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First State Insurance Co. v. Pulmosan Safety Equipment Corp.

United States District Court, W.D. Arkansas, El Dorado Division

February 11, 2019

FIRST STATE INSURANCE COMPANY and NEW ENGLAND REINSURANCE CORPORATION PLAINTIFFS
v.
PULMOSAN SAFETY EQUIPMENT CORPORATION, et al. DEFENDANTS/ THIRD-PARTY PLAINTIFFS
v.
LEXINGTON INSURANCE COMPANY, et al. THIRD-PARTY DEFENDANTS

          ORDER

          SUSAN O. HICKEY UNITED STATES DISTRICT JUDGE

         Before the Court is the issue of whether this case is moot and should be dismissed for lack of justiciability. Following the Court's directive to brief the issue, Third-Party Plaintiffs Vickie Bell; Jonathan Bell; and Phillip B. Bell, Jr. (“the Bells”); Third-Party Defendants Patricia Weiss, Ellen Weiss, and Judith Sue Weiss (“the Weisses”); Third-Party Defendant Lexington Insurance Company (“Lexington”); and Plaintiffs First State Insurance Company and New England Reinsurance Corporation separately filed briefs regarding justiciability. (ECF Nos. 90, 91, 92, 93). The Court finds the matter ripe for consideration.

         I. BACKGROUND

         On October 17, 2013, the Bells filed a separate products-liability suit in this Court[1] against multiple defendants, including Defendant Pulmosan Safety Equipment Corporation (“Pulmosan”).

         On August 29, 2016, the Court entered default judgment in Bell in favor of the Bells and against Pulmosan in the amount of $1, 327, 569.00 (“the Default Judgment”). The Court denied Pulmosan's subsequent motion to vacate the Default Judgment on the ground that the Bells improperly served Pulmosan. Pulmosan then appealed that ruling to the United States Court of Appeals for the Eighth Circuit.

         On June 5, 2017, Plaintiffs filed this declaratory-judgment action pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201, et seq., seeking declarations that they have exhausted the applicable aggregate limits of certain insurance policies issued to Pulmosan and that they have no further defense or indemnity obligations under those insurance policies for certain products-liability lawsuits filed against Pulmosan, including Bell. The Bells answered Plaintiffs' complaint and filed various counterclaims, crossclaims, and third-party claims pursuant to the Declaratory Judgment Act, seeking declarations that Plaintiffs' insurance policies are not exhausted or, alternatively, that various third-party insurance companies improperly exhausted the limits of Plaintiffs' policies and thus should defend and indemnify said policies. On January 23, 2018, the Court stayed the case at bar pending the Eighth Circuit's resolution of the appeal taken in Bell.

         On October 9, 2018, the Eighth Circuit issued its opinion and judgment in Bell, reversing the Court's order denying Pulmosan's motion to vacate the Default Judgment and remanding Bell to this Court for further proceedings. On November 16, 2018, the Court granted Pulmosan's motion to vacate in Bell, in accordance with the Eighth Circuit's instructions, and vacated the Default Judgment. On December 11, 2018, the Court in Bell dismissed the Bells' claims against Pulmosan without prejudice pursuant to Federal Rule of Civil Procedure 4(m) and closed that case.

         Also on December 11, 2018, the Court ordered the parties to this action to submit briefs discussing whether this case is now moot and should be dismissed for lack of jurisdiction in light of the Court's vacatur of the Default Judgment and subsequent dismissal of Bell. On January 18, 2019, the Bells, the Weisses, Lexington, and Plaintiffs separately filed briefs regarding this issue. (ECF Nos. 90, 91, 92, 93). Plaintiffs maintain that a justiciable controversy still exists and, thus, this case should not be dismissed as moot. The other parties, to the extent that their briefs are responsive, [2] argue that this case is now moot and should be dismissed.

         II. DISCUSSION

         Plaintiffs argue that, despite the vacatur of the Default Judgment and the dismissal of Bell, a justiciable controversy still exists in this matter and, thus, this case should not be dismissed as moot. The other parties assert that this case is now moot and should be dismissed.

         “Federal courts are courts of limited jurisdiction and can only hear actual ‘cases or controversies' as defined under Article III of the Constitution.” Neighborhood Transp. Network, Inc. v. Pena, 42 F.3d 1169, 1172 (8th Cir. 1994). “When a case . . . no longer presents an actual, ongoing case or controversy, the case is moot and the federal court no longer has jurisdiction to hear it.” Id.; see also GMAC Commercial Credit LLC v. Dillard Dep't Stores, Inc., 357 F.3d 827, 828 (8th Cir. 2004) (instructing that “[a]ny party or the court may, at any time, raise the issue of subject matter jurisdiction”). This requirement applies to all stages of the litigation, Pena, 42 F.3d at 1172, and “applies with equal force to actions for declaratory judgment as it does to actions seeking traditional coercive relief.” Marine Equip. Mgmt. Co. v. United States, 4 F.3d 643, 646 (8th Cir. 1993); see also Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 272 (1941) (holding that, under the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202, a district court is “without power to grant declaratory relief unless [an actual] controversy exists.”).

         “The test to determine whether there is an actual controversy within the meaning of the Declaratory Judgment Act is whether there is a substantial controversy between the parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Marine Equip. Mgmt. Co., 4 F.3d at 646 (internal quotation marks omitted). “A justiciable controversy is thus distinguished from a difference or dispute of a hypothetical or abstract character; from one that is academic or moot.” Cass Cnty. v. United States, 570 F.2d 737, 739 (8th Cir. 1978).

         The determination of whether an actual controversy exists is made on a case-by-case basis. Marine Equip. Mgmt. Co., 4 F.3d at 646. “The controversy must be live throughout the course of the litigation and must exist at the time of the district court's hearing of the matter and not simply when the case is filed.” Id. Accordingly, federal jurisdiction is not created by a previously existing dispute but, rather, “[t]o present an actual controversy sufficient to justify the exercise of jurisdiction, the threat of enforcement must have some sort of immediate coercive consequences.” Id. at 647.

         “An Article III case or controversy may exist where a private party threatens an enforcement action that would cause an imminent injury.” McLeod v. Gen. Mills, Inc., 856 F.3d 1160, 1166 (8th Cir. 2017). In this case, the Bells do not appear to presently threaten any enforcement action that would cause Plaintiffs imminent injury. As previously discussed, a live controversy undoubtedly existed between the parties until the Court vacated the Default Judgment in Bell and dismissed that case. Plaintiffs sought a declaratory judgment that they exhausted the applicable aggregate limits of certain insurance policies issued to Pulmosan and that they have no further defense or indemnity obligations under those policies for certain products-liability lawsuits filed against Pulmosan, including Bell. Likewise, the Bells contended that the policies were either not exhausted or were improperly exhausted, and sought a declaratory judgment holding one or more of the parties to this case liable for the amount of the Default Judgment. However, the Court subsequently vacated the Default Judgment in accordance with the Eighth Circuit's instruction and dismissed Bell based on the Bells' failure to timely serve Pulmosan in that case. The Bells have ...


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