National Union Fire Insurance Company of Pittsburgh, PA. v. Simpson Manufacturing Company, Inc. et al
Filing
47
ORDER STAYING PROCEEDINGS 10 . Signed by JUDGE ALAN C KAY on 11/7/11. (eps) -- the Court GRANTS in part and DENIES in part Defendants' motion. Specifically, the Court STAYS this case pending the resolution in the state courts of the insurance coverage issues at issue in the Coastal case CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
)
)
)
)
Plaintiff, )
)
)
vs.
)
SIMPSON MANUFACTURING COMPANY, )
)
et al.,
)
Defendants. )
)
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA,
Civ. No. 11-00254 ACK-RLP
ORDER STAYING PROCEEDINGS
I. PROCEDURAL AND FACTUAL BACKGROUND1/
Invoking the Court’s diversity jurisdiction, Plaintiff
National Union Fire Insurance Company of Pittsburgh, PA, has
filed a complaint for declaratory relief.
(Compl. ¶ 7, ECF No.
1; see also Am. Compl. ¶ 7, ECF No. 35.2/)
National Union seeks,
among other things, a declaration that it need not defend or
indemnify Defendants Simpson Manufacturing Company, Inc., Simpson
1/
The facts as recited in this order are for the purpose of
disposing of this motion and are not to be construed as findings
of fact that the parties may rely on in future proceedings in
this case.
2/
National Union filed an amended complaint on July 15,
2011. (ECF No. 35.) The amended complaint is identical to the
originally filed complaint except for the correction of a
typographical error in the prayer for relief. The parties
stipulated to have the previously filed motion to dismiss apply
to the amended complaint. (ECF No. 34.)
-1-
Strong-Tie Company, Inc., and Honolulu Wood Treating LLC
(collectively “the Simpson parties”) in four state-court actions.
(Am. Compl. ¶¶ 18–21.)
The state-court actions generally concern “allegedly
defective hurricane strap tie hold downs” that were “manufactured
by Simpson Strong-Tie, sold by Simpson Manufacturing, distributed
by Honolulu Wood, and utilized in the residences constructed” at
the Ocean Pointe Development in #Ewa Beach.
(Id. ¶ 15.)
The
hurricane ties have allegedly begun “to prematurely corrode and
rust causing cracking, spalling and other damage to the
implicated homes.”
(Id. ¶ 24.)
National Union claims that it has no duty to defend or
indemnify the defendants because the “underlying claims against
Simpson and Honolulu Wood do not constitute ‘Property Damage’
caused by an ‘Occurrence’ as those terms are defined in the
Policies.”
(Id. ¶ 28.)
To support this proposition, National
Union relies on Group Builders, Inc. v. Admiral Insurance Co.,
231 P.3d 67 (Haw. Ct. App. 2010), which held that “under Hawai#i
law, construction defect claims do not constitute an ‘occurrence’
under a [commercial general liability] policy.”
Id. at 73.
National Union also seeks reimbursement for the defense costs it
has expended so far.
(Compl. at 9–10.)
Defendants have moved the Court to dismiss the action.
(Mot. at 2., ECF No. 10.)
Defendants argue that the Court should
-2-
decline to exercise jurisdiction over the case because there are
“four parallel actions currently pending in the Hawaii state
court . . . which will adjudicate facts relevant and/or
potentially relevant to the determination of this action,
including the existence of any property damage and the cause of
any such property damage.”
(Id. at 2–3.)
Defendants further argue that “the adjudications
requested by Plaintiff would require the Court to address
unsettled questions of Hawaii law,” including, for example, the
continued viability of Group Builders and its applicability to
manufacturers and distributors.
(Id. at 3, 16–20.)
Among other
things, Defendants note the Hawaii State Legislature’s recent
excoriation of the Group Builders decision in H.B. 924 § 1
(“[T]he Group Builders decision creates a public policy crisis
that only the State is in a position to remedy.”).3/
In the alternative, Defendants request that the Court
either stay the action pending the outcome of some or all of the
state-court actions or transfer the case to the Northern District
of California, where another case, Fireman’s Fund Insurance Co.
v. Hartford Fire Insurance Co., No. CV 11 1789 SBA, is pending.
Like this case, Fireman’s Fund involves Defendants’ insurance
3/
H.B. 924 was passed by the Legislature on May 3, 2011,
and signed by the Governor on June 9, 2011. See http://www
.capitol.hawaii.gov/measure_indiv.aspx?billtype=HB&billnumber
=924. At the time of this writing, the bill has not yet been
codified in the Hawaii Revised Statutes.
-3-
coverage with regard to the Ocean Pointe development.
(Mot. Mem.
at 30–31.)
National Union filed a memorandum in opposition to
Defendants’ motion, and Defendants filed a reply in support.
(ECF Nos. 36, 38.)
October 6, 2011.
The Court held a hearing on the motion on
At the hearing, both parties acknowledged that
staying the proceedings would be within the Court’s discretion.
After the hearing, the parties filed supplemental memoranda
concerning matters that were raised at the hearing.
(ECF Nos.
44, 45.)
The Court will STAY proceedings in this case pending
the outcome of certain state-court cases that will resolve
relevant factual and legal issues.
II. DISCUSSION
A.
Related Cases
There are several pending cases concerning the Ocean
Pointe development.
The parties are familiar with the
collection, and the Court will not detail it here.
Three of
those cases, however, are particularly relevant to the Court’s
analysis of this motion, and so the Court will briefly describe
them.
1.
Coastal Construction Co. v. North American
Specialty Insurance Company
-4-
The first case is currently pending in Hawaii state
court.
It has twice been removed to this federal court, and
twice been remanded for lack of diversity jurisdiction.4/
When
the case was last in this district, it was numbered Civ. No. 1100115 HG-BMK.
The most recent remand took place on May 24, 2011,
when the district court adopted the magistrate judge’s
recommendation that the case be remanded.
(ECF No. 555/
(adopting ECF No. 46).)
The original complaint appears to have been filed in
state court on February 25, 2010, which was more than one year
ago.
(ECF No. 1-1 at 1.)
It therefore appears to the Court that
a third attempt at removal would be time-barred, and that the
case will remain in state court from this point forward.
See 28
U.S.C. § 1446 (“[A] case may not be removed on the basis of
jurisdiction conferred by section 1332 of this title more than 1
year after commencement of the action.”).
The instant action is partially distinct from Coastal,
not least because there is complete diversity in this case
whereas there is not in Coastal.
also partially distinct.
The issues in the cases are
For example, the Court’s understanding
is that Coastal will not address whether Hawaii or California law
4/
The second attempt at removal came after certain claims
had been severed from the original action.
5/
The ECF numbers cited in this section are those in the
dockets for the three discussed cases, respectively.
-5-
governs the National Union insurance policies, but that question
is before the Court in this case.
And assuming that Hawaii law
applies and that Group Builders retains any viability, Coastal
will not address the applicability of Group Builders to
manufacturers and distributors.
An additional distinction
between this case and Coastal is that none of the parties to this
action are also parties to the Coastal action.6/
Yet Coastal will address certain legal issues that are
common to both cases.
Like Defendants here, Coastal Construction
claims that its insurer should defend and potentially indemnify
it in the state-court actions involving the Ocean Pointe
development.
(ECF 1-1 at 11.)
Like National Union, North
American Specialty contends that it has no duty to defend or
indemnify based in part on Group Builders.
There are also common
issues of fact, as the underlying actions in both this case and
Coastal arise from the same alleged construction defects at the
Ocean Pointe development.
6/
The parties are engaged with the Coastal parties in other
actions related to the Ocean Pointe development. Coastal
Construction is one of the subcontractors that was responsible
for installing the Simpson products at issue in the underlying
actions. (Mot. Mem. at 5.) Certain of the Defendants have filed
third-party complaints against Coastal in the underlying actions,
for example, and NAS has sued certain of the Defendants seeking
subrogation. National Union has been involved with Defendants’
representation in those matters. (See Mot. Mem. at 5–7
(describing the underlying actions); Compl. at 9–10 (seeking
reimbursement for “the amount [National Union] has forwarded
. . . to defend any defendant in the Underlying Actions”).
-6-
Indeed, the presence of common issues of law in fact in
Coastal has already led one federal court in this district to
stay a declaratory judgment action.
To that case the Court now
turns.
2.
TIG Insurance Co. v. Haseko Homes, Inc.
The second case to discuss is currently pending (and
stayed) in this district court.
See TIG Ins. Co. v. Haseko
Homes, Inc., Civ. Nos. 10-00107 DAE-KSC, 10-00146 DAE-KSC, and
10-00575 DAE-KSC, 2011 WL 264315 (D. Haw. Jan. 26, 2011) (order
staying case).7/
TIG “is a consolidated action for declaratory
relief, which involves potential insurance liability for
allegedly defective construction work . . . in the Ocean Pointe
Project.”
Id. at *2.
The parties include Haseko Homes, Inc.,
and Haseko Construction, Inc. (the general contractor, described
collectively in TIG as “Haseko”); Coastal Construction, Inc., and
Foundations Hawaii, Inc. (two subcontractors); Marsh U.S.A., Inc.
(Haseko’s insurance broker); and insurers North American
Specialty Insurance Company, Clarendon America Insurance Company,
and TIG Insurance Company.
Many of the parties to the TIG action
are also parties to the Coastal action described above.
Like
National Union in this case, the insurance companies who are
7/
This consolidated case was subsequently assigned to Judge
Kobayashi on January 28, 2011. (ECF No. 134.) The current case
numbers are Civ. Nos. 10-00107 LEK-KSC, 10-00146 LEK-KSC, and 1000575 LEK-KSC.
-7-
parties to the TIG action seek declarations that they need not
provide a defense or coverage to their insured.
See id. at *5–9.
The pendency of the Coastal action led the TIG court to
stay proceedings.
See id. at *9–18.
Although there are
distinctions between this case and TIG, The Court’s decision in
this case largely follows TIG.
The reasoning of that decision
therefore will be discussed in more detail below.
3.
Fireman’s Fund Insurance Co. v. Hartford Fire
Insurance Co.
The last case to describe is Fireman’s Fund Insurance
Co. v. Hartford Fire Insurance Co., which is case number CV 11
1789 SBA in the Northern District of California.
The complaint in Fireman’s Fund alleges that Fireman’s
Fund issued general liability policies to Simpson that were
effective from January 1, 1998, to January 1, 2004, and that
Hartford issued general liability policies to Simpson that were
effective from January 1, 2008, to January 1, 2010.
(ECF No. 1
¶¶ 6–7.)8/
The complaint in Fireman’s Fund refers to the same
underlying actions that are referred to in this case, and alleges
that Fireman’s Fund has been providing a defense for Simpson and
Honolulu Wood Treating Company in those underlying actions.
8/
(Id.
National Union, the plaintiff in this case, provided
policies between January 1, 2004, and March 1, 2009. (Compl.
¶¶ 9–14.)
-8-
¶¶ 18–19.)
The complaint notes that the defense of Simpson has
been provided by both Fireman’s Fund and “another co-insurer of
Simpson, Chartis.”9/
(Id. ¶ 18.)
Fireman’s Fund seeks a
declaration that Hartford must join in the defense under the
terms of its insurance policy.
(Id. ¶ 25 (“Hartford has an
obligation and duty to defend Simpson and HTW along with
Fireman’s Fund and Chartis.”).)
The questions at issue in this case will be addressed
in Fireman’s Fund.
The defendants in this case have intervened
in Fireman’s Fund, and their complaint in intervention indicates
that they will seek to demonstrate both that California law
governs the insurance policies at issue and that, if Hawaii law
governs, that Group Builders does not absolve Hartford of its
duties to defend and indemnify them in the underlying actions.
In other words, Fireman’s Fund will address the same issues that
this case involves.
Neither Chartis nor National Union are
currently parties to the Fireman’s Fund case.
At the hearing,
Defendants’ attorney indicated that Defendants will bring
National Union into the Fireman’s Fund case by way of a complaint
if this Court does not transfer this case to the Northern
District of California.
Discretion under the Declaratory Judgement Act
B.
9/
Inc.
National Union is a wholly owned subsidiary of Chartis,
(Corporate Disclosure Statement, ECF No. 5.)
-9-
“In a case of actual controversy within its
jurisdiction . . . any court of the United States, upon the
filing of an appropriate pleading, may declare the rights and
other legal relations of any interested party seeking such
declaration, whether or not further relief is or could be
sought.”
28 U.S.C. § 2201(a) (emphasis added).
District courts
have discretion in whether to exercise jurisdiction under the
Declaratory Judgment Act.
See Wilton v. Seven Falls Co., 515
U.S. 277, 289 (1995); Brillhart v. Excess Ins. Co. of Am., 316
U.S. 491, 494–95 (1942).
The bounds of that discretion are set
forth in the Ninth Circuit’s opinion in Gov’t Emps. Ins. Co. v.
Dizol, 133 F.3d 1220 (9th Cir. 1998) (en banc).
The court in
Dizol set forth a number of factors for a district court to
consider.
Specifically:
The Brillhart factors remain the
philosophic touchstone for the district
court. The district court should avoid
needless determination of state law issues;
it should discourage litigants from filing
declaratory actions as a means of forum
shopping; and it should avoid duplicative
litigation. If there are parallel state
proceedings involving the same issues and
parties pending at the time the federal
declaratory action is filed, there is a
presumption that the entire suit should be
heard in state court. The pendency of a
state court action does not, of itself,
require a district court to refuse federal
declaratory relief. Nonetheless, federal
courts should generally decline to entertain
reactive declaratory actions.
-10-
Id. at 1225 (footnote and citations omitted).
A district court
may also weigh “other considerations,” such as:
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 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.
Id. at 1225 n.5 (quoting Am. States Ins. Co. v. Kearns, 15 F.3d
142, 145 (9th Cir. 1994) (Garth, J., concurring)).
Finally,
“there is no presumption in favor of abstention in declaratory
actions generally, nor in insurance coverage cases specifically.”
Id. 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.”) (quoting Aetna Cas. & Sur. Co. v. Merritt, 974 F.2d
1196, 1199 (9th Cir. 1992)).
As the court noted:
[W]hen other claims are joined with an action
for declaratory relief (e.g., bad faith,
breach of contract, breach of fiduciary duty,
rescission, or claims for other monetary
relief), the district court should not, as a
general rule, remand or decline to entertain
the claim for declaratory relief. If a
federal court is required to determine major
issues of state law because of the existence
of non-discretionary claims, the declaratory
-11-
action should be retained to avoid piecemeal
litigation.
Id. at 1225-26 (footnote and citations omitted).
On balance, as will be discussed in more detail in the
following sections, the Court finds that the above factors weigh
in favor of staying this case pending the resolution of the
insurance coverage questions at issue in the Coastal case.10/
1.
Avoidance of Needless Determination of State
Law Issues
As this Court’s analysis closely follows that of Judge
Ezra’s decision in TIG, the Court will quote portions of that
decision at length, to better illustrate how this court’s
analysis differs based on those circumstances that have changed
since the TIG decision was issued (specifically, the subsequent
remand of the Coastal case to state court and the issuance and
adoption of H.B. 924).
As the TIG decision states, the factor
concerning needless determination of state law issues focuses on:
unsettled issues of state law, not
fact-finding in the specific case. The Ninth
Circuit has held that a district court
needlessly determines state law when: (1) the
state law issue in question is the subject of
10/
The Court is not aware of any pending case that will
likely resolve theses questions before they will be resolved in
Coastal. At the hearing, one of the lawyers for the Simpson
parties averred that he is counsel for a party involved in
another case, Island Insurance Co. v. Metcalf Construction Co.,
Civ. No. 1CC11-1-000978, which is pending in state court and
involves the continuing viability of Group Builders, but that he
anticipates that Coastal will be resolved before Island
Insurance.
-12-
a parallel proceeding; (2) the area of law is
expressly left to the states by Congress; and
(3) there is no compelling federal interest.
When the sole basis for federal jurisdiction
is diversity of citizenship, the federal
interest is at its nadir and the Brillhart
policy of avoiding unnecessary declarations
of state law is especially strong.
TIG, 2011 WL 264315, at *10 (citations and internal quotation
marks omitted).11/
Insurance law is an area of law that Congress
has expressly left to the states.
See 15 U.S.C. §§ 1011–12.
And
this is a diversity case with no federal question presented.
There therefore “is no compelling federal interest here.”
Id. at
14.
The remaining issues are whether Hawaii law is
unsettled in the first place and whether the state law at issue
is the subject of a parallel proceeding.
a.
Unsettled State Law
Although the TIG court ultimately decided to stay
proceedings based on other factors, it determined that there was
“sufficient guidance” to resolve the questions presented by the
Group Builders decision and that, in any event, it “ha[d] the
option of certifying a question to the Hawaii Supreme Court” if
need be.
Id. at *11.
The Court therefore was “not persuaded
11/
The Ninth Circuit case referred to in the quotation is
Cont’l Cas. Co. v. Robsac Indus., 947 F.2d 1367, 1371 (9th Cir.
1991) (overruled in part on other grounds by Dizol, 133 F.3d at
1227).
-13-
that it [was] incapable of deciding these insurance coverage
questions.”
Id.
Since the TIG decision was issued, H.B. 924 was passed
by the Legislature and signed by the Governor.
Moreover, the
insurance coverage issues in Coastal were severed in the state
court, removed to this district, and finally remanded back to
state court.
Both of these events lead the Court to analyze the
question of whether Hawaii law is unsettled differently than
Judge Ezra did in TIG.12/
First of all, as the parties
acknowledged at the hearing, the questions about Hawaii insurance
law raised by H.B. 924 should be answered first in the Hawaii
state courts.
The bill states that “the meaning of the term
‘occurrence’ shall be construed in accordance with the law as it
existed at the time that the insurance policy was issued,” H.B.
924 § 2, but what exactly that means is unsettled at this
point.13/
12/
As the Simpson parties note, the question of whether an
insurer can obtain reimbursement for defense costs it had no duty
to incur is also unsettled under Hawaii law. See Burlington Ins.
Co. v. Panacorp, Inc., 758 F. Supp. 2d 1121, 1133 (D. Haw. 2010).
13/
At the hearing, National Union’s counsel initially
suggested that Group Builders changed nothing about Hawaii
insurance law, such that rolling back to “the law that existed at
the time that the insurance policy was issued” would nonetheless
lead to the same result that was reached in Group Builders. (See
also Opp’n at 23 n.3 (“Group Builders did not change the law in
Hawaii.”).) That position is incompatible with the Legislature’s
extreme concern about the effect of that case. See H.B. 924 § 1
(“Group Builders . . . creates uncertainty in the construction
(continued...)
-14-
Second, while Judge Ezra mentioned certifying a
question to the Hawaii Supreme Court, at the time he was
anticipating that the insurance coverage issues in Coastal might
be severed and removed to this district, and ultimately
consolidated with TIG.
See TIG, 2011 WL 264315, at *17.
Indeed,
as discussed above, Coastal did make a brief return to this
district after the TIG decision was issued, but now it has been
remanded to the state court and it appears that it will stay
there.
Staying this case pending the resolution of Coastal is
preferable under Dizol to retaining the case and certifying a
question that is already set to be addressed in state court.14/
b.
Parallel Proceeding
“[F]or a parallel proceeding to exist, the actions must
arise from the same factual circumstances, there must be
overlapping factual questions raised in the actions, or the same
issues must be addressed by both actions.”
TIG, 2011 WL 264315
13/
(...continued)
industry, and invalidates insurance coverage that was understood
to exist and that was already paid for by construction
professionals.”).
14/
The decision in TIG to stay the case rather than dismiss
it seems to have been based in large part on the possibility that
the Coastal case would be removed to federal court and
consolidated with TIG. That is no longer possible, but this
Court will nonetheless stay rather than dismiss this action
because there are several issues, such as whether Group Builders
would apply to manufacturers (if it is still good law at all),
that will not be addressed in Coastal or the other pending state
court proceedings.
-15-
at *13 (citing Golden Eagle Ins. Co. v. Travelers Cos., 103 F.3d
750, 755 (9th Cir. 1996) (“It is enough that the state
proceedings arise from the same factual circumstances.”)
(overruled in part on other grounds by Dizol, 133 F.3d at
1227)).15/
The Coastal action is parallel to this case for many
of the same reasons that Coastal is parallel to TIG.
Specifically, as it was in TIG, “[i]t is readily apparent that at
the very least, the Coastal Action and the instant . . . action
arise from the same factual circumstances, namely the allegedly
defective construction work that occurred at the Ocean Pointe
development.”
TIG, 2011 WL 264315 at *12.
15/
National Union argues that the Ninth Circuit has expanded
the concept of “parallel” far beyond the Supreme Court’s
intentions, and desires that the Court ignore Ninth Circuit
precedent in favor of National Union’s interpretation of
Brillhart and Wilton. National Union’s position is that the
Court may do so because Dizol altered the concept of what makes a
state action “parallel” in the Ninth Circuit when it overruled
several prior cases. But the Ninth Circuit’s overruling of its
previous precedent was narrow. Dizol overruled prior precedent
only to the extent that the same contained “suggestions to the
contrary” of Dizol’s holdings that “when constitutional and
statutory jurisdictional prerequisites to hear a case brought
pursuant to the Declaratory Judgment Act have been satisfied, the
district court may proceed with consideration of the action
without sua sponte addressing whether jurisdiction should be
declined”; that the Ninth Circuit is “not obligated, sua sponte,
to decide whether a district court abused its discretion in
exercising discretionary jurisdiction when neither party has
raised the issue”; and that “[i]f a party has properly raised the
issue before the district court, the court must record its
reasoning for exercising jurisdiction in accordance with
Brillhart and the general considerations we have described
herein.” Dizol, 133 F.3d at 1227.
-16-
The Court’s analysis is distinct from TIG in that in
TIG, the majority of the parties were also parties to the Coastal
action, whereas the parties in this case are not parties to the
Coastal action.
But “Ninth Circuit precedent is clear that
[these parties] need not be present in the Coastal Action for it
to be considered a parallel state proceeding.”
Id. at * 13
(citing Employers Reinsurance Corp. v. Karussos, 65 F.3d 796,
798, 800 (9th Cir. 1995) (overruled in part on other grounds by
Dizol, 133 F.3d at 1227)).16/
This case is also distinct from TIG because, as
mentioned before, the circumstances concerning the Coastal action
have changed.
The TIG order noted that it was possible, if “the
motions to dismiss or sever [in Coastal] were denied, and the
insurance coverage claims in the Coastal Action proceed, [that]
this Court and the Hawaii state court would be called upon to
decide overlapping issues of Hawaii insurance law.”
Now, the
insurance coverage issues in Coastal have been remanded to state
16/
National Union notes that under Hawaii law, as a matter
of public policy, an insurer cannot be a party to the suit
deciding the underlying tort liability. But that concept does
not preclude a determination that this action is parallel with
Coastal; the Ninth Circuit has repeatedly noted that proceedings
can be parallel where a party “could have presented the issues
that it brought to federal court in a separate action to the same
court that will decide the underlying tort action.” E.g., Polido
v. State Farm Mut. Auto. Ins. Co., 110 F.3d 1418, 1423 (9th Cir.
1997) (emphasis added) (overruled in part on other grounds by
Dizol, 133 F.3d at 1227).
-17-
court, such that if this Court were to proceed, it would
assuredly decide overlapping issues.
National Union relies heavily on Allstate Ins. Co. v.
Davis, 430 F. Supp. 2d 1112 (D. Haw. 2006), but that case is not
analogous to this one.
Davis involved an alleged murder, and the
Court stated that there were no “novel or unsettled matters of
state law.”
Id. at 1120.
That is not the case here; the state
of Hawaii insurance law is very much in flux given Group Builders
and H.B. 924.
Moreover, the “state court” in Davis “ha[d] no
reason to consider” the insurance coverage questions.
Here,
insurance coverage is at issue in other cases, as described
above.
The Court acknowledges that the specific policies issued
by National Union are not at issue in the underlying actions, but
the same policy language, factual background, and legal questions
are at issue in those cases.
2.
Declaratory Actions as a Means of Forum
Shopping
Under Brillhart, as described by Dizol, a district
court “should discourage litigants from filing declaratory
actions as a means of forum shopping.”
Dizol, 133 F.3d at 1225.
The Court finds this factor neutral in determining whether to
exercise its discretionary jurisdiction over this case.
While
National Union filed this action years after the underlying
actions commenced in state courts (and months after the
Legislature began considering H.B. 924), the Simpson parties
-18-
filed their complaint in intervention for declaratory relief in
the Fireman’s Fund case even later, and have indicated that they
intend to bring National Union into that case.
It does not
appear that any party is any worse an offender than any other
party in terms of filing declaratory actions as a means of forum
shopping.
Avoidance of Duplicative Litigation
3.
The Court agrees with the TIG decision that the policy
of avoidance of duplicative litigation weighs in favor of staying
this case pending the resolution of Coastal.
at *16–17.
See 2011 WL 264315
This factor weighs less heavily in favor of staying
the case then it did in TIG, as the parties to this case are not
parties to the Coastal action.
Yet there are factual and legal
determinations to be made in the underlying actions that will be
common to all of the cases that have arisen out of the Ocean
Pointe development.
See id.; see also Phoenix Assurance, 125 F.
Supp. 2d at 1222 (“Should this court exercise its discretionary
jurisdiction, it will very likely have to decide numerous
questions of Hawaii insurance law. . . .
Many of these very same
issues are issues to be decided in pending state court
litigation. . . .
Accordingly, the Court finds that avoidance of
duplicative litigation favors declining jurisdiction in this
action.”).
4.
Presumption That Entire Suit Should Be Heard
in State Court
-19-
According to Dizol’s explanation of the Brillhart
factors, “[i]f there are parallel state proceedings involving the
same issues and parties pending at the time the federal
declaratory action is filed, there is a presumption that the
entire suit should be heard in state court.”
1225.
Dizol, 133 F.3d at
National Union relies on this proposition to assert that
there are no parallel proceedings at all, because National Union
is not a party to any of the state actions.
(Opp’n at 9–12.)
Specifically, National Union claims that the Ninth Circuit’s
historical interpretation of the term “parallel” was at odds with
Brillhart, and that the Ninth Circuit condensed the meaning of
the term “parallel” in Dizol so it applies only when the same
parties are involved in both state and federal proceedings.
(Opp’n at 10–12.)
As discussed above, the Ninth Circuit’s
overruling of its precedent in Dizol was narrow, and did not
change the Ninth Circuit’s definition of parallel.
See supra
Part II.B.1.b.
The condition for the presumption, that “there are
parallel state proceedings involving the same issues and
parties,” implies that some “parallel state proceedings” do
not involve the same issues and parties.
This reading is
consistent with the Ninth Circuit’s prior case law determining
that the term “parallel” encompasses more than just claims
between the same parties.
See TIG, 2011 WL 264315, at *13
-20-
(“Ninth Circuit precedent is clear that TIG need not be present
in the Coastal Action for it to be considered a parallel state
proceeding.”); see also id. (emphasizing the phrase “same issues
and parties” in quoting Dizol).
In any event, all that Dizol says is that the described
situation gives rise to a “presumption.”
In other words, when
“there are parallel state proceedings involving the same issues
and parties pending at the time the federal declaratory action is
filed,” a district court’s discretion to hear the declaratory
action is curbed: the described situation so strongly favors
dismissing a case that a presumption of dismissal arises and must
be overcome.
But that does not mean that in the absence of this
type of parallel proceedings a district court must exercise its
discretionary jurisdiction over the declaratory judgment action.
All it means is that there is no presumption of dismissal.
See
Phoenix Assurance Plc v. Marimed Found. for Island Health Care
Training, 125 F. Supp. 2d 1214, 1223 (D. Haw. 2000)
(“Furthermore, even if the lack of a mirror-image state court
proceeding meant that there was not a parallel proceeding, the
Ninth Circuit in Dizol made clear that whether or not there is a
parallel proceeding is merely one factor to be considered in
addition to the three Brillhart factors when deciding whether to
accept or decline jurisdiction.
See Dizol, 133 F.3d at 1225.
Finally, the Supreme Court has left this question untouched, and
-21-
therefore open to the district courts and courts of appeals to
decide.
See Wilton, 515 U.S. 277, 290 (leaving question of a
court’s discretion to not exercise jurisdiction open in ‘cases in
which there are no parallel state proceedings’).”).
National Union cites another case from this district in
support of its claim that the Ninth Circuit’s interpretation of
the term “parallel” is at odds with Brillhart, but the analysis
in that case is consistent with this Court’s analysis in this
order.
That case questioned whether there might be conflict
between Dizol and prior Ninth Circuit precedent, but concluded,
as this Court does, that “a presumption in favor of declining
jurisdiction occurs only” in the situation described in Dizol.
See Nautilus Ins. Co. v. K. Smith Builders, Ltd., Civ. No. 0900509 JMS-BMK, 2010 WL 346457, at *5 n.2 (D. Haw. Jan. 29, 2010).
The presence of a presumption is immaterial in this
case, as it was in both TIG and Nautilus, because the Court would
stay the case with or without a presumption.
See TIG, 2011 WL
264315 at *13 n.14 (“The parties raise various arguments
regarding this presumption.
Because the Court determines that
the Brillhart factors weigh in favor of granting a stay, even
without a presumption, the Court declines to reach the issue.”);
Nautilus, 2010 WL 346457, at *5 n.2 (“[E]ven if the earlier line
of Ninth Circuit cases is still good law and this action and the
underlying action are nominally parallel because they both relate
-22-
to [the same] injuries, the court would still maintain
jurisdiction over this action upon consideration of the other
Brillhart factors.”).
5.
Other Dizol Factors
According to Dizol, in addition to the
Brillhart factors discussed above, the Court may also weigh
“other considerations,” such as:
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 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.
133 F.3d at 1225 n.5.
The Court finds that these factors “generally weigh in
favor of the Court retaining jurisdiction but staying the
proceedings.”
TIG, 2011 WL 264315 at *18.
The Court generally
agrees with the following rationale expressed in TIG:
If both this Court and the Hawaii state court
were to reach the merits of the insurance
coverage issues, there would be a genuine
risk of inconsistent judgments, piecemeal
litigation, and ultimately entanglement
between the federal and state court systems.
-23-
Id.
Specifically, the Court finds that a declaratory action
would not settle all aspects of the controversy.
The Court also
finds that the benefit of any clarification of the legal
relations at issue would be outweighed by the inconvenience and
inefficiency involved with going forward with this case.
Finally, the Court finds that the remaining Dizol factors are
neutral.
C.
Motion to Transfer Venue
As an alternative to dismissing or staying the case,
Defendants have moved the Court to transfer the case to the
Northern District of California, where a related case is pending.
Indeed, at the hearing, Defendants’ counsel suggested that he
would prefer that the Court transfer the case rather than stay
it.
The Court, however, has decided to stay the case instead of
transferring it.
Even if a district court is a proper venue for a case
under 28 U.S.C. § 1391, the district court may transfer the case
to another district for the convenience of the parties and
witnesses.
See 28 U.S.C. § 1404(a).
Section 1404(a) states:
“For the convenience of parties and witnesses, in the interest of
justice, a district court may transfer any civil action to any
other district or division where it might have been brought.”
U.S.C. § 1404(a).
28
“The purpose of this section is to prevent the
waste of time, energy, and money and to protect litigants,
-24-
witnesses and the public against unnecessary inconvenience and
expense.”
Hi-Pac, Ltd. v. Avoset Corp., 980 F. Supp. 1134, 1139
(D. Haw. 1997) (internal quotation marks and citations omitted).
In considering a motion to transfer venue, a district
court is to conduct an “individualized, case-by-case
consideration of convenience and fairness.”
498.
Jones, 211 F.3d at
The factors for a court to consider include:
(1) the location where the relevant
agreements were negotiated and executed, (2)
the state that is most familiar with the
governing law, (3) the plaintiff’s choice of
forum, (4) the respective parties’ contacts
with the forum, (5) the contacts relating to
the plaintiff’s cause of action in the chosen
forum, (6) the differences in the costs of
litigation in the two forums, (7) the
availability of compulsory process to compel
attendance of unwilling non-party witnesses,
and (8) the ease of access to sources of
proof. Additionally, the presence of a forum
selection clause is a “significant factor” in
the court’s § 1404(a) analysis. [And] the
relevant public policy of the forum state, if
any, is at least as significant a factor in
the § 1404(a) balancing.
Id. at 498–99.
“The defendant must make a strong showing of
inconvenience to warrant upsetting the plaintiff’s choice of
forum.”
Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d
834, 843 (9th Cir. 1986) (citation omitted).
The moving party
ultimately has the burden of showing that an alternative forum is
the more appropriate forum for the action.
499.
-25-
Jones, 211 F.3d at
The Jones factors favor retaining this case, despite
the pendency of the Fireman’s Fund case in the Northern District
of California.
Most of the factors are neutral or do not weigh
heavily one way or the other.
Of the factors that do weigh
heavily, Hawaii’s strong public policy interest in insurance law
in the construction context, which was expressly stated in H.B.
924, outweighs the risks and inefficiencies associated with
proceeding in parallel with the Fireman’s Fund case that is
pending in the Northern District of California.
The Court begins with the factor that most strongly
supports transfer.
Assuming that the Northern District of
California elects to exercise its discretionary jurisdiction in
Fireman’s Fund, that case will resolve the question whether the
events alleged in the underlying actions were caused by an
“occurrence,” as that term is defined in a nearly identical
insurance policy sold by the same broker to the same company.
The case will then allocate responsibility for coverage across
the three insurers that provided insurance to Defendants in the
relevant timeframe.
The coverage issue raised in this case is
the same as that raised in the California case; in Plaintiff’s
own words, “[t]he basis for National Union’s position is that,
under Hawaii law, the four underlying lawsuits do not allege an
‘occurrence’ as required by the National Union policies.”
at 1.)
(Opp’n
Based on the pleadings, the same question is at issue in
-26-
Fireman’s Fund, although at the hearing Simpson’s counsel averred
that the Fireman’s Fund defendant has abandoned its argument that
it need not provide coverage under Group Builders.
Litigating the issue in this forum in parallel with the
ongoing litigation in California would be duplicative and
therefore costly, both to the parties and to the judiciary.
It
would also risk inconsistent judgments as to Simpson’s insurance
coverage with regard to the Ocean Pointe Development.
This
factor supports transferring the case to the Northern District of
California.
Upon transfer, this case could be consolidated with
Fireman’s Fund, allowing Simpson’s insurance coverage with regard
to the Ocean Pointe development to be resolved in a single forum
at the same time.
Indeed, at the hearing, Defendants’ counsel
indicated that if this Court does not transfer this case to the
Northern District of California, then Defendants will bring
National Union into the Fireman’s Fund action.
On the other
hand, the California case could be transferred to the District of
Hawaii—and evidently that was considered and a motion to that
effect was filed, but according to the Simpson parties’ counsel
the motion was withdrawn after H.B. 924 was enacted.
In any
event, if this Court retains this case, duplicative litigation
may ensue.17/
17/
The Court is mindful that similar insurance coverage
questions are also pending in the Hawaii state court in the
(continued...)
-27-
The “relevant public policy of the forum state . . . is
at least as significant a factor in the § 1404(a) balancing.”
Jones, 211 F.3d at 499.
Defendants have identified a case from a
federal court in California that specifically references the
Group Builders decision in noting California’s public policy
interest in protecting the insurance benefits of its residents.
See Ameron Int’l Corp. v. Am. Home Assurance Co., No. CV 11-1601
CAS (AGRx), 2011 WL 2261195 (C.D. Cal. June 6, 2011).
The Ameron
court identified “a material difference of law between California
and Hawaii on the question of what constitutes an ‘occurrence’”
in light of Group Builders, and compared California’s “interest
in protecting [its residents] from the unfair practices of
insurers” and “interest in applying its law to interpretation of
. . . policies [that were formed in California]” to Hawaii’s
interests, which stemmed from being “the site of the underlying
loss and the [underlying legal action],” as well as from, in the
Ameron court’s view, Hawaii’s desire to “protect the interest of
insurers.”
Id. at *5–9.
The court found that Hawaii’s interest
in protecting insurers was attenuated in that case because none
17/
(...continued)
Coastal case. If Hawaii law governs the insurance questions in
this case, as National Union argues, then there may be
duplicative litigation between Fireman’s Fund, on one hand, and
Coastal, on the other, no matter whether this Court retains or
transfers the case.
-28-
of the insurers involved in the action were Hawaii residents.
See id. at *9.
Yet the Hawaii legislature has specifically denounced
Group Builders in very strong terms and has sought to eliminate
the uncertainty caused by that decision.
See H.B. 924 § 1
(“[T]he Group Builders decision creates a public policy crisis
that only the State is in a position to remedy.”).
Although not
as clearly drafted as it might be, H.B. 924 does state that
“[t]he purpose of this Act is to restore the insurance coverage
that construction industry professionals paid for and to ensure
that the good-faith expectations of parties at the time they
entered into the insurance contract are upheld.”
added).
Id. (emphasis
The governor has signed the bill into law.
Two branches
of the Hawaii state government have therefore indicated a strong
public policy interest in insurance coverage in the construction
industry, which is “a vital component of Hawaii’s economy” and
“one of the State’s main economic drivers.”
Id.
The state “can
ill-afford to cripple one of its most important economic
engines,” the bill states, and therefore the “uncertainty in the
construction industry” caused by Group Builders, which
“invalidates insurance coverage that was understood to exist and
that was already paid for by construction professionals,” must be
remedied.
Id.
The bill’s excoriation of Group Builder’s goes on
for several pages.
The “legislature finds that the Group
-29-
Builders decision directly affects the interests of the State,”
and that “the sudden invalidation of relied-upon insurance
coverage may be economically disastrous to contractors, building
owners, injured persons, and the general public.”
Id.
In sum, Hawaii’s public policy interest in insurance
coverage for the construction industry, as impacted by the Group
Builders decision, could not have been expressed any more
strongly.
The parties dispute the impact of Group Builders and
H.B. 924 and acknowledge the current uncertainty in Hawaii
insurance law as to what constitutes an “occurrence.”
As the
state judiciary has not yet addressed the continuing viability of
Group Builders in light of H.B. 924, and as Defendants have
indicated that they intend to seek to apply California law to
these insurance policies, it appears to the Court that Hawaii’s
public policy interest in this case provides compelling weight in
favor of retaining the case.
The remainder of the factors are either neutral or only
mildly weigh in favor of or against transfer.
First, there is no dispute that the relevant agreements
were negotiated and executed in the Northern District of
California, so that factor favors transfer.
Second, the parties dispute what law governs the
insurance policies, but even if the case were transferred, the
transferee court would apply Hawaii’s choice-of-law rules to
-30-
determine what law governs the insurance policies.
See Newton v.
Thomason, 22 F.3d 1455, 1459 (9th Cir. 1994) (noting the
“requirement that the transferee court follow the choice of law
rules of the transferor court” when a case is transferred under
28 U.S.C. § 1404(a)).
The Court finds that this factor is
neutral, in that a venue in California would be more appropriate
if California law governs, but a venue in Hawaii would be more
appropriate if Hawaii law governs.
Third, National Union filed suit in this district.
So
the plaintiff’s choice of forum weighs against transfer.
Fourth, both Simpson Manufacturing and Simpson StrongTie have their principal places of business in California.
(Compl. ¶ 2.)
corporation.
Simpson Strong-Tie is also a California
(Id.)
Honolulu Wood Treating LLC appears, from its
web site, to have its principal place of business in Hawaii, but
the company appears to be owned and controlled by a California
resident.
(Id. ¶¶ 3–6.)
National Union “is a Pennsylvania
corporation that maintains its principal place of business in New
York, New York”; no strong contacts with either Hawaii or
California are apparent.
(Id. ¶ 1.)
The Court finds that this
factor is neutral, or weighs slightly in favor of transferring
the case to California.
Fifth, the underlying factual circumstances, that is,
the allegedly defective construction, took place in Hawaii.
-31-
The
circumstances surrounding the negotiation of the insurance
policies took place in California.
But the Court considered
those negotiations in analyzing the first Jones factor, which
directs courts to consider “the location where the relevant
agreements were negotiated and executed.”
Therefore, this factor
weighs in favor of retaining the case.
Sixth, neither party has identified any unwilling nonparty witnesses, so this factor is neutral.
Seventh, neither party has specifically identified the
sources of proof that will be necessary to the case.
From the
context of this case, however, the Court determines that this
factor is neutral.
The case may turn in part on the negotiations
of the policies themselves.
California.
Those negotiations took place in
On the other hand, the construction at issue took
place in Hawaii, and sources of proof with regard to, for
example, the cause and extent of the damage that occurred will
likely be found here.
Eighth, the parties have acknowledged that there is no
forum selection clause in the insurance policies, so this factor
is neutral.
The Court will stay this case rather than transfer it
to the Northern District of California because the Hawaii State
Legislature’s strongly stated public policy interest in insurance
-32-
coverage related to the state’s construction industry weighs
heavily against transfer.
D.
Younger Abstention
Defendants argue in the alternative that the Court
should dismiss or stay the action under Younger v. Harris, 401
U.S. 37 (1971).
Generally, a court must abstain under Younger:
[I]f four requirements are met: (1) a
state-initiated proceeding is ongoing; (2)
the proceeding implicates important state
interests; (3) the federal plaintiff is not
barred from litigating federal constitutional
issues in the state proceeding; and (4) the
federal court action would enjoin the
proceeding or have the practical effect of
doing so, i.e., would interfere with the
state proceeding in a way that Younger
disapproves.
San Jose Silicon Valley Chamber of Commerce Political Action
Comm. v. City of San Jose, 546 F.3d 1087, 1092 (9th Cir. 2008).
“[W]hen each of an abstention doctrine’s requirements are not
strictly met, the doctrine should not be applied,” and therefore
“abstaining under Younger . . . [is] proper only if all four
Younger requirements [are] strictly satisfied.”
AmerisourceBergen Corp. v. Roden, 495 F.3d 1143, 1149 (9th Cir.
2007).
There are no federal constitutional issues involved
with this case.
And as discussed above, this case implicates
important state interests that are being addressed in stateinitiated proceedings.
But this action, if allowed to continue,
-33-
would neither enjoin those proceedings nor have the practical
effect of doing so.
Younger abstention would therefore be
inappropriate.
The Court has, in the past, stayed a declaratory
judgment action concerning insurance coverage under Younger.
See
Burlington Ins. Co. v. Panacorp, Inc., 758 F. Supp. 2d 1121, 1137
(D. Haw. 2010).
In that case, however, there were ongoing
proceedings in state court concerning the same questions of
insurance coverage, between the same parties and under the same
insurance policies.
See id. at 1126–27.
The Court found that
allowing the federal case to proceed would have the effect of
enjoining the state case based on collateral estoppel.18/
That possibility does not arise in this case because
neither National Union nor the Defendants are parties to any
pending state-court action concerning the insurance policies at
issue in this case.
While the Court has elected to stay the case
pending state-court evaluations of Group Builders and H.B. 924,
the state court would be free to make that evaluation even if
this Court were to allow proceedings in this case to continue.
18/
In declaratory judgment actions, it is permissible to
consider collateral estoppel and res judicata effects in
determining whether to abstain under Younger. See
AmerisourceBergen, 495 F.3d at 1151 (“[A]bstention to avoid
concurrent, duplicative litigation is available in some very
limited circumstances—in particular, when the requested relief in
federal court is a declaratory judgment.”).
-34-
The requirements of Younger abstention are therefore not strictly
met, so the Court cannot abstain under Younger.
III. CONCLUSION
For the reasons stated above, the Court GRANTS in part
and DENIES in part Defendants’ motion.
Specifically, the Court
STAYS this case pending the resolution in the state courts of the
insurance coverage issues at issue in the Coastal case.
IT IS SO ORDERED.
DATED:
Honolulu, Hawai#i, November 7, 2011.
________________________________
Alan C. Kay
Sr. United States District Judge
National Union Fire Insurance Company of Pittsburgh, PA, v. Simpson
Manufacturing Company, Civ. No. 11-00254 ACK-RLP: Order Staying Proceedings
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