Indian Harbor Insurance Company v. J. Rockcliff Realtors et al

Filing 34

ORDER by Judge Yvonne Gonzalez Rogers denying 18 Motion of Defendants for Abstention. The 5/22/2012 Hearing date is VACATED. (fs, COURT STAFF) (Filed on 5/10/2012)

1
2
3

UNITED STATES DISTRICT COURT

4

NORTHERN DISTRICT OF CALIFORNIA

5
6
7
8

INDIAN HARBOR INSURANCE CO.,

9

Plaintiff,

10

Northern District of California

United States District Court

11

Case No.: 11-CV-05499 YGR
ORDER DENYING MOTION OF DEFENDANTS
FOR ABSTENTION

vs.
J. ROCKCLIFF REALTORS et al.,

12

Defendants.

13

Plaintiff Indian Harbor Insurance Company (“Indian Harbor”) brings this action for

14
15

Declaratory Relief seeking a declaration that it is not obligated to defend or indemnify its insureds, J.

16

Rockcliff Realtors, Judy Bradley, Robert Combs, and Margaret Combs (“Insureds”) in a state court

17

lawsuit brought by Jennifer St. Louis, Richard Gaushell, Aiden Gaushell, Harrison Gaushell, and

18

Miles Gaushell through Guardian ad Litem Richard Gaushell (“Tenants”). Indian Harbor seeks three

19

declaratory judgments, that coverage under the insurance policy is excluded for claims based on (1)

20

bodily injury; (2) property damage; and/or (3) fungi. Plaintiff alleges diversity jurisdiction pursuant

21

to 28 U.S.C. § 1332.
The Tenants have filed a “Motion for Declaratory Relief Abstention, Stay, Remand and/or

22
23

Dismissal,” Dkt. No. 18 (“Defs.’ Mot.”), on the grounds that the Court should exercise its discretion

24

to decline jurisdiction over this declaratory judgment action.
Having carefully considered the papers submitted and the pleadings in this action, and for the

25
26

reasons set forth below, the Court hereby DENIES the Motion.1

27

1

28

Pursuant to Federal Rule of Civil Procedure 78(b) and Civil Local Rule 7-1(b), the Court finds that this
motion, which has been noticed for hearing on May 22, 2012, is appropriate for decision without oral
argument. Accordingly, the Court VACATES the hearing set for May 22, 2012.

I.

1

BACKG
GROUND
In Octob of 2008, the Tenants moved into a residentia property ow
ber
al
wned, opera
ated, and/or

2
3

man
naged by the Insureds. After the Ten
A
nants alleged began ex
dly
xperiencing h
health proble
ems, they

4

alleg
gedly discov
vered toxic mold and/or fungi at the residential p
m
property and thereafter re
d
equested

5

rem
mediation. Af the Insur
fter
reds alleged failed to t
dly
take remedia action, the Tenants va
al
e
acated the

6

prop
perty on Apr 26, 2009.
ril
On January 24, 2011 the Tenant filed the u
1,
ts
underlying st court law
tate
wsuit agains the Insured
st
ds

7

The Tenants alle that the residential property was uninhabitab and seek compensati from the
ege
r
p
s
ble
ion

10

ureds for ong
going health problems, damages to p
d
personal prop
perty, and co
onsequential damages.2
l
Insu

11

Northern District of California

in th Contra Co County Superior Co
he
osta
ourt, St. Loui et al. v. W
is
Wong et al., C
Case No. MS
SC11-00184.
.

9

United States District Court

8

Indi Harbor denied covera for its In
ian
d
age
nsureds for th underlyin lawsuit on March 6, 2
the
ng
n
2011 and file
ed

12

this lawsuit und the Decla
der
aratory Judgm Act, 28 U.S.C. § 22
ment
8
201, on Nov
vember 14, 2
2011.

13

II.

DISCUS
SSION
The Dec
claratory Jud
dgment Act, 28 U.S.C. § 2201(a), pro
ovides that “
“[i]n a case o actual
of

14
15

cont
troversy with its jurisd
hin
diction . . . an court of t United St
ny
the
tates . . . ma declare the rights and
ay
e

16

othe legal relati
er
ions of any interested pa seeking such declara
i
arty
ation, wheth or not fur
her
rther relief is or
s

17

coul be sought Indian Ha
ld
t.”
arbor filed th declarato judgmen lawsuit to adjudicate w
his
ory
nt
whether it ow
wes

18

a du to defend and indemn its insur in the un
uty
d
nify
red
nderlying liab
bility action proceeding in state cour
rt.

19

The Court has su
ubject matte jurisdiction pursuant to 28 U.S.C. § 1332 beca
er
o
ause the disp is betwe
pute
een

20

citiz
zens of differ states an the amou in controv
rent
nd
unt
versy exceed $75,000.0 3 Because the exercis
ds
00.
se

21

of ju
urisdiction under the Act is not comp
u
t
pulsory, eve when a dis
en
strict court c
clearly has ju
urisdiction

22

unde the Decla
er
aratory Judgm Act, it may decline in its discr
ment
e,
retion, to exe
ercise that ju
urisdiction if it
f

23

dete
ermines that declaratory relief is not appropriate. Brillhart v Excess Ins. Co. of Am., 316 U.S. 491,
.
v.

24
25
26
27
28

2

The Tenants alle twelve sta law cause of action: ( General N
ege
ate
es
(1)
Negligence; (2 Negligence Per Se; (3)
2)
e
mises Liability (4) Breach of Warranty of Habitabili and Implie Warranty o Habitability (5)Breach of
y;
ity
ed
of
y;
Prem
Cont
tract; (6) Neg
gligent Failure to Disclose Latent Defec (7) Neglig
e
cts;
gent Failure to Perform Co
o
ovenant to
Repa (8) Neglig Repair; (9) Negligent Training; (10 Nuisance; (11) Fraud; (12) and Negl
air;
gent
(
t
0)
ligent
Misr
representation
n.
3
In their Reply, the Tenants ar
t
t
rgue that the Court lacks su
C
ubject matter jurisdiction b
r
because there is no federal
e
l
ques
stion. See Dk No. 22, (“R
kt.
Reply”), at 2-3 The Tenan ignore tha diversity jur
3.
nts
at
risdiction pro
ovides a separ
rate
and independent basis for fede jurisdictio 28 U.S.C § 1332.
b
eral
on.
C.
2

1

494 (1942).
The Tenants argue that this Declaratory Judgment action should be stayed and/or dismissed

2
3

based on the six factor test set forth in Colorado River Water Conserv. Dist. v. United States, 424

4

U.S. 800 (1976) (“Colorado River”). Defs.’ Mot. 5-10. Abstention pursuant to the terms of the

5

Declaratory Judgment Act is governed by a different, but related, standard, set forth in Brillhart.

6

Wilton v. Seven Falls Co., 515 U.S. 277 (1995) (explicitly rejecting the use of the Colorado River test

7

for a § 2201(a) analysis). That said, the Court will consider the parties’ arguments under the Brillhart

8

factors.
In Brillhart, the Supreme Court instructed district courts to consider the following factors

9

Northern District of California

when deciding whether to exercise its discretion under the Declaratory Judgment Act: “whether the

11

United States District Court

10

claims of all parties in interest can satisfactorily be adjudicated in that proceeding, whether necessary

12

parties have been joined, whether such parties are amenable to proceed in that proceeding, etc.” 316

13

U.S. at 495. These factors are not exhaustive and the Ninth Circuit has suggested other factors, such

14

as whether the declaratory action will serve a useful purpose in clarifying the legal relations at issue

15

or whether the use of a declaratory action will result in entanglement between the federal and state

16

court systems. See Gov’t Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir. 1998) (citing

17

Am. States Ins. Co. v. Kearns, 15 F.3d 142, 145 (9th Cir. 1994) (J. Garth, concurring) (“First, and

18

foremost in my opinion, the district court should determine whether the federal and state cases are

19

parallel”)).
The Tenants’ motion is premised upon the claim that since another lawsuit is pending in state

20
21

court in which all the matters in controversy between the parties could be fully adjudicated, a

22

declaratory judgment action in the federal court is not warranted.4 This premise is flawed; Indian

23

Harbor is not a party to the underlying lawsuit and the scope of coverage under the insurance contract

24

is not at issue in that lawsuit. Absent a declaratory judgment, Indian Harbor must either (1) provide a

25

defense to its insured even though it believes no such obligation exists; or (2) risk being sued for

26

breach of contract for failure to defend and/or indemnify. Accordingly, the Court will exercise its

27
4

28

In their Reply, the Tenants also argue the merits of this action as a reason for abstention. As this is not a
factor under the Brillhart test or the subsequent caselaw, the Court refrains from such an analysis here.
3

1

disc
cretion under the Declara
r
atory Judgment Act.

2

III.

3
4
5
6
7
8

CONCL
LUSION
Based on the foregoi analysis, the “Motio for Declar
n
ing
,
on
ratory Relief Abstention, Stay, Rema
f
and

and/ Dismissa is DENIED.
/or
al”
D
This Ord Terminat Docket Number 18.
der
tes
N
IT IS SO ORDERED.
Date May 10, 2012
e:
2

_
___________
__________
___________
________
YVON GONZAL ROGERS
NNE
LEZ
UNITED ST
TATES DISTR
RICT COURT JUDGE
T

9
10

Northern District of California

United States District Court

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

4