United States District Court, E.D. Tennessee, Chattanooga
K. Lee Magistrate Judge.
R. MCDONOUGH UNITED STATES DISTRICT JUDGE
the Court are motions to dismiss filed by Defendant Herman
Grant Co., Inc., in each of these consolidated cases. (Case
No. 1:16-cv-369, Doc. 13; Case No. 1:17-cv-116, Doc.
For the reasons discussed herein, the Court will
GRANT the motions to dismiss.
Herman Grant Co., Inc. (“Herman Grant”) is a
Tennessee corporation with its principal place of business in
Chattanooga, Tennessee. (Doc. 1.) Plaintiffs are insurance
companies that provided commercial general liability
(“CGL”) and umbrella coverage to Herman Grant
during consecutive policy periods beginning in 2012
(collectively “the Policies”). Plaintiff Columbia
National Insurance Company (“Columbia”) issued
CGL and umbrella policies to Herman Grant for the policy
period from July 1, 2012, to July 1, 2013. (Case No.
1:17-cv-116, Doc. 1, at 5.) Plaintiff Cincinnati Insurance
Company (“Cincinnati”) issued CGL and umbrella
policies to Herman Grant for the policy periods beginning
July 1, 2013. (Doc. 1, at 4.) The Policies are governed by
Tennessee law and generally cover Herman Grant for
“bodily injury” and “property damage”
caused by “occurrences” that took place within
the coverage territory during the coverage period.
(Id. at 5-6; see also Case No. 1:17-cv-116,
Doc. 1-1, at 23.)
The Underlying Transaction
summer of 2012, Superior Silica Sands, LLC (“Silica
Sands”) contracted with a Wisconsin company called
Market & Johnson Inc. (“Market &
Johnson”) to serve as general contractor over
construction of a dry sand processing plant used in hydraulic
fracturing. (Case No. 1:17-cv-116, Doc. 1, at 3.) Market
& Johnson then subcontracted with Herman Grant to design
and construct a critical portion of the dry sand processing
plant-the sand dryer. (Id.) Herman Grant finalized
the sand dryer project in January 2013. (Id.;
see also Doc. 13-1, at 6.) According to Silica
Sands, it began noticing defects in the sand dryer almost
immediately and began notifying Herman Grant of those
defects. (Doc. 1, at 3.) Specifically, “Silica Sands
claims it notified Herman Grant that the sand dryer's
wrapper bands or plates, tire spacer blocks, steel tires,
flightings, and gear box were defective.”
(Id.) Silica Sands alleges it attempted to engage
Herman Grant to resolve those defects in the sand dryer over
the course of the next few years. (See Doc. 1, at
3-5; see also Doc. 13-1, at 7-15.)
17, 2016, Silica Sands filed a complaint in the Circuit Court
for Barron County, Wisconsin, against Herman Grant and
Columbia (the “Wisconsin Action”). (Doc. 1-1.)
Although Cincinnati was not initially named as a defendant in
the Wisconsin Action, Silica Sands amended its complaint and
added Cincinnati as a defendant on September 12, 2016. (Docs.
1-1, 13-1.) In its amended complaint, Silica Sands alleges
claims for breach of contract, breach of warranty,
negligence, and unjust enrichment against Herman Grant and
liability claims against Columbia and Cincinnati. (Doc.
September 8, 2016, and April 27, 2017, respectively,
Cincinnati and Columbia (collectively
“Plaintiffs”) filed their actions in this Court
against Herman Grant pursuant to the Declaratory Judgment
Act, 28 U.S.C. § 2201, and Rule 57 of the Federal Rules
of Civil Procedure. (Doc. 1; Case No. 1:17-cv-116, Doc. 1.)
Plaintiffs seek declaratory judgments that Herman Grant is
not entitled to coverage in the Wisconsin Action under the
Policies. (Doc. 1, at 16; see also Case No.
1:17-cv-116, Doc. 1, at 11-12.) Herman Grant has filed
motions to dismiss in both actions. (Doc. 13; Case No.
1:17-cv-116, Doc. 14.) Plaintiffs have responded (Doc. 20;
Case No. 1:17-cv-116, Doc. 17) and Herman Grant has replied
(Doc. 21). The motions to dismiss are now ripe for review.
Grant moves to dismiss Plaintiffs' complaints, arguing
that the Court should decline to exercise its discretion and
decline to declare the rights of the parties under the
Declaratory Judgment Act, 28 U.S.C. §§ 2201-02 (the
“DJA”). The DJA gives district courts the
discretion to hear actions seeking to declare the rights or
legal relations of interested parties that fall within its
purview. 28 U.S.C. § 2201 (“[I]n a case of actual
controversy within its jurisdiction, . . . any court of the
United States, upon the filing of an appropriate pleading,
may declare the rights and other legal relations of any
interested party seeking such declaration, whether or not
further relief is or could be sought.”).
“[F]ederal district courts in particular, have unique
and substantial discretion in deciding whether to declare the
rights of litigants.” Western World Ins. Co. v.
Hoey, 773 F.3d 755, 758 (6th Cir. 2014). The sound
administration of that discretion “calls for the
exercise of ‘judicial discretion, hardened by
experience into rule.'” Id. at 759
(quoting Wilton v. Seven Falls Co., 515 U.S. 277,
Sixth Circuit has articulated a series of factors, commonly
known as the Grand Trunk factors, to utilize in
determining whether to exercise discretion to hear a case
under the DJA. Grand Trunk W.R. Co. v. Consol. Rail
Corp., 746 F.2d 323, 326 (6th Cir. 1984). One of these
factors has been expanded into three sub-factors.
Hoey, 773 F.3d at 759. Specifically, the Court
(1) [w]hether the declaratory action would settle the
(2) whether the declaratory action would serve a useful
purpose in clarifying the legal relations in issue;
(3) whether the declaratory remedy is being used merely for
the purpose of “procedural fencing” or “to
provide an arena for res judicata;”
(4) whether the use of a declaratory action would increase
the friction between our federal and state courts and
improperly encroach upon state ...