Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-03002/USCOURTS-cand-3_05-cv-03002-9/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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UNITED 

STATES 

DISTRICT 

COURT

U

For the Northern District of California

NITED 

STATES 

DISTRICT 

COURT

U

For the Northern District of California

NITED 

STATES 

DISTRICT 

COURT

For the Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

AMCO INSURANCE COMPANY,

Plaintiff,

v.

GOLD MIRROR DI GRANDE ENT., INC.,

Defendant. /

No. C 05-3002 MHP

ORDER TO SHOW CAUSE

Gold Mirror is an Italian restaurant owned and operated in San Francisco by defendant Gold

Mirror Di Grande Enterprises, Inc. (“Gold Mirror”). On April 19, 2004, Gold Mirror was damaged

when a delivery truck parked across the street rolled into the front of the restaurant. Compl. ¶ 6. 

The truck was owned and operated by third-party defendants Trucklease Corp., The News Group

and Deviere Robinson (collectively “Trucklease”). At the time of the accident, Gold Mirror was

insured by plaintiff AMCO Insurance Co. (“AMCO”) under Premier Business Owners Policy No.

ACP BPF 7820697997, issued by plaintiff on June 11, 2003. Compl. ¶ 30 

Gold Mirror reported the damages to AMCO and began repairs on the building. Compl.

¶¶ 3–4. Based on its initial estimates, AMCO advanced Gold Mirror $190,000.00 to cover repairs

and the business interruption loss. Compl. ¶ 8. During the course of the construction and

negotiations over the policy coverage, a controversy arose between AMCO and Gold Mirror

concerning the amount of damages caused by the collision and which repairs were covered under the

insurance policy. Compl. ¶ 8. In particular, AMCO alleges that Gold Mirror made material

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For the Northern District of California

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misrepresentations of fact as to the cost and nature of necessary repairs caused by the collision. 

Compl. ¶ 34. The parties were unable to agree to a claim amount, resulting in the current litigation. 

AMCO, an Iowa corporation with its principal place of business in that state, filed suit in this

court against Gold Mirror on July 22, 2005, seeking a declaration that the policy was void due to

Gold Mirror’s alleged factual misrepresentations. Gold Mirror filed counterclaims against AMCO

on October 3, including a claim for breach of insurance contract. 

Gold Mirror then filed suit in the Superior Court for the County of San Francisco on October

7 (the “state court action”), against the driver of the truck, Deviere Robinson, the lessor, Trucklease

Corporation, and the lessee, The News Group, seeking to recover the damages sustained in the

collision under state tort law. Robinson is a resident of California, and Trucklease and The News

Group are corporations with their principal places of business in California. 

On December 5, AMCO, as counter-defendant in the federal action, filed a third-party

complaint in this court in subrogation against Trucklease. Finally, on December 15, Trucklease

cross-claimed against AMCO in the state court action. This court and the state court are thus

presented with identical parties litigating similar issues arising from the same set of facts. 

Jurisdiction in this court is based on diversity, 28 U.S.C. section 1332, and the Declaratory

Judgment Act, 28 U.S.C. sections 2201 et seq. The Ninth Circuit, interpreting Wilton v. Seven Falls

Co., 515 U.S. 277 (1995), has held that in declaratory relief actions relating to coverage under or

interpretation of insurance policies, even if, as here, “the suit passes constitutional and statutory

muster, the district court must also be satisfied that entertaining the action is appropriate.” 

Government Employees Insurance Co. v. Dizol, 133 F.3d 1220 (9th Cir. 1998) (en banc). 

Furthermore, “this determination is discretionary, for the Declaratory Judgment Act is ‘deliberately

cast in terms of permissive, rather than mandatory, authority.’” Id. (quoting Public Serv. Comm’n v.

Wycoff Co., 344 U.S. 237, 250 (1952) (Reed, J., concurring)). 

The reason for this threshold inquiry is that declaratory relief actions almost always involve

interpretations of state law. Concerns of comity and wise judicial administration ordinarily counsel

against exercising jurisdiction in declaratory relief actions that present only issues of state law,

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particularly while there are parallel proceedings pending in state court. See Employers Reinsurance

Corporation v. Karussos, 65 F.3d 796, 798 (1995). To exercise jurisdiction over declaratory relief

actions, the district court must be satisfied that a particular action presents circumstances that

warrant an exception to this general rule. See id. 

In Dizol, cited above, the Supreme Court underscored that the jurisprudential factors

articulated in Brillhart v. Excess Ins. Co., 316 U.S. 491 (1942), still apply to jurisdiction

considerations in declaratory relief actions. See, 133 F.3d at 1225 & n.5. These factors include but

are not limited to (1) avoiding needless determination of state law issues; (2) discouraging litigants

from filing declaratory judgment actions as a means of forum shopping; and (3) avoiding duplicative

litigation. See id. 

Based on the pleadings currently before the court, this action does not appear to present

exceptional circumstances which justify jurisdiction. Moreover, the court notes a significant

problem with allowing the instant litigation to go forward in federal court. Trucklease was

apparently impleaded under Federal Rule of Civil Procedure 14(a), despite the absence of an express

invocation of that rule by either party. See Wright & Miller, 6 Fed. Prac. & Proc. Civ. 2d § 1460. 

Because Gold Mirror and Trucklease are not diverse, this court does not have jurisdiction to hear

claims and defenses by Gold Mirror against Trucklease under the supplemental jurisdiction statute,

28 U.S.C. section 1367. See Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365 (1978). 

Subsection (b) of section 1367 precludes “supplemental jurisdiction under subsection (a) over claims

by plaintiffs against persons made parties under Rule 14 . . . .” As a counterclaimant, Gold Mirror is

a plaintiff for purposes of section 1367, and therefore the limitation contained in subsection (b)

applies to its claims against Trucklease. However, no exception to the supplemental jurisdiction

statute appears to bar this court from hearing claims and defenses made by Trucklease against Gold

Mirror. 

The state court proceeding is free of this jurisdictional problem, and all parties’ interests may

be represented there. It thus appears to this court that concerns of comity and wise judicial

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administration counsel against this court’s exercising its discretionary jurisdiction under the

Declaratory Judgment Act. 

CONCLUSION

For the foregoing reasons, this court orders defendant Gold Mirror and plaintiff AMCO to

show cause why this court should exercise jurisdiction over this action. 

Accordingly, on or before March 1, 2006, plaintiff and defendant shall each file briefs not to

exceed ten (10) pages explaining why this action should not be stayed or dismissed.

IT IS SO ORDERED.

Dated: February 17, 2006 _______________________________

MARILYN HALL PATEL

District Judge

United States District Court

Northern District of California

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