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Peffer v. Everbank

United States District Court, D. Alaska

October 30, 2017

MARK E. PFEFFER, an individual; and ROBERT B. ACREE, an individual, Plaintiffs,
v.
EVERBANK, a federal savings bank, Defendant.

          ORDER RE MOTION TO DISMISS DECLARATORY JUDGMENT ACTION

          SHARON L. GLEASON UNITED STATES DISTRICT JUDGE.

         Before the Court at Docket 6 is EverBank's Motion to Dismiss Declaratory Judgment Action Under Abstention and Ripeness Doctrines. The motion has been fully briefed.[1] Oral argument was held on October 16, 2017. For the following reasons, the motion will be granted.

         BACKGROUND

         In December 2014, EverBank loaned $28.6 million to 716 West Fourth Avenue, LLC (“716 LLC”).[2] As part of the transaction, Mark Pfeffer and Robert Acree (“Plaintiffs”) signed a guaranty agreement (“Guaranty”) in favor of EverBank.[3] In March 2016, 716 LLC defaulted on the loan.[4] 716 LLC, Plaintiffs, and EverBank then entered into a forbearance agreement.[5]

         Based on allegations that the terms of the forbearance agreement had not been met, EverBank filed a complaint in Alaska Superior Court against 716 LLC on April 28, 2017.[6] On July 18, 2017, Plaintiffs initiated this case (the “Federal Declaratory Action”) seeking declaratory relief regarding the extent of their potential liability under the Guaranty.[7] Two days later, EverBank filed its Second Amended Complaint in state court, naming the Plaintiffs in this case as additional defendants in the state court action and asserting additional claims, including claims for fraud and piercing the corporate veil.[8]

         On August 18, 2017, EverBank filed the motion now before the Court-its Motion to Dismiss Declaratory Judgment Action. EverBank asks this Court to decline to exercise jurisdiction in this case under the abstention doctrine or to dismiss this case based on the ripeness doctrine.[9]

         JURISDICTION

         Plaintiffs and EverBank are residents of different states and the amount in controversy exceeds $75, 000. Therefore, the Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332. Under diversity jurisdiction, the Court applies federal procedural law and Alaska substantive law.[10]

         DISCUSSION

         “When ruling on a motion to dismiss, [a court] may ‘generally consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice.'”[11] The Court “accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving party.”[12]

         1. Abstention Doctrine

         “[W]hen a party requests declaratory relief in federal court and a suit is pending in state court presenting the same state law issues, there exists a presumption that the entire suit should be heard in state court.”[13] In determining whether to abstain from issuing a declaratory judgment, a federal court considers the three factors articulated by the Supreme Court in Brillhart v. Excess Ins. Co.: [(1)] “avoiding needless determination of state law issues; [(2)] discouraging forum shopping; and [(3)] avoiding duplicative litigation.”[14] In Allstate v. Herron, the Ninth Circuit identified additional factors for a district court to consider, including whether retaining jurisdiction would: “resolve all aspects of the controversy in a single proceeding; . . . serve a useful purpose in clarifying the legal relations at issue; . . . permit one party to obtain an unjust res judicata advantage; . . . risk entangling federal and state court systems; or . . . jeopardize the convenience of the parties.”[15] The Court now turns to consideration of these factors.

         a. Determination of State Law Issues

         The Guaranty at issue provides that it “will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Alaska without regard to its conflicts-of-laws provisions.”[16] The interpretation of the two Guaranty terms at issue in this case appear to present solely issues of contract interpretation under Alaska law. Plaintiffs have not identified any issue regarding federal law; they acknowledge “[i]t is unclear whether federal law may be implicated by the contractual clauses in question.”[17] Accordingly, retaining jurisdiction would require this Court to decide basic issues of state contract law. This factor weighs in favor of abstaining.

         b. Forum Shopping

         EverBank filed its action in state court in April 2017, three months before Plaintiffs filed this Federal Declaratory Action.[18] But Plaintiffs note that this federal case “was the first action filed involving Plaintiffs or the Guaranty.”[19] “Timing is only one consideration when deciding whether to entertain a declaratory judgment action, and the Wilton/Brillhart factors sometimes compel a court to decline to entertain an earlier-filed action in favor of a later-filed action.”[20]

         Plaintiffs filed this federal action two days before EverBank filed its Second Amended Complaint in state court that added Plaintiffs as parties to that lawsuit and added allegations similar to those made in this Federal Declaratory Action. However, as guarantors of 716 LLC's note, Plaintiffs were likely unsurprised when they were named as defendants in the state case. Plaintiffs had been in negotiations with EverBank for many months prior to initiating this action. 716 LLC's counsel also represents Plaintiffs in this case. Plaintiff Robert Acree is the majority owner of 716 LLC; Plaintiff Mark Pfeffer is the LLC's acting manager.[21] Plaintiffs' initiation of this action is not inconsistent with forum shopping. This factor weighs in favor of abstaining from issuing a declaratory judgment.

         c. Duplicative Litigation

         EverBank asserts that the state court and federal court actions both involve the same parties and same issues and that the state court action “is a more comprehensive proceeding.”[22] Plaintiffs respond that they are seeking a “quick and clear declaration” of two specific issues that should not ...


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