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)

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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

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