United Financial Casualty Company v. L. et al

Filing 64

ORDER signed by District Judge Leslie E. Kobayashi on 11/13/17 ORDERING that on the basis of the foregoing, J.M.L.'s MOTION to STAY or in the Alternative Dismiss this Action, filed 11/22/16 23 is HEREBY GRANTED insofar as the case is STAYED pending the resolution of the aforementioned cases pending in the California State Courts. The Motion is DENIED as to J.M.L.'s request to dismiss the case. (Mena-Sanchez, L)

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 IN THE UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA ) ) ) ) Plaintiff, ) ) vs. ) J.M.L., a minor, by and ) ) through her guardian ad litem, Michelle Rogers, et ) al. ) ) ) Defendants. _____________________________ ) UNITED FINANCIAL CASUALTY COMPANY, 2:16-CV-02098 LEK 19 20 21 22 23 On November 2, 2016, Defendant J.M.L., a minor, by and 24 through her Guardian ad Litem, Michelle Rogers (“J.M.L.”), filed 25 a Motion to Stay or in the Alternative Dismiss this Action 26 (“Motion”).1 27 Company (“United Financial”) filed its memorandum in opposition 28 on November 21, 2016, and J.M.L. filed her reply on November 29, 29 2016. 30 issued an entering order reserving ruling on the Motion until all 31 of the defendants were served with the First Amended Complaint 32 for Declaratory Relief (“First Amended Complaint”), [filed 33 2/17/17 (dkt. no. 28),] and had the opportunity to respond to the 34 35 36 37 ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT J.M.L.’S MOTION TO STAY OR IN THE ALTERNATIVE DISMISS THIS ACTION [Dkt. no. 17.] [Dkt. nos. 22, 25.] 1 Plaintiff United Financial Casualty On February 23, 2017, this Court The version of the Motion filed on November 2, 2016 was not properly redacted. J.M.L. filed a properly redacted version on November 22, 2016. [Dkt. no. 23.] All references to the Motion refer to the November 22 version. 1 Motion (“2/23/17 EO”). 2 United Financial filed a notice stating that it complied with the 3 2/23/17 EO. 4 supplemental memorandum in support of the Motion (“Supplemental 5 Memorandum”). 6 suitable for disposition without a hearing pursuant to 7 L.R. 230(g) of the Local Rules of the United States District 8 Court for the Eastern District of California (“Local Rules”). 9 J.M.L.’s Motion is hereby granted in part and denied in part, for 10 [Dkt. no. 31.] [Dkt. no. 61.] On August 31, 2017, On September 6, 2017, J.M.L. filed a [Dkt. no. 63.] The Court finds the Motion the reasons set forth below. BACKGROUND 11 12 United Financial filed its original Complaint for 13 Declaratory Relief on September 1, 2016. 14 instant case is based on diversity. 15 ¶ 1.] 16 the commercial automobile insurance policy it issued to Defendant 17 Manjit Singh, doing business as Top Raman Trucking (“Singh”), 18 policy number 03036852-0 (“the Policy”). 19 Policy also has a DMV 67 MCP endorsement, in compliance with Cal. 20 Code Regs. tit. 13, § 220.06(b) (“the Endorsement”). 21 ¶ 28.] 22 Jurisdiction over the [First Amended Complaint at United Financial seeks a declaratory judgment regarding [Id. at ¶ 24.] The [Id. at On March 16, 2015, “Ewell Levy died as a result of a 23 crash while he was driving a 2009 Sterling tractor truck towing 24 two trailers loaded with dirt and gravel” (“the Incident”). 2 [Id. 1 at ¶ 29.] 2 exception of Singh – have filed an action in a California state 3 court related to the Incident (collectively, “the State Court 4 Actions”). 5 death, bodily injury, or property damage claims against Singh; or 6 claims alleging an interest in the Policy or the Endorsement. 7 Singh tendered the defense in the State Court Actions to United 8 Financial, which is defending him pursuant to a reservation of 9 rights to, inter alia, deny coverage under the Policy and the 10 All of the defendants in this case – with the The State Court Actions assert either: wrongful Endorsement. 11 [Id. at ¶¶ 30-31.] The First Amended Complaint alleges the following 12 claims: a claim for a declaratory judgment that United Financial 13 has no duty under the Policy to defend Singh in the State Court 14 Actions (“Count I”); a claim for a declaratory judgment that 15 United Financial has no duty under the Policy to indemnify Singh 16 against the claims in the State Court Actions (“Count II”); and a 17 claim for a declaratory judgment that United Financial has no 18 duty under the Endorsement to pay for any legal liability that 19 Singh has for the claims in the State Court Actions 20 (“Count III”). 21 Financial prays for costs of suit and any other appropriate 22 relief. 23 24 In addition to the declaratory relief, United As of August 26, 2016, four of the initial State Court Actions were pending in the Superior Court in the County of 3 1 Solano (“Solano Court”) – J.M.L. v. Parvinder Kumar Gir, et al., 2 Case No. FCS-045211 (“J.M.L. v. Gir”); LaToia Levy Johnson, et 3 al. v. Parvinder Kumar Gir, et al., Case No. FCS-047005 4 (“Johnson”); Wesco Insurance Co. v. J.M.L., et al., Case No. FCS- 5 04099 (“Wesco Insurance”); and United Fire & Casualty Co. v. Roby 6 Trucking, Inc., et al., Case No. FCS-047177 (“United Fire”). 7 [Motion, Decl. of Thomas C. Knowles in Supp. of Motion (“Knowles 8 Decl.”), Exh. A (Notice of Order and Order Relating Cases, of 9 Reassignment, and Notice of Case Management Conference, filed on 10 8/26/16 in the State Court Actions (“Case Management Order”)).] 11 As of the date of the Case Management Order, the four Solano 12 Court cases were either directly assigned or transferred to Judge 13 Michael Mattice and a fifth case – Farmers Insurance Exchange v. 14 Roby Trucking, Inc., et al., Case No. MSC-15-01794 (“Farmers 15 Insurance”) – was pending in the Superior Court for the County of 16 Contra Costa (“Contra Costa Court”), but was expected to be 17 transferred to the Solano Court by stipulation. 18 Management Order stated that, if Farmers Insurance was 19 transferred to the Solano Court, it would be deemed a related 20 case to those before Judge Mattice. 21 The Case [Id. at 3-4, 8.] The parties were later advised of a sixth case filed in 22 the Contra Costa Court – Rogelio Ramirez-Munoz, et al. v. Roby 23 Truck [sic], RIS Leasing, et al., Case No. C16-00172 (“Ramirez- 24 Munoz”). [Knowles Decl., Exh. B (Joint Case Management Statement 4 1 in the State Court Actions, dated October 3 and 29, 2016) at 5.2] 2 J.M.L. v. Gir and Johnson are wrongful death actions, and Munoz- 3 Ramirez is a personal injury action. 4 and Farmers Insurance are subrogration actions, and Wesco 5 Insurance “is an interpleader action which will ultimately become 6 a forum in which numerous claimants with varying types of claims 7 (wrongful death, personal injury, structure damage, commercial 8 loss, etc.) to the limited resources, will be contesting shares 9 with one another.” 10 [Id. at 10.] United Fire [Id.] As of the date of the Supplemental Memorandum, two 11 additional cases had been filed in the Solano Court.3 12 two new cases “seek[s] to pierce the corporate veil” and the 13 other “seek[s] property damage and business losses for which 14 there was insufficient insurance.” 15 the Contra Costa Court cases was dismissed and re-filed in the 16 Solano Court. 17 Judge Mattice. 18 had an unopposed motion for transfer to Judge Mattice in the 19 Solano Court. 20 September 20, 2017. One of the [Suppl. Mem. at 2.] One of All of the Solano Court cases are pending before The one case remaining in the Contra Costa Court The motion was scheduled for hearing on [Id.] 21 22 23 24 25 2 It is unclear from the Knowles Declaration and Exhibit B whether the Joint Case Management Statement was filed in the State Court Actions. 3 J.M.L. does not identify the new cases. 5 1 According to J.M.L., Singh has been named as a 2 defendant and/or cross-defendant in six of the eight State Court 3 Cases, and, every time a new plaintiff in the State Court Cases 4 files a claim against Singh, United Financial brings the 5 plaintiff into the instant case as defendant. 6 that United Financial’s counsel has been voluntarily 7 participating in the State Court Action’s case management 8 proceedings before Judge Mattice. 9 J.M.L. also notes [Id. at 2-3.] J.M.L. argues that the instant case presents state law 10 issues that “will be effectively and more efficiently adjudicated 11 in state court as part of the” State Court Actions, including 12 whether United Financial has a duty to insure and defend Singh 13 under the Policy and/or the Endorsement. 14 Motion at 7.] 15 Excess Insurance Co. of America, 316 U.S. 491 (1942), and 16 Government Employees Insurance Co. v. Dizol, 133 F.3d 1220 (9th 17 Cir. 1998), weigh in favor of staying or dismissing this case. 18 19 [Mem. in Supp. of J.M.L. asserts that the factors in Brillhart v. STANDARD This district court has set forth the following 20 analysis applicable to the determination of whether to stay a 21 declaratory judgment action in light of pending state court 22 proceedings: 23 24 25 26 A motion to stay in a declaratory relief action is considered in light of the fact that declaratory relief “is discretionary, for the Declaratory Judgment Act is ‘deliberately cast in terms of 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 permissive, rather than mandatory, authority.” Government Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1223 (9th Cir. 1998) (quoting Public Serv. Comm’n of Utah v. Wycoff Co., 344 U.S. 237, 250, 73 S. Ct. 236, 97 L. Ed. 291 (1952)). “The Act ‘gave the federal courts competence to make a declaration of rights; it did not impose a duty to do so.’” Id. (quoting Public Affairs Associates v. Rickover, 369 U.S. 111, 1112, 82 S. Ct. 580, 7 L. Ed. 2d 604 (1962)). N.E. Ins. Co. v. Masonmar, Inc., No. 1:13–cv–00364–AWI–SAB, 2013 37 WL 2474682, at *2 (E.D. Cal. June 7, 2013). 38 also uses these factors in the analysis of whether to dismiss a 39 declaratory judgment action in light of pending state court 40 proceedings. 41 No. 2:13–cv–00530–MCE–KJN, 2014 WL 295202, at *3 (E.D. Cal. 42 Jan. 24, 2014); accord R.R. St. & Co. Inc. v. Transp. Ins. Co., When deciding a motion to stay proceedings in a Declaratory Judgment Act action due to a pending proceeding in state court, the Court must consider the factors set forth in Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 62 S. Ct. 1173, 86 L. Ed. 1620 (1942) and Dizol. The Court (1) should avoid needless determination of state law issues, (2) should discourage litigants from filing declaratory actions as a means of forum shopping, and (3) should avoid duplicative litigation. Dizol, 133 F.3d at 1225. The Court should also consider (4) whether the declaratory action will settle all aspects of the controversy, (5) whether the declaratory action will serve a useful purpose in clarifying the legal relations at issue, (6) whether the declaratory action is being sought merely for the purposes of procedural fencing or to obtain a ‘res judicata’ advantage, (7) whether the use of a declaratory action will result in entanglement between the federal and state court systems, (8) the convenience of the parties, and (9) the availability and relative convenience of other remedies. Id. at 1225 n.5. This district court See, e.g., Atain Specialty Ins. Co. v. Hernandez, 7 1 656 F.3d 966, 975 (9th Cir. 2011) (noting that, in Brillhart, 2 “the Supreme Court held that a district court has discretion to 3 dismiss a federal declaratory judgment action when ‘the questions 4 in controversy . . . can better be settled in’ a pending state 5 court proceeding” (alteration in R.R. St.) (quoting Brillhart, 6 316 U.S. at 495, 62 S. Ct. 1173)). 7 8 DISCUSSION I. Brillhart/Dizol Factors 9 This Court begins by examining whether the 10 Brillhart/Dizol factors weigh in favor of or against the exercise 11 of jurisdiction in this case. 12 A. Avoiding Needless Determinations of State Law Issues 13 This district court has stated: 14 15 16 17 18 19 20 21 22 23 24 This factor relates to unsettled issues of state law, not unsettled issues of fact in the specific action. Cont’l Cas. Co. v. Robsac Indus., 947 F.2d 1367, 1371 (9th Cir. 1991), overruled on other grounds by Dizol, 133 F.3d at 1224–25. A stay is warranted where “[t]he precise state law issues at stake in the present case are the subject of a parallel proceeding in state court.” Id. James River Ins. Co v. RV Tomlinson Const., Inc., No. CIV. 25 2:13–00140 WBS AC, 2013 WL 1934354, at *2 (E.D. Cal. May 9, 2013) 26 (alteration in James River). 27 The instant case will involve the interpretation of the 28 Motor Carriers of Property Permit Act (“MCPPA”), Cal. Veh. Code, 29 § 34600 et seq. The MCPPA requires, subject to certain 8 1 exceptions, “[e]very motor carrier of property,” to maintain 2 “adequate protection against liability imposed by law upon those 3 carriers for the payment of damages in the amount of a combined 4 single limit of not less than seven hundred fifty thousand 5 dollars ($750,000) on account of bodily injuries to, or death of, 6 one or more persons, or damage to or destruction of, property.” 7 Cal. Veh. Code § 34631.5(a)(1). 8 are state law issues, California insurance law is well 9 established, and the unsettled issues in the case are factual, While the issues in this case 10 not legal. 11 the stay or dismissal of this action. 12 B. Thus, the first Brillhart/Dizol factor weighs against Discouraging Forum Shopping 13 This district court has stated: 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 The Ninth Circuit has said that Brillhart’s forum shopping factor relates to “the ‘defensive’ or ‘reactive’ nature of a federal declaratory judgment suit,” and such a suit “would justify a court’s decision not to exercise jurisdiction.” Robsac, 947 F.2d at 1371 (citation and internal quotation marks omitted). . . . . Nothing in the record before the court supports a finding that either party’s suit was improperly reactive or defensive: “Federal declaratory judgment suits are routinely filed in anticipation of other litigation. . . . Merely filing a declaratory judgment action in a federal court with jurisdiction to hear it, in anticipation of state court litigation, is not in itself improper anticipatory litigation or otherwise abusive ‘forum shopping.’” Sherwin-Williams Co. v. Holmes Cnty., 343 F.3d 383, 391 (5th Cir. 2003); see also Dizol, 133 F.3d 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Lexington Ins. Co. v. Silva Trucking, Inc., No. 2:14–CV–0015 KJM 26 CKD, 2014 WL 1839076, at *8 (E.D. Cal. May 7, 2014) (some 27 alterations in Silva Trucking). 28 issues among the issues presented in the State Court Actions, 29 United Financial apparently is not a party in any of the State 30 Court Actions. 31 forum shopping in the instant case. 32 Brillhart/Dizol factor weighs against the stay or dismissal of 33 this action. 34 C. 35 36 37 38 at 1225 (“We know of no authority for the proposition that an insurer is barred from invoking diversity jurisdiction to bring a declaratory judgment action against an insured on an issue of coverage.”) (citation and internal quotation marks omitted); but see Budget Rent-A-Car v. Crawford, 108 F.3d 1075, 1081 (9th Cir. 1997), overruled in part on other grounds by Dizol, 133 F.3d 1220 (stating that concerns about forum shopping “are also present when a federal plaintiff seeks declaratory relief in anticipation that a related state court proceeding may be filed”). Moreover, “[t]iming 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.” R.R. Street, 656 F.3d at 976. The fact that defendants’ state action was filed later similarly does not, without more, show the suit was defensive or reactive. Although the there are insurance There is no indication that United Financial is Thus, the second Duplicative Litigation A court may dismiss or abstain from a declaratory action when “[a]ll of the issues presented by the declaratory judgment action could be resolved by the state court.” Robsac, 947 F.2d 10 1 2 3 4 5 6 7 8 9 10 11 12 at 1372. The federal and state cases do not have to be completely parallel: “an exact or precise identity of the issues between the federal and state action is not required to support dismissal of a declaratory action.” Navigators Specialty Ins. Co. v. CHSI of Cal., No. 3:12–cv–1611–GPC– JMA, 2013 WL 435944, at *5 (S.D. Cal. Feb. 4, 2013); see also Emps. Reins. Corp. v. Karussos, 65 F.3d 796, 800 (9th Cir. 1995), overruled in part on other grounds by Dizol, 133 F.3d 1220. Id. at *9. 13 United Financial emphasizes that it “cannot and never 14 will be a party to” the State Court Actions. 15 16.] 16 not presented in the State Court Actions, the third 17 Brillhart/Dizol factor does not ask whether the issues in the 18 federal and state actions are identical. 19 acknowledges that this case will require comparing the terms of 20 the Policy and the Endorsement with facts related to the 21 Incident. 22 are undisputed, but this Court disagrees. 23 issues about the Incident will be litigated in both the instant 24 case and the State Court Actions, the third Brillhart/Dizol 25 factor weighs in favor of staying or dismissing this action. 26 27 [Mem. in Opp. at While the specific coverage issues in the instant case are D. [Id. at 7.] United Financial United Financial argues that the facts Because many factual Other Factors The fact that this declaratory judgment action will not 28 settle all aspects of the controversy related to the Incident 29 weighs in favor of a stay. 30 will clarify the legal relations between United Financial and As to the fifth factor, this case 11 1 Singh, but will have little to no effect on the other relevant 2 legal relations related to the Incident. 3 neutral, at best. 4 State Court Actions, it would not obtain a res judicata 5 advantage, or other procedural advantage, in the other actions if 6 this case goes forward. 7 the State Court Actions are defendants in the instant case, they 8 could use the instant case to obtain such advantages against each 9 other. 10 11 Thus, this factor is Because United Financial is not a party in the However, because the other parties in The sixth Brillhart/Dizol factor is therefore either neutral or weighs in favor of dismissal or a stay. In light of the extent of the State Court Actions and 12 the overlapping issues in both this case and the State Court 13 Actions, allowing this action to go forward will result in 14 entanglement between the federal and state court systems. 15 the seventh Brillhart/Dizol factor weighs in favor of the stay or 16 dismissal of this action. 17 weighs in favor of a stay because of the coordinated litigation 18 in the State Court Actions, in which United Financial’s counsel 19 has had some voluntarily participation. 20 Brillhart/Dizol factor weighs against the stay or dismissal of 21 this action. 22 State Court Actions, there would not be other remedies available 23 to United Financial if this case is dismissed or stayed. Thus, The convenience of the parties also However, the final Because United Financial is not a party to the 24 12 1 E. 2 Balancing the Brillhart/Dizol Factors Some of the factors weigh against dismissal or stay, 3 the majority of the factors either weigh in favor of dismissal or 4 stay or are neutral. 5 factors can be given additional weight if appropriate under the 6 facts of the case. 7 Having carefully considered the Brillhart/Dizol factors – in 8 particular, the risk of duplicative litigation and the possible 9 use of this case to gain advantages in the State Court Actions, “Numerosity is not dispositive,” and some See James River, 2013 WL 1934354, at *4. 10 this Court concludes that dismissal or a stay is warranted under 11 the circumstances of this case. 12 II. 13 Whether Dismissal or a Stay is Appropriate The Declaratory Judgment Act states that “[i]n a case 14 of actual controversy within its jurisdiction . . . any court of 15 the United States, upon the filing of an appropriate pleading, 16 may declare the rights and other legal relations of any 17 interested party seeking such declaration, whether or not further 18 relief is or could be sought.” 19 20 21 22 23 24 25 26 27 28 29 30 28 U.S.C. § 2201(a). For there to be an actual case or controversy, there must be a “substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment,” and the actual controversy between the parties must relate to a claim upon which relief can be granted. MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (quotation omitted); Leadsinger, Inc. v. BMG Music Pub., 429 F. Supp. 2d [1190, 1193] (C.D. Cal. 2005). The Act’s case or controversy requirement is satisfied when the 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 plaintiff has “a real and reasonable apprehension that he will be subject to liability.” Societe de Conditionement en Aluminum v. Hunter Eng’g Co., Inc., 655 F.2d 938, 944 (9th Cir. 1981). The fact that a defendant’s liability may be contingent does not necessarily mean there is no controversy. Progressive Cas. Ins. Co. v. Dalton, No. 12-713, 2012 WL 6088313, at *5 [(E.D. Cal. Dec. 6, 2012)]. Furthermore, the Act allows the district court to litigate a controversy that would “otherwise . . . only be tried in the future.” Societe de Conditionnement, 655 F.2d at 943. Declaratory judgment essentially provides relief for parties who seek to vindicate interests before they are jeopardized or challenged, before a right of action exists or claim accrues. Maryland Cas. Co. v. Hubbard, 22 F. Supp. 697, 699 (S.D. Cal. 1938); Allied Prop. & Cas. Ins. Co. v. Roberts, No. 2:11-CV-00740-MCE, 2011 WL 2496039, at *4 (E.D. Cal. June 21, 2011). Houston Cas. Co. v. Metheny, No. 2:14-cv-01377-KJM-CMK, 2016 WL 44 615651, at *3 (E.D. Cal. Feb. 16, 2016) (some alterations in 45 Metheny). In insurance cases, the Supreme Court has determined that an actual controversy can exist between an insurer and the allegedly injured third party even though that third party is not a party to the insurance contract. Maryland Cas. v. Pacific Coal & Oil Co., 312 U.S. 270, 273-74 (1941); see also Westchester Fire Ins. Co. v. Mendez, 585 F.3d 1183, 1189 (9th Cir. 2009). The Ninth Circuit has confirmed in recent decisions that a case or controversy exists where the insurer seeks a declaration regarding its duty to defend and indemnify its insured in a pending suit against the insured by a third-party. Am. States Ins. Co. v. Kearns, 15 F.3d 142, 144 (9th Cir. 1994); Aetna Cas. and Sur. Co. v. Merritt, 974 F.2d 1196, 1199 (9th Cir. 1992). An insurer’s declaratory relief action regarding its duty to defend and indemnify is ripe and justiciable even if the underlying liability action has not proceeded to judgment. Kearns, 15 F.3d at 144. Under this analysis, there is federal subject matter 14 1 jurisdiction in the instant case because there is an actual case 2 or controversy. 3 and a stay is appropriate under the circumstances of this case. Dismissal of the instant case is not necessary, 4 5 CONCLUSION On the basis of the foregoing, J.M.L.’s Motion to Stay 6 or in the Alternative Dismiss this Action, filed November 22, 7 2016, is HEREBY GRANTED insofar as the case is STAYED pending the 8 resolution of the aforementioned cases pending in the California 9 State Courts. 10 The Motion is DENIED as to J.M.L.’s request to dismiss the case. 11 IT IS SO ORDERED. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 DATED AT HONOLULU, HAWAII, November 13, 2017. /s/ Leslie E. Kobayashi Leslie E. Kobayashi United States District Judge UNITED FINANCIAL CASUALTY CO. V. J.M.L., ET AL.; CASE NO. 2:16CV-02098 LEK; ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT J.M.L.’S MOTION TO STAY OR IN THE ALTERNATIVE DISMISS THIS ACTION 15

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