United States District Court, Southern District of Mississippi
MEMORANDUM OPINION AND ORDER
DAVID BRAMLETTE, UNITED STATES DISTRICT JUDGE
This cause is before the Court on defendant RREF RB Acquisitions, Inc. (“RREF”)’s Motion to Dismiss the plaintiff Starr Indemnity & Liability Company (“Starr”)’s Amended Complaint for Declaratory Judgment (docket entry 195), and on the Court’s sua sponte consideration of its subject matter jurisdiction. Having carefully considered RREF’s motion and Starr’s response, the memoranda of the parties and the applicable law, and being fully advised in the premises, the Court finds as follows:
Starr’s Amended Complaint is a declaratory judgment action against defendants RREF, Mississippi Housing Development Corporation, Inc. (“MHD”), Southwest Development Corporation, Inc. (“SWD”), Pattison Apartment Homes III (“Pattison”), and Britton & Koontz Bank, N.A. (“B&K”), brought pursuant to Rule 57 of the Federal Rules of Civil Procedure and the Federal Declaratory Judgment Act, 28 U.S.C. §§ 2201 et seq.
The Amended Complaint for declaratory judgment is based on MHD and/or SWD’s claims against Starr for property losses arising from vandalism, fire and theft which occurred on certain property located in Pattison, Claiborne County, Mississippi. The plaintiff alleges that there is diversity of citizenship between the parties and an amount in controversy in excess of $75, 000.
Since a declaratory judgment claim is not jurisdiction-conferring, there must be an independent basis for federal jurisdiction. Budget Prepay, Inc. v. AT&T Corp., 605 F.3d 273, 278 (5th Cir. 2010). Starr is an insurance company organized and existing under the laws of the State of Texas, having its principal place of business in the State of New York. MHD and SWD are Mississippi domestic corporations, and Pattison is a Mississippi domestic liability company. At the time Starr’s Amended Complaint was filed, B&K was a Mississippi company. RREF is a Delaware limited liability company, having its principal place of business in the State of Florida. Defendants MHD and SWD submitted a claim for coverage under the Starr policy of insurance for $715, 617.76. See Amended Complaint ¶¶ 2-6, 11. The Court therefore finds that it has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1332 because both the diversity of citizenship and amount in controversy requirements are met. The Court further finds that since subject matter jurisdiction is based on diversity, the Court shall apply the substantive law of the State of Mississippi. See MGM Resorts Mississippi, Inc. v. Thyssenkrupp Elevator Corp., 2014 WL 4914243 (N.D. Miss. Sept. 30, 2014).
On or about July 10, 2011, Starr issued a policy to MHD, an entity organized for non-profit housing. The property described therein, located in Pattison, Mississippi, included rental units listed as 1127 Elizabeth Street (“Pattison I & II”) and 1041 Pattison Hermanville Road (“Pattison III & IV”). On or about June 28, June 29, and July 3, 2012, three of the insured buildings located at Pattison I & II were damaged by separate fires which the plaintiff claims were incendiary. MHD submitted a claim under the Starr policy for $715, 617.76 for the three fire claims. In addition, MHD sought an undetermined amount for “theft to multiple units between November, 2010 and July 2012.” Amended Complaint, ¶ 11.
Upon its receipt of MHD’s claim, Starr began an investigation which was ongoing at the time the Amended Complaint was filed. Starr states that it learned that the fires were the result of arson, that there were unreported incidents of vandalism, fire and/or theft on the property, and that there were policy coverage issues “including but not limited to those related to Defendants’ duties under the policy, occupancy of the property and the applicable law.” Amended Complaint, ¶ 12. In addition, Starr’s investigation included attempts to determine who had an insurable interest under the policy, whether there was valid coverage, and whether any of the policy defenses were applicable, “including those based upon occurrences of arson, material misrepresentation in the application of its policy, the failure of the insured to comply with the loss conditions of the policy, including the lack of compliance with the insureds’ duties under the policy as well as the vacancy provisions.” Amended Complaint, ¶ 13. Starr seeks a declaration of its obligation, if any, to pay proceeds under the policy. Amended Complaint, ¶ 15.
RREF’s motion to dismiss, brought pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, alleges that Starr has not denied the insurance claims at issue, but instead has stated that its investigation of the claims is ongoing, thus requiring further factual development. Motion to Dismiss, ¶¶ 2, 7. Further, RREF asserts that Starr’s Amended Complaint “should be dismissed for lack of subject matter jurisdiction because there is no case or controversy before this Court that is ripe for adjudication.” Motion to Dismiss, ¶ 1.
The Fifth Circuit requires a three-step inquiry for purposes of considering a declaratory judgment action. “First, the court must determine whether the declaratory action is justiciable. Typically, this becomes a question of whether an ‘actual controversy’ exists between the parties to the action.” Orix Credit Alliance, Inc. v. Wolfe, 212 F.3d 891, 895 (5th Cir. 2000) (citation omitted). “Second, if it has jurisdiction, then the district court must resolve whether it has the ‘authority’ to grant declaratory relief in the case presented.” Id. (citation omitted). “Third, the court has to determine how to exercise its broad discretion to decide or dismiss a declaratory judgment action.” Id. (citation omitted).
The Court interprets RREF’s argument as invoking the doctrine of ripeness. “A court should dismiss a case for lack of ‘ripeness’ when the case is abstract or hypothetical. The key considerations are ‘the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration.’ A case is generally ripe if any remaining questions are purely legal ones; conversely, a case is not ripe if further factual development is required.’” New Orleans Public Service, Inc. v. Council of New Orleans, 833 F.2d 583 (5th Cir. 1987)(quoting Abbott Laboratories v. Gardner, 387 U.S. 136, 149 (1967)(holding that a ripeness determination considers (1) fitness for review, and (2) hardship to parties of withholding judicial consideration)).
The Fifth Circuit recognizes that “applying the ripeness doctrine in the declaratory judgment context presents a unique challenge.” Orix, 212 F.3d at 896. Applying the Abbott Labs test “in the declaratory judgment context often requires custom tailoring, for there are at least two salient differences between declaratory judgment actions and the mind-run of other cases: first, declaratory relief is more likely to be discretionary; and, second, declaratory actions contemplate an ‘ex ante determination of rights’ that ‘exists in some tension with traditional notions of ripeness.’” Rhode Island v. Narragansett Indian Tribe, 19 F.3d 685, 692 (1st Cir. 1994)(citations omitted)(quoted in Orix, 212 F.3d at 896). “Declaratory judgments are typically sought before a completed ‘injury-in-fact’ has occurred ... but still must be limited to the resolution of an ‘actual controversy.’” United Transp. Union v. Foster, 205 F.3d 851, 857 (5th Cir. 2000)(quoted in Orix, 212 F.3d at 896).
A specific, concrete threat of litigation can be sufficient to establish a controversy sufficient to sustain a declaratory judgment action. Orix, 212 F.3d at 897. As the Fifth Circuit has explained:
A declaratory judgment action is ripe for adjudication only where an “actual controversy” exists. See 28 U.S.C. § 2201(a)(“In a case of actual controversy within its jurisdiction ... any court of the United States ... may declare the right and other legal relations of any interested party seeking such declaration.”)(emphasis added); Texas v. West Publ’g. Co., 882 F.2d 171 (5th Cir. 1989). As a general rule, an actual controversy exists where “a substantial controversy of sufficient immediacy and reality [exists] between parties having adverse legal interests.” Middle South Energy, Inc. v. City of New Orleans, 800 F.2d 488, 490 (5th Cir. 1986) see generally West Publ’g. Co., 882 F.2d at 175 (noting that the “case or controversy” requirement of Article III of the United States Constitution is “identical to the actual controversy requirement under the Declaratory Judgment Act”). Whether particular facts are sufficiently immediate to establish an actual controversy is a question ...