma

August 1, 2019

STATE FARM TIRE AND CASUALTY COMPANY, an Illinois Corporation, Plaintiff,
v.
1 ABERDEEN ENTERPRIZES II, INC.; an Oklahoma Corporation; 2 JIM D. SHOFNER; 3 RENITA SHOFNER; 4 ROBERT SHOFNER; 5 OKLAHOMA SHERIFFS' ASSOCIATION; 6 MIKE WATERS; 7 R.B. HAUF; 8 HARLAN MOORE; 9 MICHEAL BOOTH; 10 SHANNON SMITH; 11 TONY HEAD; 12 CHRIS WEST; 13 JIM WEIR; 14 CLAY SANDER; 15 BOBBY WHITTINGTON; 16 ROGER LEVICK; 17 CARLY GRAFF; 18 RANDY FRAZIER; 19 DAVID SMITH; 20 KENDALLIA KILLMAN; 21 LINDA MEACHUM; 22 CHRISTOPHER CHOATE; 23 IRA LEE WILKINS; and 24 MELANIE HOLMES. Defendants.

          OPINION AND ORDER

          TERENCE C. KERN UNITED STATES DISTRICT JUDGE

         Before the Court are the (1) Motion to Stay (Doc. 35), filed by Defendants Aberdeen Enterprizes, II, Inc., Jim D Shofner, Renita Shofner, Robert Shofner, Oklahoma Sheriffs' Association, Mike Waters, R B Hauf, Harlan Moore, Michael Booth, Shannon Smith, Tony Head, Chris West, Jim Weir, Clay Sander, Bobby Whittington, and Roger Levick (“Underlying Defendants'”)[1] and (2) Motion for Leave to File Two Motions for Summary Judgment (Doc. 36), filed by Plaintiff State Farm Fire and Casualty Company (“State Farm”). For reasons discussed below, both motions are DENIED.

         I. Factual Background

         Ira Lee Wilkins initially filed No. 17-cv-606 (“Underlying Action”) in the Northern District of Oklahoma on November 2, 2017. The case was a putative class action against Underlying Defendants and others. After considerable motion practice, Ira Lee Wilkins, along with Carly Graff, Randy Frazier, David Smith, Kendallia Killman, Linda Meachum, Christopher Choate, and Melanie Holmes (“Underlying Plaintiffs”) filed their Second Amended Complaint (“SAC”) on September 21, 2018. The SAC is 102 pages and names sixty-six (66) defendants. In the SAC, Underlying Plaintiffs allege ten claims against varying combinations of the Underlying Defendants and other Defendants in the Underlying Action, including various statutory, constitutional, and common law claims. Working in groups, all Defendants in the Underlying Action have filed motions to dismiss, which are currently pending. The Court in the Underlying Action has delayed entering a scheduling order pending the resolution of several motions, including Underlying Defendants' motions to dismiss, and it does not appear that discovery is currently ongoing.

         Underlying Defendants have demanded that State Farm pay for their defense in the Underlying Action, and indemnify them for monetary damages pursuant to State Farm Businessowners Insurance Policies 96-73-6754-7 and 96-B1-W299-2 (“Policies”). Additionally, Aberdeen has made a demand on State Farm to indemnify it under the Policies for its defense and indemnity of at least fifty-four (54) of the defendants in the Underlying Action. State Farm is providing a defense to the Underlying Defendants in the Underlying Action subject to a reservation of rights, including the right to bring a declaratory judgment action. (Doc. 2; Doc. 37, pg. 6.) State Farm is also apparently paying the costs and expenses of Aberdeen's defense of the at least fifty-four (54) defendants in the Underlying Action. (Doc. 36, pg. 2.)

         Finally, on December 17, 2018, State Farm brought the instant action against Underlying Defendants and Underlying Plaintiffs. It seeks declaratory judgment that the Policies do not provide coverage for the damages the Underlying Plaintiffs seek from the Underlying Defendants in the Underlying Action, and as such State Farm has no duty to defend or indemnify them. (Doc. 2.) Underlying Defendants and Underlying Plaintiffs have all filed Answers. (Docs. 13, 15, 20, and 30.)

         II. Motion to Stay (Doc. 35)

         A. Standard

         Underlying Defendants request that the Court stay this case pending the resolution of the motions to dismiss in the Underlying Action. 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. However, the federal courts possess “unique and substantial discretion in deciding whether to declare the rights of litigants, ” even when the suit otherwise satisfies subject matter jurisdictional prerequisites, and are therefore not required to entertain such a case. See Wilton v. Seven Falls Co., 515 U.S. 277, 282-86 (1995). If the Court finds that it should not exercise jurisdiction over a declaratory judgment action, it must also consider whether Plaintiff's claims should be dismissed without prejudice or stayed. See United States v. City of Las Cruces, 289 F.3d 1170, 1192-93 (10th Cir. 2002). The Tenth Circuit has articulated several factors to guide district courts in their exercise of such substantial discretion:

(1) whether a declaratory action would settle the controversy; (2) whether it would serve a useful purpose in clarifying the legal relations at issue; (3) whether the declaratory remedy is being used merely for the purpose of “procedural fencing” or “to provide an arena for a race to res judicata”; (4) whether 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.

State Farm Fire & Cas. Co. v. Mhoon, 31 F.3d 979, 983 (10th Cir. 1994).

         While Mhoon addressed a parallel state court proceeding, the policy undergirding these factors-clarifying and eliminating uncertainty from legal relations-apply equally to the parallel federal court proceeding, and other district courts have similarly applied Mhoon in such circumstances. See, e.g., Colony Ins. Co. v. Global Power Generation Serv. Corp., No. 17-cv-2690-EFM, 2018 U.S. Dist. LEXIS 137008, *16 (D. Kan. Aug. 14, 2018) (denying a motion to dismiss or stay a declaratory judgment action in a case with a parallel federal court action because the parties failed to address the Mhoon factors); Firstline Sec., Inc. v. Alarm.com Inc. (In re Firsline Sec. Inc.), 415 B.R. 553, 559-560 (D. Utah Apr. 2, 2009) (Court considered the Mhoon factors to stay the case pending the resolution of a motion in the underlying federal bankruptcy case).

         In their Reply, Underlying Defendants contend for the first time that the Mhoon factors do not apply here.[2] Because this argument was raised for the first time on reply, and State Farm has therefore not had a meaningful opportunity to respond, the Court finds it improper to consider this argument.[3] See United States v. Herget, 585 Fed.Appx. 948, 950-51 (10th Cir. 2014). Moreover, the Court notes that Underlying Defendants have failed to present a plausible alternative to the Mhoon factors-the test cited in their Reply appears to be based on the Court's power under Federal Rule of Civil Procedure(“Rule”) 26(c) to stay discovery pending its decision on a dispositive motion in the same case. As the relevant dispositive motions are not pending in this case, the test is inapplicable.

         B. ...


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