Catholic Foreign Mission Society of America, Inc. v. Arrowood Indemnity Company; et al.

Filing 38

ORDER GRANTING PLAINTIFF'S MOTION FOR REMAND (ECF No. 7 ) AND DENYING DEFENDANTS' MOTION TO DISMISS OR TRANSFER (ECF. No. 13 ). Signed by JUDGE HELEN GILLMOR on 12/29/2014.Excerpt of Conclusion: "The Court exercises its discretion to decline to exercise jurisdiction. Plaintiff's MOTION FOR REMAND (ECF No. 7 ) is GRANTED. Because the Court grants Plaintiff's Motion for Remand, Defendants' Motion to D ismiss or Transfer is moot. Defendants' MOTION TO DISMISS OR TRANSFER (ECF No. 13 ) is DENIED AS MOOT. Defendants' request for additional time to file an Answer to Plaintiff Maryknoll's Amended Complaint is DENIED AS MOOT. The case and all files herein are REMANDED to the Circuit Court of the First Circuit, State of Hawaii for further proceedings." Written Order follows hearing held on 12/22/2014 on Plaintiff's Motion for Remand 7 and Defendant Arrowood Indemnity Company's Motion to Dismiss or Transfer 13 . Minutes of hearing: doc. no. 37 . (afc)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
CATHOLIC FOREIGN MISSION
)
SOCIETY OF AMERICA, INC., aka )
MARYKNOLL FATHERS AND BROTHERS, )
)
Plaintiff,
)
)
)
vs.
)
)
)
ARROWOOD INDEMNITY COMPANY,
)
formerly known as Royal
)
Indemnity Company, as successor )
to Royal Globe Insurance
)
Company and THE TRAVELERS
)
COMPANIES, INC.
)
)
Defendants.
)
)

CIV. NO. 14-00420 HG-BMK

ORDER GRANTING PLAINTIFF’S MOTION FOR REMAND(ECF No. 7) AND
DENYING DEFENDANTS’ MOTION TO DISMISS OR TRANSFER (ECF. No. 13)

This case involves a request for declaratory relief as to
insurance coverage for several underlying Hawaii state court
lawsuits alleging sexual abuse by members of the clergy.
Plaintiff filed a declaratory judgment action in Hawaii state
court.

Defendants removed the action to the Federal District

Court for the District of Hawaii.

Plaintiff moves for remand,

requesting that the Court exercise its discretion to decline to
exercise jurisdiction as the nature of the case is one for
declaratory relief under the Declaratory Judgment Act.

Defendants have moved to dismiss or transfer this action
because of a pending declaratory judgment action, filed by
Defendant Arrowood, in the United States District Court for the
Southern District of New York.
The Court declines to exercise jurisdiction.
Plaintiff’s Motion to Remand (ECF No. 7) is GRANTED.
Defendants’ Motion to Dismiss or Transfer (ECF No. 13) is
DENIED.

PROCEDURAL HISTORY

On August 14, 2014, Plaintiff Catholic Foreign Mission
Society of American, Inc., aka Maryknoll Fathers and Brothers
(“Maryknoll”) filed a Complaint against Defendants Arrowood
Indemnity Company (“Arrowood”) and The Travelers Companies, Inc.
(“Travelers”) in the Circuit Court of the First Circuit, State of
Hawaii.
On August 29, 2014, Plaintiff filed a First Amended
Complaint against Defendants Arrowood Indemnity Company and The
Travelers Companies, Inc. in the Circuit Court of the First
Circuit, State of Hawaii.
On September 16, 2014, Defendants Arrowood and St. Paul Fire
and Marine Insurance Company (“St. Paul”) filed a Joint Notice of
Removal in the United States District Court for the District of
2

Hawaii.

(ECF No. 2.)

Defendants contend that Plaintiffs

incorrectly sued The Travelers Companies, Inc., rather than its
subsidiary St. Paul.
On October 6, 2014, Plaintiff Maryknoll filed a Motion for
Remand. (ECF No. 7.)
On October 7, 2014, Plaintiff Maryknoll filed a Motion for
Leave to File Second Amended Complaint.

(ECF No. 8.)

Hearing on

Plaintiff’s Motion for Leave to File Second Amended Complaint is
set for January 21, 2015.
On October 15, 2014, Defendant Arrowood filed a Motion to
Dismiss or Transfer, in which Defendant St. Paul joined. (ECF No.
13, 14.)
On November 10, 2014, Defendants Arrowood filed an
Opposition to Plaintiff’s Motion to Remand, in which Defendant
St. Paul joined.

(ECF No. 21, 22.)

On November 10, 2014, Plaintiff Maryknoll filed an
Opposition to Defendant Arrowood and St. Paul’s Motion to Dismiss
or Transfer, in which Defendant St. Paul joined.

(ECF No. 23.)

On December 4, 2014, Defendant Arrowood filed a Reply to
Plaintiff’s Motion to Remand, in which Defendant St. Paul joined.
(ECF No. 28, 29.)
On December 4, 2014, Plaintiff Maryknoll filed a Reply to
Defendants’ Opposition to Plaintiff’s Motion to Remand.
30.)

3

(ECF No.

Plaintiff’s Motion to Remand and Defendants’ Motion to
Dismiss or Transfer came on for hearing on December 22, 2014.

BACKGROUND
Plaintiff’s Complaint for Declaratory Judgment filed in Hawaii
State Court.
August 29, 2014, Plaintiff Maryknoll filed a First Amended
Complaint (“FAC”) for declaratory judgment against Defendants
Arrowood and Travelers in the Circuit Court of the First Circuit,
State of Hawaii.

(ECF No. 2-2.)

The FAC contains two counts.

Count I seeks a declaratory judgment as to the Defendants’ duty
to defend and Count II seeks a declaratory judgment as to the
Defendants’ duty to indemnity.
In particular, in the FAC, Maryknoll seeks a declaratory
judgment that Arrowood and Travelers have a duty to provide
insurance coverage regarding several cases filed in the Circuit
Court of the First Circuit of Hawaii.

(FAC ¶ 1.)

Maryknoll

alleges that it is a not-for-profit corporation incorporated in
the State of New York, with its principle place of business in
New York. (FAC ¶ 3.) As to Defendants, Maryknoll alleges that
Defendant Arrowood is a Delaware corporation with its principle
place of business located in Charolotte, North Carolina and that
Defendant Travelers is a Minnesota Corporation with its principle
place of business in New York.

(FAC ¶¶ 4, 5.)
4

Insurance policies
In the FAC, Plaintiff Maryknoll seeks a declaration as to
coverage under a number of insurance policies issued to Plaintiff
Maryknoll by either Defendant Arrowood or Defendant Travelers
(through its subsidiary, St. Paul), in the 1960s and 1970s. (FAC
¶¶ 9, 17-22.)

Plaintiff alleges that, upon information and

belief, the Umbrella Excess Liability policy issued by St. Paul
is now administered by Travelers.

(FAC ¶ 22.)

As discussed

further below, Defendant St. Paul disputes that Travelers is a
proper party and has appeared in this matter as Defendant St.
Paul “incorrectly sued herein as The Travelers Companies, Inc.”.
Underlying State Court Lawsuits
According to Maryknoll’s proposed Second Amended Complaint,
there are fourteen underlying State court lawsuits filed in the
Circuit Court for the First Circuit, State of Hawaii.

The

lawsuits name Maryknoll and members of the clergy as defendants.
The lawsuits allege sexual abuse by members of the clergy, that
Maryknoll failed to warn the plaintiffs, and that Maryknoll was
negligent in continuing to employ and failing to properly
supervise accused members of the clergy.
Defendant Arrowood’s Declaratory Judgment Action in New York
On June 5, 2014, prior to the filing of Plaintiff’s suit
before this Court, Defendant Arrowood filed a declaratory
judgment action in the United States District Court for the
5

Southern District of New York.

(See Arrowood Indemnity Company

v. Catholic Foreign Mission Society of America Inc. a/k/a
Maryknoll Fathers and Brothers, Civil Action No. 14 CV 4089 (“New
York Lawsuit”).

In the New York Lawsuit, Defendant Arrowood

seeks a declaration that it owes neither a duty to defend nor a
duty to indemnity Maryknoll in the underlying lawsuits filed in
Hawaii state court.

On September 16, 2014, Arrowood amended its

complaint in the New York Lawsuit to include St. Paul as a
Defendant and to seek declaratory relief with respect to
additional underlying lawsuits tendered by Maryknoll to Arrowood
and St. Paul after the filing of the New York Lawsuit. Travelers
is not a party to the New York lawsuit.

The Federal District

Court in New York has issued a scheduling order in the New York
Lawsuit.

Maryknoll filed a motion to dismiss or stay the New

York Lawsuit.

As of the date of the hearing before this Court,

Maryknoll’s motion to dismiss or stay has not been ruled upon.
Plaintiff’s Proposed Second Amended Complaint
Plaintiff Maryknoll’s proposed Second Amended Complaint
includes four additional insurance carriers and ten additional
underlying lawsuits pending in the First Circuit Court, State of
Hawaii.

Hearing on Plaintiff’s Motion for Leave to File Second

Amended Complaint has been deferred until after the Court rules
on the pending motions - Plaintiff’s Motion to Remand and

6

Defendants’ Motion to Dismiss or Transfer, to allow a ruling on
the Court’s exercise of jurisdiction in this matter.
Notice of Removal
In their notice of removal, Defendants assert diversity
jurisdiction.

(ECF No. 2.)

It is undisputed that Defendant

Arrowood, as alleged in the FAC, is incorporated in Delaware and
his its principle place of business in Charlotte, North Carolina.
(Id.)

The Notice of Removal is also filed by St. Paul, which

describes itself as a Defendant and says that it has been sued
incorrectly as The Travelers Companies, Inc.

(Id.)

St. Paul is

a corporation organized under the laws of Connecticut with its
principal place of business in Connecticut.

St. Paul received

the initial complaint through service upon CSC, the registered
agent for service in Hawaii for the subsidiaries of The Travelers
Companies, Inc., including St. Paul.

Defendants point out that

the policy at issue in the FAC as to Travelers/St. Paul, states,
on its face, that it was issued by St. Paul Fire and Marine
Insurance Company.
Travelers, the named defendant in the FAC, is alleged to be
a Minnesota Corporation with its principle place of business in
New York.

(FAC ¶ 5.)

Plaintiff Maryknoll is a New York

corporation with its principle place of business in New York.
With Travelers named as a defendant, Plaintiff Maryknoll and

7

Defendant Travelers are citizens of the same state, such that
there is no diversity jurisdiction.
Affidavit of Peter Schwartz in Support of Removal
In support of their argument that St. Paul, and not
Travelers, is the proper party, Defendants have filed the
Affidavit of Peter Schwartz in Support of Removal. Mr. Schwartz
is the Senior Vice President, Group General Counsel Corporate
Litigation and Assistant Corporate Secretary of The Travelers
Companies, Inc. (Affidavit of Peter Schwartz, (“Schwartz Aff.”),
ECF No. 2-1.) Mr. Schwartz avers that Plaintiff’s allegation that
the St. Paul policy is “now administered by The Travelers
Corporation” is incorrect.

(Schwartz Aff. ¶¶ 5-7.) According to

Schwartz, Travelers has not and does not administer insurance
policies or claims for St. Paul or any other insurer.

(Id.) Mr.

Schwartz further explains that Travelers is not an insurer, does
not issue policies of insurance and is not authorized to issue
policies of insurance in Hawaii or in any other state. (Id.)
Defendants argue that Travelers is not an indispensable party and
that inclusion of defendant should be disregarded for diversity
purposes on the grounds of fraudulent joinder.
Defendants also state that the cost of defending the
underlying lawsuits, and thus the amount in controversy, is far
in excess of $75,000.

8

Plaintiff’s Motion to Remand
Plaintiff Maryknoll moves to remand this case to state court
on the grounds that: (1) pursuant to the Federal Declaratory
Judgment Act, the exercise of federal jurisdiction over this
action is purely discretionary; (2) this action presents solely
issues of state law; and (3) the Defendants appear to be forum
shopping because they removed this case from state court to
Federal Court for the District of Hawaii and have now moved to
transfer it to the United States District Court for the Southern
District of New York.
As to Defendants’ assertion that Travelers has been
fraudulently joined, Plaintiff Maryknoll simply notes in a
footnote that “[w]hether St. Paul and/or Travelers is a proper
defendant in this action remains unresolved.”

(ECF No. 7-1,

Motion to Remand at p. 4-5, n.1.)
Defendants’ Motion to Dismiss
Defendants move to dismiss the case or, in the alternative,
to transfer it to the Southern District of New York.
motion is based on the first-filed rule.

Defendants’

See Pacesetter Systems,

Inc. v. Medtronic, Inc., 678 F.2d 93, 94-95 (9th Cir. 1982)
(“There is a generally recognized doctrine of federal comity
which permits a district court to decline jurisdiction over an
action when a complaint involving the same parties and issues has
already been filed in another district. Normally sound judicial

9

administration would indicate that when two identical actions are
filed in courts of concurrent jurisdiction, the court which first
acquired jurisdiction should try the lawsuit and no purpose would
be served by proceeding with a second action. However, this
‘first to file’ rule is not a rigid or inflexible rule to be
mechanically applied, but rather is to be applied with a view to
the dictates of sound judicial administration.”) (citations
omitted).

Defendants argue that the Court should dismiss or

transfer the case because Defendant Arrowood filed their New York
Lawsuit two months prior to the declaratory judgment lawsuit
filed by Plaintiff in Hawaii state court now removed by
Defendants to this Court.

STANDARD OF REVIEW
Motion to Remand
A motion to remand may be brought to challenge the removal
of an action from state to federal court.

28 U.S.C. § 1447(c);

Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1244 (9th
Cir. 2009).

Removal of a civil action is permissible if the

district courts of the United States have original jurisdiction
over the action.

28 U.S.C. § 1441.

There is a “strong

presumption” against removal, and “[f]ederal jurisdiction must be
rejected if there is any doubt as to the right of removal in the
first instance.”

Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th

10

Cir. 1992) (internal citations omitted).

The “strong

presumption” against removal jurisdiction “means that the
defendant always has the burden of establishing that removal is
proper.”

Id.

Subject matter jurisdiction is conferred on federal courts
either through federal question jurisdiction under 28 U.S.C. §
1331, or through diversity jurisdiction under 28 U.S.C. § 1332.
Peralta v. Hispanic Bus., Inc., 419 F.3d 1064, 1068 (9th Cir.
2005).
Diversity jurisdiction exists when there is complete
diversity of citizenship between the parties, and the amount in
controversy exceeds $75,000.

28 U.S.C. § 1332(a); Caterpillar

Inc. v. Lewis, 519 U.S. 61, 68 (1996).

The burden of

establishing that diversity jurisdiction exists rests on the
party asserting it.

Hertz Corp. v. Friend, 559 U.S. 77, 96-97

(2010).
The Declaratory Judgment Act
Under the Declaratory Judgment Act, United States courts
“may declare the rights and other legal relations of any
interested party seeking such declaration.” 28 U.S.C. § 2201(a).
A lawsuit seeking federal declaratory relief must first present
an actual case or controversy within the meaning of Article III,
section 2 of the United States Constitution. Gov't Employees Ins.
Co. v. Dizol, 133 F.3d 1220, 1222–23 (9th Cir. 1998).

11

Jurisdiction under the Declaratory Judgment Act is discretionary
even where there is diversity of citizenship. See Dizol, 133 F.3d
at 1222–23.
The lawsuit must also fulfill statutory jurisdictional
prerequisites. Id.

If the suit passes constitutional and

statutory muster, the district court must also be satisfied that
entertaining the action is appropriate. Id.

A district court has

the “unique and substantial discretion to decide whether to issue
a declaratory judgment,” Wilton v. Seven Falls Co., 515 U.S. 277,
286 (1995), but is “under no compulsion to exercise that
jurisdiction.” Brillhart v. Excess Ins. Co. of America, 316 U.S.
491, 494 (1942).

In Dizol, the Ninth Circuit Court of Appeals

held that the Brillhart factors outlined by the Supreme Court
“remain the philosophic touchstone” in analyzing whether to
entertain a declaratory action, and the district court should:
(1) avoid needless determination of state law issues; (2)
discourage litigants from filing declaratory actions in an
attempt to forum shop; and (3) avoid duplicative litigation.
Dizol, 133 F.3d at 1225 (citing Continental Cas. Co. v. Robsac
Industries, 947 F.2d 1367, 1371–73 (9th Cir. 1991)). In this
analysis a court must proceed cautiously, balancing concerns of
judicial administration, comity, and fairness to the litigants.
Chamberlain v. Allstate Ins. Co., 931 F.2d 1361, 1367 (9th Cir.

12

1991) (overruled in part on other grounds by Wilton, 515 U.S. at
289–90).
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. Dizol at 1225 (citing
Chamberlain, 931 F.2d at 1366–67). As the Supreme Court explained
in Brillhart:
Ordinarily it would be uneconomical as well as
vexatious for a federal court to proceed in a
declaratory judgment suit where another suit is pending
in a state court presenting the same issues, not
governed by federal law, between the same parties.
Gratuitous
interference
with
the
orderly
and
comprehensive disposition of a state court litigation
should be avoided.
316 U.S. 491, 495.
With the teachings of Brillhart in mind, the Ninth Circuit
Court of Appeals held that the pendency of a state court action
does not, of itself, require a district court to refuse federal
declaratory relief. Dizol, 133 F.3d at 1225. Nonetheless, the
federal courts should generally decline to entertain reactive
declaratory actions. Id.
Additionally, the Ninth Circuit Court of Appeals recognized
that the Brillhart factors are not exhaustive and suggested that
district courts also consider the following factors:

13

[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; whether the use of a
declaratory action will result in entanglement
between the federal and state court systems; the
convenience of the parties, and the availability
and relative convenience of other remedies.
Dizol, 133 F.3d at 1225 n. 5 (citation omitted).

ANALYSIS
I.

Diversity Jurisdiction
As a preliminary matter the Court considers whether there is

statutory jurisdiction.

A lawsuit seeking federal declaratory

relief “must also fulfill statutory jurisdictional
prerequisites.”

Dizol, 133 F.2d at 1222-23 (citing Skelly Oil

Co. v. Phillips Petroleum Co., 339 U.S. 667, 672 (1950)).
Defendants removed this action based on diversity
jurisdiction. 28 U.S.C. § 1332 provides that “district courts
shall have original jurisdiction of all civil actions where the
matter in controversy exceeds the sum or value of $75,000,
exclusive of interest and costs, and is between ... citizens of
different states.”
On the face of the FAC, there is no diversity jurisdiction
because both Plaintiff and Travelers are citizens of New York.
Defendants submit evidence, in the form of an affidavit by Mr.
14

Schwartz, that the proper defendant is St. Paul, a subsidiary of
Travelers, and not Travelers.

If St. Paul is substituted as a

defendant, there would be diversity jurisdiction because St. Paul
is a citizen of Connecticut. Mr. Schwartz’s Affidavit is
persuasive evidence that St. Paul should at least be joined or
added as a defendant.

The parties have not fully briefed the

issue of whether Travelers was fraudulently joined or may also
remain a proper defendant.1

If Travelers remains as a defendant,

there would not be complete diversity of citizenship as required
for the Court to exercise diversity jurisdiction.
The Court need not reach the question of whether Travelers
is fraudulently joined.

Even assuming the Court has diversity

jurisdiction, the Court has discretion to determine whether

1

“Fraudulent joinder” is a term of art. Morris v. Princess
Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001). “Joinder of
a non-diverse defendant is deemed fraudulent, and the defendant’s
presence in the lawsuit is ignored for purposes of determining
diversity, ‘[i]f the plaintiff fails to state a cause of action
against a resident defendant, and the failure is obvious
according to the settled rules of the state.’” Id. (quoting
McCabe v. General Foods Corp., 811 F.2d 1336, 1339 (9th Cir.
1987)). There is a general presumption against fraudulent
joinder, and the removing defendant carries a heavy burden to
prove fraudulent joinder by clear and convincing evidence.
Hamilton Materials, Inc. v. Dow Chemical Corp., 494 F.3d 1203,
1206 (9th Cir. 2007). Joinder is not fraudulent if there is any
possibility that the plaintiff will be able to establish
liability against the non-diverse defendant. Hunter v. Philip
Morris USA, 582 F.3d 1039, 1046 (9th Cir. 2009); Pampillonia v.
RJR Nabisco, Inc., 138 F.3d 459, 461 (2d Cir. 1998) (finding that
the defendant must show “that there is no possibility, based on
the pleadings, that plaintiff can state a cause of action against
the non-diverse defendant in state court”).
15

exercising jurisdiction is appropriate.

For the reasons set

forth below, the Brillhart and Dizol factors weigh in favor of
remanding the action to the Circuit Court for the First Circuit,
State of Hawaii.
II.

Court’s Discretion to Decline to Exercise Jurisdiction
A.

Consideration of parallel state court proceedings

The existence of parallel state court proceedings gives rise
to a presumption in favor of declining to exercise jurisdiction.
See Dizol, 133 F.3d at 1225.
1.

There are parallel state court proceedings

Defendants argue there is no parallel state court proceeding
because there is no state court proceeding for declaratory relief
regarding insurance coverage for the underlying state court
lawsuits. Plaintiff disagrees.

Plaintiff argues that the

underlying lawsuits against Maryknoll and members of the clergy
for sexual abuse are “parallel state court proceedings” because
“the ultimate legal determination in each depends upon the same
facts.”

(ECF No. 30, Reply at p. 3.)

The Court agrees with

Plaintiff.
The Ninth Circuit’s decisions in American National Fire
Insurance Co. v. Hungerford, 53 F.3d 1012, 1017 (9th Cir.1995)
and Golden Eagle Ins. Co. v. Travelers Cos., 103 F.3d 750, 755
(9th Cir. 1996) support Plaintiff’s argument.2

2

Hugerford and

These cases were overruled on other grounds by Dizol.
16

Golden Eagle Ins. Co. provided a flexible approach to whether two
actions are “parallel” such that the court should decline
jurisdiction.

In Hungerford, 53 F.3d at 1017, the court stated

that “when an ongoing state proceeding involves a state law issue
that is predicated on the same factual transaction or occurrence
involved in a matter pending before a federal court, the state
court is the more suitable forum for a petitioner to bring a
related claim.”

Similarly, the court in Golden Eagle Ins. Co.,

103 F.3d at 755 stated that “[i]t is enough that the state
proceedings arise from the same factual circumstances.”

See

Employers Reinsurance Corp. v. Karussos, 65 F.3d 796, 800 (9th
Cir. 1995) (finding state and federal actions parallel when the
actions raised overlapping, but not identical, factual issues),
overruled in part on other grounds, Dizol, 133 F.3d at 1227.
The Court finds that the underlying lawsuits are
sufficiently parallel state court proceedings.

The Defendants’

insurance coverage duties depend on a comparison of the
allegations made in the underlying state court complaints with
the insurance policies’ provisions.

If the allegations raised in

the underlying proceedings raise any possibility of coverage
under its policies, Defendants would have a duty to defend.

The

duty to indemnify also rests on factual determinations made in
the underlying state cases.

17

The existence of the parallel state court proceedings weighs
strongly in favor of the Court exercising its discretion to
decline to exercise jurisdiction.3

See Maryland Casualty Co. v.

Knight, 96 F.3d 1284, 1288 (9th Cir. 1996).
The Court next turns to consideration of the Brillhart and
Dizol factors.
B.

The Brillhart Factors Favor Remand
1.

Needless Determination of State Law Issues

The first consideration is whether remand will avoid
needless determination of state law issues. There is no federal
question presented here and no federal interest at issue.
case is governed by state law.

The

A federal district court should

avoid needless determinations of state law. Continental Cas. Co.

3

Defendants contend that if there is no parallel state court
proceeding the Brillhart factors do not apply. Even if there
were no parallel state court proceeding, the federal district
court has discretion to determine whether to exercise
jurisdiction and, contrary to Defendants’ contention, the Court
may apply the Brillhart factors in determining whether to
exercise jurisdiction. See e.g., Aetna Cas. & Sur. Co. v.
Ind-Com Elec. Co., 139 F.3d 419, 423 (4th Cir. 1998) (“There is
no requirement that a parallel proceeding be pending in state
court before a federal court should decline to exercise
jurisdiction over a declaratory judgment action. Rather, as the
district court stated, “[t]he existence or nonexistence of a
state court action is simply one consideration relevant to
whether to grant declaratory relief.” To hold otherwise would in
effect create a per se rule requiring a district court to
entertain a declaratory judgment action when no state court
proceeding is pending. Such a rule would be inconsistent with our
long-standing belief that district courts should be afforded
great latitude in determining whether to grant or deny
declaratory relief.”) (footnotes omitted).
18

v. Robsac Industries, 947 F.2d 1367, 1371 (9th. Cir.
1991)(overruled in part by Dizol on other grounds, 133 F.3d at
1227). Insurance law is “an area that Congress has expressly left
to the states through the McCarran–Ferguson Act.” Id. at 1371
(citing 15 U.S.C. § 1011–12 (1988)). Remand here will avoid the
needless determination of state insurance law issues by the
Court.
The parties also argue about which state’s law applies.
Plaintiff contends that Hawaii law applies whereas Defendants
contend that New York law applies.
The Court applies the forum’s law in resolving conflict of
law issues.

See Lemen v. Allstate Ins. Co., 938 F.Supp. 640, 643

(D. Haw. 1995) (citing Van Dusen v. Barrack, 376 U.S. 612, 628
(1964); Lettieri v. Equitable Life Assurance Society of the U.S.,
627 F.2d 930, 932 (9th Cir. 1980)).

“There is a presumption that

Hawaii law applies unless another state's law would best serve
the interests of the states and persons involved.”

Id. (citation

and quotations omitted).
The Hawaii Supreme Court discussed its choice of law
jurisprudence in Mikelson v United Serv. Auto Ass’n, 111
P.3d 601 (Haw. 2005).

This
rigid
trend
state

The Mikelson court observed the following:

court has moved away from the traditional and
conflict-of-laws rules in favor of the modern
towards a more flexible approach looking to the
with the most significant relationship to the
19

parties and subject matter. This flexible approach
places primary emphasis on deciding which state would
have the strongest interest in seeing its laws applied
to the particular case. Hence, this court has said that
the interests of the states and applicable public
policy reasons should determine whether Hawai‘i law or
another state's law should apply. The preferred
analysis ... would be an assessment of the interests
and policy factors involved with a purpose of arriving
at a desirable result in each situation.
Mikelson, 111 P.3d at 607 (citations, brackets, and quotation
marks omitted).
In Del Monte Fresh Produce (Hawaii), Inc. v. Fireman's Fund
Ins. Co., 183 P.3d 734, 742 (Haw. 2007), the Hawaii Supreme Court
applied the Mikelson court’s flexible approach and cited the
Restatement (Second) of Conflict of Laws in rejecting Defendant’s
argument that California, and not Hawaii law applied.

The

Defendants in that case made arguments similar to the Defendants
here, contending that California law should apply because (1) all
of the contracting parties to the insurance policies were located
in California, (2) the policies were negotiated in California,(3)
the insurance contract would be performed by the insurer in
California in the event that policy benefits were provided, (4)
the insured tendered claims to the insurer in California, and (5)
California was the principal place of business for all
contracting parties.

In rejecting Defendants’ argument, the Del

Monte court cited the Restatement (Second) Conflict of Laws § 193
for the proposition that the rights created by an insurance

20

contract “are determined by the local law of the state which the
parties understood was to be the principal location of the
insured risk during the term of the policy, unless with respect
to the particular issue, some other state has a more significant
relationship....” Id. at 742 n. 12 (quoting Restatement (Second)
of Conflict of Laws § 193 (emphasis added)).
Here, Hawaii has a stronger interest in seeing its insurance
laws applied than does New York in seeing New York law applied.
All of the underlying lawsuits arose out of actions which took
place in Hawaii.

The underlying lawsuits were filed in Hawaii.

The fact witnesses in the underlying lawsuits are located in
Hawaii.

These same witnesses have information pertinent to the

insurers’ duty to indemnity Plaintiff Maryknoll for any liability
incurred in the underlying actions. Hawaii is the state which the
parties understood to be the principal location of the insured
risk during the term of the policies.
more significant interest.

New York does not have a

The fact that the insurance policies

were issued in New York and Plaintiff Maryknoll’s principle place
of business is in New York is relatively insignificant.

See Del

Monte Fresh Produce (Hawaii), Inc., 183 P.3d at 742 n.12 (citing
P.W. Stephens Contractors v. Mid American Indemnity Insur. Co.,
805 F.Supp. 854, 856 (D. Haw. 1992)(“The place of contracting is
relatively insignificant when there is no other significant
relationship between the transaction and that place.”)).

21

It is highly likely that the Hawaii state court, under the
flexible approach described in Mikelson, would apply Hawaii law.
The Court, however, need not decide which state law applies.

For

the first Brillhart factor to weigh in favor of the Court
declining to exercise jurisdiction, it is sufficient that the
matter implicates state, and not federal, law.
2.

Discouraging Forum Shopping

The second consideration is whether declining to exercise
jurisdiction will discourage litigants from filing declaratory
actions in an attempt to forum shop.

Defendants are seeking to

transfer this case to the Southern District of New York.
According to Plaintiff, Defendant Arrowood abruptly filed the New
York Lawsuit in the midst of the parties’ discussions regarding
insurance coverage issues.

On May 27, 2014, Defendant Arrowood’s

counsel sent Plaintiff’s counsel a letter regarding insurance
coverage for the underlying lawsuits.

(ECF No. 23-2, Plaintiff’s

Opposition to Motion to Dismiss or Transfer at Exh. A.)

The May

27, 2014 letter indicated that policy investigation was underway.
(Id.)

Plaintiff’s counsel responded with a letter, dated June 2,

2014, stating that if Arrowood failed to defend Plaintiff would
have “no alternative but to pursue a declaratory judgment action
against Arrowood.”

(Id. at Exh. B.)

The facts indicate that the

New York Lawsuit is the type of reactive declaratory judgement
action strongly discouraged by the Ninth Circuit appellate court.

22

See Maryland Cas. Co. v. Knight, 96 F.3d 1284, 1289 (9th Cir.
1996) (“We have similarly indicated that a district court should
exercise its discretion to decline jurisdiction when the federal
action has simply been filed in anticipation of an impending
state court suit”) (citation omitted).
Although all of the underlying lawsuits are pending in
Hawaii state court, Defendants are actively seeking to resolve
the insurance coverage issues in federal court in New York.
Plaintiff suggests that Defendants have a motive to forum shop
because Hawaii law is favorable to the insured.

See Sentinel

Ins. Co., Ltd. v. First Ins. Co. of Hawaii, Ltd., 875 P.2d 894,
904 (Haw. 1994) (under Hawaii law, the duty to defend is broad,
resting primarily on the possibility that coverage exists).

This

factor weighs in favor of declining to exercise jurisdiction.
3.

Avoiding Duplicative Litigation

The third consideration is whether declining to exercise
jurisdiction will avoid duplicative litigation.

As discussed

above, the factual issues in the underlying state lawsuits
parallel the factual issues which must be resolved to determine
the insurance coverage issues.

Plaintiff originally filed this

action in Hawaii state court seeking declaratory relief from the
same state court entertaining the underlying lawsuits.

Because

declaratory relief can be granted by the state court and this
case raises many of the same issues before the court in the

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underlying lawsuits, this factor weighs in favor of declining to
exercise jurisdiction.
C.

Additional Dizol Factors Favor Remand

In determining whether to exercise jurisdiction, district
courts may also consider other factors identified by the Ninth
Circuit appellate court in Dizol: 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; whether the use of a declaratory
action will result in entanglement between the federal and state
court systems; the convenience of the parties, and the
availability and relative convenience of other remedies.
The additional factors identified by the Ninth Circuit
appellate court in Dizol also favor remand.

In this case, if the

Court were to retain jurisdiction it would not “settle all
aspects of the controversy”.

The underlying lawsuits are still

being litigated in state court and the resolution of issues in
those cases have bearing on the coverage issues in the
declaratory judgment action.

A declaratory action will serve a

useful purpose in clarifying the legal relations at issue, but
the declaratory judgment action need not be maintained in this
Court.

As discussed above, the state court is in a better

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position to resolve the issues raised in the declaratory judgment
action.

The consideration of whether the declaratory action is

being sought merely for the purposes of procedural fencing or to
obtain a ‘res judicata’ advantage also weighs in favor of
declining to exercise jurisdiction.

Issues of ‘res judicata' may

arise if the Court were to reach certain legal or factual issues
before the Hawaii state court reaches those issues in the
underlying lawsuits.

Maintaining the declaratory action in this

Court could result in entanglement between the federal and state
court systems.

This factor weighs in favor of remand.

If the

underlying lawsuits proceed in state court and the declaratory
judgment action proceeds in this Court, it creates an obvious
entanglement between the federal and state court systems.
final two considerations –

The

the convenience of the parties, and

the availability and relative convenience of other remedies –
also weigh in favor of remand.

The circumstances giving rise to

the underlying state cases occurred in Hawaii.

A remedy for the

Court’s decision to decline to exercise jurisdiction is readily
available in the form of remand to the Hawaii state court.
The additional factors identified by the Dizol court for
consideration weigh in favor of the Court exercising its
discretion to decline to exercise jurisdiction.

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CONCLUSION

The Court exercises its discretion to decline to exercise
jurisdiction.

Plaintiff’s MOTION FOR REMAND (ECF No. 7) is

GRANTED.
Because the Court grants Plaintiff’s Motion for Remand,
Defendants’ Motion to Dismiss or Transfer is moot. Defendants’
MOTION TO DISMISS OR TRANSFER (ECF No. 13) is DENIED AS MOOT.
Defendants’ request for additional time to file an Answer to
Plaintiff Maryknoll’s Amended Complaint is DENIED AS MOOT.
The case and all files herein are REMANDED to the Circuit
Court of the First Circuit, State of Hawaii for further
proceedings.
IT IS SO ORDERED.
DATED:

Honolulu, Hawaii, December 29, 2014.

_________________________________________________________________
Catholic Foreign Mission Society of American, Inc., aka Maryknoll
Fathers and Brothers v. Arrowood Indemnity Company, et al.; Civ.
No. 14-00420; ORDER GRANTING PLAINTIFF’S MOTION FOR REMAND(ECF
No. 7) AND DENYING DEFENDANTS’ MOTION TO DISMISS OR TRANSFER
(ECF. No. 13)

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