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Tchividjian v. Federal Insurance Co.

United States District Court, W.D. Virginia, Lynchburg Division

April 24, 2018

Basyle Tchividjian, ET AL., Plaintiffs,
v.
Federal Insurance Company, Defendant.

          MEMORANDUM OPINION

          NORMAN K. MOON SENIOR UNITED STATES DISTRICT JUDGE

         Rickey Boyer, Sr., who is not a party to this lawsuit, sued Basyle Tchividjian (“Tchividjian”) and Godly Response to Abuse in the Christian Environment, Inc. (“G.R.A.C.E.”) for defamation in the Lynchburg Circuit Court. The instant action started when Tchividjian and G.R.A.C.E. then sued Federal Insurance Company (“Federal”), also in the Lynchburg Circuit Court. Tchividjian and G.R.A.C.E. are seeking a declaratory judgment that their insurance contract with Federal requires Federal to defend and indemnify them in the underlying suits filed by Boyer. Federal removed this case, and Tchividjian and G.R.A.C.E. now ask this Court to remand it to state court.

         This Court has diversity jurisdiction over the suit. See 28 U.S.C. § 1332(a); see also 28 U.S.C. § 2201(a) (granting a cause of action for declaratory judgments only “[i]n a case of actual controversy within [the court's] jurisdiction . . . .”). Federal is a citizen of both Indiana and New Jersey, while the plaintiffs are citizens of Virginia and Florida. See Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). In suits for declaratory relief, the amount in controversy is “measured by the value of the object of the litigation.” Hunt v. Washington State Apple Advert. Comm'n, 432 U.S. 333, 347 (1977). In this case, the object of the litigation is the amount at issue in the underlying lawsuits, which is well over $75, 000.

         While the Court has jurisdiction, Tchividjian and G.R.A.C.E. ask the Court to abstain from exercising it. “District courts ordinarily have a strict duty to exercise the jurisdiction that is conferred on them by Congress.” Myles Lumber Co. v. CNA Fin. Corp., 233 F.3d 821, 823 (4th Cir. 2000). But this obligation “must . . . be qualified in a declaratory action.” Mitcheson v. Harris, 955 F.2d 235, 237 (4th Cir. 1992). The Declaratory Judgment Act provides that “any court of the United States . . . may declare the rights and other legal relations of any interested party seeking such declaration ..... ” 28 U.S.C. § 2201(a) (emphasis added). And so even when a “District Court ha[s] jurisdiction of the suit under the Federal Declaratory Judgments Act, it [i]s under no compulsion to exercise that jurisdiction.” Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494 (1942); Wilton v. Seven Falls Co., 515 U.S. 277, 287 (1995) (“We have repeatedly characterized the Declaratory Judgment Act as ‘an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant.'”); VonRosenberg v. Lawrence, 781 F.3d 731, 735 (4th Cir. 2015) (“Brillhart /Wilton [abstention] . . . naturally flows from the broad discretion afforded courts to entertain actions and award declaratory relief under the Declaratory Judgment Act.” (emphasis in the original)). The discretionary decision to exercise jurisdiction in this context is specially implicated when related suits are pending in state court. See Brillhart, 316 U.S. 491, 495 (1942) (“Ordinarily it would be uneconomical as well as vexatious for a federal court to proceed in a declaratory judgment suit where another suit is pending in a state court presenting the same issues, not governed by federal law, between the same parties.”).

         But this discretion is not without bounds, so “the court must [decline to exercise its jurisdiction] only for ‘good reason.'” Cont'l Cas. Co. v. Fuscardo, 35 F.3d 963, 965 (4th Cir. 1994). The Fourth Circuit has articulated four factors that bind a district court's discretion:

(1) whether the state has a strong interest in having the issues decided in its courts; (2) whether the state courts could resolve the issues more efficiently than the federal courts; (3) whether the presence of “overlapping issues of fact or law” might create unnecessary “entanglement” between the state and federal courts; and (4) whether the federal action is mere “procedural fencing, ” in the sense that the action is merely the product of forum-shopping.

United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 493-94 (4th Cir. 1998); see Great Am. Ins. Co. v. Gross, 468 F.3d 199, 211 (4th Cir. 2006) (same). The Court now works through these factors.

         I.

         The first of these factors, whether the state has a strong interest in having the issues decided in its courts, is inconclusive. Certainly “[t]here exists an interest in having the most authoritative voice speak on the meaning of applicable law, and that voice belongs to the state courts when state law controls the resolution of the case.” Mitcheson v. Harris, 955 F.2d 235, 237 (4th Cir. 1992). But “defer[ring] to the state court tort case in the circumstances before us will not advance the State's interests significantly because (1) the contractual coverage issue will not be decided by the state tort case, and (2) [the insurer] is not a party to the state case.” Penn-Am. Ins. Co. v. Coffey, 368 F.3d 409, 414 (4th Cir. 2004).

         Mitcheson and Coffey both arose under similar facts to the instant case; they involved insurers bringing declaratory judgment actions in federal court to determine whether they were required to defend and indemnify underlying state court actions. They also both came to opposite conclusions on whether this factor favored the exercise of jurisdiction. The primary difference between the cases is whether the issue of state law presented in the declaratory judgment action was “difficult, complex, or unsettled.” Gross, 468 F.3d at 211. The Fourth Circuit has repeatedly recognized that states have stronger interests in deciding cases when the issue is novel or otherwise problematic. See, e.g., Centennial Life Ins. Co. v. Poston, 88 F.3d 255, 258 (4th Cir. 1996) (“For instance, although only state law is at issue, the relevant state law is not problematic or difficult to apply, which weakens somewhat the state's interest in having these issues decided in state court.”); Mitcheson, 955 F.2d at 240 (“The aforementioned interests assume greater saliency where, as here, the issues of state law are close.”).

         The issues presented by this suit concern the interpretation of the parties' contract under Virginia law. The underlying suits allege the plaintiffs in this suit defamed Boyer through the publication of a blog post that alleged Boyer “crossed sexual boundaries.” Whether National is required to defend the plaintiffs and indemnify them for any damages arising out of those lawsuits turns on the terms of the parties' contract. Specifically, the parties both point to contractual language excluding coverage for claims “based upon, ” “arising from, ” or “in consequence of” any actual or alleged sexual behavior.[1] Many of these terms have been definitively construed by the Supreme Court of Virginia, although not specifically in the sexual abuse context. See, e.g., Doctors Co. v. Women's Healthcare Assocs., Inc., 285 Va. 566, 574 (2013) (construing “arising” in an insurance contract).

         Accordingly, while Virginia certainly has an interest in construing its own laws, in this case that interest is “not particularly significant” because this Court “would be unlikely to break new ground or be faced with novel issues of state interest.” United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 494 (4th Cir. 1998). Instead, the Court will simply need to apply settled law to the contract at issue in this case.

         II.

         The second factor, whether the state courts could resolve the issues more efficiently than the federal courts, favors this Court's exercise of jurisdiction. While “[t]here is no requirement that a parallel proceeding be pending in state court before a federal court should decline to exercise jurisdiction over a declaratory judgment action, ” Aetna Cas. & Sur. Co. v. Ind-Com Elec. Co., 139 F.3d 419, 423 (4th Cir. 1998), Brillhart abstention is centrally focused on cases where “another suit is pending in a state court presenting the same issues [as in the declaratory judgment action], not governed by federal law, between the same parties.” 316 U.S. at 495 (emphasis added). To that end, Brillhart directed courts to ...


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