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Pennsylvania National Mutual Casualty Insurance Co. v. Levitas

United States District Court, D. Maryland

January 3, 2017

PENNSYLVANIA NATIONAL MUTUAL CASUTALTY INSURANCE COMPANY
v.
STEWART J. LEVITAS, ET AL.

          MEMORANDUM

          Catherine C. Blake United States District Judge.

         Plaintiff Pennsylvania National Mutual Casualty Insurance Company (“Penn National”) brought this action against Stewart J. Levitas (“Levitas”), State Real Estate, Inc. (“SRE, ” and collectively with “Levitas, ” the “Levitas Parties”), Tajah Jeffers, and Tynae Jeffers, requesting a declaratory judgment that Penn National's responsibility for the final judgments awarded to the Jeffers only extends to its pro-rata time on the risk.[1]

         Pending before the court is the Jeffers' motion to dismiss or stay. (Defs.' Mot. Dismiss or Stay, ECF No. 18). Penn National filed a response in opposition, (Pl.'s Resp. Opp'n to Mot. Dismiss or Stay, ECF No. 22), to which the Jeffers replied. (Defs.' Reply to Resp. to Mot., ECF No. 25). 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 motion to stay will be granted and the case stayed pending resolution of Case No. 24-C-16-003198 in the Circuit Court for Baltimore City.

         BACKGROUND

         This case arises out of lead paint exposure at 2116 Hollins Street in Baltimore, Maryland (the “Property”). (Compl. ¶¶ 11, 14, ECF No. 1). During the time period in question, Levitas owned and SRE managed the Property. (Id. ¶ 13). The Levitas Parties contracted with Penn National to insure the Property, among others, under contract 2300007180 (“Insurance Contract”), with coverage beginning November 27, 1991 and ending August 1, 1997. (Id. ¶ 9). The Insurance Contract included commercial general liability coverage. (Id. ¶ 12).

         Plaintiff Tajah Jeffers resided at the Property from March 17, 1994, until March 26, 1998. (Id. ¶ 21). Tajah exhibited elevated blood-lead levels from September 24, 1993, up to her last elevated blood-level test on June 2, 1998. Plaintiff Tynae Jeffers resided at the Property from the date of her birth on November 8, 1996, until March 26, 1998. (Id. ¶ 22). Tynae exhibited elevated blood-lead levels from May 14, 1997, up to her last elevated blood-lead level test on November 25, 1998.

         On August 23, 2013, the Jeffers plaintiffs filed a lawsuit against the Levitas Parties and Penn National in the Circuit Court for Baltimore City, Case No. 24-C-12-005059 (the “Underlying Case”), requesting damages as a result of their exposure to lead paint while residing at the Property. (Compl., Ex. A, Tajah Jeffers, et al. v. Stewart Levitas et al. Compl., ECF No. 1-1). The Levitas Parties requested defense and indemnification from Penn National under the Insurance Contract, which Penn National agreed to provide subject to a reservation of rights. (Compl. ¶¶ 16-19). At the conclusion of the five-day trial, the jury returned a verdict in favor of Tajah and Tynae Jeffers and final judgment was entered in the amount of $2, 413, 134.33 and $1, 650, 619.33, respectively. (Compl. Ex. B, Notice of R. J., ECF No. 1-2; Compl. Ex. C, Cir. Ct. of Baltimore City Or., ECF No. 1-3).

         After an unsuccessful appeal, (Defs.' Mot. Dismiss or Stay, Ex. C, Ct. App. Md. Or., ECF No. 18-4), the Levitas Parties have yet to satisfy the judgment in the Underlying Case. (Defs.' Mot. Dismiss or Stay 4, ECF No. 18). The Jeffers sent a letter to Penn National on May 5, 2016, demanding satisfaction of the judgment. (Defs.' Mot. Dismiss or Stay, Ex. D, Demand Letter, ECF No. 18-5). On May 19, 2016, the Jeffers filed an action against Penn National in the Circuit Court for Baltimore City, Case No. 24-C-16-003198, seeking the full amount of the judgment entered in the Underlying Case. (Defs.' Mot. Dismiss or Stay 4). Penn National followed suit by filing this declaratory judgment action on June 13, 2016.

         ANALYSIS

         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 insurance contract. 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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