# Opposition Brief — Covalt v. Allstate Insurance Insurance Co. (No. 09-128)

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 2009

## Text

(D Supreme Court, U.S.
FILED
No. 09-128 AUG 28 2009
OFFICE OF THE CLERK
In The
Supreme Court of the United States
*

WILLIAM COVALT, Individually, and
LOREN MORGAN, as Personal Representative
of the Estate of LINDA COVALT, Deceased,

Petitioners,

Vv.

ALLSTATE INSURANCE COMPANY,

Respondent.

4

On Petition For Writ Of Certiorari
To The United States Court Of Appeals
For The Tenth Circuit

¢

BRIEF IN OPPOSITION

%

RICHARD J. HARRIS
Counsel of Recerd
JERRY D. NOBLIN, JR.
WALLS WALKER HARRIS
& WOLFE, PLLC
Union Plaza, Suite 500
3030 N.W. Expressway
Oklahoma City, OK 73112
Telephone: (405) 702-5300
Attorneys for Respondent
Allstate Insurance Company

COCKLE LAW BRIEF PRINTING CO (800) 225-6964
OR CALL COLLECT (402) 342-2831

QUESTION PRESENTED

Whether the district court properly exercised its
discretion by accepting jurisdiction over this first-
filed contractual insurance dispute under the Federal
Declaratory Judgment Act.

CORPORATE DISCLOSURE STATEMENT
PURSUANT TO SUPREME COURT RULE 29.6

In accordance with Sup. Cr. R. 29.6, Respondent,
Allstate Insurance Company (“Allstate”) states that it
is a wholly-owned subsidiary of The Allstate Corpo-
ration, a publicly-held Delaware corporation.

111

TABLE OF CONTENTS

Page
QUBS LION PIU Bi) vesesussconvsnvssssvscsseceynasensees 1
CORPORATE DISCLOSURE STATEMENT ........ re
SUMMARY OF RESPONDENT'S ARGUMENT .. 1
STATEMENT OF THE CABE.......ccssccsscersssscsscseseses 2
REASONS FOR DENYING THE PETITION ....... 6

a

IT.

The Tenth Circuit Properly Affirmed The
District Court’s Discretionary Decision To
Hear Allstate’s First-To-Be-Filed Declara-
COTY COVOTRMBO AGCIOTasecsccissccssesesssserevececssesess

A. The District Court’s Exercise of Juris-
diction Under the Act is Reviewed for
PDMS CT EPIDOT OCOD eee sivcsisscacsccvcsscescsececces

B. The Oklahoma Federal District Court
was a Proper Forum for Resolution of
an Insurance Contract Coverage Dis-
pute Between Citizens of Different
States Involving Allegedly Competing
Public Policies of Two States.................

C. The District Court Accepted Jurisdic-
tion Based on a Thorough Review of Ap-
propriate, Well-Established Factors.....

The District Court’s Proper Exercise Of
Its Discretion Under The Act Did Not
“Change The Law” Governing Any Issue In
This Case, Nor Did It Violate “Erie Policy”
Or Deprive Morgan Of Any Traditional
Privilege Of Selecting The Forum For His
Tort Claim Amminet COVBUIE ........0ssssccccssessnsces

¢)

TABLE OF CONTENTS — Continued

Page

III. There Is No Split Between The Tenth And
Fifth Circuits On Any Issue Presented
IR cc g0i asa cdescatiatabnoscuedecteovenactstes choo tircekie 16

ST ehiiikivictnainnceitakssucterrapniensnaereei 19

TABLE OF AUTHORITIES

Page
CASES
Aetna Cas. & Sur. Co. v. Ind-Com Elec. Co., 139
ee ee On ES ID ooo os. ccocaasackvarcansnddachiacesacens 11
Bohannon v. Allstate Ins. Co., 820 P.2d 787
(DR AR I SR a SI ee ee See TaN a 16
Cincinnati Ins. Co. v. Holbrook, 867 F.2d 1330
a 13
Cont’l Cas. Co. v. Robsac Indus., 947 F.2d 1367
I a Fe 11

Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938)....14, 16
E.R. Squibb & Sons, Inc. v. Lloyd’s & Cos., 241

Pe I Oe IY is ei visnssaccsscasncndeewcsscuvaavccecevcat
Farmers Alliance Mut. Ins. Co. v. Jones, 570

ee, BT BE Ht, BOT? aviv cncevnccscvevecncareowaecsansecavnnse 8
Franklin Life Ins. Co. v. Johnson, 157 F.2d 653

I nS area ei dasdattandcoseiins 13
Harris v. U.S. Fid. & Guar. Co., 569 F.2d 850

i sd sad dauccudncavecedebannacwinvdnkenk 11
Kern v. TXO Prod. Corp., 738 F.2d 968 (8th Cir.

Bilt AT el AIR Rp a eer ee oa Po ey cl eA 7
Kunkel v. Cont’l Cas. Co., 866 F.2d 1269 (10th

sc ee 11

Mission Ins. Co. v. Puritan Fashions Corp., 706
F.2d 599 (5th Cir. 1983) ................. 11, 16, 17, 18, 19

vi

TABLE OF AUTHORITIES — Continued

Patterson by Patterson v. Coca-Cola Bottling
Co. Catro-Sikeston, 852 F.2d 280 (7th Cir.

Resort Car Rental Systems, Inc. v. Chuck
Ruwart Chevrolet, Inc., 519 F.2d 317 (10th
CRT sass rd ads cancun eucovesaviiesacobenenocaiareyid pexéogioyee 10

Rogers v. Andrus Transp. Servs., 502 F.3d 1147

I ssi ia Sane Vapinesdbinnapeuetmesnecumeunnonh teens 6
State Auto. Ins. Cos. v. Summy, 234 F.3d 131
I ors) enh avs sab edekanoisemsseiokieaewerveaeus’ 13
State Farm Fire & Casualty v. Mhoon, 31 F.3d
REARS Aes 2 ri DE 5, 8,9, 17
St. Paul Fire & Marine Ins. Co. v. Runyon, 53
ee BES CREST, BOP case cincsssectnesesserssissustansrancess 11
United Capitol Ins. Co. v. Kapiloff, 155 F.3d
I III isn ccavesasvansanednevvakess savveuid 8,11, 13
Van Dusen v. Barrack, 376 U.S. 612 (1964)......... 14,15
Wilton v. Seven Falls Co., 515 U.S. 277 (1995)............ 6
STATUTES
ee CE Ss i cans bpembenoekensbacnceeaeeauante’ 16
y Sok Rede 27 es auabbanansunesins ideo 14
a ade oan pads enmeerieeeeabee: 10
RULES
PE EE oes cdanissécsuincviaancdsevsuerns July Gkded tasdeataasaenien 7

TABLE OF AUTHORITIES — Continued

Page
OTHER AUTHORITIES
6A Moore’s FEDERAL PRACTICE § 57.08(4) (2d
es SRR Tn Day ieee y ABBA Sel INENBES ANION 120 trae OS a |

WRIGHT, MILLER, AND KANE, Federal Practice
and Procedure, Civil § 2751 (3d ed. 1998)................ 7

SUMMARY OF RESPONDENT’S ARGUMENT

The Petition presents nothing more than a fact-
bound challenge to a district court’s discretionary
decision to exercise jurisdiction over this first-filed in-
surance dispute under the Federal Declaratory Judg-
ment Act (“Act”). The underlying dispute involved
Oklahoma insurance contracts issued to Oklahoma
citizens covering risks principally located in Okla-
homa. After giving Petitioner Covalt notice and the
opportunity to join in the case on stipulated facts,
respondent Allstate filed this action in federal district
court in Oklahoma, seeking a declaration of its
contractual obligations.

Petitioners thereafter filed a state-court tort
lawsuit in New Mexico, and sought to dismiss this
lawsuit on the ground that the contractual issue
presented here should be decided there. Applying a
number of well-settled discretionary factors, the
district court below declined to dismiss this action in
light of the New Mexico lawsuit, and the United
States Court of Appeals for the Tenth Circuit affirmed
on the ground that the district court did not thereby
abuse its discretion. This case accordingly involves
nothing more than the discretionary application of
settled law to fact, and does not remotely implicate a
circuit conflict. The United States Court of Appeals
for the Fifth Circuit case cited by Petitioners also
affirmed a district court’s exercise of its discretion
concerning jurisdiction under the Act, and the district
court there simply declined to exercise that
jurisdiction on the particular facts of that case. It is

2

not surprising that courts reach different results in
applying discretionary factors to different facts;
indeed, that is the very essence of discretion. This
Court should deny the Petition.

a

STATEMENT OF THE CASE

Petitioner William Covalt, his wife Linda, and
their daughter LaDon all lived in Oklahoma and were
Oklahoma citizens. They owned a 1999 Ford Econo-
line van principally garaged at their Oklahoma home.
In August 2007, the Covalts were returning home
from a trip to California. While driving through New
Mexico on U.S. Interstate Highway 40 at approxi-
mately 1:00 a.m., Mr. Covalt lost control of the van. It
rolled over, killing Mrs. Covalt. No other vehicle was
involved, no other persons were injured, and no other
property was damaged.

Before the accident, the Covalts purchased two
insurance policies from Respondent Allstate in Okla-
homa: (1) an automotive policy which provided both
uninsured motorist (“UM”) and liability coverage (the
“Auto Policy”) and (2) a Persona! Umbrella Policy (the
“PUP”). Allstate issued the Auto Policy pursuant to
the requirements of Oklahoma’s Compulsory Insur-
ance laws. (10th Cir. App., Tab 6, p. 144) (“Liability
Insurance is provided in this Policy in accordance
with coverage required by the Compulsory Insurance
Laws of Oklahoma”). The Auto Policy contained an
exclusion which reduced (i.e., “stepped-down”) the
liability coverage limits from $250,000 to Oklahoma’s

3

statutory minimum ($25,000) whenever the injured
person was a relative of, and resided with, the
insured. The PUP was a general excess liability policy
which applied only to bodily injury damages
exceeding $100,000 and which excluded all coverage
for personal injuries sustained by an insured.

Both the Auto Policy and the PUP were pur-
chased in Oklahoma, issued in Oklahoma, and
covered risks principally located in Oklahoma. Con-
sequently, both policies contained virtually the same
choice of law provision which defaulted to Oklahoma
law unless one stated exception applied. (10th Cir.
App., Tab 6, p. 159 (Auto Policy), and p. 182 (PUP).)

After the accident, Mr. Covalt hired an Oklahoma
attorney and filed a probate action concerning his
wife’s Last Will and Testament in Oklahoma state
court. Mrs. Covalt’s Will named Mr. Covalt (the tort-
feasor) as the sole beneficiary and personal represen-
tative of her estate. (10th Cir. App., Tab 6, p. 201.) Mr.
Covalt, as Mrs. Covalt’s surviving spouse, then
asserted a claim with Allstate (through the same
attorney) under the Auto Policy for Mrs. Covalt’s
death.

Allstate determined that the UM limits of
$250,000 were owed, and that the Auto Policy’s “step-
down” provision limited liability coverage to Okla-
homa’s minimum limits ($25,000) because the injured
person (Mrs. Covalt) was a resident relative of the
insured (Mr. Covalt). In early November 2007,
Allstate’s Oklahoma counsel contacted Mr. Covalt’s
counsel and informed him that Allstate would pay the

4

Auto Policy’s UM limits of $250,000 and offered the
stepped-down liability coverage limits of $25,000.
Allstate’s counsel also expressed Allstate’s conclusion
that the step-down provision was enforceable under
Oklahoma law, which governed the construction of
the policy. Mr. Covalt’s attorney stated his belief that
New Mexico law governed this insurance policy and
that the step-down provisieon was not enforceable
under that law. (10th Cir. App., Tab 4, p. 43.)

Allstate’s counsel informed Mr. Covalt’s counsel
that Allstate intended to file a declaratory judgment
action in Oklahoma federal court on the issue of
coverage, and invited Mr. Covalt to join in that action
on stipulated facts. Mr. Covalt’s counsel never re-
sponded. Jd. Four days later, on November 13, 2007,
Allstate’s counsel sent a courtesy copy of the Com-
plaint seeking declaratory judgment to Mr. Covalt’s
counsel prior to filing, and again invited him to join
in the action. Again, there was no response. Later
that same day, Allstate filed this declaratory judg-
ment action in the United States District Court for
the Western District of Oklahoma. Mr. Covalt sub-
sequently nominated another Oklahoma citizen,
Petitioner Loren Morgan, and had him appointed
persona) representative of his wife’s estate by the
Oklahoma probate court, without notifying Allstate.
(10th Cir. App., Tab 6, p. 203.)

Mr. Covalt’s counsel then associated with a New
Mexico lawyer and filed suit in that state on
December 6, 2007, on behalf of Mr. Morgan against
Mr. Covalt. The New Mexico suit originally included

only allegations of tort liability (wrongful death).
There is no dispute over the choice of New Mexico as
a proper venue for litigating any tort claims arising
from the accident. However, in an effort to make the
second-filed New Mexico state action mirror Allstate’s
federal declaratory contract action, Mr. Morgan filed
an amended complaint on December 17, 2007, and a
second amended complaint on December 20, 2007,
adding Allstate as a defendant and asserting a claim
for declaratory judgment that the Oklahoma policy
exclusions were unenforceable under New Mexico
law. (10th Cir. App., Tab 4, pp. 33-38.) Mr. Covalt then
moved to dismiss or stay this Oklahoma federal
declaratory action.

The district court denied that motion after con-
cluding, based on all applicable factors, that this
action was an appropriate use of the Act. Specifically,
the district court applied the discretionary factors set
forth by the Tenth Circuit in State Farm Fire &
Casualty Company v. Mhoon, 31 F.3d 979, 983 (1984),
for determining when a district court should exercise
jurisdiction over a declaratory action.

After the district court denied Covalt’s Motion to
Dismiss or Stay, Allstate moved for summary judg-
ment on the issue of coverage. The district court then
addressed the conflict of law issue, holding that Okla-
homa law governed the contract dispute, and ruled in
favor of Allstate on the merits. On appeal, a unani-
mous panel of the Tenth Circuit, in an unpublished

6

opinion, affirmed the district court’s analysis and
conclusions in all respects.

4

REASONS FOR DENYING THE PETITION

I. The Tenth Circuit Properly Affirmed The
District Court’s Discretionary Decision To
Hear Allstate’s First-To-Be-Filed Declara-
tory Coverage Action.

A. The District Court’s Exercise of Juris-
diction Under the Act is Reviewed for
Abuse of Discretion.

“Since its inception, the Declaratory Judgment
Act has been understood to confer on federal courts
unique and substantial discretion in deciding whether
to declare the rights of litigants.” Wilton v. Seven
Falls Co., 515 U.S. 277, 286 (1995) (emphasis added).
This Court has “distinguish{ed] the declaratory judg-
ment context from other areas of the law in which
concepts of discretion surface” and has given lower
courts a larger “breadth of leeway” for their exercise
of discretion under the Act. /d., at 287. So long as the
lower court’s decision to accept jurisdiction is not
arbitrary, capricious or manifestly unreasonable, and
does not exceed the bounds of permissible choice
under the circumstances, the lower court will be
found to have properly exercised its substantial
discretion. Rogers v. Andrus Transp. Servs., 502 F.3d
1147, 1153 (10th Cir. 2007); Patterson by Patterson v.
Coca-Cola Bottling Co. Cairo-Sikeston, 852 F.2d 280,

7

283 (7th Cir. 1988); Kern v. TXO Prod. Corp., 738 F.2d
968, 971 (8th Cir. 1984).

B. The Oklahoma Federal District Court
was a Proper Forum for Resolution of
an Insurance Contract Coverage Dis-
pute Between Citizens of Different
States Involving Allegedly Competing
Public Policies of Two States. |

The Oklahoma federal district court was a per-
fectly appropriate forum for resolution of this contrac- —
tual insurance coverage dispute involving Allstate,
Oklahoma citizens and Oklahoma policies, particu-
larly given the presence of an underlying alleged
conflict of laws between two states. The Act states in
pertinent part as follows: “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.” 28 U.S.C. § 2201; accord, FED.R.Civ.P. 57.
Congress passed the Act for the very purpose of the
early resolution of disputes: “The remedy made
available by the Declaratory Judgment Act and Rule
57 is intended to ... afford one threatened with
hability an early adjudication without waiting until
an adversary should see fit to begin an action[.]”
WRIGHT, MILLER, AND KANE, Federal Practice &
Procedure, Civil § 2751 (3d ed. 1998).

8

Circuit courts have recognized the usefulness of
the Act in resolving insurance coverage disputes. As
the Tenth Circuit has stated, “Declaratory judgment
actions are seen as useful in actions wherein in-
surance companies seek to have their liability de-
clared. We have expressly recognized that one of the
primary functions of the Act is to provide the insurer
such a forum.” Farmers Alliance Mut. Ins. Co. uv.
Jones, 570 F.2d 1384, 1386 (10th Cir. 1978) (emphasis
added). Indeed, federal declaratory judgment actions
are the process by which insurance coverage disputes
are traditionally resolved. United Capitol Ins. Co. v.
Kapiloff, 155 F.3d 488, 494 (4th Cir. 1998); see also,
E.R. Squibb & Sons, Inc. v. Lloyd’s & Cos., 241 F.3d
154, 177 (2d Cir. 2001) (“[L]itigation over insurance
coverage has become the paradigm for asserting
jurisdiction [under the Act.]”) (emphasis added).

C. The District Court Accepted Jurisdic-
tion Based on a Thorough Review of
Appropriate, Well-Established Factors.

The district court acted within its substantial
discretion by applying the well-established factors set
forth by the Tenth Circuit in State Farm Fire &
Casualty Company v. Mhoon, 31 F.3d 979 (10th Cir.
1994) to the unique facts of this case. In Mhoon, the
Tenth Circuit held that a district court should con-
sider the following factors when determining whether
to hear a declaratory action:

(1) Whether the declaratory action would
settle the controversy;

9

(2) Whether it would help clarify the
parties’ legal relations at issue;

(3) Whether it is being used for “procedural
fencing”;

(4) Whether it would increase friction be-
tween federal and state courts and en-
croach upon state jurisdiction; and,

(5) Whether there is a better or more effec-
tive alternative forum.

In both the district court and on appeal, Petitioners
conceded that Mhoon governed their Motion to Dis-
miss or Stay. (10th Cir. App., Tab 4, p. 22.) Petitioners
have never argued that Mhoon contravened the law
from this Court or any appellate court. Petitioners
failed to show that the district court’s discretionary
application of even one of the Mhoon factors was
arbitrary or manifestly unreasonable. That is why the
Tenth Circuit had no difficulty affirming the district
court’s application of those discretionary factors to
the facts of this case.

The record amply reveals that the district court’s
decision to hear the declaratory action was reason-
able and well-grounded in both the facts and law. The
lower court reviewed the extensive and predominat-
ing contacts of this contract dispute showing that all
material contacts were in Oklahoma and concluding
that it would be appropriate for the parties to litigate

10

coverage in an Oklahoma forum. (Petitioners’ App., p.
34a.)’

Moreover, the district court observed that the
wrongful death claim filed in New Mexico was
distinct and severable frein the coverage issue under
the Oklahoma policies. (Petitioners’ App., p. 32a-33a.)
Coverage is a matter of contract construction and
enforceability which is distinct from the tert issues of
liability and damages. Resort Car Rental Sys., Inc. uv.
Chuck Ruwart Chevrolet, Inc., 519 F.2d 317, 319
(10th Cir. 1975) (“[Tlhe construction of a contract is a
question of law for the court.”). The plain language of
the Act clearly establishes that a declaratory coverage
action need not resolve underlying tort claims. 28
U.S.C. § 2201 (“[AJny court of the United States .
may declare the rights and other legal relations of

' The lower court found the following Oklahoma contacts:
(1) Allstate issued both insurance policies in Oklahoma; (2) The
Oklahoma Auto Policy expressly notes that the insurance is
provided in accordance with the requirements of Oklahoma's
Compulsory Financial Responsibility laws; (3) Mr. Covalt, as a
policyholder, the alleged tortfeasor, and sole beneficiary of his
deceased wife’s estate, is a citizen of Oklahoma; (4) Mrs. Covalt
was, prior to her death, a citizen of Oklahoma; (5) The Personal
Representative of the deceased’s Estate is a citizen of Oklahoma;
(6) The Estate’s primary legal counsel is located in Oklahoma;
and, (7) The insured auto involved in the accident was prin-
cipally garaged in Oklahoma. The only connection of this case to
New Mexico was that the underlying accident happened to occur
there. (Petitioners’ App., p. 34a.)

11

any interested party ... whether or not further relief
is or could be sought.”).”

Furthermore, the district court considered (and
properly rejected) Petitioners’ contention that Allstate
had engaged in improper “procedural fencing.” There
was no evidence that Petitioners were lulled into in-
action, that Allstate preemptively filed because Peti-
tioners were threatening litigation or that Allstate
acted for any other improper or abusive reason.”
Rather, as the district court noted, Allstate’s actions
were “above board,” as it attempted to resolve this
matter in an open, prompt manner. Allstate twice
invited Petitioners to join the declaratory coverage

* See also, Kunkel v. Cont’l Cas. Co., 866 F.2d 1269, 1276
(10th Cir. 1989) (“Nothing in the Declaratory Judgment Act pro-
hibits a court from deciding a purely legal question of contract
interpretation which arises in the context of a justifiable con-
troversy presenting other factual issues.”); Kapiloff, 155 F.3d at
494 (upholding a declaratory judgment even though it did not
resolve underlying state law tort claims); Harris v. U.S. Fid. &
Guar. Co., 569 F.2d 850, 852 (5th Cir. 1978) (“It is well settled
that a district court may render a declaratory judgment though
that judgment will not settle all the issues of the entire con-
troversy. The controversy settled by the declaratory judgment
need only be an autonomous dispute.”); 6A MOORE’S FEDERAL
PRACTICE § 57.08(4) (2d ed. 1974).

> For examples where such conduct did occur, see, Aetna
Cas. & Sur. Co. v. Ind-Com Elec. Co., 139 F.3d 419, 423 (4th Cir.
1998); Mission Ins. Co. v. Puritan Fashions Corp., 706 F.2d 599
(5th Cir. 1983); Cont Cas. Co. v. Robsac Indus., 947 F.2d 1367,
1373 (9th Cir. 1991); (overruled on other grounds) and, St. Paul
Fire & Marine Ins. Co. v. Runyon, 53 F.3d 1167, 1170 (10th Cir.
1995)

12

action with stipulated facts, informed them in ad-
vance of the intent to file the declaratory action in
federal court, selected a convenient court in Peti-
tioners’ home-state and, after receiving no response,
proceeded to file in a timely manner.’ (Petitioners’
App., p. 35a.)

Finally, the district court properly weighed
whether its resolution of the coverage dispute in-
volving Oklahoma citizens, Oklahoma insurance
policies and risks principally located in Oklahoma
might “gratuitously interfere” with a New Mexico
state court’s jurisdiction. The district court observed
that, while the administrative regulation of the

* As the District Court observed, if any party had engaged
in procedural gamesmanship, it was Petitioners: “To the extent
either party has engaged in procedural fencing or forum
shopping, the court concludes that Mr. Covalt and his
counsel have done at least as much, if not more, than
Allstate and its counsel.” (Petitioners’ App., p. 35a) (emphasis
added). Covalt’s counsel told Allstate no personal representative
had been appointed and never responded to Allstate’s open
invitations. After Allstate filed, Covalt and his attorney waived
his appointment as Personal Representative, had Morgan
appointed in his place, never gave Allstate notice of the new
appointment, left Oklahoma and traveled 340 miles to New
Mexico to “sue” Covalt (but not Allstate) in New Mexico state
court for wrongful death. Then, after adding Allstate to the New
Mexico case under a declaratory judgment claim of their own,
Petitioners filed two Motions to Dismiss Allstate’s first-filed
federal action and argued that it was “gratuitously interfering”
with their second-to-be-filed New Mexico action, and that
Allstate’s claim should be dismissed for failing to join Morgan,
the theretofore undisclosed Personal Representative. (See, 10th
Cir. App., Tabs 4, 14.)

13

insurance industry is traditionally left to the states,
the resolution of coverage disputes under insurance
policies is an accepted role for federal courts and an
appropriate use of the Act. (Petitioners’ App., pp. 33a-
34a.) See also, Kapiloff, 155 F.3d at 494; Cincinnati
Ins. Co. v. Holbrook, 867 F.2d 1330, 1333 (11th Cir.
1989).

Petitioners submitted no evidence to support
their claim of gratuitous interference. In essence,
they argued to the lower court (as they do now to this
Court) that anytime an insurance company files a
declaratory action in federal court, if the insured or
tort claimant later files his or her own declaratory
action in a state court, the federal court must stand
down. The district court properly rejected that
extreme position. See, e.g., State Auto. Ins. Cos. v.
Summy, 234 F.3d 131, 136 (3d Cir. 2000) (holding
gratuitous interference occurs when a federal court
declares the rights of litigants on unsettled issues
of state Jaw currently pending before that state’s
appeals court); Franklin Life Ins. Co. v. Johnson, 157
F.2d 653, 659 (10th Cir. 1946) (The mere “mainte-
nance of [a] declaratory judgment action does not
amount to a usurpation of state court jurisdiction.
There is no interference with the orderly and compre-
hensive disposition of pending state court litigation.”).

14

II. The District Court’s Proper Exercise Of
Its Discretion Under The Act Did Not
“Change The Law” Governing Any Issue
In This Case, Nor Did It Violate “Erie
Policy” Or Deprive Morgan Of Any
Traditional Privilege Of Selecting The
Forum For His Tort Claim Against Covalt.

Petitioners insist, however, that the district
court’s decision to accept jurisdiction “changed the
law” applicable to this Oklahoma-based contract dis-
pute, deprived Morgan of his choice of forum for his
tort claim, and somehow violated the principles of
Erie Railroad Company v. Tompkins, 304 U.S. 64
(1938). Petitioners base that argument on Van Dusen
v. Barrack, 376 U.S. 612 (1964).

That reliance is unavailing. The only issue in Van
Dusen was whether a change in venue under the
federal transfer statute, 28 U.S.C. § 1404(a), should
result in a change in the substantive law applicable
to the plaintiffs’ tort claims. 376 U.S., at 625.” This
Court ruled that a change of venue could not be used
to shut the courthouse doors to the plaintiffs’

* In Van Dusen, personal representatives of the victims of a
commercial airliner crash in Massachusetts filed numerous
wrongful death actions in both Massachusetts and Pennsylvania
federal court. The defendants moved under 28 U.S.C. § 1404(a)
to transfer the Pennsylvania actions to Massachusetts. The
district court held that transfer of venue to another state was
proper even though numerous Pennsylvania plaintiffs had not
qualified under Massachusetts law to sue as personal repre-
sentatives.

15

wrongful death claims by changing the applicable
law.

Van Dusen is inapposite because a transfer of
venue did not occur here nor was it ever requested.
Thus, no “change of law” was made. In fact, when the
district court accepted jurisdiction over Allstate’s
contractual declaratory judgment claim, the question
of which state’s law would apply to the contracts was
still undetermined. The conflict of laws issue was not
presented for decision by Petitioners’ Motions to
Dismiss or Stay Proceedings, but only by Allstate’s
subsequent Motion for Summary Judgment. Also,
Petitioners’ characterization that a change of law
occurred assumes (incorrectly) that New Mexico law
governed the insurance contracts in the first instance.
Whether New Mexico law governed the policies was a
legal proposition which they failed to demonstrate to
the district court, failed to demonstrate to the Tenth
Circuit, and have not even attempted to demonstrate
to this Court.

Furthermore, the district court decision to accept
jurisdiction over the declaratory judgment claim did
not foreclose, or in any way affect, Petitioner
Morgan’s ability to prosecute his tort claim in the
forum of his choosing (New Mexico). The parties
never disputed that New Mexico law governed Mor-
gan’s tort claim or that New Mexico state courts
would have jurisdiction over that claim. Conse-
quently, it is clear that the district court’s proper
exercise of jurisdiction over the contractual coverage
dispute did not deprive Morgan of any traditional
prerogative to select the forum for his tort claim.

16

Further, Petitioners’ effort to invoke “Erie Policy”
(that “the ‘accident of diversity’ [should] not result in
a substantially different outcome in federal court
than would be achieved if the action were filed in
state court”) (Petition, p. 6) must also fail because
the “Erie Policy” they invoke clearly was not violated
here. That doctrine aims to prevent inconsistent
results between cases filed in a federal court under
diversity jurisdiction and cases filed in state court in
the same state where the federal court sits. This case
presents no danger of any such inconsistency. Had
Allstate filed this declaratory judgment action in
Oklahoma state court, Oklahoma’s choice of law rules
still would have governed. See, Bohannon v. Allstate
Ins. Co., 820 P.2d 787 (Okla. 1991); 12 Okla. Stat.
§ 1651 (providing declaratory judgment actions in
Oklahoma state courts). Thus, while the diversity of
citizenship between the litigants here allowed
Allstate to bring the matter in the neutral federal
court, it in no way resulted in a different outcome
than would have occurred if the case had been
brought in Oklahoma state court.

Ill. There Is No Split Between The Tenth And

Fifth Circuits On Any Issue Presented
Here.

Petitioners claim that the Fifth Circuit in Mis-
sion Insurance Company v. Puritan Fashions Corpo
ration, 706 F.2d 599 (5th Cir. 1983) held that a
district court should not hear a federal declaratory
action if doing so would change the law to be applied

17

in the declaratory defendant's state court action.
(Petition, p. 10.) Again, no “change in the law”
occurred here. But even if it did, the Fifth Circuit in
Mission never endorsed any such rule.

Rather, the Fifth Circuit in Mission (like the
Tenth Circuit in this case) utilized several factors to
review a district court’s exercise of discretion under
the Act regarding whether to accept jurisdiction. /d.,
at 601 (“The district court may .. . take into account a
wide variety of factors. Our review of the district
court’s action is limited to whether it abused its
discretion.”) (In fact, the Tenth Circuit in Mhoon even
cites Mission as support for the abuse of discretion
standard it employs. Mhoon, 31 F.3d at 983, fn. 6).
Moreover, a comparison of Mission to the Tenth
Circuit’s decision in the present case reveals that
both circuits considered and applied effectively the
same law. Compare, Mission, 706 F.2d at 602-03, with
Covalt, Petitioners’ App., pp. 32a-35a.

A comparison of Mission to the present case also
makes clear that the lower courts reached different
discretionary decisions not because they applied
different law, but because they faced markedly dif-
ferent facts. Mission involved an insurance claim by a
clothing manufacturer for the alleged theft of
$900,000 in merchandise. The clothing was manu-
factured in Texas, but the FBI investigation led to the
conviction of two individuals in California. The
insurance policy contained a one-year limitations
period for filing suit. The insured requested an

extension of that deadline. The insurer promised to

18

allow the insured additional time to file suit up to
thirty days after such time as the claim might be
denied in writing. Subsequently, the insurance
company’s “president orally rejected [the] claim, and
this declaratory judgment suit was filed by the
[Insurance] Company in Texas that same day.”
Mission, 706 F.2d at 600.

The insured then filed its own suit in California
asserting not only a declaratory judgment claim, but
claims of bad faith, fraud and unfair claim settlement
practices against the insurance company, as well as
tort claims for conversion against other defendants.
The Fifth Circuit affirmed the Texas federal district
court’s decision not to accept jurisdiction, finding:

Plaintiff caused Defendant to delay filing
suit in California by representing that Plain-
tiff was considering the merits of the claim
and by allowing an extension of the one year
limitations period. But for those representa-
tions and implications, Defendant would
have been the first to file an action pre-
senting the same issues (plus a few more),
and the forum for the trial of those [factual]
issues presented in this suit would be in
California.

ld., at 601.

Clearly, the facts of Mission are nothing like
those here. As noted above, Allstate promptly
informed the insured of its coverage determination.
When the insured disagreed, Allstate informed him in
advance of its intention to file a declaratory action in

19

Oklahoma federal court and invited him to partici-
pate. The insured never expressed any intention to
file suit. Further, there were no factual issues to be
determined in the coverage dispute, which was purely
a legal issue, and all contacts relevant to the con-
tractual dispute were in Oklahoma, not New Mexico.
Thus, the Tenth Circuit’s affirmance of the lower
court’s decision to accept jurisdiction was entirely
consistent with the Fifth Circuit’s holding in Mission.

°

CONCLUSION

For the foregoing reasons, this Court should deny
the Petition for Writ of Certiorari.

Respectfully submitted,

RICHARD J. HARRIS
Counsel of Record
JERRY D. NOBLIN, JR.
WALLS WALKER HARRIS
& WOLFE, PLLC
Union Plaza, Suite 500
3030 N.W. Expressway
Oklahoma City, OK 73112
Telephone: (405) 702-5300
Attorneys for Respondent
Allstate Insurance Company

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_0884%3A1. Public record. Not legal advice.