Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-00356/USCOURTS-caed-2_06-cv-00356-1/pdf.json

Parties Involved:
Allen L. Mason
Defendant
American National Property and Casualty Company
Plaintiff
Craig Catto
Defendant
Sara Catto
Defendant
Dragonfly Ventures, Inc.
Defendant
Flying Vikings Incorporated
Defendant
Chester Peterson
Defendant
Rancho Rotors
Defendant
Brian Sanders
Defendant
Dennis Sanders
Defendant
Elise Sanders
Defendant
Kimberly Sanders
Defendant
Sanders Aircraft Technologies, Inc.
Defendant
Sanders Aircraft, Inc.
Defendant

Document Text:

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

AMERICAN NATIONAL PROPERTY AND

CASUALTY COMPANY, a Missouri

corporation

NO. CIV. S-06-356 WBS PAN (JFM)

Plaintiff,

v. MEMORANDUM AND ORDER RE: 

MOTION TO DISMISS OR STAY

DRAGONFLY VENTURES, INC., a

California corporation and

doing business as RANCHO

ROTORS; CHESTER PETERSON,

individually and doing

business as RANCHO ROTORS;

ALLEN L. MASON; SARA CATTO,

individually and through her

guardian ad litem, CRAIG

CATTO; KIMBERLY SANDERS,

individually and as guardian

ad litem for ELISE SANDERS;

FLYING VIKINGS INCORPORATED;

DENNIS SANDERS; BRIAN SANDERS;

SANDERS AIRCRAFT TECHNOLOGIES,

INC.; SANDERS AIRCRAFT, INC.;

and DOES 1 through 10,

inclusive;

Defendants.

----oo0oo----

Defendant Kimberly Sanders, joined by all codefendants, moves the court to dismiss or stay this action,

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It is unclear whether this provision prevents the use 1

of the aircraft for flight instruction; the policy specifically

contemplates that a student pilot may operate the aircraft with a

qualified flight instructor. (Nunez Decl., Ex. 1 at 28.)

2

because of a related personal injury action that is currently

pending in state court.

I. Factual and Procedural Background

On August 3, 2005, an airplane accident occurred

involving Kimberly Sanders, the pilot of a Beechcraft A23

aircraft that she had rented from Rancho Rotors, Sara Catto, a

student pilot who was on board, and Elise Sanders, Kimberly

Sanders’ five year old daughter. (Compl. ¶¶ 19, 21.) All three

people sustained personal injuries as a result of the crash. 

(Id. ¶ 21.) A civil action was filed in Sacramento Superior

Court in October 2005 on behalf of Sara Catto, by her guardian ad

litem, against Kimberly Sanders, Rancho Rotors, and other parties

who are defendants here. (Id. ¶ 22.) 

Plaintiff American National Property and Casualty

Company insured the aircraft and is a named defendant in the

state court action. (Id. ¶ 18.) Plaintiff also accepted the

tender of defense in the state court action for defendants

Chester Peterson, Dragonfly Ventures, Inc., and Rancho Rotors,

under a reservation of rights letter. (Id. ¶ 27.) Defendant’s

policy excludes coverage for rental aircraft when a renting pilot

operates the aircraft or permits the aircraft to be operated for

any purpose and charges another for the use of the aircraft.

(Nunez Decl., Ex. 1 at 4 (Renter Pilot Liability Coverage

Extension).) On February 6, 2006, plaintiff filed this suit in 1

federal court, seeking a declaratory judgment that, based on

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these exclusions, plaintiff has no duty to defend or indemnify

any person under its policy in connection with any claims related

to liability for the August 3rd accident. (Id. ¶ 35.) Plaintiff

additionally seeks declaratory relief that it will not be

responsible for attorneys’ fees for defending Peterson,

Dragonfly, and Rancho Rotors for any claims related to liability

for the accident. (Id.) Defendants now ask the court to abstain

from issuing a declaratory judgment and to dismiss or stay this

action.

II. Discussion

On a motion to dismiss, the court must accept the

allegations in the complaint as true and draw all reasonable

inferences in favor of the pleader. Scheuer v. Rhodes, 416 U.S.

232, 236 (1974); Cruz v. Beto, 405 U.S. 319 (1972). In general,

the court may not consider material other than the facts alleged

in the complaint; however, reliance on matters of public record

is allowed. Anderson v. Angelone, 86 F.3d 932, 934 (9th Cir.

1996) (noting that a district court cannot rely on “materials

outside the pleadings in support or opposition to [a] motion [to

dismiss]”); Mack v. S. Bay Beer Distribs., 798 F.2d 1279, 1282

(9th Cir. 1986), abrogated on other grounds by Astoria Fed. Sav.

& Loan Ass’n v. Solimino, 501 U.S. 104 (1991) (recognizing that

matters of public record can be relied upon when deciding a Rule

12(b)(6) motion). Therefore, because defendant Sara Catto’s

state court complaint has been filed with the Superior Court in

and for the County of Sacramento, it is a matter of public

record, and the court can rely on it in deciding whether to

abstain from deciding this declaratory judgment action. See Kent

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v. Daimlerchrysler Corp., 200 F. Supp. 2d 1208, 1219 (N.D. Cal.

2002) (“[A] legal memorandum filed in a state court action . . .

is a public record.”).

When a declaratory judgment is at issue, “the normal

principle that federal courts should adjudicate claims within

their jurisdiction yields to considerations of practicality and

wise judicial administration.” Wilton v. Seven Falls Co., 515

U.S. 277, 288 (1995). “[T]here is no presumption in favor of

abstention in declaratory actions generally, nor in insurance

coverage cases specifically.” Gov’t Employees Ins. Co. v. Dizol,

133 F.3d 1220, 1225 (9th Cir. 1998) (en banc). Instead, because

the grant of a declaratory judgment is a discretionary act, a

court may decline to entertain such actions even when

jurisdiction over the subject matter of the claim is otherwise

proper. 28 U.S.C. § 2201(a); Dizol, 133 F.3d at 1223 (“[T]he

Declaratory Judgment Act is ‘deliberately cast in terms of

permissive, rather than mandatory, authority.’” (quoting Pub.

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

(Reed, J., concurring))). 

Still, a court cannot yield jurisdiction on a “whim or

personal disinclination,” but instead “must balance the concerns

of judicial administration, comity, and fairness to the

litigants.” State Farm Fire & Cas. Co. v. McIntosh, 837 F. Supp.

315, 316 (N.D. Cal. 1993). More specifically, a court should

consider the eight factors identified in Dizol that govern its

discretion to stay or dismiss an action. 133 F.3d at 1225. The

relevant considerations are whether the federal declaratory

action will or will not: (1) result in a needless determination

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Given the facts in this case, the analysis of factors 2

one and three is closely related, with both factors addressing

whether litigation here will be duplicative of litigation in

state court. The first factor, avoiding needless determination

of state law issues, has been explained as follows: “when

‘parallel state proceedings involving the same issues and parties

[are] pending at the time the federal declaratory action is

filed, there is a presumption that the entire suit should be

heard in state court.’” Dizol, 133 F.3d at 1225. Similarly, if

this court proceeds with the declaratory action, and the state

court does not stay the underlying action, it is conceivable that

the result will be some degree of duplicative litigation (the

third factor). 

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of state law issues, (2) encourage forum shopping, (3) lead to

duplicative litigation, (4) settle all aspects of the

controversy, (5) clarify the legal relations at issue, (6) serve

only as a procedural fence, (7) result in entanglement between

the federal and state court systems, and (8) inconvenience the

parties or witnesses. Dizol, 133 F.3d at 1225 & n.5 (describing

the relevant factors governing discretion as provided in

Brillhart v. Excess Insurance Company of America, 316 U.S. 491,

495 (1942), and other factors added by the Ninth Circuit to the

non-exhaustive Brillhart list). 

Defendants contend that the court should abstain from

hearing this declaratory judgment action based primarily on

factors one and three of those listed above, namely, the needless

determination of state law issues and the avoidance of

duplicative litigation. These factors have considerable sway 2

when a declaratory judgment action would require the

determination of whether someone acted negligently or caused an

intentional tort; in other words, when such an action would

require the determination of facts essential to the determination

of liability in an ongoing state court proceeding. See, e.g.,

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Nationwide Ins. v. Zavalis, 52 F.3d 689, 694 (7th Cir. 1995)

(“When the underlying facts and the nature of the insured’s

conduct are disputed, the court presiding over the declaratory

action typically cannot decide whether the insured acted

negligently or intentionally (and consequently whether he has

coverage or not) without resolving disputes that should be left

to the court presiding over the underlying tort action.”);

Allstate Ins. Co. v. Harris, 445 F. Supp. 847, 849-51 (N.D. Cal.

1978) (declining to resolve a declaratory judgment action because

the insurance exclusion required finding whether a defendant

caused intentional injury, and would therefore “decide a disputed

question of fact that is at the heart of the underlying tort

action”). 

With regard to these factors, defendants contend that,

by retaining this declaratory judgment action, this court risks

invading the province of the state factfinder. Additionally,

they argue that an adverse decision in this case might

collaterally estop Kimberly Sanders from defending herself

against liability in state court. See McIntosh, 837 F. Supp. at

316 (“Federal courts should be reluctant to decide factual issues

which are currently at issue in state court. Where a federal

court determines such a factual issue, the parties may be

collaterally estopped from litigating the issue further in the

underlying state action.” (citations omitted)).

However, the legal questions identified by defendants

as matters that this court will need to decide here are either

matters that will not have a conclusive effect on the state court

litigation, or they are matters that this court will not actually

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need to address. Specifically, defendants contend that the

declaratory relief action will require the court to find whether

defendant Kimberly Sanders was acting as a flight instructor at

the time of the accident, whether she was charging defendant Sara

Catto for the use of the aircraft, and whether she was flying the

aircraft at the time of the accident. They argue that these

issues will determine whether Kimberly Sanders was negligent and

if so, the appropriate apportionment of fault. These concerns

are insufficient to justify abstention. 

First, if this court decides whether Kimberly Sanders

was acting as a flight instructor, it will not be deciding the

ultimate issue of negligence will not need to be decided by this

court. Whether Kimberly Sanders was acting as a qualified flight

instructor may have some effect on the ultimate determination of

negligence, and if so, on the apportionment of fault. Yet, even

if the court here determines whether Kimberly Sanders was or was

not acting as a qualified flight instructor, the jury verdict in

the state court proceedings would by no means become a foregone

conclusion. The jury would still have to determine what Kimberly

Sanders’ duty of reasonable care was, given the role she occupied

at the time of the accident, and whether she breached that duty. 

Moreover, defendants have not cited any caselaw to indicate that

determining that Kimberly Sanders was a flight instructor will

elevate her duty of care beyond that of an ordinary pilot. 

Deciding facts the jury may take into account in determining the

issue of negligence would not decide facts “at the heart of the

underlying tort action”, Allstate Ins. Co., 445 F. Supp. at 849.

Second, whether Kimberly Sanders charged others for use

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of her rented aircraft, which will be essential in the litigation

before this court, is not an issue in the underlying state tort

action. Defendants do not have any support or legal theory to

establish that Kimberly Sanders may be prejudiced by a

determination in this court that she was charging for the use of

the aircraft. 

Third, the court does not need to decide whether

Kimberly Sanders was actually flying the plane at the time of the

accident, because such a determination is irrelevant to the

coverage exclusions at issue. The coverage exclusions apply to

any renter pilot, even if that pilot permits the plane to be

operated by another. Because defendant Kimberly Sanders was the

pilot who rented the plane, it does not matter for the purposes

of this court’s determination whether she was actually flying the

plane at the time of the accident. 

Moreover, it is undisputed that Kimberly Sanders was

the pilot in command. Under the regulations promulgated by the

Federal Aviation Administration, “[t]he pilot in command of an

aircraft is directly responsible for, and is the final authority

as to, the operation of the aircraft.” 14 C.F.R. § 91.3(a); see

also Fagerquist v. W. Sun Aviation, Inc., 191 Cal. App. 3d 709,

721 (1987). Where, as here, there was a passenger in the plane

(namely, Kimberly Sanders’ five year old daughter), a student

pilot may not be the pilot in command. 14 C.F.R. 61.89(a)(1) (“A

student pilot may not act as pilot in command of an aircraft: (1)

That is carrying a passenger . . . .”). Even when a student is

operating the controls of an aircraft, the instructor is seated

at a set of controls and retains his or her status as pilot in

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command. See McGee v. Cessna Aircraft Co., 139 Cal. App. 3d 179,

182 n.2 (1983) (noting that because an aircraft has dual

controls, “[t]he instructor remains pilot in command even when

the student has physical control over the aircraft.”). 

Because it is not disputed that Sara Catto was a

student pilot, Kimberly Sanders was the renter pilot, and the

only other person in the plane was Kimberly Sanders’ five year

old daughter, it is clear that Kimberly Sanders was the pilot in

command. Therefore, whether or not Kimberly Sanders was flying

the plane at the time of the accident, is irrelevant for

determination whether the coverage exclusions will apply to her.

Consequently, factors one and three do not counsel in

favor of dismissal or a stay. The litigation here will not

result in a needless determination of state law or interfere with

matters that should be decided in state court by the jury.

Of the factors remaining, only one factor favors

abstention. Deciding this declaratory judgment action would not

settle the underlying tort claims. Consequently, scarce judicial

resources might be wasted as “separate suits stemming from the

same overall controversy and involving overlapping issues . . .

proceed simultaneously on parallel tracks.” McIntosh, 837 F.

Supp. at 317 (quoting Mitcheson v. Harris, 955 F.2d 235, 239 (4th

Cir. 1992). Thus, this factor supports abstention. 

The remaining factors, however, do not favor

abstention. This suit does not appear to be the result of forum

shopping. Although a court ordinarily should not exercise

jurisdiction when a federal declaratory judgment suit is

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“A declaratory judgment action by an insurance company 3

against its insured during the pendency of a non-removable state

court action presenting the same issues of state law is an

archetype of what we have termed ‘reactive’ litigation.” Cont’l

Cas. Co. v. Robsac Indus., 947 F.2d 1367, 1372 (9th Cir. 1991),

overruled on other grounds by Dizol, 133 F.3d at 1223-24. 

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reactive, this suit is not necessarily reactive, because the 3

same issues are not involved in the state court and federal court

proceedings. “A declaratory judgment as to coverage will

terminate and afford relief from the uncertainty that the

insurers face as to coverage.” Cont’l Cas. Co. v. Coastal

Savings Bank, 977 F.2d 734, 738 (2d Cir. 1992) (citing Broadview

Chem. Corp. v. Loctite Corp., 417 F.2d 998, 1001 (2d Cir. 1969)). 

“The respective interests and obligations of insured and

insurers, when disputed, require determination much in advance of

judgment since they will designate the bearer of ultimate

liability in the underlying cases and hence the bearer of the

onus and risks of settlement . . . .” Id. 

Additionally, “[t]he availability of declaratory relief

in the state court, unsought by any party, does not . . .

preclude the exercise of jurisdiction to grant such relief in the

federal action.” Id. In fact, “[a]n insured and his insurer

have a mutual interest in speedy resolution of the insurer’s duty

to supply him a defense against a tort claim that may fall

outside the coverage of the insurance policy.” Zavalis, 52 F.3d

at 697 (citations omitted) (emphasis added). Thus, the legal

relations of the parties would be clarified by this court’s

retention of jurisdiction. 

This action for declaratory judgment has a purpose

other than serving as a procedural hurdle, and it is unlikely

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that the retention of jurisdiction would result in the

entanglement of the state and federal court systems. Finally,

none of the parties appear to suffer undue inconvenience from

this litigation. 

III. Conclusion

The court is mindful of the possibility that retaining

jurisdiction could, in certain cases involving an insurance

company seeking declaratory judgment based on coverage relating

to a state court action, cause defendants to suffer collateral

estoppel if the court invades the province of the jury and finds

facts determinative of the ultimate issue in an underlying state

action. However, the specter of such a possibility has not truly

been raised here. Moreover, the balance of the factors clearly

indicates that abstention would not be appropriate, with only one

factor weighing in favor of abstention, but the remainder

weighing against it. Thus, pursuant to the Brillhart factor

analysis, the court exercises its discretion to retain

jurisdiction over this action for declaratory judgment. 

IT IS THEREFORE ORDERED that plaintiff’s motion to

dismiss or stay be, and the same hereby is, DENIED. 

DATED: June 2, 2006

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