Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-00716/USCOURTS-caed-2_05-cv-00716-1/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

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

EMPIRE FIRE AND MARINE 

INSURANCE COMPANY, a

corporation duly organized

under the laws of the State of

Oklahoma, with principal place

of business in State of

Nebraska,

NO. CIV. S 05-0716 MCE DAD

Plaintiff,

v. MEMORANDUM AND ORDER

MARK BROOM III, an individual;

KAREN BROOM, an individual;

Does 1 through 50,

Defendants.

----oo0oo----

Presently before the Court is a Motion to Dismiss,

predicated on lack of subject matter jurisdiction under Federal

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 Unless otherwise stated, all further references to a Rule 1

are to the Federal Rules of Civil Procedure.

 Because oral argument would not be of material 2

assistance, this matter was deemed suitable for decision without

oral argument. E.D. Local Rule 78-230(h).

2

Rule of Civil Procedure 12(b)(1) , filed by Defendant Karen Broom 1

(“Karen”). Karen contends the instant declaratory action, filed

by Plaintiff Empire Fire and Marine Insurance Company (“Empire”),

must be dismissed because the state court is the proper forum for

resolution of all the issues. Alternatively, Karen contends that

this action should be stayed. For the reasons set forth below,

Karen’s motion is DENIED.2

BACKGROUND

Defendant Mark Broom, III (“Mark”) rented a vehicle from

Enterprise Rent A Car (“Enterprise”). In conjunction with the

rental, Mark purchased insurance coverage under a Supplemental

Liability Insurance policy (“policy”) provided by Empire. When

driving the vehicle, Mark was involved in a single vehicle

accident in which Karen suffered injuries. Karen brought a

personal injury action against Mark and Enterprise in Sacramento

County Superior Court.

Empire’s policy exempts “injury to or property damage

suffered by the renter, any authorized driver or employee of the

renter, or family members of the aforementioned related by blood,

marriage or adoption if such family member resides in the same

household with the renter...”. Pl.’s Compl. ¶ 8. Empire seeks a

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judicial declaration that, regardless of the outcome in the state

court action, Mark is not entitled to indemnity for injuries to

Karen under its policy.

STANDARD

On a motion to dismiss pursuant to Rule 12(b)(1), the

standard the court applies varies according to the nature of the

jurisdictional challenge. A motion to dismiss for lack of

subject matter jurisdiction may either attack the allegations of

jurisdiction contained in the complaint as insufficient on their

face to demonstrate the existence of jurisdiction (“facial

attack”), or may be made as a “speaking motion” attacking the

existence of subject matter jurisdiction in fact (“factual

attack”). Thornhill Publishing Co. v. General Tel. & Elec.

Corp., 594 F.2d 730, 733 (9 Cir. 1979); Mortensen v. First Fed. th

Sav. & Loan Ass’n, 549 F.2d 884, 891 (3d Cir. 1977). If the

motion constitutes a facial attack, the court must consider the

factual allegations of the complaint to be true. Williamson v.

Tucker, 645 F.2d 404, 412 (5 Cir. 1981); Mortensen, 549 F.2d at th

891. If the motion constitutes a factual attack, however, “no

presumptive truthfulness attaches to plaintiff’s allegations, and

the existence of disputed material facts will not preclude the

trial court from evaluating for itself the merits of

jurisdictional claims.” Thornhill, 594 F.2d at 733 (quoting

Mortensen, 549 F.2d at 891).

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ANALYSIS

“In a case of actual controversy within its jurisdiction,

... any court of the United States may ... may declare the rights

and legal obligations of any interested party seeking such

declaration.” 28 U.S.C. § 2201 (West 1994). When a party

challenges the court’s subject matter jurisdiction over a

declaratory action, the district court determines whether the

lawsuit presents a case or controversy and whether exercising the

court’s discretionary jurisdiction is appropriate. The court

must make a sufficient record of its reasoning to enable

appellate review. Government Employees Ins. Co. v. Dizol, 133

F.3d 1220, 1222-23, 1225 (9th Cir. 1998) (“GEICO”).

1. Case or Controversy Requirement

An action by an insurer to determine its liability to defend

or indemnify an insured satisfies the case or controversy

requirement. GEICO, 133 F.3d at fn. 2; Am. Nat’l Fire Ins. v.

Hungerford, 53 F.3d 1012, 1015-16 (9th Cir. 1995); Am. States

Ins. Co. v. Kearns, 15 F.3d 142, 144 (9th Cir. 1994).

2. Exercise of Court’s Discretion

a. Presumption to Decline Jurisdiction

The pendency of a state action does not require a district

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court to decline jurisdiction over a declaratory action, however,

where there are “parallel state proceedings involving the same

issues and parties pending at the time the federal declaratory

action is filed, there is a presumption that the entire suit

should be heard in state court.” GEICO, 133 F.3d at 1225 (citing

Chamberlain v. Allstate Ins. Co., 931 F.2d 1361 (9th Cir. 1991)). 

Karen argues that because the pending state court action is 

parallel to this action, there is a presumption that the state

court should hear the entire matter. In Huth v. Hartford, 298

F.3d 800 (9th Cir. 2002), a case relied upon in the moving

papers, the Ninth Circuit upheld the dismissal of a declaratory

action when there was a declaratory action pending in the state

court and the state court action involved identical parties and

precisely the same issue. Id. at 802. 

This action and the state court action do not represent

parallel actions with identical parties and issues. Here, the

state court action is a personal injury suit for damages between

Mark and Karen, while Empire seeks a declaration of its

obligations under the insurance contract. The issue of liability

under tort law is not identical to the issue of an obligation

under a contract. Further, Empire is not a party to the state

court action, nor can it join the action under California law. 

The California Evidence Code prohibits the admission of evidence

of liability insurance. Cal. Evid. § 1155 (West 1995). 

Moreover, the California Supreme Court has construed § 1155 to

prohibit an action against both the insured and the insurer. 

Moradi-Shalal v. Fireman’s Fund. Ins. Co., 46 Cal. 3d 287, 311

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(1988); Royal Globe Ins. Co. v. Superior Ct., 23 Cal. 3d 880, 891

(1979).

Because there is no parallel state court action with issues

identical to those raised in this proceeding, this Court finds no

grounds to presume that the entire matter should be heard in

state court. Thus, the decision to exercise jurisdiction in this

case is solely within the Court’s sound discretion.

b. Brillhart Factors

In determining whether to exercise its discretion, the court

must consider whether the declaratory action 1) will create

duplicative litigation, 2) will encourage filing declaratory

actions as a means of forum shopping, or 3) will require a

needless determination of state law. GEICO, 133 F.3d at 1220

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

These considerations, commonly referred to as the Brillhart

factors, will now be addressed in turn.

1. Avoiding Duplicative Litigation. Retaining jurisdiction

over this matter will not encourage duplicative litigation. 

Empire is well within its rights to bring an action to declare

its obligations under the insurance contract. Further, as set

forth above, Empire cannot pursue its interests within the

pending state court action under California law. Resolving the

tort liability issues and the insurance contract obligations

requires two separate actions. As a diverse party, Empire chose

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to bring its action in this federal court as it was entitled to

under 28 United States Code section 1332 (West 1993 & Supp.

2005).

2. Avoiding Forum Shopping. The court must also determine

whether the exercise of jurisdiction will encourage forum

shopping, or “reactive” declaratory actions. A federal court

should not entertain a “reactive” or “defensive” declaratory

action brought by an insurance company. Continental Cas. Co. v.

Robsac Indus., 947 F.2d 1367, 1371 (9th Cir. 1991). When the

insurer is a party to the state court action, filing a

declaratory action to determine an identical issue in federal

court is “reactive.” Id. at 1372-73. In the present case,

Empire is not a party to the state court action, and, as set

forth above, cannot join the action. Further, the tort liability

issues presented in the state court action and the contractual

obligation issues presented in this federal action are not

identical. Because this federal action is not “defensive” or

“reactive,” exercising jurisdiction over this matter does not

encourage forum shopping.

3. Avoiding a Needless Determination of State Law. A

federal declaratory action involves a needless determination of

state law where the pending state court action will resolve the

issue. Id. at 1371. Where the state and federal proceedings

will resolve the same issue, the state court is the preferable

forum. Huth, 298 F.3d at 804. In the present case, as already

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indicated, the state court proceeding will resolve issues of

liability under tort law, while this declaratory action will

resolve contractual obligations. Because the pending state court

action will not resolve the issues presented in this declaratory

action, this case does not present a “needless” determination of

state law.

CONCLUSION

Based on the foregoing, Defendant Karen Broom’s Motion to

Dismiss is hereby DENIED.

IT IS SO ORDERED.

DATED: November 16, 2005

_____________________________

MORRISON C. ENGLAND, JR

UNITED STATES DISTRICT JUDGE

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