In Owners Insurance Company v. Scates Builder, LLC, Case No. 5:21-cv-00060-CHB (USDC ED KY May 2, 2022), the District Court declined to exercise its discretion under the Declaratory Judgment Act, 28 U.S.C. ?2201 and dismissed the plaintiff insurer’s suit seeking a declaration that declaration that certain insurance policies do not provide coverage to Scates Builders for the acts alleged by the Homeowners in two underlying lawsuits brought by separate home buyers and pending in Kentucky state court.
In a detailed 25 page opinion, the Court engaged in an extensive analysis of the “Grand Trunk” factors, named after the case that introduced the list in the Sixth Circuit. These are (1) whether judgment would settle the controversy; (2) whether the declaratory judgment action would serve a useful purpose in clarifying the legal relations at issue; (3) whether the declaratory remedy is being used merely for the purpose of “procedural fencing” or “to provide an arena for a race for res judicata;” (4) whether the use of a declaratory action would increase the friction between our federal and state courts and improperly encroach on state jurisdiction; and (5) whether there is an alternative remedy that is better or more effective.
After determining that moving forward would involve determinations of questions of fact, and not just law, based upon the claims made in the underlying cases, the Court declined to exercise jurisdiction over the lawsuit. The Court also noted that the Kentucky State Courts were equipped to handle the issues and that a dismissal would avoid “unnecessary friction” between the courts. This case was hotly contested, likely in part because Scatres Builders filed bankruptcy while the underlying cases were pending.