Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-02856/USCOURTS-cand-3_05-cv-02856-4/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:2201 Declaratory Judgement

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United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

THE TRAVELER'S PROPERTY CASUALTY

COMPANY OF AMERICA, f/k/a The

Traveler's Indemnity Company of

Illinois, a Connecticut

corporation,

Plaintiff,

v.

CROW CANYON DEVELOPERS, LTD., a

California limited partnership,

KAJIMA DEVELOPMENT CORPORATION, a

Delaware corporation, REYNOLD C.

JOHNSON, ENTERPRISES, a dissolved

California corporation, THE

STRINGER GROUP, LP, a California

limited partnership, CEDAR GROVE

APARTMENTS, LP, d/b/a Promontory

View, a California limited

partnership, and DOES 1-10, 

Defendants. 

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No. C-05-2856 SC

ORDER GRANTING

DEFENDANTS CROW

CANYON'S AND KAJIMA

DEVELOPMENT GROUP'S 

MOTION TO STAY

PLAINTIFF'S

DECLARATORY RELIEF

ACTION 

AND

ORDER DENYING 

DEFENDANTS CROW

CANYON'S AND KAJIMA

DEVELOPMENT GROUP'S 

MOTION TO DISMISS

PLAINTIFF'S ACTION 

I. INTRODUCTION

The Travelers Property Casualty Company of America

("Plaintiff" or "Traveler's") brought this action for declaratory

relief against Defendants Crow Canyon, Ltd. and the Kajima

Development Corporation ("Defendants"), asking the Court to

declare that Plaintiff has no duty to provide coverage to

Defendants under any provision of the insurance policies, that it

Case 3:05-cv-02856-SC Document 28 Filed 11/01/05 Page 1 of 8
United States District Court

For the Northern District of California

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may withdraw from its current defense of Defendants, and to order

Defendants to reimburse it for attorneys' fees and costs. 

Plaintiff's Memorandum in Opposition to Motion to Dismiss or Stay

Declaratory Relief Action at 7-8 ("Pl.'s Mem."). 

Defendant now moves to dismiss or, in the alternative, stay

this federal action. Defendants' Memorandum in Support of the

Motion to Stay or Dismiss Federal Declaratory Relief Action, at 1

("Defs' Mem."). 

For the reasons contained herein, this Court hereby GRANTS

Defendants' motion for a STAY of the federal proceedings and

DENIES the motion to dismiss the federal action. 

II. BACKGROUND

Plaintiff issued liability policies to Crow Canyon

Developers, Inc., Kajima Development, and the Stringer Group,

which were in effect from March 6, 1997 to April 30, 1998 ("the

Policies"). Pl.'s Mem. at 2. Plaintiff contends that, from 1991

to 1998, Defendants owned property in San Ramon, California, which

they had developed as the Promontory View Apartments ("the

Promontory Apartments"). Id. Defendants sold the Promontory

Apartments to Cedar Grove Apartments, LP ("Cedar Grove") on April

30, 1998. Id. In April 2004, Cedar Grove filed suit in The

Superior Court for the County of Contra Costa, California ("the

State Action") against Defendants and Reynold Johnson Enterprises,

Inc., a partner in the Stringer Group. Id. In the State Action,

Cedar Grove alleges that these defendants are liable for faulty

design and defective construction of Apartments. Id. at 3. The

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State Action is pending. Id. Plaintiff is not a party in the

State Action. Id. at 4. 

Defendants tendered their defense of the State Action to

Plaintiff, which accepted their defense pursuant to a reservation

of rights. Id. at 3. One month after accepting the defense,

Plaintiff advised Defendants that it owed no coverage for

liabilities in the State Action. Id. Specifically, Plaintiff

contends that it need not provide coverage to Defendants in the

State Action because the policies, under Exclusion j (sic)

("Exclusion J"), exclude coverage for property damage to "property

[the policy holder] own[s], rent[s], or occup[ies]." Defs' Mem.,

Ex. A at 5. Because Defendants owned the Promontory Apartments

during the Policies' effective period, Plaintiff contends that it

owes no coverage for whatever damage was caused during that time. 

Pl.'s Compl. at 3 ("Compl."). Plaintiff, however, continues to

provide a defense to Defendants in the State Action. Id. at 4. 

 Plaintiff brought this action in Federal Court based on

diversity of citizenship, pursuant to 28 U.S.C. Section 1332,

alleging that Plaintiff and Defendants are citizens of different

states and the matter in controversy exceeds $75,000.00, exclusive

of interests and costs. Complaint for Declaratory Relief at 3

("Compl."). 

III. LEGAL STANDARD

A District Court is authorized, in the sound exercise of its

discretion, "to stay or dismiss an action seeking declaratory

judgment before trial or after all arguments have drawn to a

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close." Wilton v. Seven Falls Company, 515 U.S. 277, 288 (1995). 

"In the declaratory judgment context, the normal principle that

federal courts should adjudicate claims within their jurisdiction

yields to considerations of practicality and wise judicial

administration." Id.

The Declaratory Judgment Act "gave federal courts competence

to make a declaration rights; it did not impose a duty to do so." 

Public Affairs Associates v. Rickover, 369 U.S. 111, 112 (1962). 

This discretion is not, however, unfettered. "[A] District Court

cannot decline to entertain such an action as a matter of whim or

personal disinclination." Id. 

In deciding whether to exercise its discretion, a Federal

Court aims to avoid needless determination of state law issues, to

discourage forum-shopping, and to avoid duplicative litigation. 

See Brillhart v. Excess Insurance Company of America, 316 U.S.

491, 495 (1942). 

The issues in the underlying state action need not be

identical - an overlap of factual questions between the two

actions is sufficient. See Polido v. State Farm Mutual Automobile

Insurance Company, 110 F.3d 1418, 1423 (9th Cir. 1997), overruled

on other grounds by Government Employees Insurance Company v.

Dizol, 133 F.3d 1220 (9th Cir. 1998). Also, the parties need not

be identical - it will suffice that a party can be joined as a

necessary party in the state action or can intervene therein as a

matter of right. Id. 

"A stay will often be the preferable course because it

assures that the federal action can proceed [later,] without risk

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1 Plaintiff also asks the Court to declare that Plaintiff has

no duty to provide a defense "on the basis of any other term,

exclusion or condition of any or all of the referenced Policies..." 

Pl.'s Mem. at 7. The Court will not address this request at

present. First, Plaintiff has not sufficiently briefed the Court

on this very broad request. Second, it would unnecessarily

complicate the State Action to make determinations about the rights

and duties of Plaintiff under the Policies. 

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of a time bar if the state case fails to resolve the matter in

controversy. Wilton, 515 U.S. at 288, FN 2. 

In considering whether to stay the federal proceedings, a

District Court should examine the "scope of the pending state

court proceeding and the nature of the defenses there [which

includes consideration of] whether the claims of all parties in

interest can satisfactorily be adjudicated in that proceeding,

whether necessary parties have been joined, whether such parties

are amenable to process in that proceeding, etc." Id. at 283,

quoting Brillhart v. Excess Insurance Company of America, 316 U.S.

491, 495 (1942). 

IV. DISCUSSION

Plaintiff contends that Exclusion J frees it of the duty to

supply a defense to Defendant. Compl. at 5-6. In relevant part,

Exclusion J states that "coverage does not apply to 'property

damage' to...property you own, rent or occupy." Defs' Mem., Ex. A

at 5.1

Defendants contend that "whether 'property damage' as defined

by the [the Policies] has occurred" is being litigated in the

State Action. Defs' Mem. at 10.

As stated above, the State Action Complaint alleges that the

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Promontory Apartments were defective in many respects. 

In order for the Court to determine whether Exclusion J 

frees Plaintiff from the duty to provide a defense to Defendant,

the Court must answer, among other questions, whether there was

property damage. The Court believes that by determining this

issue it would duplicate the litigation currently underway in the

State Action. 

The Court finds that issuing a stay is the preferable course. 

Not only will it avoid duplicating litigation, it will also allow

Plaintiff the possibility of a future forum, if the State Action

fails to resolve pertinent issues. 

The Court finds it unnecessary to consider Defendants'

contentions regarding dismissal because these contentions largely

discuss the need to avoid piecemeal litigation and having to

defend a case in two forums. Defs' Mem. at 6-13. A stay

accomplishes these ends. 

Plaintiff, however, contends that a stay is not appropriate

in this case. Pl.'s Mem. at 1-2. 

 In support of this, Plaintiff cites California Code of Civil

Procedure § 387 and Hodge v. Kirkpatrick Development, Inc., 130

Cal.App.4th 540 (2005) to support its proposition that Traveler's

would not be allowed to intervene in the State Action. Pl.'s Mem.

at 8, FN 3. 

Plaintiff, however, fails to state with any specificity how

these authorities support its position. The Court, after

reviewing these authorities, finds nothing in them to support

Plaintiff's contention. In fact, California Code of Civil

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2 California Code of Civil Procedure § 387(a) in relevant part

reads: "Upon timely application, any person, who has an interest

in the matter in litigation, or in the success of either of the

parties, or an interest against both, may intervene in the action

or proceeding."

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Procedure § 387 would seem to allow Plaintiff to intervene in the

State Action, rather than to bar him from so doing2, a fact that

weighs in favor of staying the federal proceedings. See Wilton v.

Seven Falls Company, 515 U.S. 277, 283 (1995). 

The Court has reviewed Plaintiff's other cited federal and

state authorities. The Court finds that these cases address, 

directly or indirectly, the same issue the Court addresses, viz.,

whether the Court should avoid duplicating litigation underway in

state court. The issue of property damage, so crucial in deciding

the issue of coverage, is part of the litigation in the State

Action. Accordingly, the Court will refrain from deciding this

issue. 

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V. CONCLUSION

The Court will stay the federal action in order to avoid

duplicating litigation underway in the State Action and to provide

Plaintiff with the possibility of a future forum. 

For these reasons, the Court GRANTS Defendants' motion to

STAY Plaintiff's declaratory relief action. This action is STAYED 

until such time as it is appropriate for the Court to take up the

case again. 

The Court DENIES Defendants' motion to dismiss the federal

action. 

IT IS SO ORDERED.

Dated: November 1, 2005

 

UNITED STATES DISTRICT JUDGE

Case 3:05-cv-02856-SC Document 28 Filed 11/01/05 Page 8 of 8