Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_09-cv-05328/USCOURTS-cand-3_09-cv-05328-3/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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United States District Court

For the Northern District of California

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 The Court GRANTS the Halstensons’ request for judicial notice. See Fed. R. Evid.

201.

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

HARTFORD FIRE INSURANCE

COMPANY,

Plaintiff,

 v.

MICHAEL CHRISTOPHER MCGHEE,

Defendant. /

No. C 09-05328 JSW

ORDER GRANTING

DEFENDANTS’ MOTION TO

DISMISS

Now before the Court is the motion to dismiss filed by defendants Leo and Ann

Halstenson (collectively, “Halstensons”). The Court finds that this matter is appropriate for

disposition without oral argument and the matter is deemed submitted. See N.D. Civ. L.R. 7-

1(b). Accordingly, the hearing set for June 4, 2010 is HEREBY VACATED. Having carefully

reviewed the parties’ papers and considering their arguments and the relevant authority, and

good cause appearing, the Court hereby GRANTS the Halstensons’ motion to dismiss.1

BACKGROUND

The Halstensons filed an amended complaint for damages for wrongful death against 

Hartford Fire Insurance Company (“Hartford”), Michael Christopher McGhee, Michael Bruce

McGee, Raven Funding LLC and D.L. Peterson Trust on January 9, 2009 in the Superior Court

of the State of California for the County of Marin. Hartford then filed a complaint for

declaratory relief in federal court against the Halstensons, Michael Christopher McGhee and

Michael Bruce McGhee. Hartford’s complaint contains a single cause of action seeking

Case 3:09-cv-05328-JSW Document 35 Filed 05/27/10 Page 1 of 5
United States District Court

For the Northern District of California

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declaratory judgment, under California law, interpreting the rights and obligations of the parties

under an insurance policy issued by Hartford to the Hartford Financial Services Group where

Michael Bruce McGhee works. 

The Court will address additional specific facts as required in the analysis. 

ANALYSIS

The Halstensons argue that the Court should abstain from exercising jurisdiction and

dismiss this matter pursuant to the Declaratory Judgment Act (“DJA”), 28 U.S.C. § 2201 et seq.

 The DJA grants courts discretionary jurisdiction to declare the rights of litigants. Wilton v.

Seven Falls Co., 515 U.S. 277, 286 (1995) (citing 28 U.S.C. § 2201(a)). Under Brillhart v.

Excess Ins. Co., 316 U.S. 491, 495 (1942), the district court must undertake an analysis to

determine whether it should exercise its discretionary jurisdiction. In making the determination

whether to exercise jurisdiction, the Court should (1) avoid needless determination of state law

issues; (2) discourage litigants from filing declaratory actions as a means of forum shopping;

and (3) avoid duplicative litigation. Government Employees Ins. Co. v. Dizol, 133 F.3d 1220,

1225 (9th Cir. 1998). Moreover, if the Court declines to hear a claim for declaratory relief, it

must “explain the basis for its decision on the record,” specifically analyzing the Brillhart

factors to demonstrate how it came to the conclusion to dismiss the claim. Principal Life Ins.

Co. v. Robinson, 394 F.3d 665, 672 (9th Cir. 2004). The Court may consider several additional

factors when considering whether to decline to hear a claim for declaratory relief. The factors

are non-exclusive and include determining whether declining to hear the claim for declaratory

relief will: avoid duplicative litigation; balance concerns of judicial administration, comity, and

fairness to the litigants; settle all aspects of the controversy; whether the declaratory action will

serve a useful purpose in clarifying the legal relations at issue; whether the declaratory action is

being sought merely for the purposes of procedural fencing or to obtain a res judicata

advantage; or whether the use of a declaratory action will result in entanglement between the

federal and state court systems. Dizol, 133 F.3d at 1225 n.5 (citing Brillhart, 316 U.S. at 494-

95). In addition, the court may consider the convenience of the parties and the availability of

other remedies in determining whether to decline to hear a claim for declaratory judgment. Id. 

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United States District Court

For the Northern District of California

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In American National Fire Ins. Co. v. Hungerford, 53 F.3d 1012 (9th Cir.1995),

overruled on other grounds by Dizol, 133 F.3d at 1227 (9th Cir.1998), an insurance company

issued an directors and officers liability policy to PLM Companies, Inc. (“PLMC”). PLMC

then formed PLM International, Inc. (“PLMI”) to consolidate activities of another company. 

Disgruntled investors who had voted against the consolidation sued PMLI, PLMC’s predecessor

in interest, and other defendants in state court for breach of fiduciary duties. Id., 133 F.3d at

1013-1014. During the pendency of this action, the insurance company brought a separate

action in federal court against the founder, Chairman of the Board and Chief Executive Officer

of PLMC, seeking a declaration of non-coverage in the state court action. Id. at 1014. The

Ninth Circuit held that the district court erred in exercising its discretion in hearing the

declaratory relief action, despite the fact that the federal and state cases were not identical and

the insurance company, who was not a party to the state court action, was barred under state law

from joining the action or having the issue of insurance coverage heard in the state court action. 

Id. at 1016.

The Ninth Circuit relied on a similar case from the Sixth Circuit in which the court held

that “an insurer’s inability to join directly in the related underlying tort action did not preclude

the denial of federal court jurisdiction to the insurer in its separate declaratory relief claim.” Id.

at 1016-1017 (citing Allstate Ins. Co. v. Mercier, 913 F.2d 273, 278-79 (6th Cir.)). The Mercier

court noted that “there was a sufficient parallel in the underlying facts of each case and that a

sufficient remedy existed in state court for the insurer.” Id. at 1017 (citing Mercier, 913 F.2d at

278-79). The Mercier court reasoned:

We realize that [the insurer] is not a party in the underlying tort action and

cannot be made a party. But [the state] does have a procedure for obtaining a

declaration of the rights and other legal relations of an interested party seeking

a declaratory judgment.... Thus, [the insurer] could have presented the issues

that it brought to federal court in a separate action to the same court that will

decide the underlying tort action....

It is true that in the present case the federal declaratory judgment action does

not parallell[ ] a state court action arising from the same facts in the sense that

different legal issues are presented by the pleadings. Nevertheless, the federal

action does parallel the state action in the sense that the ultimate legal

determination in each depends upon the same facts. And, there is an alternate

state remedy by which the legal determination sought in the federal declaratory

judgment action may be made on the basis of a well-developed factual record,

rather than on the basis of a barren record.

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For the Northern District of California

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Mercier, 913 F. 2d at 278-79 (internal citations and quotations omitted). The Ninth Circuit

agreed with the holding of Mercier “that when an ongoing state court 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 petition to

bring a related claim.” Hungerford, 53 F.3d at 1017 (citing Mercier, 913 F.2d at 278). 

Both the Hungerford and the Mercier courts squarely rejected the argument that the

insurer’s inability to join in the state court action required the district court to accept

jurisdiction, noting that the insurer could have sought declaratory relief from the same court,

albeit in a separate action, that will decide the underlying tort action. Hungerford, 53. F.3d at

1018; Mercier, 913 F.2d at 278. Given that the declaratory relief actions ultimately involved

interpretations of state law related to factual disputes that were pending before the state court,

both courts found that “the [state] court would be in a superior position to address the legal

issues on which [the insurer] [sought] a declaration of rights.” Hungerford, 53. F.3d at 1018;

Mercier, 913 F.2d at 278-79. 

The Hungerford court further reasoned that allowing the insurance company to bring a

declaratory relief action in federal court:

would simply result in a waste of federal resources at every level of the decision

making process. Any other holding, given the facts of this case, would result in

the federal district court needlessly analyzing a state law issue that the state court

is equally, if not better equipped to decide; it will also lead to the state and

federal appellate courts reviewing claims arising from an identical set of facts

even though the cases can easily be consolidated if filed within the same court.

Id., 53 F.3d at 1018. Moreover, the Hungerford court found that “exercising jurisdiction over a

suit that raised the same issues as those in a pending state court action ... would only be

encouraging forum shopping in violation of the second Brillhart principle.” Id. Therefore, as

in Mercier, the Hungerford court held that “a decision to exercise jurisdiction in this case would

only encourage forum shopping, procedural fencing, and the ‘race for res judicata.’” Id. at 1018;

Mercier, 913 F.2d at 279. Finally, the Hungerford court held that the interests of comity and

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avoiding needlessly determining issues of state law warranted declining to exercise jurisdiction. 

Id. at 1018-19 (citing Brillhart, 316 U.S. at 495.)

The action before this Court is factually analogous to the actions before the Hungerford

and Mercier courts. Both the state court action and this case involve the same underlying

factual occurrence, the car accident in which William Halstenson was killed by the car driven

by Michael Christopher McGhee. At issue in both actions is the factual dispute regarding

whether Michael Christopher McGhee was driving with the permission of Michael Bruce

McGhee and/or Hartford. Despite the fact that Hartford cannot bring a declaratory relief claim

to determine insurance coverage in the same wrongful death action pending in state court,

Hartford could bring a separate declaratory relief action in state court. As in Hungerford, this

Court finds that exercising jurisdiction over a suit that raises the same factual issues as those

pending in state court “would simply result in a waste of federal resources at every level of the

decision making process” and would “encourage forum shopping, procedural fencing, and the

‘race for res judicata.’” Id., 53 F.3d at 1018. Moreover, the interests of comity and avoiding

needlessly determining issues of state law warrants declining to exercise jurisdiction here. Id. at

1018-19; Brillhart, 316 U.S. at 495. Accordingly, the Court declines to exercise jurisdiction

over this declaratory relief action and grants the Halstensons’ motion to dismiss.

CONCLUSION

For the foregoing reasons, the Court GRANTS the Halstensons’ motion to dismiss.

IT IS SO ORDERED.

Dated: May 27, 2010 

JEFFREY S. WHITE

UNITED STATES DISTRICT JUDGE

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