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Cincinnati Insurance Co. v. Herman Grant Co., Inc.

United States District Court, E.D. Tennessee, Chattanooga

July 11, 2017

CINCINNATI INSURANCE COMPANY, Plaintiff,
v.
HERMAN GRANT CO., INC., Defendant. COLUMBIA NATIONAL INSURANCE COMPANY, Plaintiff,
v.
HERMAN GRANT CO., INC., Defendant.

          Susan K. Lee Magistrate Judge.

          MEMORANDUM OPINION

          TRAVIS R. MCDONOUGH UNITED STATES DISTRICT JUDGE

         Before 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. 14.)[1] For the reasons discussed herein, the Court will GRANT the motions to dismiss.

         I. BACKGROUND

         A. The Policies

         Defendant 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.)

         B. The Underlying Transaction

         In the 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.)

         On June 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. 13-1.)

         On 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.

         II. ANALYSIS

         Herman 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, 289 (1995)).

         The 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 should consider:

(1) [w]hether the declaratory action would settle the controversy;
(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 ...

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