Shops and Garage at Canal Place, LLC v. Wilson Canal Place II, LLC

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

THE SHOPS AND GARAGE AT CIVIL ACTION

CANAL PLACE, L.L.C.

VERSUS NO. 20-2271

WILSON CANAL PLACE II, LLC SECTION: “G”(4)

ORDER AND REASONS

Before the Court is Plaintiff, The Shops and Garage at Canal Place, LLC’s (“Plaintiff”)

“Motion to Remand.”1 Defendant Wilson Canal Place II, LLC (“Defendant”) opposes the

motion.2 Having considered the motion, the memoranda in support and in opposition, the

arguments made during oral argument, the record, and the applicable law, the Court denies

Plaintiff’s motion to remand.

I. Background

A. Factual Background

This declaratory judgment action arises out of a dispute regarding the interpretation of a

lease allegedly entered into by Plaintiff and Defendant on February 24, 2016, for a commercial

parking garage in New Orleans, Louisiana (“Lease”).3 In the petition for declaratory judgment

filed by Plaintiff, Plaintiff submits that it leases the commercial parking garage from Defendant

pursuant to the terms of the Lease, which includes a provision for minimum payment in excess

1 Rec. Doc. 9.

2 Rec. Doc. 12.

3 Rec. Doc. 1-2 at 1–2.

of $7 million per year (“Minimum Rent”).4 Plaintiff further submits that the “Interruption of Use”

provision of the Lease “protects” Plaintiff from having to pay the Minimum Rent when an

“unforeseen act of God or unforeseen cause beyond the reasonable control of [Plaintiff] interrupts

or substantially impairs the use of the Leased Premises, allowing such Minimum Rent to abate

until the day after the cause of the interruption or substantial impairment of use is removed.”5

Plaintiff alleges that the COVID-19 pandemic has “substantially impaired” the

commercial parking garage operations, leading to a 75% drop in gross transient revenue.6 Plaintiff

further alleges that it agreed with Defendant by letter dated April 9, 2020, (“April 2020 Letter”)

that the “Interruption of Use” provision was triggered, resulting in Plaintiff no longer paying

Minimum Rent.7 Yet Plaintiff avers that Defendant stated in a letter to Plaintiff dated June 18,

2020, that the “Interruption of Use” provisions “are no longer applicable and that [Plaintiff’s]

obligation to pay Minimum Rent resumed as of June 13, 2020.”8 Plaintiff counters that the

COVID-19 pandemic and its effects are ongoing and therefore contests Defendant’s alleged

contention that the cause of the substantial impairment of use is removed.9

B. Procedural Background

Prior to the instant action, Plaintiff had filed suit against Defendant in the Civil District

Court for the Parish of Orleans, State of Louisiana (“CDC”) on March 22, 2020. The April 2020

4 Id. at 2–3.

5 Id. at 4 (internal quotations omitted).

6 Id. at 3.

7 Id. at 4–5.

8 Id. at 5 (internal quotations and emphasis omitted).

9 Id. at 5–6.

Letter states that “[w]ithin three (3) business days after the date of this settlement letter, [Plaintiff]

shall file a motion to dismiss without prejudice the lawsuit filed by Plaintiff on March 22, 2020.”10

Thereafter, the first lawsuit was dismissed without prejudice.11

On July 17, 2020, Plaintiff filed a petition in the instant action for declaratory judgment

in the CDC. In the petition, Plaintiff asserts that the parties “contractually agreed” that a

declaratory judgment action arising out of a substantial impairment to the use of the leased

premises resulting from the COVID-19 pandemic “shall have ‘exclusive venue’ in either the CDC

or in the United States District Court for the Eastern District of Louisiana.”12 Plaintiff seeks a

declaration that the abatement of Minimum Rent did not end on June 13, 2020, and that Plaintiff

did not have to resume paying Minimum Rent as of June 13, 2020.13 Plaintiff also seeks attorneys’

fees, litigation expenses, expert fees, and court costs.14 On August 14, 2020, Plaintiff filed an

amended petition seeking additional declaratory relief.15

Defendant removed the action to this Court on August 14, 2020, pursuant to the federal

diversity jurisdiction statute Title 28, United States Code, Section 1332.16 In the notice of

removal, Defendant represents that it is a limited liability company whose sole member is The

State of Wisconsin Investment Board (“SWIB”).17

10 Rec. Doc. 9-4 at 2.

11 The parties do not dispute that the first action was dismissed.

12 Rec. Doc. 1-2 at 2.

13 Id. at 8.

14 Id.

15 Id. at 16.

16 Rec. Doc. 1.

17 Id. at 2.

On September 13, 2020, Plaintiff filed the instant motion to remand this action to CDC.18

Defendant filed an opposition to the motion on September 29, 2020.19 With leave of Court,

Plaintiff filed a reply brief in further support of the motion to remand on October 8, 2020.20 On

October 15, 2020, with leave of Court, Defendant filed a sur-reply in further opposition to the

motion to remand.21 The Court granted Plaintiff’s request for oral argument on the instant motion

to remand.22 Oral argument was heard via videoconference on October 20, 2020.23

II. Parties’ Arguments

A. Plaintiff’s Motion to Remand

Plaintiff makes three arguments in support of remand. First, Plaintiff argues that this Court

should remand the case to state court because it “is a declaratory judgment action which raises

novel issues under Louisiana law as to the length of adverse effects of the novel

coronavirus. . . .”24 In support, Plaintiff cites two non-binding cases in which federal district court

judges in Pennsylvania declined to adjudicate declaratory judgment actions because of “novel,

complex, and unsettled state law issues” implicated by COVID-19 related contractual disputes.25

Second, Plaintiff argues that the April 2020 Letter “confirms” that this matter should be

18 Rec. Doc. 9.

19 Rec. Doc. 17.

20 Rec. Doc. 18.

21 Rec. Doc. 19. The Court subsequently denied Plaintiff’s motion for leave to file a sur-sur-reply brief,

which was filed the day before oral argument in this matter. Rec. Doc. 23.

22 Rec. Doc. 11.

23 Rec. Doc. 16.

24 Rec. Doc. 9-1 at 2.

25 Id. at 12–15.

remanded to state court.26 Specifically, Plaintiff contends that April 2020 Letter provides that

“the sole and exclusive venue and jurisdiction for a declaratory judgment action . . . shall be the

Civil District Court for the Parish of Orleans or the United States District Court for the Eastern

District of Louisiana.”27 Accordingly, Plaintiff argues that once it instituted a declaratory

judgment action against Defendant in state court, Defendant was barred from removing the action

to federal court.28 Additionally, Plaintiff argues that Defendant waived its right to removal

because the April 2020 Letter “did not reserve any right to [Defendant] to remove an action filed

in [the CDC], which was specifically identified as one of the two potential jurisdictions in which

a declaratory judgment action could be initially filed, to federal court.”29 Moreover, Plaintiff

argues that “any interpretation of the April 2020 Letter and surrounding issues should be decided

by the Civil District Court for the Parish of Orleans as it was the March 2020 lawsuit filed in [the

CDC] which prompted the letter in the first place.”30

Third, Plaintiff claims that “[Defendant] has not met its burden to show the parties are

diverse.”31 Specifically, Plaintiff asserts that Defendant is a limited liability corporation whose

sole member is the State of Wisconsin Investment Board (“SWIB”).32 Plaintiff further asserts

SWIB is a state-appointed board that invests for several Wisconsin public funds, including the

26 Id. at 15.

27 Id. at 15–16 (internal quotations omitted).

28 Id.at 16.

29 Id.

30 Id. at 17.

31 Id. at 17–23.

32 Id. at 3.

Wisconsin Retirement System.33 Plaintiff contends that “[n]umerous federal courts have held that

state entities that invest in public retirement funds, such as SWIB . . ., are arms or alter egos of

the State” and therefore are not citizens for purpose of diversity jurisdiction.34 For these reasons,

Plaintiff argues that the Court should remand this case to state court.

B. Defendant’s Arguments in Opposition

In opposition, Defendant argues as an initial matter that the seven factors set forth by the

Fifth Circuit in St. Paul Ins. Co. v. Trejo establish that this Court should retain jurisdiction over

this declaratory judgment action.35 Defendant then contends that remand is inappropriate for three

reasons.36

First, with respect to Plaintiff’s assertion that remand is appropriate because of the novel

state law issues surrounding COVID-19, Defendant counters that “this Court is well-suited to

address” these contractual matters.37 Defendant contends that “[t]here is nothing specific to

Louisiana law that would render this Court incapable of hearing and deciding those issues,” and

that numerous federal district courts have “expressly rejected the idea that they are not equipped

to render decisions relating to the COVID-19 pandemic and its effect on contractual

relationships.”38

Second, Defendant argues that it did not waive its right to remove this action.39 Defendant

33 Id. at 22.

34 Id. at 18–24.

35 Id. at 6–7; see also 39 F.3d 585, 590 (5th Cir. 1994).

36 Rec. Doc. 12 at 1.

37 Id. at 2.

38 Id. at 7–8.

39 Id. at 11.

contends that the April 2020 Letter designated jurisdiction in the “Civil District Court for the

Parish of Orleans or the United States District Court for the Eastern District of Louisiana.”40

Defendant further contends that Fifth Circuit precedent establishes that waiver of the right to

removal must be explicit.41

Third, Defendant asserts that pursuant to the factors set forth by the Fifth Circuit in

Tradigrain, Inc. v. Mississippi State Port Auth., SWIB is not an arm of the State of Wisconsin for

purposes of this Court’s jurisdictional analysis.42 Defendant also points out that a Wisconsin state

court and the United States Court of Appeals for the Fourth Circuit have held that SWIB is an

independent agency, not an arm of the State of Wisconsin.43 In addition, Defendant submits a

declaration of SWIB’s Chief Legal Counsel, Sara Chandler, in support of its assertion that SWIB

is not an arm of the State of Wisconsin.44 For these reasons, Defendant argues that this Court

should deny the motion to remand.45

C. Plaintiff’s Arguments in Further Support of Remand

In reply to Defendant’s opposition, Plaintiff makes four arguments in further support of

the motion to remand. First, Plaintiff argues that Defendant’s reliance on other federal district

court cases in which a court maintained jurisdiction over cases involving COVID-19 related

issues is misplaced because “the vast majority” of these cases are not “purely” declaratory

40 Id. (emphasis in original).

41 Id. at 12.

42 Id. at 13; see also 701 F.2d 1131 (5th Cir. 1983).

43 Rec. Doc. 12 at 15.

44 Rec. Doc. 12-1.

45 Rec. Doc. 12 at 18.

judgment actions.46 Second, Plaintiff relies on briefs filed by the Wisconsin State Attorney

General in a case decided in Wisconsin state court to argue that SWIB is an arm of the state of

Wisconsin for purposes of this Court’s jurisdictional analysis.47 Third, Plaintiff argues that the

declaration of Sara Chandler does not dispute the “primary facts” relied upon by Plaintiff.48

Finally, Plaintiff argues that “[a]t the very least,” this Court “should allow [Plaintiff] to conduct

jurisdictional discovery on SWIB.”49

D. Defendant’s Sur-Reply in Opposition to Remand

In the sur-reply brief, Defendant argues that Plaintiff “materially alters” and erroneously

relies on briefs submitted by SWIB in Bahr v. State Inv. Bd.50 Defendant also argues that Plaintiff

“failed to disclose to the Court that, when Bahr was decided, the Wisconsin statute was phrased

differently and placed more restrictions on SWIB’s investment activities. Yet even under that

version of the statute, the Bahr court decided that SWIB was an independent agency.”51

Defendant contends that the Wisconsin statute imposing restrictions on SWIB’s investment

authority was “critically revised in 2008 to grant SWIB even broader authority over its functions

as an investment agency.”52

46 Rec. Doc. 18 at 2.

47 Id. at 4–7.

48 Id. at 7–9.

49 Id. at 10.

50 Rec. Doc. 22 at 1–2 (citing Bahr v. State Inv. Bd., 186 Wis. 2d 379, 521 N.W.2d 152 (Ct. App. 1994)).

51 Id. at 3.

52 Id. at 2.

III. Legal Standard

“Federal courts are courts of limited jurisdiction. They possess only the power authorized

by Constitution and statute, which is not to be expanded by judicial decree.”53 “Only state court

actions that originally could have been filed in federal court may be removed to federal court by

the defendant.”54 The removing party bears the burden of demonstrating that federal jurisdiction

exists by a preponderance of the evidence.55 Moreover, the removal statute must be strictly

construed, and “any doubt about the propriety of removal must be resolved in favor of remand.”56

A. Subject Matter Jurisdiction Under 28 U.S.C. § 1332

A defendant generally may remove a state court civil action to federal court when the

federal court has original jurisdiction over the action.57 A federal court has original jurisdiction

over an action when the case “is between citizens of different states” and the amount in

controversy “exceeds the sum or value of $75,000.”58 “[T]he party seeking to remove bears the

burden of showing that federal jurisdiction exists and that removal was proper.”59 When

determining whether diversity jurisdiction is present, a federal court considers “the claims in the

state court petition as they existed at the time of removal.”60

53 Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (internal citations omitted).

54 Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987) (citing 28 U.S.C. § 1441(a)).

55 See Allen v. R&H Oil & Gas Co., 63 F.3d 1326, 1335 (5th Cir. 1995).

56 Gasch v. Hartford Acc. & Indem. Co., 491 F.3d 278, 281 (5th Cir. 2007) (internal citation omitted); see

also Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002).

57 28 U.S.C. § 1441(a).

58 28 U.S.C. § 1332(a)(1).

59 Mumfrey v. CVS Pharm., Inc., 719 F.3d 392, 397 (5th Cir. 2013).

60 Manguno, 276 F.3d at 723.

A state is not a citizen of any state for purposes of diversity jurisdiction.61 This rule also

applies if a suit is brought against an agency that is the alter ego or arm of the state—federal

jurisdiction is lacking.62 However, if the agency is an independent one, separate and distinct from

the state, the district court can properly assert jurisdiction over the case.63

B. Contractual Waiver of Right to Removal

“For a contractual clause to prevent a party from exercising its right to removal, the clause

must give a ‘clear and unequivocal’ waiver of that right.”64 The Fifth Circuit has held that there

are three ways in which a party may clearly and unequivocally waive its removal rights: (1) by

explicitly stating that it is doing so, (2) by allowing the other party the right to choose venue, or

(3) by establishing an exclusive venue within the contract.”65

C. Abstention Under the Declaratory Judgment Act

The Declaratory Judgment Act, codified at 28 U.S.C. § 2201, provides:

(a) In 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. Any such declaration shall

have the force and effect of a final judgment or decree and shall be reviewable

as such.66

The Declaratory Judgment Act “is an enabling act, which confers discretion on the courts rather

61 Moor v. County of Alameda, 411 U.S. 693, 717 (1973).

62 PYCA Industries, Inc. v. Harrison County Waste Water Management, 81 F.3d 1412, 1416 (5th Cir. 1996)

(internal citations omitted).

63 Id.

64 City of New Orleans v. Mun. Admin. Servs., Inc., 376 F.3d 501, 504 (5th Cir. 2004).

65 Id.

66 28 U.S.C. § 2201.

than an absolute right on a litigant.”67 In evaluating whether to maintain jurisdiction over a

declaratory judgment action, a federal district court must determine: “(1) whether the

declaratory action is justiciable; (2) whether the court has the authority to grant declaratory

relief; and (3) whether to exercise its discretion to [maintain jurisdiction over] the action.”68

III. Analysis

A. Whether the Court has Subject Matter Jurisdiction Under 28 U.S.C. § 1332

In this case, Plaintiff argues that complete diversity is lacking because Defendant is an

alter ego or arm of the state.69 Defendant responds that it is an independent agency, not an arm of

the State.70 When determining whether diversity jurisdiction is present, the citizenship of

a limited liability company is determined by the citizenship of each of its constituent members.71

Because Defendant is a limited liability company, this Court must determine the citizenship of its

sole member, SWIB.

“In determining whether the agency is an alter ego of the state or an independent agency,

the essential question is whether the state is the real party in interest in the lawsuit.”72 To decide

whether an agency is an alter ego of the state or an independent agency, this Court considers the

following factors: “(1) whether state statutes and case law characterize the agency as an arm of

the state; (2) the source of entity funding; (3) the degree of local autonomy; (4) whether the entity

67 Wilton v. Seven Falls, Co., 515 U.S. 277, 287 (1995) (quoting Public Serv. Comm’n of Utah v. Wycoff

Co., 34 U.S. 237 (1952).

68 Sherwin-Williams Co. v. Holmes Cnty., 343 F.3d 383, 387 (5th Cir. 2003) (citing Orix Credit Alliance,

Inc. v. Wolfe, 212 F.3d 891, 895 (5th Cir. 2000)).

69 Rec. Doc. 9-1 at 3, 18–24.

70 Rec. Doc. 12 at 13–18.

71 See Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1078 (5th Cir. 2008).

72 Tradigrain, 701 F.2d 113 at 1132.

is concerned primarily with local, as opposed to statewide problems; (5) the authority to sue and

be sued in its own name; and (6) the right to hold and use property.”73

The Court finds that the application of the Tradigrain factors to SWIB reveals that SWIB

is not an arm of the state, but rather a citizen within the meaning of 28 U.S.C. § 1332. The Fifth

Circuit has held that the first factor––whether state statutes and case law characterize the agency

as an arm of the state––subsumes all others.74 With respect to SWIB, in the analogous context of

sovereign immunity, 75 the Wisconsin Court of Appeals reviewed the statutory underpinnings of

SWIB to find that “[SWIB] not only is specifically authorized to sue and be sued in [its own]

name, but the legislature has expressly stated its intent . . . that the board be an independent agency

of the state . . . .”76 Accordingly, the Wisconsin Court of Appeals held that SWIB is an agency

with “independent proprietary powers and functions.”77 Plaintiff’s attempts to rely on the briefing

submitted in that case to distract from the Wisconsin court’s central holding are unpersuasive.78

In light of the Wisconsin Court of Appeals’ determination that SWIB is an independent agency,

not an arm of the state, the Court finds that the first Tradigrain factor weighs heavily in favor of

construing SWIB as an independent agency.

Furthermore, the Court finds that the remaining Tradigrain factors also weigh in favor of

the conclusion that SWIB is an independent agency. In an affidavit, Chief Legal Counsel for

73 PYCA, 81 F.3d at 1416 (identifying and applying the Tradigrain factors).

74 Tradigrain, 701 F.2d at 1132.

75 Id. (“[T]he analysis of an agency's status is virtually identical whether the case involves determination of

immunity under the Eleventh Amendment or a determination of citizenship for diversity jurisdiction.”).

76 Bahr, 186 Wis. 2d at 399 (internal citations and quotations omitted).

77 Id. at 394.

78 See Rec. Doc. 18 at 4–7.

SWIB, Sara Chandler, attested that “a judgment against SWIB related to one of its investments

would not be paid out of the state treasury;” “SWIB manages its own budget, owns its own assets,

and pays its investing and operating expenses from the trust funds under its management;” “SWIB

has exclusive control over the investment and collection of the principal and interest of all moneys

loaned or invested from the various funds it manages;” “SWIB is a body corporate with power to

sue and be sued in its name;” and “SWIB holds and uses property.”79

Although not binding upon this Court, the United States Court of Appeals for the Fourth

Circuit’s decision in Roche v. Lincoln Property Co. provides persuasive support for this

conclusion. There, the Fourth Circuit analyzed the statutory contours of SWIB to hold that it “is

not an arm of the State of Wisconsin and therefore is a citizen within the meaning of 28 U.S.C.

§ 1332.”80 Specifically, that court found that the Wisconsin legislature granted SWIB the

authority to “(1) sue and be sued in its own name; (2) manage its assets; (3) pay its liabilities; (4)

promulgate rules and regulations; and (5) formulate its investment policies.”81 For these reasons,

the Court finds that SWIB is a Wisconsin citizen within the meaning of 28 U.S.C. § 1332.82

Because Plaintiff is a citizen of Louisiana83 and the amount in controversy exceeds $75,000,84

the Court finds that it has federal subject matter jurisdiction over this action.

79 Rec. Doc. 12-1.

80 Roche v. Lincoln Prop. Co., 175 F. App'x 597, 601 (4th Cir. 2006).

81 Id. (citing Wis. Stat. §§ 25.15, 25.17).

82 The Court denies Plaintiff’s request for jurisdictional discovery on this issue. See Rec. Doc. 18 at 10.

Plaintiff has not shown that jurisdictional discovery is necessary to resolve this issue.

83 Rec. Doc. 1-2 at 1.

84 Rec. Doc. 1 at 3.

B. Whether Defendant Waived its Right to Remove the Action to this Court

Plaintiff relies on the forum-selection clause in the April 2020 Letter to argue that this

case should be remanded to the CDC.85 The April 2020 Letter provides: “Landlord and Tenant

agree that the Civil District Court for the Parish of Orleans or the United States District Court for

the Eastern District of Louisiana shall be the sole and exclusive venue and jurisdiction for any

action or proceeding described in this paragraph . . . .”86

Plaintiff argues that once it instituted a declaratory judgment action against Defendant in

the CDC, Defendant was barred from removing the action to the Eastern District of Louisiana.87

Additionally, Plaintiff argues that Defendant waived its right to removal because the April 2020

Letter “did not reserve any right to [Defendant] to remove an action filed in [the CDC], which

was specifically identified as one of the two potential jurisdictions in which a declaratory

judgment action could be initially filed, to federal court.”88 In opposition, Defendant argues that

it did not waive its right to remove this action.89

At the outset, the Court finds that the plain language of the forum-selection clause makes

clear that the parties did not agree to litigate exclusively in state court. Rather, by providing that

“the Civil District Court for the Parish of Orleans or the United States District Court for the

Eastern District of Louisiana shall be the sole and exclusive venue and jurisdiction” for this

85 Rec. Doc. 9-1 at 16–17.

86 Rec. Doc. 9-4 at 2.

87 Rec. Doc. 9-1 at 16.

88 Id.

89 Rec. Doc. 12 at 11.

category of proceeding, the parties agreed that this Court is a proper forum for this action.90

Furthermore, the April 2020 Letter does not specify that once a party files in one of the two proper

forums, the other party is precluded from transferring the action to the other proper forum.91

Plaintiff’s attempt to distract from the plain language of the forum selection clause—and its

complete silence as to issues of removal and remand—by arguing that the April 2020 Letter “did

not reserve any right to [Defendant]” to remove this action is therefore unavailing.

Moreover, the Court finds that Defendant did not waive its right to removal. “For a

contractual clause to prevent a party from exercising its right to removal, the clause must give a

‘clear and unequivocal’ waiver of that right.”92 The Fifth Circuit has held that there are three

ways in which a party may clearly and unequivocally waive its removal rights: (1) by explicitly

stating that it is doing so, (2) by allowing the other party the right to choose venue, or (3) by

establishing an exclusive venue within the contract.”93

In this case, the forum-selection clause did not provide a “clear and unequivocal” waiver

of that right.94 First, nowhere in the April 2020 Letter does Defendant explicitly state that it is

waiving its right to remove the action to federal court.95 Second, nothing in the state court record

indicates that Defendant allowed Plaintiff the exclusive right to choose venue.96 Third, as

described above, the forum-selection clause does not provide that the CDC is the exclusive venue

90 Rec. Doc. 9-4 at 2 (emphasis added).

91 See Rec. Doc. 9-4.

92 City of New Orleans v. Mun. Admin. Servs., Inc., 376 F.3d 501, 504 (5th Cir. 2004).

93 Id.

94 Id.

95 See Rec. Doc. 9-4.

96 See generally Rec. Doc. 1-2, Rec. Doc. 9-4.

for this proceeding.97 Accordingly, the Court finds that Defendant did not waive its right to

remove this action to the Eastern District of Louisiana.

C. Whether the Court will Exercise its Discretion to Maintain Jurisdiction over this

Declaratory Judgment Action

Finally, Plaintiff argues that this Court should remand the case to state court because it

“is a declaratory judgment action which raises novel issues under Louisiana law as to the length

of adverse effects of the novel coronavirus. . . .”98 Having found that this Court has subject

matter jurisdiction over this action and Defendant did not waive its removal right, the Court

turns to the question of whether to exercise its discretion to maintain jurisdiction over this

judgment action.

In evaluating whether to maintain jurisdiction over a declaratory judgment action

pursuant to 28 U.S.C. § 2201, a federal district court must determine: “(1) whether the

declaratory action is justiciable; (2) whether the court has the authority to grant declaratory

relief; and (3) whether to exercise its discretion to [maintain jurisdiction over] the action.”99 The

Court examines each factor in turn.

1. Justiciability

A declaratory judgment action is justiciable, or “ripe for adjudication only where an

‘actual controversy’ exists.”100 Generally, an actual controversy exists where “a substantial

controversy of sufficient immediacy and reality [exists] between parties having adverse legal

97 See Rec. Doc. 9-4 at 2.

98 Rec. Doc. 9-1 at 2.

99 Sherwin-Williams, 343 F.3d at 387 (citing Orix Credit Alliance, 212 F.3d at 895).

100 Orix Credit Alliance, 212 F.3d at 895 (quoting 28 U.S.C. § 2201(a)).

interests.”101 A district court must address on a case-by-case basis whether the facts are

sufficiently immediate to establish an actual controversy.102

In this case, the parties dispute the interpretation of a Lease provision relating to the

abatement of Minimum Rent.103 The Court finds that this represents an actual controversy

between the parties and their dispute is sufficiently immediate. Thus, the Court concludes that

this case is justiciable.

2. Authority to Grant Relief

A district court lacks authority to consider the merits of a declaratory judgment action

when: (1) the defendant in the declaratory judgment action previously filed a lawsuit in the state

court; (2) the state court case involved the same issues as those in the federal court declaratory

judgment action; and, (3) the district court is prohibited from enjoining the state proceeding under

the Anti-Injunction Act, 28 U.S.C. 2283.104 “The absence of any of the three factors defeats

mandatory abstention, and the district court has broad discretion over whether to grant declaratory

relief.”105

Here, Defendant has not previously filed a lawsuit in state court.106 As a result, the Court

finds that mandatory abstention is not required, and the Court has authority to grant the requested

relief.

101 Id. (quoting Middle South Energy, Inc. v. City of New Orleans, 800 F.2d 488, 490 (5th Cir. 1986)).

102 Id.

103 Rec. Doc. 1-2; Rec. Doc. 12 at 3.

104 Sherwin-Williams Co., 343 F.3d at 388 n.1.

105 Sealed v. Sealed, 1994 WL 487245, at *2 (5th Cir. 1994) (citing Torch, Inc. v. LeBlanc, 947 F.2d 193,

194 (5th Cir. 1991)).

106 The previous lawsuit initiated in the CDC on March 22, 2020, was filed by Plaintiff, not Defendant. Rec.

Doc. 9-1 at 7.

3. Exercising Discretion to Maintain Jurisdiction over this Declaratory

Judgment Action

“[T]he Declaratory Judgment Act has been understood to confer on federal courts unique

and substantial discretion in deciding whether to declare the rights of litigants.”107 Although the

district court’s discretion is broad, it is not unfettered and courts may not decline to maintain

jurisdiction over an action “on the basis of whim or personal disinclination.”108 The Fifth Circuit

has indicated that district courts should utilize the seven, nonexclusive Trejo factors in

determining whether to maintain jurisdiction over a declaratory action.109 The Trejo factors are

as follows:

(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 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.110

The Court addresses each of the Trejo factors in turn.

a. Factor One: Pending State Action

At oral argument, counsel for Defendant stated that there is no pending action in state

court. Plaintiff does not dispute that assertion. Notably, the Fifth Circuit has declared that “[t]he

lack of a pending parallel state proceeding should not automatically require a district court to

107 Sealed v. Sealed, 1994 WL 487245, at *2 (5th Cir. 1994) (citing Torch, 947 F.2d at 194).

108 Travelers Ins. Co. v. Louisiana Farm Bureau Fed'n, Inc., 996 F.2d 774, 778 (5th Cir. 1993).

109 Sherwin-Williams Co., 343 F.3d at 388.

110 Id. (citing St. Paul Ins. Co. v. Trejo, 39 F.3d 585 (5th Cir. 1994)).

decide a declaratory judgment action.”111 However, the Fifth Circuit has also stated that “the

presence or absence of a pending parallel state proceeding is an important factor,” and “[t]he

absence of any pending related state litigation strengthens the argument against dismissal of the

federal declaratory judgment action.”112 Accordingly, the absence of a pending state action

weighs in favor of retaining jurisdiction.

Despite the absence of a parallel state action, Plaintiff argues that a Louisiana state court

is a more appropriate forum because Louisiana law is undeveloped with respect to COVID-19

related contractual issues.113 In support, Plaintiff presents two non-binding decisions in which

Pennsylvania district courts remanded declaratory actions regarding COVID-19 related

contractual issues because they implicated unsettled state law issues.114 In opposition, Defendant

presents several non-binding decisions from other federal district courts denying remand of

declaratory judgment actions that presented COVID-19 related contractual questions.115

Additionally, Defendant cites fourteen cases involving COVID-19 related issues that were

pending in the Eastern District of Louisiana on September 29, 2020.116

As an initial matter, the Court is not bound by the authority cited by either party as those

cases were not decided by the Fifth Circuit or the United States Supreme Court. While Plaintiff

may be correct that Louisiana law surrounding COVID-19 is relatively undeveloped, state law

111 Sherwin-Williams Co., 343 F.3d at 394.

112 Id.

113 Rec. Doc. 9-1 at 11.

114 Id. at 12–13.

115 Rec. Doc. 12 at 8–10.

116 Id. at 10–11.

contractual issues are adjudicated by this Court on a regular basis and the existence of novel state

law issues is not a hindrance to this Court exercising jurisdiction.117 Moreover federal courts are

regularly tasked with interpreting contractual agreements, and are no less capable than state courts

of doing so with respect to factual scenarios arising out of the COVID-19 pandemic. A declaratory

judgment in this case would simply clarify the legal obligations at issue by determining

Defendant’s obligations under the Lease; that judgment would not implicate state law issues in a

way that is meaningfully different from any other diversity case.

Plaintiff has not argued, and the Court is not aware of, another state court action examining

coverage under the same lease or lease provision at issue here. Accordingly, the Court finds that

the comity and efficiency considerations presented by a parallel state court action are not present

in this case and concludes that the first Trejo factor weighs strongly against remand.118

b. Factors Two, Three, and Four: Fairness and Improper Forum Shopping

The second, third, and fourth Trejo factors require the Court to consider the motivations

of the party seeking declaratory judgment in federal court, “analyzing whether the [party] is using

the declaratory judgment process to gain access to a federal forum on improper or unfair

grounds.”119 The Court examines “whether the declaratory judgment [party] filed suit ‘in

anticipation’ of a lawsuit to be filed by the [other party]; whether the [party] engaged in ‘forum

shopping’ in bringing the declaratory judgment action; and whether possible inequities exist in

allowing the declaratory judgment [party] to gain precedence in time or to change forums…”120

117 See Cates v. Sears, Roebuck & Co., 928 F.2d 679, 687 (5th Cir. 1991) (stating that the Erie doctrine

requires federal courts sitting in diversity to apply state substantive law).

118 See Sherwin-Williams Co., 343 F.3d at 394.

119 Id. at 391–92.

120 Id.

The instant declaratory judgment action was filed in state court by Plaintiff and removed

by Defendant.121 Accordingly, the Court must consider Defendant’s motivations in removing the

action to federal court.

With respect to the second factor, Defendant contends that “this declaratory action was

not filed to preempt a lawsuit by another party.”122 The April 2020 Letter specifies that in the

event that the parties are unable to agree on when Minimum Rent payments are to resume, “either

party shall have the right to file suit for declaratory judgment.”123 Therefore, Plaintiff’s filing of

the suit was proper. Further, because Defendant was not the party who initiated the action,

Defendant did not use declaratory judgment as an anticipatory tactic.124 Thus, the Court finds that

this factor weighs against remand.

Considering the third factor, concerns about forum-shopping arise when there is evidence

a party seeks the forum for its more favorable law.125 Here, Defendant removed the action to

federal court under diversity jurisdiction. The Fifth Circuit has explicitly recognized that a

traditional justification for diversity jurisdiction is “to protect out-of-state defendants.”126

Removal of a case by an out-of-state defendant “does not necessarily demonstrate impermissible

forum selection.”127 Moreover, as discussed above, the parties agreed in the April 2020 Letter

121 See Rec. Doc. 1.

122 Rec. Doc. 12 at 7.

123 Rec. Doc. 9-4 at 2.

124 Rec. Doc. 17 at 7.

125 Sherwin-Williams, 343 F.3d at 399.

126 Id.

127 Id.

that venue and jurisdiction would be proper in the Eastern District of Louisiana.128 Accordingly,

there is no forum shopping present, and the Court finds that this factor weighs against remand.

The fourth factor examines whether retaining the action would allow Defendant to gain

precedence in time or a change of forums.129 Neither party asserts that there is an inequity

regarding timing, and it does not appear that there is any pending state proceeding. Therefore,

there is no potential for one party to gain an advantage of precedence in time. Defendant argues

that no inequity arises from a change of forum, and Plaintiff likewise does not present this

contention. Plaintiff’s opposition lies in its argument that Louisiana courts are a more appropriate

forum for deciding new issues of state law.130 As discussed above, federal courts are capable of

deciding issues of state law without inequity to either party. In fact, the traditional rationale for

diversity jurisdiction is that it can protect out-of-state defendants.131 Accordingly, no inequity

arises from the removal of the declaratory judgment action and this factor weighs against remand.

Based on the foregoing analysis, the Court finds that the three fairness factors all weigh

against remand.

c. Factor Five: Convenient Forum

The state action was filed in the Civil District Court for the Parish of Orleans, State of

Louisiana.132 As the state court and this Court are in the same city, this Court is equally convenient

128 See Rec. Doc. 9-4 at 2.

129 Sherwin-Williams, 343 F.3d at 391–92.

130 Rec. Doc. 9-1 at 11.

131 Sherwin Williams, 343 F.3d at 399 (“[The selection of a federal forum] does not necessarily demonstrate

impermissible forum selection when the declaratory judgment out-of-state plaintiff invokes

diversity. Rather, it states the traditional justification for diversity jurisdiction, to protect out-of-state

defendants.”).

132 Rec. Doc. 9-1.

for the parties. Therefore, this factor is neutral.

d. Factor Six: Judicial Economy

Defendant asserts that maintaining the lawsuit in federal court would serve the purposes

of judicial economy.133 The record reflects that this action was filed on July 17, 2020, and is still

in its infancy.134 Additionally, this Court has hitherto decided no issues in this case.135

Accordingly, either state or federal court could efficiently decide the declaratory action. This

factor is also neutral.

e. Factor Seven: Construction of a State Judicial Decree

There is no state judicial decree at issue between the parties and no pending parallel suit.

Therefore, this factor weighs against remand.

For the reasons discussed above, five factors weigh against remand and two factors are

neutral. Considering these factors together, the Court exercises its discretion to maintain

jurisdiction over this declaratory judgment action.

V. Conclusion

Considering the foregoing reasons, the Court finds that removal is proper, and the Court

will exercise its discretion to maintain jurisdiction over this declaratory judgment action.

Accordingly,

133 Rec. Doc. 12 at 7.

134 Rec. Doc. 1-2 at 1.

135 The only pending motion is Defendant’s motion to dismiss a second-filed duplicate action. Rec. Doc. 7.

IT ISHEREBY ORDERED that Plaintiff The Shops and Garage at Canal Place, LLC’s

“Motion to Remand” is DENIED.

NEW ORLEANS, LOUISIANA, this 2/8t day of October, 2020.

envette,ahewette

CHIEF JUDGE

UNITED STATES DISTRICT COURT

86 Rec. Doc. 9.

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