Federal DJA Abstention, No Bad Faith Attorney's Fees.

   In a recent Federal Court decision, the Judge was faced with a Complaint in two Counts:  First, alleged breach of contract based on a claim that Policyholder(s) breached an Insurance Policy's "cooperation clause," and second, for Declaratory Judgment.  The Complaint was filed by an Insurance Company against its Policyholders under a Commercial General Liability Policy and the Injured Claimant who sued them.

   The Defendants argued for abstention and for "Bad-Faith" attorney's fees under a Federal Statute, in pertinent part.

   First, the Federal Judge ruled on the breach of contract claim based on what the Federal Court viewed as settled Texas State Insurance Law that a breach of the cooperation clause does not provide the basis for a cause of action or a claim of breach of contract.  Download Evanston Insurance Co. v. Tonmar, L.P. (N.D. Tex. Opinion Filed November 5, 2009), attached Official Slipsheet Opinion at 12.

   Next, the Federal Court abstained from considering the Insurance Company's Declaratory Judgment Action.  Download Evanston Insurance Co. v. Tonmar, L.P. (N.D. Tex. Opinion Filed November 5, 2009), at 13-18.  The Court displayed seven (7) factors to consider in evaluating three (3) "key aspects" of the equation, "fairness, federalism, and efficiency".   "These factors are," said the Federal Court:

(1) whether there is a pending state action in which all of the matters in controversy may be fully litigated;

(2) whether the plaintiff filed suit in anticipation of a lawsuit filed by the defendant;

(3) whether the plaintiff engaged in forum shopping in bringing the suit; 

(4) whether possible inequities in allowing the declaratory plaintiff to gain precedence in time or to change forums exist;

(5) whether the federal court is a convenient forum for the parties and the witnesses;

(6) whether retaining the lawsuit would serve the purposes of judicial economy; [and]

(7) whether the federal court is being called on to construe a state judicial decree involving the same parties and entered by the court before whom the parallel state suit between the same parties is pending.

Download Evanston Insurance Co. v. Tonmar, L.P. (N.D. Tex. Opinion Filed November 5, 2009), at 14.

    Finally, the Federal Judge denied the request for "vexatious" and "unreasonable," i.e., "Bad Faith" Attorney's Fees, based upon the Court's holding of an insufficient showing.  Download Evanston Insurance Co. v. Tonmar, L.P. (N.D. Tex. Opinion Filed November 5, 2009), at 19-20.

 

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