Advent, Inc. v. National Union Fire Insurance Company of Pittsburgh, PA
Filing
37
ORDER by Judge Lucy H. Koh granting 21 Motion to Remand; finding as moot 28 Motion to Intervene (lhklc3, COURT STAFF) (Filed on 7/8/2013)
1
2
3
4
5
6
7
UNITED STATES DISTRICT COURT
8
NORTHERN DISTRICT OF CALIFORNIA
9
SAN JOSE DIVISION
United States District Court
For the Northern District of California
10
11
ADVENT, INC., a California corporation,
Plaintiff,
12
v.
13
14
15
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA., a
Pennsylvania corporation,
Defendant.
16
17
18
19
)
)
)
)
)
)
)
)
)
)
)
)
Case No.: 13-CV-00561-LHK
ORDER GRANTING MOTION TO
REMAND
Plaintiff Advent, Inc. (“Advent”) brings this insurance coverage action against Defendant
National Union First Insurance Company of Pittsburgh (“National Union”) seeking declaratory
relief. Before the Court is Advent’s Motion to Remand the instant case to state court. Defendant
20
National Union opposes. The Court finds this matter appropriate for determination without oral
21
argument and hereby VACATES the hearing set for July 11, 2013. See Civil L.R. 7-1(b). Having
22
reviewed the parties’ submissions and the relevant law, the Court GRANTS Advent’s Motion to
23
Remand.
24
I.
BACKGROUND
25
A.
The Insurance Contract Dispute
26
The matter before the Court arises out of a construction project to build an apartment
27
complex. First Am. Compl. ¶ 6 (“FAC”), ECF. No. 19. Plaintiff Advent, Inc., the contractor on
28
1
13-CV-00561-LHK
ORDER GRANTING MOTION TO REMAND
1
the construction project, entered into an agreement with a subcontractor, Pacific Structures
2
(“Pacific”). FAC, Ex. A. Advent alleges that certain provisions in its contract with Pacific
3
required Pacific to obtain general liability insurance of $1,000,000 and to insure Advent as an
4
additional insured. FAC ¶ 6; id., Ex. A. Then, according to Advent, Pacific required that its own
5
subcontractor, Johnson Western Gunite (“Gunite”), provide insurance certificates naming Advent
6
as an additional insured. FAC ¶ 7.
7
Defendant National Union Fire Insurance Company of Pittsburgh issued two policies to
Gunite: one general commercial liability policy and one “Umbrella Prime: Commercial Umbrella
9
Liability Policy with CrisisResponse” policy (“Excess Policy”). FAC ¶¶ 9-11; id., Exs. C, D. The
10
United States District Court
For the Northern District of California
8
general commercial liability policy has an occurrence limit of $1,000,000, FAC ¶ 9; id., Ex. C, and
11
the Excess Policy has an occurrence limit of $15,000,000, FAC ¶ 9; id., Ex. D.
The only issue in the instant case concerns the Excess Policy. Advent’s sole cause of action
12
13
is for a declaratory judgment that it is an additional insured under the Excess Policy and is thus
14
entitled to coverage. FAC ¶ 22.
15
B.
16
The dispute before the Court came about as a result of serious injuries sustained by Jerome
17
Kielty after a fall at the construction site for Advent’s project. FAC ¶ 18. Mr. Kielty, through his
18
guardian ad litem, Sherry Lynn Kielty, filed suit (the “Kielty Lawsuit”) against Advent as well as
19
other contractors and subcontractors in the Santa Clara County Superior Court for damages
20
stemming from his injuries. FAC ¶ 18; id., Ex. E.
21
The Underlying State Court Tort Action
On April 9, 2009, National Union filed a complaint-in-intervention in the Kielty Lawsuit
22
seeking reimbursement from the defendants for benefits paid under a worker’s compensation
23
policy. See Pl.’s Req. for Judicial Notice (“RJN”), Ex. A, ECF. No. 21-4.1 The worker’s
24
compensation policy involved is unrelated to the Excess Policy at the center of the dispute between
25
Advent and National Union. See ECF No. 22, at 6; ECF No. 25, at 5. National Union requested
26
27
28
1
The parties rely upon and seek judicial notice for certain documents beyond the complaint. For
the reasons discussed in Part III, the Court grants Defendants’ Request for Judicial Notice (“RJN”).
2
13-CV-00561-LHK
ORDER GRANTING MOTION TO REMAND
1
that the complaint-in-intervention be dismissed with prejudice on February 21, 2013. See id. Ex.
2
B, ECF No. 24-5.2
3
The parties to the Kielty Lawsuit have entered into a stipulated partial settlement agreement
4
under which payments were made to Mr. Kielty. In turn, Mr. Kielty agreed to dismiss all claims
5
against Defendants with prejudice except for his claims against Advent. See Woodward Decl. Ex.
6
1, § 3 (“Stipulated Settlement”), ECF No. 24-1.3 Pursuant to the settlement agreement, Mr. Kielty
7
and Advent agreed to stay the trial pending resolution of a declaratory judgment action against
8
National Union. Id. § 3, ¶¶ j-k. Additionally, Mr. Kielty agreed to pay all costs and fees of the
9
declaratory judgment action, and also agreed that he would dismiss all claims against Advent with
United States District Court
For the Northern District of California
10
prejudice if Advent is determined not to be covered by the Excess Agreement. Id. § 3, ¶ l, n. If
11
there is a judicial determination that Advent is covered by the policy, “the stay of proceedings and
12
trial in the underlying action will be lifted and trial will proceed against Advent only.” Id. § 3, ¶ o.
13
According to Advent’s counsel, the Kielty Lawsuit is in a “‘quasi stay’ whereby the [state court]
14
will hold periodic case management conferences with the purpose of evaluating the status of the
15
present coverage action.” Woodward Decl. ¶ 4, ECF No. 24.
16
C.
Procedural Background of the Instant Case
17
Advent initially brought this action against National Union on January 9, 2013, in the Santa
18
Clara Superior Court—the same court in which the Kielty Lawsuit is currently pending. See Req.
19
for Judicial Notice in Supp. of Def.’s Opp’n to Mot. to Remand Ex. 1, ECF. No. 23-1. In that
20
complaint, Advent requested the declaratory relief it currently seeks from this Court as well as
21
relief for a breach of contract claim. See id., Ex.1 (Compl. ¶¶ 19-27).
22
On February 7, 2013, National Union filed a notice of removal on the basis of diversity of
23
citizenship. See ECF No. 1. On February 14, 2013, National Union filed a motion to dismiss
24
Advent’s complaint in its entirety, see Mot. Dismiss, ECF No. 10. National Union withdrew this
25
motion on February 20, 2013. See ECF. No. 13. That same day, National Union filed an amended
26
27
28
As of April 29, 2013, the docket report in the Kielty Lawsuit characterizes National Union’s
request for dismissal as “partial” 0452-000. Pl.’s Supplemental Req. for Judicial Notice in Supp.
of Reply Mot. for Remand Ex. A, docket entry 0452-000, ECF No. 25-4.
3
National Union is also a signatory of the stipulated settlement agreement. See ECF No. 24-1.
3
2
13-CV-00561-LHK
ORDER GRANTING MOTION TO REMAND
1
motion to dismiss Advent’s breach of contract claim, but not its declaratory judgment claim. See
2
ECF No. 14.
3
On March 5, 2013, Advent and National Union filed a Stipulation and Proposed Order
4
regarding the filing of a first amended complaint (“FAC”) and National Union’s motion to dismiss.
5
ECF No. 16. They stipulated that: (1) Advent would file a first amended complaint containing only
6
one cause of action for declaratory relief; (2) Advent’s withdrawal of its cause of action for breach
7
of contract would be “done without prejudice to Advent’s right to later assert this cause of action;”
8
(3) Advent’s breach of contract cause of action would be “deemed dismissed without prejudice;”
9
and (4) National Union would withdraw its amended motion to dismiss Advent’s breach of contract
United States District Court
For the Northern District of California
10
cause of action. Id. ¶¶ 1-3. On March 5, 2013, this Court granted the parties’ stipulated order.
11
ECF No. 17. Advent filed its FAC on March 6, 2013. ECF No. 19. National Union filed its
12
answer on March 27, 2013, ECF No. 20, which it then amended on July 2, 2013, ECF No. 34.
13
On April 9, 2013, Advent filed the Motion to Remand that is presently before the court.
14
ECF No. 21 (“Mot.”). National Union filed its opposition to the motion on April 23, 2013, ECF
15
No. 22 (“Opp’n”), and then Advent filed its reply on April 30, 2013, ECF No. 25 (“Reply”).4
16
II.
LEGAL STANDARDS
“Except as otherwise expressly provided by Act of Congress, any civil action brought in a
17
18
State court of which the district courts of the United States have original jurisdiction, may be
19
removed by the defendant . . . to the district court of the United States for the district and division
20
embracing the place where such action is pending.” 28 U.S.C. § 1441(a). Diversity of citizenship
21
of the parties under 28 U.S.C. § 1332(a) vests a district court with original subject matter
22
jurisdiction over a case, and thus represents a basis for removal. See 28 U.S.C. § 1441(b).
23
Even when parties are diverse, however, a district court is not always required to assert
24
jurisdiction over a case once it is removed to federal court. The Federal Declaratory Judgment Act
25
provides that, “[i]n a case of actual controversy within its jurisdiction . . . any court of the United
26
4
27
28
In addition, on June 13, 2013, a third party, Topa Insurance Co., filed a motion to intervene and a
complaint-in-intervention. ECF No. 29. Both Plaintiff and Defendant have filed non-opposition
statements to this intervention. ECF No. 32-33.
4
13-CV-00561-LHK
ORDER GRANTING MOTION TO REMAND
States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of
2
any interested party seeking such a declaration, whether or not further relief is or could be sought.”
3
28 U.S.C. § 2201(a) (emphasis added). Though “a District Court cannot decline to entertain such
4
an action as a matter of whim or personal disinclination,” Pub. Affairs Assocs., Inc. v Rickover, 369
5
U.S. 111, 112 (1962) (per curiam), “[t]he exercise of jurisdiction under the Federal Declaratory
6
Judgment Act, 28 U.S.C. § 2201(a), is committed to the sound discretion of the federal courts.”
7
Huth v. Hartford Ins. Co. of the Midwest, 298 F.3d 800, 802 (9th Cir. 2002) (citation omitted).
8
“Even if the district court has subject matter jurisdiction, it is not required to exercise its authority
9
to hear [a] case.” Id. (citation omitted). Congress, by instituting the Declaratory Judgment Act,
10
United States District Court
For the Northern District of California
1
“sought to place a remedial arrow in the district court’s quiver; it created an opportunity, rather
11
than a duty, to grant a new form of relief to qualifying litigants.” Wilton v. Seven Falls Co., 515
12
U.S. 277, 288 (1995) (emphasis added). Thus, if a court determines that its discretion is best
13
exercised by declining to assert jurisdiction over a declaratory judgment case removed from state
14
court on the basis of diversity of citizenship, it may remand the matter back to state court. See,
15
e.g., Huth, 298 F.3d at 802, 804 (affirming a district court’s order to remand a declaratory
16
judgment action that had been removed under § 1332 back to state court after declining to exercise
17
jurisdiction over the case).
In Brillhart v. Excess Ins. Co. of America, 316 U.S. 491 (1942), the Supreme Court “set[]
18
19
forth the primary factors” that a district court should consider in exercising its discretion under
20
Section 2201(a) of the Federal Declaratory Judgment Act. Huth, 298 F.3d at 803. “The district
21
court should avoid needless determination of state law issues; it should discourage litigants from
22
filing declaratory actions as a means of forum shopping; and it should avoid duplicative litigation.”
23
Gov’t Emps. Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir. 1998) (en banc). In conducting an
24
analysis under Brillhart, district courts “[e]ssentially . . . ‘must balance concerns of judicial
25
administration, comity, and fairness to the litigants.’” Am. States Ins. Co. v. Kearns, 15 F.3d 142,
26
144 (9th Cir. 1994) (quoting Chamberlain v. Allstate Ins. Co., 931 F.2d 1361, 1367 (9th Cir.
27
1991)).
28
5
13-CV-00561-LHK
ORDER GRANTING MOTION TO REMAND
Though the Brillhart factors “remain the philosophic touchstone for the district court,”
1
2
Dizol, 133 F.3d at 1225, they “are not necessarily exhaustive,” Huth, 298 F.3d at 803 (citing
3
Kearns, 15 F.3d at 145 (Garth, J., concurring)). Additional factors that courts have considered
4
include:
5
[W]hether the declaratory action will settle all aspects of the controversy; whether
the declaratory action will serve a useful purpose in clarifying the legal relations at
issue; whether the declaratory action is being sought merely for the purposes of
procedural fencing or to obtain a “res judicata” advantage; or whether the use of a
declaratory action will result in entanglement between the federal and state court
systems. In addition, the district court might also consider the convenience of the
parties, and the availability and relative convenience of other remedies.
6
7
8
9
United States District Court
For the Northern District of California
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
Dizol, 133 F.3d at 1225 n.5 (quoting Kearns, 15 F. 3d at 145 (Garth, J., concurring)). None of
these considerations or the Brillhart factors is necessarily dispositive. See Huth, 298 F.3d at 80203 (rejecting the argument that, because there was no pending state action, a federal district court
was precluded from exercising its discretion to decline jurisdiction over a declaratory action,
because “there are other balancing factors the district court must weigh”). Additionally, in spite of
courts’ “substantial discretion in deciding whether to declare the rights of the litigants,” Wilton,
515 U.S. at 286, a district court nevertheless “must make a sufficient record of its reasoning to
enable appropriate appellate review” if a party raises the issue, Dizol, 133 F.3d at 1225.
III.
REQUEST FOR JUDICIAL NOTICE
In connection with the Motion to Remand, Advent requests that, pursuant to Federal Rule
of Evidence 201, the Court take judicial notice of the following documents, which were filed in the
Underlying Action: (1) National Union’s complaint-in-intervention in the Kielty Lawsuit, (2)
National Union’s request for partial dismissal from the Kielty Lawsuit. See RJN, ECF No. 21-3.
Likewise, in its Opposition to Advent’s Motion to Remand, National Union requests that the Court
take judicial notice of the following documents: (1) Advent’s complaint in this action filed in state
court. See RJN Opp’n., ECF No. 23. Finally, in its Reply, Advent also requests that the Court
take judicial notice of the following: the register of actions from the Kielty Lawsuit. Neither party
objects to the Court taking judicial notice of these exhibits. See ECF No. 25-3.
28
6
13-CV-00561-LHK
ORDER GRANTING MOTION TO REMAND
A matter may be judicially noticed if it is either “generally known within the territorial
1
2
jurisdiction of the trial court” or “can be accurately and readily determined from sources whose
3
accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). However, a court may not take
4
judicial notice of a fact in the public record that is “subject to reasonable dispute.” Id. In
5
particular, “[w]hen a court takes judicial notice of another court’s opinion, it may do so ‘not for the
6
truth of the facts recited therein, but for the existence of the opinion, which is not subject to
7
reasonable dispute over its authenticity.’” Lee v. City of L.A., 250 F.3d 668, 690 (citation omitted).5
Accordingly, the Court GRANTS both parties’ Requests for Judicial Notice.
8
9
IV.
DISCUSSION
United States District Court
For the Northern District of California
10
A.
Avoiding Needless Determination of State Law Issues
11
With regard to the first factor of the Brillhart analysis, Advent contends that “this
12
declaratory relief action over insurance coverage seeks resolution of matters solely pertaining to
13
state law, and thus weighs in favor of abstention.” Mot. at 7. If this Court were to rule on
14
Advent’s claim for declaratory relief, Advent argues, “the Court [would] have to immerse itself in
15
purely state insurance law concepts.” Id. In response, National Union argues that “[t]his Court has
16
the same ability as the state court ‘to settle all aspects of the controversy’ and ‘clarify[] the legal
17
relations at issue.’” Opp’n at 5 (alteration in original).
18
“Where . . . the sole basis of jurisdiction is diversity of citizenship, the federal interest is at
19
its nadir. Thus, the Brillhart policy of avoiding unnecessary declarations of state law is especially
20
strong [in this circumstance].” Cont’l Cas. Co. v. Robsac Indus., 947 F.2d 1367, 1371 (9th Cir.
21
1991), overruled on other ground by Dizol, 133 F.3d at 1227. In evaluating this factor, the Court
22
finds the Ninth Circuit’s decision in Huth v. Hartford Insurance Co. of the Midwest, 298 F.3d 800
23
(9th Cir. 2002), to be instructive. In Huth, Hartford Insurance Company (“Hartford”) filed first in
24
federal court seeking a declaration that Huth, an individual injured in an automobile accident, was
25
5
26
27
28
In Lee, the reviewing court found that the district court was correct in taking judicial notice of
“the fact of the extradition hearing, the fact that a Waiver of Extradition was signed by [Plaintiff]
and the fact that [Plaintiff] purportedly waived his right to challenge his extradition . . . .” Lee, 250
F.3d at 690 (emphasis in original). However, the district court erred by taking judicial notice of
disputed facts underlying those documents by, for example, presuming the validity of the waiver of
extradition which Plaintiff was challenging. Id.
7
13-CV-00561-LHK
ORDER GRANTING MOTION TO REMAND
1
not entitled to insurance coverage. 298 F.3d at 802. Huth then filed a similar action for
2
declaratory relief in state court. Id. Hartford then, on the basis of diversity jurisdiction, removed
3
the state action to federal court where the two cases were consolidated. Id. Once in federal court,
4
Hurth filed a motion to remand to state court and to stay Hartford’s federal action. Id. The district
5
court granted the defendant’s motion to remand, declining to exercise its jurisdiction under 28
6
U.S.C. § 2201(a). Id. In doing so, the district court “held that state court would be the preferable
7
forum,” because “both the federal and state actions involve the same purely state law issue.” Id. at
8
804. The Ninth Circuit affirmed the district court’s decision, even though “there [was] no great
9
need for state court resolution of an open question of state law in the case.” Id.
United States District Court
For the Northern District of California
10
In the instant case, the first Brillhart factor weighs in favor of remanding the matter to state
11
court. First, the dispute before the Court involves purely a question of state insurance law, which is
12
“an area that Congress has expressly left to the states through the McCarran-Ferguson Act.”
13
Robsac, 947 F. 2d at 1371 (citing 15 U.S.C. § 1011-12 (1988)); see Emp’rs Reinsurance Corp. v.
14
Karussos 65 F.3d 796, 799 (9th Cir. 1995) (“The states regulate insurance companies for the
15
protection of their residents, and state courts are best situated to identify and enforce the public
16
policies that form the foundation of such regulation.”), overruled on other grounds by Dizol, 133
17
F.3d at 1227. It follows that, as in Huth, the controversy before the Court is one that can be fully
18
resolved through the application of state law, requiring an analysis of California law that the state
19
courts are well positioned to perform. Cf. Am. Nat’l Fire Ins. Co. v. Hungerford, 53 F.3d 1012,
20
1018 (9th Cir. 1995) (holding that, because state courts were “equally, if not better equipped to
21
decide” questions of state law that would resolve both a federal declaratory judgment action and an
22
underlying state court action, the district court should have declined to exercise jurisdiction over
23
the declaratory judgment matter), overruled on other grounds by Dizol, 133 F.3d at 1227.
24
Moreover, California law provides a declaratory remedy similar to 28 U.S.C. § 2201(a). Compare
25
28 U.S.C. § 2201 (creating a right of action to have a federal district court declare “the rights and
26
other legal relations of any interested party seeking such declaration”), with Cal. Civ. Proc. Code §
27
1060 (West 2013) (providing a right of action in California Superior Court to obtain a declaration
28
of, inter alia, one’s “rights or duties with respect to another” pursuant to an agreement with another
8
13-CV-00561-LHK
ORDER GRANTING MOTION TO REMAND
1
party). Consequently, though this Court is capable of analyzing the dispute between the parties
2
under California law, state court is the preferable forum for this case as far as the first Brillhart
3
factor is concerned. The state courts are well equipped to issue a declaratory judgment on a matter
4
that turns solely on questions of state contract and insurance law.
5
6
B.
Discouraging Litigants from Filing Declaratory Actions
as a Means of Forum Shopping
The second Brillhart factor “usually is understood to favor discouraging an insurer from
8
forum shopping,” but not in every case. See Am. Cas. Co. of Reading, Pa. v. Krieger, 181 F.3d
9
1113, 1119 (9th Cir. 1999) (affirming the district court’s exercise of jurisdiction over an insurance
10
United States District Court
For the Northern District of California
7
company’s declaratory relief claim in order to prevent “‘the [d]efendants, who [did] not fare[] well
11
in the three summary judgments in this action, from wiping the slate clean and starting this
12
litigation anew in state court on the eve of their federal court trial’” (citation omitted)). Other
13
considerations may tip the balance of the second Brillhart factor in one party’s direction. If a claim
14
for declaratory relief is “defensive or reactive”—for example, if an insurer brings a declaratory
15
judgment action in federal court to obtain a ruling as to its obligations under a policy at the center
16
of an underlying state court dispute, which, for a variety of reasons, the insurer could not remove
17
from state court—it may be indicative of forum shopping. Robsac, 947 F.2d at 1371.
18
Additionally, to determine to which party the second Brillhart factor tips, courts have looked to
19
whether the declaratory relief action could have been filed in state court and “coordinated with the
20
pending state court actions.” See Great Am. Assurance v. McCormick, No. 05-02175, 2005 WL
21
3095972, *2 (N.D. Cal. Nov. 15, 2005) (citing Polido v. State Farm Mut. Auto. Ins. Co., 110 F.3d
22
1418, 1423 (9th Cir. 1997)).
23
Regardless of these considerations, the forum shopping factor may not weigh in favor of
24
either party if both the plaintiff and the defendant merely seek a strategic advantage. For example,
25
in Huth, the Ninth Circuit affirmed the district court’s exercise of its discretion to decline
26
jurisdiction in a declaratory judgment action even though “[t]he district court . . . found that
27
‘avoiding forum shopping’ favored neither party, noting that [one party] merely preferred state
28
resolution while [the other party] preferred federal resolution.” 298 F.3d at 804. The fact that one
9
13-CV-00561-LHK
ORDER GRANTING MOTION TO REMAND
1
party filed first in federal court did not sway the Ninth Circuit in its direction. The Huth Court
2
noted that, while “‘federal courts should generally decline to entertain reactive declaratory
3
actions,’” id. (quoting Dizol, 133 F.3d at 1225), “there is no question that both parties seek
4
declaratory relief, and the fact that [one party] won the race to the courthouse . . . does not place it
5
in a preferred position,” id. Consequently, the Ninth Circuit concluded that the district court did
6
not abuse its discretion in finding that the second Brillhart factor favored neither party. Id.
7
Here, both Advent and National Union appear to seek a strategic advantage, as parties to
8
litigation are prone to do. National Union admitted as much at its meet-and-confer with Advent to
9
discuss potentially remanding this case to state court. See Chaney Decl. July 11, 2013 ¶¶ 2-4, ECF
United States District Court
For the Northern District of California
10
No. 21-1 (stating, according to Advent’s counsel, that National Union “‘insists it stay in Federal
11
Court for strategic reasons’”). As for the Plaintiff, Advent would not have brought this action in
12
state court if it found federal court to be a more hospitable forum. Furthermore, as National Union
13
contends, see Opp’n Mot. Remand at 5 (“The only logical conclusion is that Advent offered to
14
dismiss that unripe [breach of contract] claim not in the interest of justice, but solely to create
15
grounds for a motion to remand based on discretionary jurisdiction.”), it is possible Advent agreed
16
to dismiss its breach of contract claim in order have this case remanded to state court. The Court
17
cannot say that one party is more culpable that the other in terms of forum shopping. Both appear
18
to have made strategic choices throughout the course of this litigation to, in the parties’ judgment,
19
gain an advantage in this litigation. Though the fact that the declaratory relief sought here may
20
also be obtained in state court provides parties with the opportunity to engage in forum shopping,
21
the Court is unwilling to give great weight to this consideration with regard to the second Brillhart
22
factor. To automatically close the door to federal court in order to avoid forum shopping in
23
declaratory judgment actions, merely because state courts make declaratory relief available, would
24
deplete the broad discretion district courts have in determining whether to retain jurisdiction under
25
28 U.S.C. § 2201(a).
26
Consequently, the Court finds that the best course of action with regard to the second
27
Brillhart factor is to follow the Ninth Circuit’s decision in Huth and find that both parties’ strategic
28
maneuvers in the course of this litigation offset each other. Advent prefers state court resolution of
10
13-CV-00561-LHK
ORDER GRANTING MOTION TO REMAND
1
this matter while National Union prefers federal court resolution. Cf. Huth, 298 F.3d at 804.
2
Because of the considerations discussed supra, and because both parties have jockeyed to move
3
this case to a strategically advantageous forum, the Court finds that the second Brillhart factor
4
favors neither party.
C.
6
Advent contends that “[t]he third Brillhart factor also leans toward abstention because the
7
state court already is familiar with the parties and the underlying issues. Although the legal issues
8
are not identical, the state court may be in a better position to coordinate a global settlement of both
9
actions.” Mot. at 8. Moreover, Advent asserts that, for this factor to weigh in its favor, the Kielty
10
United States District Court
For the Northern District of California
5
Lawsuit “need not involve the same parties or issues” because “the Kielty [Lawsuit] and this action
11
arise from the same factual circumstances.” Reply at 4, 6. Specifically, both lawsuits arise from
12
the personal injury action and involve disputes about whether Advent is entitled to coverage for
13
losses relating to those injuries.” Id. at 6.
14
Avoiding Duplicative Litigation
National Union, in contrast, points out that “Advent initiated a separate lawsuit to
15
adjudicate its coverage claims, and expressly agreed to stay the [Kielty Lawsuit] until those claims
16
are determined.” Opp’n at 5-6. As a result, National Union asserts, “there were always going to be
17
two separate actions; this coverage action, followed by the [Kielty Lawsuit] (if necessary),” which
18
“will be litigated separately and sequentially, even if they proceed in the same forum.” Id. at 4, 6.
19
While National Union concedes that “the state court is clearly familiar with the issues in the [Kielty
20
Lawsuit],” National Union nevertheless maintains that the state court “has no familiarity with the
21
issues now pending before this Court.” Id. at 6.
22
“If there are parallel state proceedings involving the same issues and parties pending at the
23
time [a] federal declaratory action is filed, there is a presumption that the entire suit should be
24
heard in state court.” Dizol, 133 F.3d at 1225 (citation omitted). Similarly, if a declaratory
25
judgment claim that only involves questions of state law is brought “during the pendency of a
26
related state court proceeding,” then “practicality and wise judicial administration considerations
27
generally counsel against the exercise of federal-court jurisdiction.” Golden Eagle Ins. Co. v.
28
11
13-CV-00561-LHK
ORDER GRANTING MOTION TO REMAND
1
Travelers Cos., 103 F.3d 750, 754 (9th Cir. 1996) (internal quotation marks and citations omitted),
2
overruled on different grounds by Dizol, 133 F.3d at 1227.
3
However, the existence of a pending state court action does not require that a district court
4
abstain from exercising its jurisdiction over a declaratory action, Dizol, 133 F.3d at 1225 (citation
5
omitted), nor does “the Declaratory Judgment Act require[] a parallel state proceeding in order for
6
the district court to exercise its discretion to decline to entertain [an] action [for declaratory relief].”
7
Golden Eagle, 103 F.3d at 754. Indeed, even “the potential for [a parallel] proceeding may
8
suffice.” Id. (citation omitted).
9
Moreover, “the dispositive question is not whether the pending state proceeding is
United States District Court
For the Northern District of California
10
‘parallel,’ but rather, whether there was a procedural vehicle available to the insurance company in
11
state court to resolve the issues raised in the action in federal court.” See Polido, 110 F.3d at 1423.
12
For example, in Polido v. State Farm Mutual Auto Insurance Co., 110 F.3d 1418 (9th Cir. 1997), a
13
consolidated action of two declaratory relief claims—one by an insurance company and the other
14
by that company’s insured—the insurance company argued “that the removed declaratory
15
judgment action filed by [the insured] . . . [was] not ‘parallel’” to an underlying state court tort
16
action. Id. at 1420, 1423. The insurance company contended this was so because the issue in the
17
federal court declaratory actions “involve[d] only contractual claims” as compared to the state
18
court action which sounded in tort. Id. at 1423. Additionally, the insurance company argued that
19
retaining jurisdiction was appropriate because it was not a party to the underlying state court
20
action. Id. The Ninth Circuit rejected these arguments, holding that the fact that the federal
21
declaratory judgment action and the underlying state court tort action involved different parties and
22
legal issues did not necessarily weigh in favor of retaining jurisdiction because the declaratory
23
action could have been resolved in the state court that was already familiar with the related
24
underlying action. See id. at 1423 (“The record in this case unequivocally demonstrates that [the
25
insurance company] could have obtained relief in . . . state court, because the merits of its
26
contention that it is not liable under the terms of the policy were squarely before the state court in
27
the declaratory relief action that [the insurance company] removed to the district court.”).
28
Consequently, the Polido Court remanded the case to the district court to determine whether it
12
13-CV-00561-LHK
ORDER GRANTING MOTION TO REMAND
1
should exercise its jurisdiction over the declaratory judgment claims, as the district court had not
2
previously considered this issue. Id. at 1424.
3
While National Union is correct to point out that the Kielty Lawsuit and the instant case
4
involve different legal analyses and “will be litigated separately and sequentially, even if they
5
proceed in the same forum” as a result of the Stipulated Settlement Opp’n at 4, this does not end
6
the Court’s inquiry under the third Brillhart factor. As noted supra, “differences in factual and
7
legal issues between the state and federal court proceedings are not dispositive because the insurer
8
‘could have presented the issues that it brought to federal court in a separate action to the same
9
court that will decide the underlying tort action.’” Polido, 110 F.3d at 1423 (quoting Karussos 65
United States District Court
For the Northern District of California
10
11
F.3d at 800).
Here, the Court finds that the state court—the forum where the related underlying action is
12
pending—is better situated to resolve this declaratory action. The Kielty Lawsuit and the
13
declaratory judgment action before the Court stem from the same incident, Mr. Kielty’s accident,
14
though the two cases will be resolved after differing factual and legal analyses. The Kielty Lawsuit
15
sounds in tort and deals with an accident at a construction site; the instant case, in contrast, is an
16
insurance contract dispute and its resolution, pursuant to the settlement agreement between Advent
17
and Mr. Kielty, determines whether the Kielty Lawsuit proceeds or not. It follows, then, that
18
National Union is correct to point out that the Kielty Lawsuit and the instant case “will be litigated
19
separately and sequentially, even if they proceed in the same forum.” Opp’n at 4. However, this
20
does not end the Court’s inquiry under the third Brillhart factor because, as noted supra,
21
“differences in factual and legal issues between the state and federal court proceedings are not
22
dispositive because the insurer ‘could have presented the issues that it brought to federal court in a
23
separate action to the same court that will decide the underlying tort action.’” Polido, 110 F.3d at
24
1423 (quoting Karussos 65 F.3d at 800).
25
The state court’s familiarity with the parties, the fact that this action is inextricably linked to
26
the Kielty Lawsuit, and the state court’s greater institutional capacity to interpret state law in order
27
to issue a declaratory judgment all weigh in favor of remanding the case under the third Brillhart
28
factor. Similar to the insurance company in Polido, National Union contends that this Court should
13
13-CV-00561-LHK
ORDER GRANTING MOTION TO REMAND
1
retain jurisdiction because the instant case “involves only contractual claims” and its involvement
2
in the underlying state court tort action came about as a result of the happenstance of National
3
Union having issued a worker’s compensation policy that is unrelated to the dispute before the
4
state court. But, as the Polido court indicated, it is within the district court’s broad discretion under
5
28 U.S.C. § 2201(a) to consider the insurance coverage action’s relation to the underlying state
6
court tort case and find that state court is the better forum for both related actions. With this in
7
mind, the Court finds that the third Brillhart factor weighs in favor of remanding this case to state
8
court to allow the parties here and in the Kielty Action to resolve their entire dispute in California
9
courts, which, as noted supra Part IV.A, are best equipped to interpret California law and issue a
United States District Court
For the Northern District of California
10
declaratory judgment.
11
D.
Additional Factors
12
While the Brillhart factors represent the primary considerations the Court must weigh in
13
determining whether to remand the instant action, Dizol, 133 F.3d at 1225, they “are not
14
necessarily exhaustive,” Huth, 298 F.3d at 803 (citing Kearns, 15 F.3d at 145 (Garth, J.,
15
concurring)). As noted supra Part II, additional factors include:
16
17
18
19
20
21
22
23
24
25
26
27
28
Whether the declaratory action will settle all aspects of the controversy; whether the
declaratory action will serve a useful purpose in clarifying the legal relations in
issue; whether the declaratory action is being sought merely for the purposes of
procedural fencing or to obtain a “res judicata” advantage; or whether the use of a
declaratory action will result in entanglement between the federal and state court
systems. In addition, the district court might also consider the convenience of the
parties, and the availability and relative convenience of other remedies.
Dizol, 133 F.3d at 1225 n.5 (quoting Kearns, 15 F. 3d at 145 (Garth, J., concurring)).
None of the factors that courts weigh in addition to the Brillhart factors persuade the Court
to exercise its discretion to retain jurisdiction over this declaratory action. First, the Court agrees
with National Union that there is no res judicata advantage to either party. See Opp’n at 5.
Second, the Court does not find that Advent has engaged in “procedural fencing” by voluntarily
dismissing its breach of contract claim, as that dismissal resulted from an agreement between both
parties. Third, the Court cannot conclude that there is “no risk” of entanglement between federal
and state court systems. Because there is an underlying related state court case, and because this
14
13-CV-00561-LHK
ORDER GRANTING MOTION TO REMAND
1
Court’s declaratory judgment ruling would require solely an analysis of California law, a risk of
2
entanglement is at least conceivable. Cf. Hungerford, 53 F.3d at 1019 (“[E]ven if the declaratory
3
judgment would clarify the nature of the legal relationship at issue, such clarification would only
4
come at the cost of increasing friction between state and federal courts, and would constitute an
5
improper encroachment on state court jurisdiction. . . . ‘[C]ourts should generally decline to assert
6
jurisdiction in insurance coverage and other declaratory relief actions presenting only issues of
7
state law during the pendency of parallel proceedings in state court.’” (citation omitted)).
8
9
Furthermore, the Court does not find that the factors of convenience of the parties and the
availability and convenience of other remedies support retaining jurisdiction. National Union
United States District Court
For the Northern District of California
10
argues that it would conserve judicial resources and be more convenient to the parties to remain in
11
federal court for two reasons: (1) the discovery process already has commenced in this case, and
12
(2) “[s]taying in federal court is axiomatically more convenient than returning to state court.” Id.
13
With regard to National Union’s first point, though the parties have conducted some discovery,
14
they will be able to utilize the discovery they have obtained in state court. As for National Union’s
15
second point, if it were more convenient to retain jurisdiction over a declaratory action simply
16
because the case is currently in federal court, convenience and judicial economy concerns would
17
never favor remanding a case. Such a categorical stance is inconsistent with the broad discretion of
18
federal district courts to abstain from asserting jurisdiction over claims brought under the
19
Declaratory Judgment Act.
20
Finally, as for National Union’s claim that this Court “has the same ability as the state court
21
‘to settle all aspects of the controversy’ and ‘clarify[] the legal relations at issue,’” Opp’n at 5
22
(alteration in original), the Court is unpersuaded. As discussed supra Part IV.A, California courts
23
are “equally, if not better equipped to decide” a question of California law. See Hungerford, 53
24
F.3d at 1018. Furthermore, because the underlying related tort action is pending before the state
25
court while awaiting the result of this declaratory action, the state court’s familiarity with the
26
underlying issues may facilitate a global settlement of this matter or, at the very least, streamline
27
the resolution of the declaratory action and the Kielty Action within the same court system.
28
E.
Summary
15
13-CV-00561-LHK
ORDER GRANTING MOTION TO REMAND
In Huth, the Ninth Circuit affirmed the district court’s remanding of a case even though
1
2
only the first Brillhart weighed in favor of remanding. In the instant case, the Court finds that both
3
the first and third Brillhart factors weigh in favor of remanding this case to state court. With
4
regard to the first factor of avoiding the needless determination of state law issues, the Court finds
5
that, because this matter concerns solely the resolution of an insurance contract dispute—an issue
6
of state law, the California courts are better equipped to provide a declaratory judgment to resolve
7
this case. With regard to the third factor of avoiding duplicative litigation, the Court finds that,
8
because a California court is adjudicating the related state court tort action whose outcome depends
9
in part on the result of this declaratory action, the state judicial system is better equipped to resolve
United States District Court
For the Northern District of California
10
the global dispute. As for the second Brillhart factor, the Court finds that it weighs in neither
11
party’s favor. Finally, the additional factors courts have considered in addition to the Brillhart
12
factors do not compel this Court to retain jurisdiction. If anything, they provide further reason to
13
remand this case to state court.
14
Weighing the Brillhart factors as well as additional factors courts have considered in
15
determining whether to remand a declaratory action to state court, the Court finds that its discretion
16
is most appropriately exercised by remanding this matter to state court.
17
V.
18
CONCLUSION
For the foregoing reasons, the Court GRANTS Advent’s Motion to Remand. In light of
19
this Order, all pending motions are DENIED as moot. The Clerk shall close the file.
20
IT IS SO ORDERED.
21
22
Dated: July 8, 2013
_________________________________
LUCY H. KOH
United States District Judge
23
24
25
26
27
28
16
13-CV-00561-LHK
ORDER GRANTING MOTION TO REMAND
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?