Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_12-cv-01227/USCOURTS-azd-2_12-cv-01227-1/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:2201 Declaratory Judgment (Insurance)

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UNITED STATES DISTRICT COURT

DISTRICT OF ARIZONA

IDS Property Casualty Insurance Company, )) Plaintiff, )) 2:12-cv-01227 JWS vs. )) ORDER AND OPINION

Frank and Bettina Gambrell, et al., )

) [Re: Motion at docket 12]

Defendants. )

) )

I. MOTION PRESENTED

At docket 12 defendants Frank and Bettina Gambrell (“defendants” or

“Gambrells”) filed a motion to dismiss the federal declaratory action filed by plaintiff IDS

Property Casualty Insurance Company (“IDS” or “plaintiff”) pursuant to Rule 12(b)(1) of

the Federal Rules of Civil Procedure. In the motion, the defendants request that the

court decline to exercise its discretionary jurisdiction over the declaratory judgment

action because of a parallel action pending in state court (“State Case”).1 IDS opposes

the motion to dismiss at docket 14, and the Gambrells reply at docket 18. The parties

request oral argument, but the court concludes that argument is not necessary. 

1

IDS removed the State Case to federal court (Case No. 4:12-cv-00661), but the

court recently remanded it to state court.

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II. BACKGROUND

Both the federal declaratory judgment case and the State Case arise out of an

automobile accident that occurred March 4, 2011, in which Frank Gambrell sustained

personal injuries after another car crossed the center line and collided with the truck

Gambrell was driving. The Gambrells settled with the tortfeasor’s insurance carrier for

the $15,000 liability limit. The Gambrells claimed that $15,000 was insufficient to fully

compensate them for Frank Gambrell’s injuries, and so the Gambrells also filed a claim

for $100,000 under the underinsured motorist coverage through their personal auto

insurance policy that they maintained with IDS. That auto insurance policy did not cover

the truck Frank Gambrell was driving at the time of his accident. IDS denied coverage. 

On June 8, 2012, after the parties were unable to settle the claim, IDS initiated a

declaratory relief action in federal court. In the complaint, IDS asks the court to

judicially determine the parties’ dispute over insurance coverage. On July 25, 2012, the

Gambrells initiated the State Case by filing a complaint in state court. The complaint

originally alleged a breach of contract and bad faith claim against IDS.2

 On August 3,

2012, shortly after IDS declined the Gambrell’s request to stipulate to a remand of the

federal declaratory judgment case, the Gambrells filed an amended complaint in state

court, adding Stacey Harrish as a defendant and alleging that Harrish was assigned to

adjust the claim and that both IDS and Harrish owed them a duty of good faith and fair

dealing, which they breached when they refused without reasonable basis to provide

benefits under the policy.3

 On September 4, 2012, IDS filed a notice of removal. The

parties filed competing motions related to the removed State Case: Harrish filed a

motion seeking dismissal of the claims against her, and the Gambrells filed a motion

asking that the case be remanded back to state court because of the lack of diversity

between the parties. The court then consolidated the State Case with the declaratory

2

Doc. 1-3 at p. 12 in Case No. 4:12-cv-00661.

3

Id. at pp. 17-25.

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judgment case. The court recently granted the motion to remand and denied Stacey

Harrish’s motion to dismiss as moot, and, consequently, the State Case has been

severed and remanded. 

III. STANDARD OF REVIEW

Under Federal Rule of Civil Procedure 12(b)(1), a party may seek dismissal of an

action for lack of subject matter jurisdiction. In order to survive a defendant’s motion to

dismiss, the plaintiff has the burden of proving jurisdiction.4

 Where the defendant brings

a facial attack on the subject matter of the district court, the court assumes the factual

allegations in the plaintiff’s complaint are true and draws all reasonable inferences in the

plaintiff’s favor.5 The court does not, however, accept the truth of legal conclusions cast

in the form of factual allegations.6 A 12(b)(1) motion appears to be a proper method for

raising the issue of abstention.7

 However, the court may rely on undisputed matters of

public record8 and can therefore look at the complaint filed in the State Case to compare

the causes of action. 

The Declaratory Judgment Act provides that a court “may declare the rights and

other legal relations of any interested party seeking such declaration.”9

 Given this

permissive language, federal district courts have discretion under the Declaratory

Judgment Act to determine whether to maintain jurisdiction over an action for

declaratory relief.10 The outer boundaries of the court’s discretion is not clearly defined,

4

Tosco v. Cmtys. for a Better Env’t, 236 F.3d 495, 499 (9th Cir. 2000).

5

Doe v. Holy See, 557 F.3d 1066, 1073 (9th Cir. 2009).

6

Id.

7

Beres v. Village of Huntley, 824 F.Supp. 763, 766 (N.D. Ill. 1992). 

8

Lee v. City of Los Angeles, 250 F.3d 668, 688-90 (9th Cir. 2001). 

9

28 U.S.C. § 2201(a) (emphasis added). 

10See Gov’t Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1223 (1998) (“[T]he Declaratory

Judgment Act is ‘deliberately cast in terms of permissive, rather than mandatory, authority.’”

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but the court may not decline jurisdiction on a whim; instead, it must make the decision

in a manner that furthers the Declaratory Judgment Act’s purpose of fostering judicial

economy and cooperative federalism.11

IV. DISCUSSION

Courts have broad discretion to dismiss a federal declaratory judgment action

when the issues can be better settled in a pending state court proceeding.12 In this

case, there is a pending state court proceeding because the court recently remanded

the State Case back to state court. The existence of pendant state action, however,

does not automatically bar request for federal declaratory relief.13 Instead, when

determining whether to exercise discretion to dismiss the action, the court must look

primarily to three factors set forth in Brillhart v. Excess Insurance Company of

America:14 (1) avoiding needless determination of state law issues; (2) discouraging

forum shopping; and (3) avoiding duplicative litigation.15 While these three factors are

the “philosophic touchstone” for such analysis, courts may consider a number of other

factors.16 In the Ninth Circuit, other possibly relevant factors include 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 procedural fencing; whether the use of a

(quoting Pub. Serv. Comm’n of Utah v. Wycoff Co., 344 U.S. 237, 250 (1952) (Reed, J.,

concurring))). 

11R.R. St. & Co. Inc. v. Transp. Ins. Co., 656 F.3d 966, 975 (9th Cir. 2011).

12Id.

13Dizol, 133 F.3d at 1225. 

14316 U.S. 491 (1942):

15See R.R. Street, 656 F.3d at 975.

16Dizol, 133 F.3d at 1225; R.R. St. & Co. Inc., 656 F.3d 966. 

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declaratory judgment action will result in entanglement between the state and federal

court systems; the convenience of the parties; and the availability of other remedies.17

Plaintiff’s briefing does not apply these factors to support its argument that

abstention is not warranted. Instead, plaintiff argues that only “exceptional

circumstances” justify abstention, citing to Colorado River Water Conservation Dist. v.

United States.

18 The “exceptional circumstances” test, however, does not control

because the case involves only a declaratory judgment action.19

A. Avoiding needless determination of state law issues

Under the first Brillhart factor, avoiding needless determination of state law

issues, the court looks at whether the federal declaratory judgment action will require

the court to determine unsettled issues of state law.20 The issue in both the federal and

the State Case is whether underinsured motorist coverage exists for the Gambrells’

loss. Neither party indicates in their briefing whether resolution of such an insurance

coverage issue will involve novel questions of state law, but, generally, an examination

of the policy terms and the exclusions therein is a matter of contract interpretation and

does not appear to raise any novel or unsettled issues of state law. That said, in run-ofthe-mill insurance coverage cases, where the court’s only basis for jurisdiction is

diversity, comity concerns are “particularly weighty” because “‘states ha[ve] a free hand

17Dizol, 133 F.3d at 1225 n.5. 

18424 U.S. 800 (1976). 

19Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995) (“Distinct features of the

Declaratory Judgment Act . . . justify a standard vesting district courts with greater discretion in

declaratory judgment actions than that permitted under the ‘exception circumstances’ test . . .”);

Huth v. Hartford Ins. Co. of the Midwest, 298 F.3d 800, 804 (9th Cir. 2002) (noting that

“exceptional circumstances” is not the standard for discretionary jurisdiction under the federal

declaratory judgment act). 

20Nat’l Chiropractic Mut. Ins. Co. v. Doe, 23 F. Supp. 2d 1109, 1118 (D. Alaska 1998)

(citing Cont’l Cas. Co. v. Robsac Indus., 947 F.2d 1367, 1371 (9th Cir. 1991), overruled on other

grounds by Dizol, 133 F.3d at 1227). 

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in regulating the dealings between insurers and their policyholders.’”21 This appears to

be of particular import when the same insurance coverage issues are simultaneously

being considered in state court. Therefore, this factor weighs slightly in favor of

abstention.

B. Discouraging forum shopping

An insurer is considered to be forum shopping if it files a federal declaratory

judgment action at the same time the insurer is engaged in a state court action in the

hopes that it might fare better in federal court.22 Such forum shopping is improper if the

declaratory judgment action is reactive or defensive, meaning that the insurer files in

federal court after it has already been sued in state court by either the injured third party

or the insured.23 In this case, plaintiff argues that defendants are the ones engaged in

forum shopping because they filed the complaint in the State Case after it initiated the

declaratory judgment action in federal court, and then they joined a non-diverse

defendant to prevent removal. While the court acknowledges plaintiff’s argument, it

could equally be argued that defendants raced to the courthouse in anticipation of a

state lawsuit. Furthermore, the fact that defendants initiated the State Case a few

weeks after the federal action does not require that the court retain jurisdiction.24 The

court therefore concludes that this factor is neutral in the determination.

21Employers Reinsurance Corp. v. Karussos, 65 F.3d 796, 799 (9th Cir. 1995) (quoting

SEC v. Nat’l Sec., Inc., 393 U.S. 453, 459 (1969)), overruled on other grounds by Dizol, 133

F.3d at 1227; see also Great Am. Assurance Co. v. Discover Prop. and Cas. Ins. Co., 779 F.

Supp. 2d 1158, 1163 (D. Mont. 2011) (noting that insurance coverage questions are strictly in

the province of state law). 

22See Allstate Ins. Co. v. Davis, 430 F. Supp. 2d 1112, 1120-21 (D. Hawaii 2006) (citing

Krieger, 181 F.3d at 1119). 

23Id. (citing Nat’l Chiropractic, 23 F. Supp. 2d at 1117-18)).

24See Wilton, 515 U.S. at 280-82 (affirming dismissal of a federal declaratory judgment

action in light of a later-filed state action); R&R Street, 656 F.3d at 976 (“Timing is only one

consideration when deciding whether to entertain a declaratory judgment action, and the

Wilton/Brillhart factors sometimes compel a court to decline to entertain an earlier-filed action in

favor of a later-filed action.”).

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C. Duplicative litigation

 One of the defendants in the State Case, Stacey Harrish, prevents removal of

the case to federal court. Thus, if the court retains jurisdiction, the state and federal

proceedings would continue to be parallel, resulting in duplicative litigation.

Furthermore, there is a presumption that a case should be heard in state court

“[i]f there are parallel state proceedings involving the same issues and parties pending

at the time the federal declaratory action is filed.”25 The State Case involves the same

parties and it involves the same issues. IDS concedes as much.26 While the State

Case was not pending at the time the declaratory judgment action was filed, as

discussed above, timing is not conclusive. As the court noted in Wilton, the district court

was within its bounds in staying a declaratory judgment action where parallel

proceedings, which presented ventilation of the same state law issues, were underway

in state court, even if those proceedings commenced after the filing of the declaratory

judgment action.27 Thus, a court can consider the circumstances as they exist at the

time it rules on a request for abstention, and in the situation at hand, there is a parallel

state proceeding in state court involving the same parties and insurance coverage

issues. Such circumstances strongly weigh in favor of abstention. 

D. Other factors

As for other factors that might weigh in the determination, this court finds that no

one factor tips the scales back in favor of retaining the case. While the declaratory

action will settle all aspects of the controversy and will serve a useful purpose in

clarifying the legal relations at issue, the state case will serve the exact same purpose. 

While a Phoenix venue may be more convenient than a Tucson venue, where the State

25Dizol, 133 F.3d at 1225 (emphasis added). 

26See Doc. 11 at p. 9

27Wilton, 515 U.S. at 289.

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Case was filed and is now pending, that factor is not enough to outweigh those in favor

of abstention. 

V. CONCLUSION

Based on the foregoing analysis, the defendants’ Rule 12(b)(1) Motion to Dismiss

at docket 12 is GRANTED. The court declines to exercise jurisdiction over the case,

and the Clerk of Court is directed to close the case. 

DATED this 27th day of December 2012

 /s/ 

JOHN W. SEDWICK

UNITED STATES DISTRICT JUDGE

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