Bituminous Casualty Corporation et al v. Kerr Contractors, Inc. et al

Filing 38

OPINION AND ORDER: Defendant City of Portland's Motion to Dismiss, Abstain, or in the Alternative, to Stay Proceedings 16 is GRANTED and this case is DISMISSED without prejudice. Defendant Kerr's Motion to Limit Discovery in Plaintiffs' Claims One and Three(Duty to Defend) and Stay Plaintiffs' Remaining Claims(Duty to Indemnify) 13 is DENIED AS MOOT. Signed on 6/22/10 by Judge Michael W. Mosman. (cib)

UNITED STATES DISTRICT C O U R T DISTRICT O F OREGON P O R T L A N D DIVISION

B I T U M I N O U S CASUALTY CORPORATION a n d EVEREST N A T I O N A L INSURANCE COMPANY,
N o . C V 10-78-MO Plaintiffs, OPINION A N D O R D E R

v.
K E R R C O N T R A C T O R S , INC., a n d T H E CITY O F PORTLAND,
Defendants.

MOSMAN,J.,
Plaintiffs B i t u m i n o u s Casualt)' C o r p o r a t i o n ("BCC") a n d E v e r e s t N a t i o n a l I n s u r a n c e C o m p a n y are t w o insurance c o m p a n i e s t h a t i s s u e d insurance p o l i c i e s t o defendant K e r r Contractors, Inc. The other defendant i n this case, the Cit)' o f Portland, sued Kerr i n state court f o r t h i r t e e n m i l l i o n d o l l a r s w o r t h o f d a m a g e s the C i t y a l l e g e s w e r e c a u s e d b y K e r r ' s n e g l i g e n c e and breach o f contract during sewer pipe installation. (See V a n Dyke Decl. (#33) Ex. A.) Over a y e a r a f t e r t h e s t a t e l a w s u i t w a s filed, B C C a n d E v e r e s t f i l e d t h i s f e d e r a l l a w s u i t a g a i n s t t h e C i t ) '
.
.

o f P o r t l a n d a n d Kerr, i n w h i c h t h e y seek a d e c l a r a t i o n t h a t t h e y h a v e n o d u t y t o d e f e n d o r i n d e m n i f y K e r r i n t h e u n d e r l y i n g s t a t e a c t i o n . T h e s o l e b a s i s f o r f e d e r a l c o u r t j u r i s d i c t i o n is diversity o f citizenship. See 18 U.S.C. § 1332. T h e City o f Portland n o w moves this Court t o

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exercise its discretion to dismiss, abstain, or stay these federal proceedings. (Def. City o f P o r t l a n d ' s M o t . t o D i s m i s s , A b s t a i n , o r i n t h e A l t e r n a t i v e , to S t a y P r o c e e d i n g s ( # 1 6 ) . ) K e r r j o i n e d t h e City's m o t i o n ( K e r r ' s R e s p . to Def. City's M o t . ( # 2 3 » , a n d a l s o m o v e d s e p a r a t e l y f o r a n o r d e r l i m i t i n g d i s c o v e r y o n plaintiffs' d u t y t o d e f e n d c l a i m s a n d staying plaintiffs' d u t y t o indemnify claims (Kerr's Mot. (#13).) Because i t is unlikely that this lawsuit c a n b e resolved w i t h o u t creating e n t a n g l e m e n t b e t w e e n t h e s t a t e a n d federal c o u r t systems, I G R A N T t h e C i t y o f P o r t l a n d ' s m o t i o n and D I S M I S S t h i s a c t i o n w i t h o u t p r e j u d i c e .

DISCUSSION
The Declaratory Judgments A c t states: " I n a case o f actual controversy within its j u r i s d i c t i o n . . . any c o u r t o f t h e U n i t e d S t a t e s . . . m a y declare t h e rights a n d o t h e r l e g a l r e l a t i o n s o f any interested party seeking s u c h declaration." 28 U.S.C. § 2201(a) (emphasis added). The A c t r e q u i r e s federal d i s t r i c t c o u r t s t o c o n s i d e r t w o t h r e s h o l d q u e s t i o n s . F i r s t , i s t h e r e a n a c t u a l c a s e o r controversy u n d e r A r t i c l e i l l , a n d second, s h o u l d t h e c o u r t c h o o s e t o e x e r c i s e t h a t j u r i s d i c t i o n ?

See Am. States Ins. Co. v. Kearns, 15 F.3d 142, 143-44 (9th Cir. 1994). The requirements for
diversity jurisdiction are satisfied i n this case (see CompI. (#1) ~~ 1-4; see also 18 U.S.C. § 1332), a n d there i s a n actual case o r controversy b e t w e e n t h e parties. See M d Cas. Co. v. Pac.

Coal & Oil Co., 312 U.S. 2 7 0 , 2 7 1 - 7 4 (1941) (holding t h a t "there [was] a substantial
controversy, b e t w e e n p a r t i e s h a v i n g a d v e r s e l e g a l interests, o f s u f f i c i e n t i m m e d i a c y a n d r e a l i t y t o w a r r a n t t h e i s s u a n c e o f a d e c l a r a t o r y j u d g m e n t I I w h e n a n i n s u r e r s u e d for a d e c l a r a t i o n r e g a r d i n g i t s d u t y to d e f e n d a n d i n d e m n i f y b e f o r e t h e u n d e r l y i n g s t a t e a c t i o n h a d p r o c e e d e d to j u d g m e n t ) . T h e r e f o r e , t h e c r i t i c a l q u e s t i o n for p u r p o s e s o f d e c i d i n g t h e C i t y ' s m o t i o n i s w h e t h e r t h i s C o u r t s h o u l d c h o o s e t o e x e r c i s e d i s c r e t i o n a r y j u r i s d i c t i o n o v e r p l a i n t i f f s ' d e c l a r a t o r y r e l i e f action.

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"[T]here is n o p e r se rule against the district court exercising i t s jurisdiction t o resolve an i n s u r a n c e c o v e r a g e d i s p u t e w h e n t h e u n d e r l y i n g l i a b i l i t y s u i t is p e n d i n g i n s t a t e c o u r t . " K e a r n s , 15 F.3d at 145. Instead, my discretion under the Declaratory Judgments A c t is guided b y

Brillhartv. Excess Insurance Co., 316 U.S. 491 (1942), w h i c h requires district courts t o consider
whether exercising jurisdiction would require "needless determination o f state law issues,lI e n c o u r a g e f o r u m s h o p p i n g , o r l e a d to d u p l i c a t i v e l i t i g a t i o n i n s t a t e a n d f e d e r a l c o u r t . G o v ' t

Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 ( 9 t h Cir. 1998) (en bane). The Brillhart factors
lead d i s t r i c t c o u r t s t o " a s c e r t a i n w h e t h e r t h e q u e s t i o n s i n c o n t r o v e r s y b e t w e e n t h e p a r t i e s . . . c a n b e b e t t e r s e t t l e d i n t h e p r o c e e d i n g p e n d i n g i n t h e state court." 3 1 6 U . S . at 4 9 5 . " I f t h e r e a r e p a r a l l e l state p r o c e e d i n g s i n v o l v i n g t h e s a m e issues a n d p a r t i e s p e n d i n g a t t h e t i m e t h e federal d e c l a r a t o r y a c t i o n i s f i l e d , t h e r e is a p r e s u m p t i o n t h a t t h e e n t i r e s u i t s h o u l d b e h e a r d i n s t a t e court." Dizol, 133 F.3d at 1225 (citing Chamberlain v. Allstate Ins. Co., 931 F.2d 1361, 1366-67

(9th Cir. 1991)). I n addition to t h e established Brillhart factors, t h e district court m u s t "balance
concerns o f judicial administration, comity, and fairness to the litigants. 1t Chamberlain, 931 F.3d a t 1367. A f t e r c o n s i d e r i n g t h e B r i l l h a r t factors, N i n t h C i r c u i t p r e c e d e n t , a n d p r i n c i p l e s o f e f f i c i e n c y , fairness, a n d c o m i t y , I a b s t a i n from e x e r c i s i n g d i s c r e t i o n a r y j u r i s d i c t i o n o v e r t h i s d e c l a r a t o r y j u d g m e n t a c t i o n . I n r e a c h i n g t h i s d e c i s i o n , I f i n d t h e f i r s t B r i l l h a r t factor, n e e d l e s s d e t e r m i n a t i o n o f state law, w e i g h s a g a i n s t e x e r c i s i n g j u r i s d i c t i o n o v e r p l a i n t i f f s ' d u t y t o d e f e n d claims. A s to t h e second Brillhart factor, forum shopping, I find there are facts favorable t o both s i d e s a n d t h i s f a c t o r i s n e u t r a l . W i t h r e s p e c t t o t h e t h i r d B r i l l h a r t factor, d u p l i c a t i v e l i t i g a t i o n , I fmd t h e r i s k o f i n c o n s i s t e n t factual d e t e r m i n a t i o n s w e i g h s a g a i n s t e x e r c i s i n g j u r i s d i c t i o n o n t h e

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more fact-intensive duty to indemnify claims. A n d to the extent plaintiffs seek to admit evidence b e y o n d t h e c o m p l a i n t a n d i n s u r a n c e p o l i c y to n e g a t e t h e i r d u t y t o d e f e n d , t h e d u t y t o d e f e n d c l a i m s w o u l d also r a i s e c o n c e r n s a b o u t d u p l i c a t i v e l i t i g a t i o n . O t h e r c o n s i d e r a t i o n s i d e n t i f i e d b y

Chamberlain and D i z o l , p a r t i c u l a r l y c o n s i d e r a t i o n s o f c o m i t y a n d t h e i n t e r e s t i n a v o i d i n g
e n t a n g l e m e n t b e t w e e n s t a t e a n d federal c o u r t p r o c e e d i n g s , w e i g h i n f a v o r o f d e c l i n i n g t o e x e r c i s e j u r i s d i c t i o n o v e r b o t h t h e d u t y to d e f e n d a n d d u t y to i n d e m n i f y c l a i m s . T h e r e f o r e , o n b a l a n c e , t h e

B r i l l h a r t , Chamberlain, a n d D i z o l factors w e i g h i n f a v o r o f a b s t e n t i o n .

I.

Needless Determinations o f State Law·
T h e f i r s t B r i l l h a r t f a c t o r c o n s i d e r s w h e t h e r t h e federal a c t i o n w o u l d i n v o l v e n e e d l e s s

d e t e r m i n a t i o n s o f s t a t e l a w . A l t h o u g h i n s u r a n c e c o v e r a g e c a s e s o f t e n apply w e l l - e s t a b l i s h e d O r e g o n law, t h e n a t u r e o f plaintiffs' d u t y t o d e f e n d c l a i m s , t h e i r r e s p o n s e s t o K e r r ' s m o t i o n a n d t h e C i t y ' s m o t i o n , a n d t h e i r d e l a y i n f i l i n g t h i s l a w s u i t t o r e s o l v e t h e i r d e f e n s e o b l i g a t i o n s all s u g g e s t t h a t p l a i n t i f f s w i l l s e e k to n e g a t e t h e i r d u t y t o d e f e n d b y i n t r o d u c i n g e v i d e n c e f r o m t h e u n d e r l y i n g l i a b i l i t y action. U n d e r O r e g o n law, a c o u r t g e n e r a l l y r e s o l v e s t h e i s s u e o f a n i n s u r e d ' s duty t o d e f e n d b y analyzing o n l y t w o documents: t h e insurance p o l i c y a n d t h e operative complaint i n the underlying liability action. A b r a m s v. Gen. Star Indem. Co., 67 P 3 d 931, 933 (Or. 2003). For this reason, duty to defend claims generally do n o t raise the same Brillhart concerns a s duty to indemnify claims. See Allstate Ins. Co. v. Hall, No. 06-CV-653-BR, 2006 WL 2519608, at *5 (D. Or. Aug. 29, 2006) (deciding t o retain jurisdiction over a declaratory j u d g m e n t action in w h i c h f1the Court only would b e required to r e v i e w the underlying state l a w c o m p l a i n t as w e l l as t h e a p p l i c a b l e i n s u r a n c e p o l i c i e s . . . t o d e t e r m i n e w h e t h e r p l a i n t i f f h a s a duty to defend. ") B u t plaintiffs argue, i n the context o f opposing Kerr's m o t i o n t o limit discovery

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on the duty t o defend claims, that Oregon l a w allows courts to consider evidence beyond t h e c o m p l a i n t and i n s u r a n c e p o l i c y w h e n " l a c k o f c o v e r a g e h a s b e e n e s t a b l i s h e d i n a separate j u d i c i a l p r o c e e d i n g " - i n c l u d i n g the urtderlying state litigation. (pIs.' Resp. to Kerr's Mot. (#24) 11 n.7 (citing Oregon Ins. Guar. A s s ' n v. Thompson, 7 6 0 P . 2 d 890, 893 (1988)).) From this line o f c a s e s , p l a i n t i f f s s u g g e s t t h a t O r e g o n l a w p r o h i b i t s a n i n s u r e r f r o m e s t a b l i s h i n g facts o u t s i d e o f t h e complaint only w h e n those facts are raised for the fIrst time i n the coverage actions. (See PIs.' Resp. to Kerrts Mot. (#24) 10-11.) And i n their response to t h e City's motion, plaintiffs a c k n o w l e d g e t h a t t h e i s s u e s r e l e v a n t t o t h e d u t y t o d e f e n d c l a i m s , specifIcally w h a t K e r r k n e w about the alleged problems w i t h the pipeline and w h a t rtoccurrences," i f any,
c~used

"property

damage," will involve evidence beyond the complaint and insurance policy. (See Resp. to City's M o t . (#25) 9-10.) R e g a r d l e s s o f w h e t h e r plaintiffs' i n t e r p r e t a t i o n o f O r e g o n l a w i s a c o r r e c t one, t h e i r d u t y t o d e f e n d c l a i m s w o u l d require t h i s C o u r t t o decide w h e t h e r e v i d e n c e e s t a b l i s h e d i n t h e underlying liability p r o c e e d i n g m a y b e c o n s i d e r e d b y a c o u r t w h e n i t r e s o l v e s a n insured's d u t y t o d e f e n d - a q u e s t i o n t h a t r e m a i n s u n a n s w e r e d b y O r e g o n state c o u r t s . P l a i n t i f f s ' a r g u m e n t r e l i e s p r i m a r i l y o n a n O r e g o n S u p r e m e C o u r t c a s e t h a t r e s o l v e d a n i n s u r e d ' s d u t y to d e f e n d b y c o n s i d e r i n g " c o m p e l l i n g e v i d e n c e o f n o c o v e r a g e " b a s e d o n f a c t u a l fIndings t h a t w e r e e s t a b l i s h e d i n a "separate j u d i c i a l p r o c e e d i n g " a n d w e r e " b i n d i n g u p o n t h e p l a i n t i f f i n any subsequent action against his insurer." See Casey v. Nw. Sec. Ins. Co., 491 P . 2 d 208, 210 (Or.

1971); N Pac. Ins. Co. v. Wilson's Distrib. Servo Inc., 908 P . 2 d 8 2 7 , 8 3 1 (Or. Ct. App. 1995).
H o w e v e r , t h i s is s t i l l a n i l l - d e f i n e d a r e a o f t h e l a w i n w h i c h i t i s u n c l e a r h o w O r e g o n c o u r t s d e f m e "separate j u d i c i a l p r o c e e d i n g t l a n d " c o m p e l l i n g e v i d e n c e o f n o coverage." F o r e x a m p l e , a

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subsequent O r e g o n C o u r t o f A p p e a l s case defines "separate j u d i c i a l proceeding" i n a m a n n e r t h a t excludes t h e underlying state c o u r t liability proceeding. See N. Pac. Ins. Co. v. Wilson's Distrib.

Serv., Inc., 908 P . 2 d 8 2 7 , 8 3 2 (Or. Ct. App. 1995) ( " [ N ] o n e o f t h e authorities r e l i e d u p o n b y
p l a i n t i f f . . . s u p p o r t s i t s c o n t e n t i o n t h a t i t m a y e s t a b l i s h facts i n t h i s d e c l a r a t o r y j u d g m e n t proceeding t h a t h a v e n o t b e e n uncontrovertibly e s t a b l i s h e d i n a separate p r o c e e d i n g , c o m m e n c e d b e f o r e t h e u n d e r l y i n g a c t i o n is c o n c l u d e d , t h a t w o u l d d e m o n s t r a t e t h a t i t h a s n o d u t y t o d e f e n d . .

. . ") North Pacific's interpretation is n o t inconsistent w i t h Casey o r Thompson, w h i c h e a c h
involved t h r e e proceedings: a declaratory j u d g m e n t proceeding, a n underlying civil liability proceeding, a n d a concluded c r i m i n a l p r o c e e d i n g - t h e "separate proceeding" i n w h i c h a j u r y d e t e r m i n a t i o n o f t h e i n s u r e d ' s guilt c o n c l u s i v e l y d e t e r m i n e d t h a t t h e i n s u r e r h a d n o d u t y t o defend i n t h e underlying civil proceeding. See Casey, 491 P . 2 d a t 210-11; Thompson, 760 P . 2 d at 893. I e x p r e s s n o o p i n i o n o n h o w t h i s q u e s t i o n s h o u l d u l t i m a t e l y b e r e s o l v e d ; r a t h e r , I a d d r e s s i t o n l y t o e x p l a i n t h a t plaintiffs' d u t y t o d e f e n d c l a i m s a p p e a r likely t o raise a n o v e l a n d i m p o r t a n t state l a w q u e s t i o n u p o n w h i c h t h e r e i s substantial g r o u n d f o r difference o f opinion.

II.

F o r u m Shoppin&
W i t h r e s p e c t t o t h e s e c o n d B r i l l h a r t factor, w h i c h i s a i m e d a t d i s c o u r a g i n g f o r u m

s h o p p i n g , t h e r e is n o e v i d e n c e t h a t p l a i n t i f f s filed t h i s l a w s u i t a f t e r l e a r n i n g t h a t K e r r i n t e n d e d to file, o r h a d a l r e a d y filed, a d e c l a r a t o r y a c t i o n o f i t s o w n i n s t a t e court. H o w e v e r , e v e n w h e n t h e r e w a s n o i n s u r a n c e c o v e r a g e d e c l a r a t o r y a c t i o n p e n d i n g i n s t a t e court, t h e N i n t h C i r c u i t w e i g h e d t h i s factor i n f a v o r o f t h e i n s u r e d b e c a u s e t h e p l a i n t i f f - i n s u r e r c h o s e to file a d e c l a r a t o r y j u d g m e n t a c t i o n i n federal c o u r t i n s t e a d o f filing t h e a c t i o n i n s t a t e court, w h e r e i t w o u l d b e h a n d l e d alongside t h e underlying litigation. See Am. Nat. Fire Ins. Co. v. Hungerford, 53 F . 3 d

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1012, 1018 (9th Cir. 1995), overruled on other grounds by Dizol, 133 F . 3 d 1220; see also

Federated Servs. Ins. Co. v. Les Schwab Warehouse Ctr., Inc., N o . Civ. 03-1268-HU, 2004 W L
1088298, a t *5 (D. Or. Apr. 1 4 , 2 0 0 4 ) . T h e r e i s n o q u e s t i o n t h a t plaintiffs issued insurance p o l i c i e s t o Kerr, a n O r e g o n c o r p o r a t i o n ( C o m p l . ( # 1 ) ~ ~ 3 , 1 6 , 19), a n d a r e a m e n a b l e t o s u i t i n O r e g o n s t a t e c o u r t s . Declaratory r e l i e f i s available u n d e r O r e g o n law. See State Farm Fire & Cas. Co. v. Reuter, 657 P . 2 d 1231, 1235 (Or. 1983) (noting that, u n d e r O r e g o n law, tI[i]t i s p r o p e r f o r insurance companies t o j o i n all potential t h i r d p a r t y claimants i n a declaratory j u d g m e n t action. tI). State c o u r t i s a m o r e appropriate forum f o r t h i s litigation b e c a u s e t h a t c o u r t i s m u c h m o r e familiar w i t h t h e facts a n d c l a i m s a t i s s u e i n t h e u n d e r l y i n g l i a b i l i t y d i s p u t e , w h i c h h a s b e e n p e n d i n g s i n c e O c t o b e r 2008, a n d t h e s t a t e c o u r t i s i n a b e t t e r p o s i t i o n to c o o r d i n a t e t h e d e m a n d s o f t h i s insurance coverage litigation w i t h t h e d e m a n d s o f t h e pending liability trial. See Brillhart, 316 U.S. a t 4 9 5 ( r e q u i r i n g c o u r t s t o c o n s i d e r w h e t h e r t h e c o n t r o v e r s y " c a n b e t t e r b e s e t t l e d i n t h e p r o c e e d i n g p e n d i n g i n s t a t e court," i n c l u d i n g " w h e t h e r t h e c l a i m s o f a l l p a r t i e s i n i n t e r e s t c a n s a t i s f a c t o r i l y b e a d j u d i c a t e d i n t h a t p r o c e e d i n g , w h e t h e r n e c e s s a r y p a r t i e s h a v e b e e n j o i n e d , [and] w h e t h e r s u c h parties are amenable to process. fl) Therefore, because there is n o evidence o f tlreactive" f o r u m shopping, b u t there are still u n a n s w e r e d q u e s t i o n s as t o w h y p l a i n t i f f s n o w s e e k to r e s o l v e t h e s e i n s u r a n c e c o v e r a g e i s s u e s i n f e d e r a l c o u r t i n s t e a d o f a l o n g s i d e t h e u n d e r l y i n g s t a t e l i a b i l i t y action, I c o n c l u d e t h a t t h i s f a c t o r is neutral.

m.

Duplicative L i t i e a t i o n
T h e t h i r d Brillhart factor considers w h e t h e r t h e federal case w o u l d create duplicative

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litigation. The quintessential Brillhart abstention case is one i n which a n insurer brings a federal declaratory a c t i o n t o r e s o l v e an i n s u r a n c e c o v e r a g e dispute while " a s t a t e c o u r t a c t i o n i n v o l v i n g the same p~es a n d the same issue o f coverage [is] already pending." See A e t n a Cas. & Sur. Co.

v. Merritt, 974 F.2d 1196, 1199 (9th Cir. 1992). When there is n o pending coverage litigation in
state c o u r t , n e i t h e r B r i l l h a r t n o r i t s p r o g e n y c a t e g o r i c a l l y forbid a n i n s u r e r " f r o m i n v o k i n g d i v e r s i t y j u r i s d i c t i o n to b r i n g a d e c l a r a t o r y j u d g m e n t a c t i o n a g a i n s t a n i n s u r e d o n a n i s s u e o f coverage." I d N e v e r t h e l e s s , t h e N i n t h C i r c u i t h a s d e f i n e d "parallel litigation" l i b e r a l l y a n d c o u n s e l e d its d i s t r i c t courts t o d e c l i n e j u r i s d i c t i o n " w h e n a n o n g o i n g s t a t e p r o c e e d i n g i n v o l v e s a s t a t e l a w i s s u e t h a t i s p r e d i c a t e d o n t h e s a m e factual t r a n s a c t i o n o r o c c u r r e n c e i n v o l v e d i n a matter pending before a federal court." Hungerford, 53 F.3d a t 1017; see also Employers

Reinsurance Corp. v. Karussos, 65 F.3d 7 9 6 , 8 0 1 (9th Cir. 1995), overruled on other grounds b y Dizol, 133 F . 3 d 1220 ("[C]oncerns o f 'practicality' a n d 'wise j u d i c i a l administration' generally
counsel against the exercise o f federal-court j u r i s d i c t i o n over claims for declaratory r e l i e f that i n v o l v e o n l y state l a w q u e s t i o n s a n d a r e b r o u g h t d u r i n g t h e p e n d e n c y o f a r e l a t e d state c o u r t proceeding. "). P l a i n t i f f s ' c l a i m s , p a r t i c u l a r l y t h e d u t y t o i n d e m n i f y c l a i m s , are l i k e l y t o r e q u i r e t h e C o u r t to interpret state l a w in light o f facts that are yet to b e determined in the underlying state action. Questions involving the duty to indemnify generally raise more concern i n t h i s area t h a n do questions involving the duty to defend. See Am. States Ins. Co. v. Dastar Corp., 318 F . 3 d 881, 8 9 0 ( 9 t h Cir. 2 0 0 3 ) ( n o t i n g t h a t , u n d e r O r e g o n l a w , " ' [ t ] h e d u t y t o i n d e m n i f y i s i n d e p e n d e n t o f t h e d u t y to d e f e n d , I I I a n d , " u n l i k e l i a b i l i t y u n d e r t h e d u t y to d e f e n d , [ l i a b i l i t y f o r i n d e m n i t y ] derives from factual determinations separate from the allegations i n the complaint. ") (quoting

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Ledford v. Gutoski, 877 P.2d 80, 84 (Or. 1994)). I agree w i t h the general principle t h a t a duty to
d e f e n d c l a i m is l e s s l i k e l y t o c r e a t e d u p l i c a t i v e l i t i g a t i o n , a n d , f o r t h i s r e a s o n , I c o n s i d e r p r i m a r i l y w h e t h e r t h e d u t y t o i n d e m n i f y c l a i m s w o u l d c r e a t e d u p l i c a t i v e litigation. A s t h e a n a l y s i s o f t h e f I r s t B r i l l h a r t f a c t o r s u g g e s t s , h o w e v e r , i f t h e u n a n s w e r e d s t a t e l a w q u e s t i o n is resolved i n plaintiffs favor a n d I consider plaintiffs' d u t y t o defend in l i g h t o f evidence beyond t h e C i t y ' s c o m p l a i n t a n d t h e i n s u r a n c e p o l i c y , t h e n p l a i n t i f f s ' d u t y to d e f e n d c l a i m w o u l d r a i s e s i m i l a r d u p l i c a t i v e l i t i g a t i o n concerns. O n the r e c o r d I h a v e b e f o r e m e , I d i s a g r e e t h a t t h e n a t u r e and e x t e n t o f t h e City's a l l e g e d d a m a g e s c a n b e c l e a n l y b i f u r c a t e d f r o m Kerr's l i a b i l i t y f o r t h o s e damages. B e c a u s e t h e c a u s e , n a t u r e , a n d e x t e n t o f t h e C i t y ' s d a m a g e s a r e a l l c e n t r a l i s s u e s i n t h e state c o u r t l i t i g a t i o n , t h e s t a t e c o u r t p r o c e e d i n g i s a " p a r a l l e l " p r o c e e d i n g t h a t is " p r e d i c a t e d o n t h e s a m e f a c t u a l t r a n s a c t i o n o r occurrence involved i n a matter pending before a federal court." See Hungerford, 53 F.3d at

1017; see also Golden Eagle Ins. Co. v. Travelers Cos., 95 F.3d 807, 811 (9th Cir. 1996), overruled on other grounds by Dizol, 133 F . 3 d 1220 (rejecting a plaintiff-insurer's argument that
t h e state c o u r t p r o c e e d i n g s w e r e n o t ' pa r a l l e l ' b e c a u s e t h e s t a t e c o u r t a c t i o n i n v o l v e d d i f f e r e n t parties a n d different issues and reaffirming the principle t h a t "[i]t is enough t h a t the state p r o c e e d i n g s a r i s e from t h e s a m e factual c i r c u m s t a n c e s " ) . T a k e , f o r e x a m p l e , p l a i n t i f f s ' c l a i m t h a t t h e r e is n o d u t y t o i n d e m n i f y K e r r b e c a u s e t h e C i t y ' s a l l e g e d p r o p e r t y d a m a g e w a s n o t c a u s e d b y a n " o c c u r r e n c e , " w h i c h t h e p o l i c y d e f I n e s as " a n a c c i d e n t , i n c l u d i n g c o n t i n u o u s o r r e p e a t e d e x p o s u r e to s u b s t a n t i a l l y t h e s a m e g e n e r a l h a r m f u l c o n d i t i o n s . " (CompI. ( # 1 ) ~ 30). P l a i n t i f f s a s s e r t t h a t t h i s c l a i m b e a r s o n t h e n a t u r e o f p r o p e r t y d a m a g e , r a t h e r t h a n K e r r ' s l i a b i l i t y f o r a n y a l l e g e d damage. B u t i n t h e state c o u r t

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proceeding, the City alleges that "the Garden h o m e segment has experienced a n u m b e r o f failures f o r different r e a s o n s a t d i f f e r e n t l o c a t i o n s , including, b u t n o t l i m i t e d to, failures o f a i r valves, drain valves, a BRICO coupler, . . . [and] improperly fused" pipes." (See V a n Dyke Dec!. (#33) Ex. A a t ' 6.) U n d e r its second claim for negligence, the City attributes these problems to Kerr's "failure t o p r o p e r l y i n s t a l l i t s pipeline," i t s r e c o m m e n d a t i o n s r e g a r d i n g t h e p i p e , a n d its misrepresentations regarding the suitability o f the pipe. (Id. at ~L 16~) I n responding t o t h e City's a l l e g a t i o n s , K e r r h a s n o t o n l y d e n i e d t h a t i t is r e s p o n s i b l e f o r p r o p e r t y d a m a g e , i t a l s o d i s p u t e s t h e e x i s t e n c e o f p r o p e r t y d a m a g e and t h e m a n n e r i n w h i c h a n y a l l e g e d p r o p e r t y d a m a g e occurred. Therefore, w h e n deciding plaintiffs' duty to indemnifY, t h e C o u r t would likely determine h o w t h e alleged property rnunage occurred, a n d that factual determination would likely influence, o r c o n f l i c t w i t h , factual d e t e r m i n a t i o n s i n t h e s t a t e c o u r t proceeding. B e c a u s e t h e r e a s o n for t h e p i p e f a i l u r e a n d t h e c o n s e q u e n c e s o f t h a t f a i l u r e a r e t h e c e n t r a l i s s u e s i n t h e s t a t e c o u r t litigation, Kerr's l i a b i l i t y i n state c o u r t seems t o b e i n e x t r i c a b l y i n t e r t w i n e d w i t h , r a t h e r t h a n isolated from, t h e nature and cause o f the City's alleged property damage. I also d i s a g r e e t h a t t h e q u e s t i o n o f w h e t h e r K e r r k n e w a b o u t " p r o b l e m s a r i s i n g w i t h t h e p i p e l i n e b e f o r e , o r s h o r t l y after, t h e P r o j e c t w a s c o m p l e t e d " i s i n d e p e n d e n t o f t h e l i a b i l i t y questions a t issue i n state court. (See CompI. (#1) ~ 3 2 ; see also PIs.' Opp. to Kerr's Mot. (#24) 2 n . 1 . ) Instead, t h e i n s u r a n c e i m p l i c a t i o n s o f Kerr's k n o w l e d g e w i l l i n v o l v e e v i d e n c e t h a t l i k e l y b e a r s o n t h e City's b r e a c h o f c o n t r a c t c l a i m , w h i c h a l l e g e s , i n t e r alia, t h a t K e r r b r e a c h e d i t s contract "[b]y failing t o correct its deficient work," "[b]y failing to b e a r all losses and damages that resulted from its performance o f work, " a n d r'[b]y failing t o take responsibility for [the use o f HDPE] pipe." (See V a n Dyke DecI. (#33) Ex. A
at~

13.) T h e C i t y c o u l d n o t p r o v e t h a t K e r r

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breached its contract i n these respects without also proving that Kerr knew property damage h a d occurred and k n e w Kerr's work h a d caused it. Although Kerr is expected to deny, i n b o t h the s t a t e a n d federal p r o c e e d i n g s , t h a t i t k n e w o f o r c a u s e d p r o p e r t y damage, t h e p o t e n t i a l f o r factual o v e r l a p r a i s e s a l e g i t i m a t e c o n c e r n o f e i t h e r c o l l a t e r a l e s t o p p e l p r o b l e m s o r d i v e r g e n t factual fmdings i n state a n d federal court.!

IV.

Other Considerations
A s C h a m b e r l a i n a n d D i z o l m a k e clear, t h e B r i l l h a r t f a c t o r s are n o t e x h a u s t i v e . T h e c o u r t

s h o u l d also c o n s i d e r w h e t h e r t h e d e c l a r a t o r y a c t i o n " w i l l s e t t l e a l l a s p e c t s o f t h e c o n t r o v e r s y [ ; ] . . . " w i l l s e r v e u s e f u l p u r p o s e i n c l a r i f y i n g t h e l e g a l r e l a t i o n s a t issue[;] . . . i s b e i n g s o u g h t f o r t h e p u r p o s e s o f p r o c e d u r a l fencing o r t o o b t a i n a ' r e s j u d i c a t a ' advantage[;] o r w o u l d r e s u l t i n entanglement between the federal a n d state court systems." Dizol, 133. F . 3 d at 1225 n . s . A l t h o u g h I agree t h a t r e s o l u t i o n o f t h e i n s u r a n c e c o v e r a g e i s s u e s w o u l d clarify t h e r e l a t i o n s h i p b e t w e e n t h e party, t h i s factor p r o v e s t o o much. A n y d e c l a r a t o r y j u d g m e n t a c t i o n t h a t m e e t s t h e j u r i s d i c t i o n a l requirements o f Article i l l will, b y definition, c l a r i f y s o m e a s p e c t o f a r e l a t i o n s h i p b e t w e e n t h e parties. T h e r e a l q u e s t i o n i s t h e p r i c e o f t h a t c l a r i f i c a t i o n , w h i c h i s c a l c u l a t e d i n terms o f "judicial administration, comity, and fairness to the litigants." See Chamberlain, 931 F . 2 d a t 1367. A n d i n t h e s e r e s p e c t s , I a m n o t p e r s u a d e d t h a t r e s o l u t i o n o f t h e i n s u r a n c e c o v e r a g e

! Although at least one District o f Oregon court applied a "n o estoppel rule" to cure the p o t e n t i a l for c o n f l i c t i n g f a c t u a l d e t e r m i n a t i o n s i n s t a t e a n d f e d e r a l c o u r t , t h a t d e c i s i o n w a s d r i v e n b y a u n i q u e s e t o f c i r c u m s t a n c e s a n d a p p e a r s t o b e a rare e x c e p t i o n t o t h e general r u l e a g a i n s t parallel litigation. See Home Indem. Co. v. Stimson Lumber Co., 229 F. Supp. 2 d 1075, 1091 (D. Or. 2 0 0 1 ) ("When, . . . b e c a u s e o f t h e n a t u r e o f t h e u n d e r l y i n g t h i r d - p a r t y litigation, i t m a k e s m o r e s e n s e f r o m a c a s e m a n a g e m e n t s t a n d p o i n t t o l i t i g a t e t h e c o v e r a g e q u e s t i o n first, t h e r e a r e strong policy reasons for applying [a] 'no estoppel' principle to factual determinations m a d e initially i n t h e coverage case. ")

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issues w i l l come w i t h o u t a substantial c o s t to t h e convenience o f t h e state court a n d t h e parties, a n d w i t h o u t c r e a t i n g e n t a n g l e m e n t b e t w e e n t h e s t a t e a n d federal c o u r t systems. P l a i n t i f f s s e e k t o clarify t h e i r c o v e r a g e obligations to t h e i n s u r e d a t a late s t a g e o f t h e u n d e r l y i n g s t a t e litigation, e s s e n t i a l l y o n t h e e v e o f t r i a l , e v e n t h o u g h B C C has d e f e n d e d K e r r i n s t a t e c o u r t f o r o v e r a y e a r u n d e r a r e s e r v a t i o n o f rights. T h i s d e c l a r a t o r y j u d g m e n t a c t i o n w a s f i l e d o n J a n u a r y 2 5 , 2 0 1 0 , a t a t i m e w h e n t h e state c o u r t t r i a l w a s s c h e d u l e d for J u n e 7 , 2 0 1 0 . T h e trial h a s s i n c e b e e n r e s c h e d u l e d t o S e p t e m b e r 2 7 , 2 0 1 0 . T h e t i m i n g o f t h i s federal l a w s u i t r a i s e s p a r t i c u l a r c o n c e r n s w i t h r e s p e c t t o plaintiffs' duty t o d e f e n d claims, c o n s i d e r i n g t h e r e w e r e n o a m e n d m e n t s to t h e C i t y ' s c o m p l a i n t b e t w e e n O c t o b e r 2 0 0 8 a n d J a n u a r y 2 0 1 0 . (See S e c o n d V a n D y k e D e c l . (#28) , 3 (noting t h a t t h e C i t y filed its F i r s t A m e n d e d C o m p l a i n t i n A p r i l 2010); S u p p l e m e n t a l V a n Dyke Decl. (#33) ( n o t i n g t h a t t h e C i t y filed i t s S e c o n d A m e n d e d C o m p l a i n t o n M a y 2 0 , 2 0 1 0 ) . ) D e f e n d a n t s argue, a n d I agree, t h a t d i s c o v e r y a n d m o t i o n p r a c t i c e i n t h i s federal l a w s u i t are l i k e l y to d i s r u p t t h e u n d e r l y i n g s t a t e l i t i g a t i o n as t h e p a r t i e s p r e p a r e for trial.

CONCLUSION
E i t h e r d i s m i s s a l o r a stay o f p r o c e e d i n g s i s a n a p p r o p r i a t e r e m e d y to a d d r e s s t h e c o n c e r n s described above. See, e.g., Karussos, 65 F . 3 d at 801 (vacating a district court's g r a n t o f s u m m a r y j u d g m e n t a n d r e m a n d i n g t h e c a s e w i t h i n s t r u c t i o n s to d i s m i s s t h e c a s e f o r l a c k o f j u r i s d i c t i o n ) ;

Chamberlain, 931 F . 2 d a t 1367 ("In m o s t cases w h e n a district c o u r t refrains f r o m exercising its
j u r i s d i c t i o n , t h e result is t h a t n o a s p e c t o f t h e proceeding r e m a i n s i n federal court."); Century Sur.

Co. v. J Quinn Constr., No. C V 09-06085 D D P (JEMX), 2 0 1 0 W L 330246, a t *4-6 (C.D. Cal.
Jan. 2 0 , 2 0 1 0 ) ( d i s m i s s i n g i n s u r a n c e c o v e r a g e a c t i o n w i t h o u t p r e j u d i c e w h e r e t h e u n d e r l y i n g state action c o u l d create duplicative litigation); see also Wilton v. Seven Falls Co., 515 U.S. 2 7 7 ,

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283,290 (1995) (affrrming a district court's decision to stay a n "action for declaratory r e l i e f w h e r e p a r a l l e l p r o c e e d i n g s . . . w e r e u n d e r w a y i n s t a t e court" a n d n o t i n g t h a t t h e s t a t e c o u r t ' s decision to stay, rather t h a n dismiss, the case was " o f little moment"); Nat'l Chiropractic Mut.

Ins. Co. v. Doe, 23 F. Supp. 2 d 1109, 1123 (D. Alaska 1998) (staying a declaratory j u d g m e n t
action involving a coverage dispute "to a l l o w the ongoing fact-fmding process to run i t s full course i n state court . . . [and] avoid potential collateral estoppel problems"). B a s e d o n t h e f o r e g o i n g analysis, w h i c h h i g h l i g h t t h e d i f f i c u l t i e s i n c o o r d i n a t i n g t h i s c a s e w i t h t h e p e n d i n g t r i a l i n t h e s t a t e c o u r t c a s e , I a m p e r s u a d e d t h a t t h e s t a t e c o u r t is t h e b e t t e r f o r u m f o r r e s o l v i n g this c o v e r a g e d i s p u t e . A c c o r d i n g l y , D e f e n d a n t C i t y o f P o r t l a n d ' s M o t i o n t o D i s m i s s , A b s t a i n , o r i n t h e A l t e r n a t i v e , t o S t a y P r o c e e d i n g s ( # 1 6 ) is G R A N T E D a n d t h i s c a s e is D I S M I S S E D w i t h o u t prejudice. D e f e n d a n t Kerr's M o t i o n t o L i m i t D i s c o v e r y i n P l a i n t i f f s ' C l a i m s O n e a n d T h r e e ( D u t y t o D e f e n d ) and S t a y P l a i n t i f f s ' R e m a i n i n g C l a i m s ( D u t y t o Indemnify) ( # 1 3 ) i s D E N I E D AS MOOT. I T IS SO ORDERED. D A T E D t h i s ~ a y o f J u n e , 2010.

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