Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_05-cv-00203/USCOURTS-caed-1_05-cv-00203-3/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1330 Breach of Contract

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

BOU-MATIC, L.L.C. a Wisconsin

Limited Liability Corporation,

Plaintiff,

v.

OLLIMAC DAIRY, INC., a

California Corporation; TURLOCK

DAIRY AND REFRIGERATION, INC., a

California Corporation; R.J.

FULLWOOD AND BLAND, LIMITED, a

United Kingdom Limited Liability

Company; FULLWOOD FUSION

ELECTRONICS B.V., a Netherlands

Corporation; FULLWOOD LIMITED, a

United Kingdom Corporation; LELY

RESEARCH HOLDING AG, a foreign

business entity; and LELY

INDUSTRIES N.V., a foreign

business entity,

Defendants.

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1:05-cv-0203 OWW SMS

ORDER DENYING DEFENDANT

OLLIMAC DAIRY’S MOTION TO

DISMISS

(F.R.Civ.P. 12(b)(1))

I. INTRODUCTION

Defendant Ollimac Dairy, Inc. (Ollimac) moves to dismiss

Plaintiff Bou-Matic’s (Bou-Matic) suit for declaratory judgment

for lack of subject-matter jurisdiction. Plaintiff opposes the

motion.

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II. PROCEDURAL HISTORY

The complaint was filed on February 14, 2005, seeking

declaratory judgment, pursuant to Title 28, Section 2201, of the

United States Code. Doc. 1, Compl. Subject-matter jurisdiction

is alleged based on diversity of the parties’ citizenship and

satisfaction of the $75,000 requirement for minimum amount in

controversy. See 28 U.S.C. § 1332. 

Ollimac filed the motion to dismiss on November 18, 2005.

Doc. 35, Mot. to Dismiss. Bou-Matic filed its response in

opposition on February 10, 2006. Doc. 47, Mem. in Opp. Ollimac

replied on February 17, 2006. Doc. 48, Reply. 

 

III. BACKGROUND

Bou-Matic is a dairy equipment supplier, distributing

nationwide through independent local equipment dealers such as

Defendant Turlock Dairy and Refrigeration, Inc (TDR). One of its

products is a robotic milking system (RMS), which reduces the

need for human involvement in the milking process. Doc. 1,

Compl., ¶¶ 3-4.

Through TDR, Bou-Matic supplied an RMS to Ollimac, after

lengthy negotiations, between April 2003 and August 2004. Decl.

of Robert A. Morelli (RAM Decl.), ¶ 7. 

The RMS did not perform to Ollimac’s expectations, and

Ollimac became concerned that the representations allegedly made

by Bou-Matic during the prior negotiations were false. Ollimac

brought these concerns to Bou-Matic, and requested assistance

from Bou-Matic and TDR to ensure that the RMS perform in the

manner which Ollimac claims Bou-Matic’s representations led it to

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expect. RAM Decl., ¶¶ 8-12. Bou-Matic then filed the present

action, seeking a declaration of its rights and responsibilities

regarding the named Defendants, who participated in various

capacities in the development, construction, sale, and

installation of the RMS. Doc. 47, Mem. in Opp., 2. 

IV. LEGAL STANDARD

Rule 12(b)(1) of the Federal Rules of Civil Procedure

governs dismissal of a suit for lack of subject-matter

jurisdiction. “A federal court is presumed to lack jurisdiction

in a particular case unless the contrary affirmatively appears.” 

A-Z Int’l v. Phillips, 323 F.3d 1141, 1145 (9 Cir. 2003). th

“When subject-matter jurisdiction is challenged under Federal

Rule of [Civil] Procedure 12(b)(1), the plaintiff has the burden

of proving jurisdiction in order to survive the motion.” Tosco

Corp. v. Communities for a Better Environment, 236 F.3d 495, 499

(9 Cir. 2001). th

A challenge to jurisdiction under Rule 12(b)(1) “can be

either facial, confining the inquiry to allegations in the

complaint, or factual, permitting the court to look beyond the

complaint.” Savage v. Glendale Union High School, 343 F.3d 1036,

1039-40 n.2 (9 Cir. 2003). In a factual Rule 12(b)(1)

th

challenge, “the district court is not restricted to the face of

the pleadings, but may review any evidence, such as affidavits

and testimony, to resolve factual disputes concerning the

existence of jurisdiction.” McCarthy v. United States, 850 F.2d

558, 560 (9 Cir. 1988); see also Safe Air for Everyone v.

th

Meyer, 373 F.3d 1035, 1039 (9 Cir. 2004) (“[i]n resolving a th

factual attack on jurisdiction, the district court may review

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evidence beyond the complaint without converting the motion to

dismiss into a motion for summary judgment”). 

Once the moving party has converted the motion to dismiss

into a factual motion by presenting affidavits or other evidence

properly brought before the court, the party opposing the motion

must furnish affidavits or other evidence necessary to satisfy

its burden of establishing subject-matter jurisdiction. Savage,

343 F.3d 1039-40 n.2.

V. ANALYSIS

1. Subject-matter Jurisdiction

The Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202, does

not by itself confer federal subject-matter jurisdiction. BouMatic is required to plead an independent basis for federal

jurisdiction. See Nationwide Mut. Ins. Co. v. Liberatore, 408

F.3d 1158, 1161 (9 Cir. 2005). Ollimac argues that the court

th

lacks subject-matter jurisdiction over this declaratory-judgment

action, because the court has neither federal-question (“arisingunder”) nor diversity jurisdiction over the underlying suit.

Doc. 35, Mot. to Dismiss, at 7-9, 11-12. 

A party may seek declaratory relief in federal court if the

one against whom the action is brought could have asserted her or

his own rights there. If the declaratory-judgment defendant

could have brought a coercive action in federal court to enforce

that party’s rights, then the court has jurisdiction. The court

determines whether it has jurisdiction by asking whether it would

have jurisdiction had the declaratory-relief defendant been a

plaintiff seeking a federal remedy. See Standard Ins. Co. v.

Saklad, 127 F.3d 1179, 1181 (9 Cir. 1997) (citing Franchise Tax

th

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Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 19 & n.

19 (1983)); see also 10B Wright, Miller & Kane, Fed. Prac. &

Pro.: Civil 3d [hereinafter, “Wright, Miller & Kane”] § 2767. 

a. Federal Question (“Arising Under”)

Ollimac argues that there is no federal-question subjectmatter jurisdiction because the underlying claims, which Ollimac

is presently asserting against Bou-Matic in state court, all

arise under state, not federal, law:

Each of [Ollimac’s] claims [is] related to what amounts

to a basic contract dispute, or a tort theory, that

will be adjudicated based upon state substantive law. 

Doc. 35, Mot. to Dismiss, 8. 

Ollimac’s Stanislaus County Superior Court action complaint,

attached as Exhibit B to its motion to dismiss, alleges eight

causes of action: (1) fraud and deceit; (2) negligent

misrepresentation; (3) breach of contract (third-party

beneficiary); (4) breach of express warranty; (5) breach of

implied warranty; (6) strict products liability; (7) negligence;

and (8) declaratory relief. Doc. 35, Mot. to Dismiss, Ex. B, 1. 

All these causes of action arise only under state law. Ollimac

represents that it will not assert any other claim which would

arise under federal law. Doc. 35, Mot. to Dismiss, 8. 

The well-pleaded complaint rule applies to declaratoryjudgment actions. Republican Party of Guam v. Gutierrez, 277

F.3d 1086, 1089 (9 Cir. 2002). A case “arises under” federal

th

law either where federal law creates the cause of action or where

the vindication of a right under state law necessarily turns on

some construction of federal law. The presence or absence of

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federal-question jurisdiction is governed by the well-pleaded

complaint rule, which provides that federal jurisdiction exists

only when a federal question is presented on the face of the

plaintiff's properly pleaded complaint. Gutierrez, 277 F.3d at

1088-89 (citations and internal quotation marks omitted).

Since there is no arising-under jurisdiction over Ollimac’s

underlying claims, there is no arising-under jurisdiction over

Bou-Matic’s declaratory-judgment action. Id.; Saklad, 127 F.3d

1179, 1181.

b. Diversity Jurisdiction

Bou-Matic claims subject-matter jurisdiction based on the

parties’ diversity of citizenship and the amount in controversy,

exclusive of interests and costs:

This [c]ourt has subject-matter jurisdiction over this

action because Plaintiff, a citizen of Nevada and

Wisconsin, seeks declaratory relief pursuant to [Title

28, Section 2201, of the United States Code] involving

potential liability that far exceeds $75,000, and the

Defendants are citizens of California, the United

Kingdom, Switzerland, and the Netherlands, thus

creating complete diversity between the Plaintiff and

each Defendant.

Doc. 47, Mem. in Opp., 6. See Budget Rent-A-Car, Inc. v.

Higashiguchi, 109 F.3d 1471, 1473 (9 Cir. 1997). th

While conceding that the amount-in-controversy requirement

for diversity jurisdiction is satisfied, see 28 U.S.C. § 1332,

Ollimac denies that there is complete diversity in the underlying

claim. Ollimac argues:

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[I]t is TDR who officially sold the robots to Bank of

the West, who now leases them to Ollimac. [citation]

Accordingly, Ollimac possesses compulsory claims

against TDR which must necessarily be adjudicated in

conjunction and simultaneously with Ollimac’s claims

against Bou-matic. Pursuant to Section 8(b) of

Ollimac’s lease agreement with Bank of the West,

Ollimac is assigned all rights the Bank may have

against the seller of the robots (TDR). In effect,

Ollimac stands in the shoes of the bank for the purpose

of the causes of action asserted against TDR in state

court. 

Doc. 35, Mot. to Dismiss, 11. 

Section 8(b) of Ollimac’s lease agreement with Bank of the

West provides:

[Ollimac] and [Bank of the West] agree that all such

risks described above [express or implied warranties] .

. . are to be borne by [Ollimac]. [Bank of the West] is

not responsible for any direct, indirect, incidental,

or consequential damage to or losses resulting from the

installation, operation, or use of [the RMS] or any

products manufactured thereby. All assignable

warranties made by the Supplier to [Bank of the West]

are hereby assigned to [Ollimac] for and during the

term of this lease and [Ollimac] agrees to resolve all

such claims directly with the Supplier. 

Doc. 35, Mot. to Dismiss, Ex. A, 2 (emphasis added). TDR is a

defendant in the Stanislaus County Superior Court case filed by

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Ollimac. Id., Ex. B, 1. Both Ollimac and TDR are California

corporations. 

Unlike the federal-question jurisdiction determination in

the context of declaratory judgment, in which the court looks to

the underlying claim, the ordinary rule of diversity jurisdiction

applies. The court considers only the citizenship of the parties

as they appear in the declaratory-judgment action, not as they

would in any underlying claim.

The usual rules apply in determining the existence of

diversity and of the requisite amount in controversy.

. . . Federal question jurisdiction is more complicated, as is discussed in the next section. 

Wright, Miller & Kane, § 2766. 

The parties to the declaratory-judgment action are diverse,

and more than the statutory minimum amount, seventy-five thousand

dollars, is in dispute. Federal subject-matter jurisdiction

based on diversity exists. 

2. Discretionary Dismissal of Declaratory-Judgment Action

Ollimac argues that even if the court has subject-matter

jurisdiction over the declaratory-judgment action, the court

should dismiss the complaint. Even where federal jurisdiction

exists, the district court enjoys broad discretion to dismiss a

suit for declaratory relief where a state suit is pending.

Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995) (citing

Brillhart v. Excess Ins. Co. of America, 316 U.S. 491 (1942)). 

The Brillhart factors remain the philosophic touchstone

for the district court. The court should avoid

needless determination of state law issues; it should

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discourage litigants from filing declaratory actions as

a means of forum shopping; and it should avoid

duplicative litigation.

Government Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th

Cir. 1998). State law alone controls the outcome of this case.

Ollimac’s underlying claims sound exclusively in tort and

contract, and are therefore creatures of California, not federal,

law. 

Bou-Matic argues correctly that no presumption has arisen in

favor of dismissal of the declaratory-judgment action, because

the state-court action was not pending when the suit for

declaratory relief was filed. Doc. 47, Mem. in Opp., 9 (citing

Dizol, 133 F.3d at 1225). Nor is there a presumption in favor of

abstention in declaratory actions generally. Government

Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9 Cir. 1998). th

Plaintiff’s choice of forum is entitled to deference. Tuazon v.

R. J. Reynolds Tobacco Co., 433 F.3d 1163, 1178 (9 Cir. 2006). th

Ollimac argues that its later-filed state suit involving the

same Defendants and factual issues as in the federal case

presents the potential for duplicative litigation and conflicting

rulings. This is a risk Ollimac created. 

The fact that state law controls the outcome of this

litigation is not dispositive, since substantive state law is

applied in all diversity actions. Conestoga Services Corp. v.

Executive Risk Indemnity, Inc., 312 F.3d 976, 980-81 (9 Cir. th

2002). The mere potential for conflict in the results of

adjudications does not require federal court abstention. The

possibility of a race to judgment is inherent in a system of dual

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sovereigns and, in the absence of exceptional circumstances, that

possibility alone is not sufficient to overcome the interest in

the federal courts’s exercise of jurisdiction over cases properly

before them. Colorado River Conservation District v. United

States, 424 U.S. 800, 816, 818 (1976); Holder v. Holder, 305 F.3d

854, 867 (9 Cir. 2002). 

th

Bou-Matic argues that dismissal is inappropriate because

Ollimac has participated in the declaratory-judgment action for a

year. Doc. 47, Mem. in Opp., 10-11. In particular, Bou-Matic

claims that Ollimac aided Bou-Matic in invoking the court’s

personal jurisdiction over the Fullwood Defendants, and that

having argued in favor of jurisdiction, Ollimac should be

judicially estopped to argue against it. See Doc. 21, Mot. to

Dismiss; Doc. 29, Mem. in Opp.

The Declaration of Michelle I. Morelli, attached as Exhibit

5 to Bou-Matic’s opposition, was submitted in support of the

exercise of personal jurisdiction over the Fullwood Defendants in

the forum state, California, not in favor of federal subjectmatter jurisdiction over the declaratory-judgment action. See

Doc. 29, Mem. in Opp., 10 (“[t]he following facts conclusively

establish that the Fullwood Defendants are subject to personal

jurisdiction in California”). Ollimac’s position regarding

personal jurisdiction over the Fullwood Defendants is not

inconsistent with its position regarding subject-matter

jurisdiction over the declaratory-judgment suit. 

Bou-Matic argues against dismissal on the grounds that it is

Ollimac who has forum-shopped by filing suit in state court eight

months after Bou-Matic filed the present case. Doc. 47, Mem. in

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Opp., 9-10. Bou-Matic claims that the state suit is a “reactive”

action, filed for the improper purpose of defeating federal

diversity jurisdiction and in hopes of obtaining a “home-court

advantage.” Id., 9-10, 11-12. 

Bou-Matic, Ollimac, and TDR entered into a mediation

agreement on March 10, 2005, whereby they agreed to a stay of

proceedings until July 31, 2005. This agreement was reduced to

stipulation and made an order on March 28, 2005. Doc. 17, Stip.

and Order, 2. A subsequent agreement between the parties

extended the period until September 30, 2005. Decl. of Timothy

J. Grant, ¶ 4. The mediation agreement provided that Ollimac

would have until December 19, 2005, to respond to the complaint. 

Id. Ollimac’s delay in filing the declaratory-judgment action is

not dispositive. 

VI. CONCLUSION

Bou-Matic first sought a federal forum for resolution of its

dispute with Defendants based on diversity jurisdiction. There

is no compelling reason to invoke abstention discretion to deny

Plaintiff its choice of forum. Defendant Ollimac’s motion to

dismiss is DENIED.

SO ORDERED. 

DATED: April 17, 2006

/s/ OLIVER W. WANGER 

______________________________

 Oliver W. Wanger

UNITED STATES DISTRICT JUDGE

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