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American Southern Insurance Co. v. Anne Arundel County

United States District Court, D. Maryland

September 15, 2016



          Catherine C. Blake United States District Judge.

         Plaintiff American Southern Insurance Company (“American Southern”) brought this action against Anne Arundel County (the “County”) and Ridge Forest Glen Homeowners Association, Inc. (“Homeowners Association”), requesting a declaratory judgment that American Southern has no obligations as surety to pay for repairs on the alleged stormwater management violations at Ridge Forest Glen Subdivision. Plaintiff also requests a declaratory judgment that the Homeowners Association and the County are responsible for the past ten years' maintenance on the stormwater management system.

         Pending before the court are the defendants' motions to dismiss for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). (Anne Arundel Mot. Dismiss, ECF No. 5; Homeowners Ass'n Mot. Dismiss, ECF No. 9). American Southern filed a response in opposition (American Southern Opp'n Mot. Dismiss, ECF No. 14), to which Anne Arundel County filed a reply that the Homeowners Association joined and adopted. (Anne Arundel Reply Opp'n Mot. Dismiss, ECF No. 15; Homeowners Ass'n Reply Opp'n Mot. Dismiss, ECF No. 16). The motions are fully briefed, and no oral argument is necessary. See Local Rule 105.6 (D. Md. 2016). For the reasons stated below, the defendants' motions to dismiss will be denied, but the case will be stayed pending resolution of Case No. C-02-CV-16-001039 in the Circuit Court for Anne Arundel County.


         In 2002, Route 100 Ridge Road, LLC (“Developer”) began development of the Ridge Forest Glen Subdivision in Hanover, Maryland. (Compl. ¶ 7, ECF No. 1; Homeowners Ass'n Mot. Dismiss 2). As part of the subdivision development, the County issued grading permit G02009603 on December 13, 2002, to the Developer for the proposed grading, sediment control, and stormwater management of sixty-three lots and common areas. (Compl., Ex. C, Grading Permit, ECF No. 1-6; Homeowners Ass'n Mot. Dismiss 2). The County required the Developer to post security for the good and faithful performance of the work required in the grading permit as a condition of granting the permit. (Compl. ¶ 17). American Southern issued Grading and Sediment Control Bond No. B98800010783 (the “Bond”) on July 8, 2004, in the amount of $126, 000, naming the County as obligee. (Compl., Ex. D, Grading and Sediment Control Bond, ECF No. 1-7).

         On August 11, 2014, the County inspected Ridge Forest Glen subdivision and found numerous violations of Article 16 of the Anne Arundel County Code, including failure to maintain a stormwater management practice, failure to comply with the permit, failure to submit as-builts and certifications, and failure to complete an expired permit. (Compl., Ex. G, Stormwater Management Violation Notice 1, ECF No. 1-10). The County notified the Developer and American Southern of the violations, included in its notification a list of corrective measures, and mandated that curative work begin on September 12, 2014. (Id. 2). The County warned that “failure to comply with the requirements of this notice will be cause for the Department to proceed with bond default.” (Id.).

         American Southern believes the Homeowners Association is liable for any stormwater management maintenance through its relationship with the Developer under the Declaration of Covenants (Compl. Ex. A, ECF No. 1-4), Inspection and Maintenance Agreement (Compl. Ex. B, ECF No. 1-5), and Common Areas Deed. (Compl. Ex. F, ECF No. 1-9; Compl. ¶¶ 9-15, 24-27). The Homeowners Association denies any liability for the repairs the County is demanding. (Compl. ¶ 35). American Southern maintains that the Grading Permit expired on January 1, 2007, and that the Developer no longer owns, possesses, or controls any property within Ridge Forest Glen. (Compl. ¶¶ 20, 28).

         The Developer failed to complete the curative work.[1] (Homeowners Ass'n Mot. Dismiss 2). The County informed American Southern it would initiate litigation on or before June 1, 2016, if American Southern refused to honor its obligations under the Bond. (Anne Arundel Mot. Dismiss 1; Compl. ¶ 36). American Southern “exchanged correspondence with” and “participated in meetings” with the County, the Homeowners Association, and the Developer; however, the parties were unable to resolve the dispute about the requested repairs. (Compl. ¶ 33-34). American Southern filed this declaratory judgment against the County and the Homeowners Association on March 11, 2016. Subsequently, on March 23, 2016, the County filed a breach of contract suit against American Southern in the Circuit Court for Anne Arundel County. (Anne Arundel Mot. Dismiss 2).


         This court has diversity jurisdiction over the case, 28 U.S.C. § 1332(a), because the parties are diverse and the amount in controversy exceeds $75, 000. The suit is brought pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201(a), as the sole relief sought in the complaint is the declaration of the parties' rights under the Bond, the Declaration of Covenants, the Common Areas Deed, and the Inspection and Maintenance Agreement. The central question presented by defendants in their motions is whether the court should exercise its discretion to issue a declaratory judgment.

         The Declaratory Judgment Act is “an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant.” Wilton v. Seven Falls Co., 515 U.S. 277, 287 (1995) (quoting Public Serv. Comm'n of Utah v. Wycoff Co., 344 U.S. 237, 241 (1952)). Even where a declaratory judgment action “otherwise satisfies subject matter jurisdictional prerequisites, ” the district court “possess[es] discretion” in determining whether to entertain the suit. Id. at 282; see also Brillhart v. Excess Ins. Co., 316 U.S. 491, 494 (1942). The Fourth Circuit has long recognized “the discretion afforded to district courts in determining whether to render declaratory relief.” Aetna Cas. & Sur. Co. v. Ind-Com Elec. Co., 139 F.3d 419, 421-22 (4th Cir. 1998). This discretion is especially “crucial when . . . a parallel or related proceeding is pending in state court.” New Wellington Fin. Corp. v. Flagship Resort Dev. Corp., 416 F.3d 290, 297 (4th Cir. 2005).

         In determining whether to exercise jurisdiction in a declaratory judgment action, the district court must “weigh considerations of federalism, efficiency, and comity.” United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 493 (4th Cir. 1998) (quoting Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371, 376 (4th Cir. 1994)); see also New Wellington Fin. Corp., 416 F.3d at 297. The Fourth Circuit has articulated four factors for district courts to consider when determining whether to abstain from exercising jurisdiction over a declaratory judgment action during the pendency of a parallel state proceeding:

(1) [W]hether the state has a strong interest in having the issues decided in its courts; (2) whether 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 ...

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