United States District Court, E.D. Washington
ATLANTIC CASUALTY INSURANCE COMPANY, a North Carolina corporation, Plaintiff,
BRAD BELLINGER, an individual d/b/a LILAC CITY VAPOR; LILAC CITY VAPOR, a Washington limited liability company; MARLENE RUBERTT, an individual, Defendant.
ORDER DENYING DEFENDANTS' MOTION TO DISMISS OR,
ALTERNATIVELY, TO STAY
Stanley A. Bastian United States District Judge
the Court is Defendants' Motion to Dismiss or,
Alternatively, to Stay. ECF No. 11. The motion was heard
without oral argument. Based on the reasons discussed herein,
Defendants' motion is denied.
filed this Declaratory Judgment Action on December 1, 2016,
seeking a declaration that, under the applicable insurance
policy, Defendants Brad Bellinger and Lilac City Vapor, LLC
are not entitled to insurance coverage for claims made by
Defendant Marlene Rubertt in an underlying state court
products liability lawsuit and that it has no duty to defend.
Defendants moved to dismiss pursuant to Rule 12(b)(1) and
12(b)(6), although the briefing contains no argument that the
Court lacks subject matter jurisdiction over this action or
that Plaintiff fails to state a claim upon which relief may
be granted. The Rule 12 motion to dismiss is
denied. Alternatively, Defendants moved the
Court to stay this action pending resolution of the
underlying state court lawsuit.
Declaratory Judgment Act provides that “upon the filing
of an appropriate pleading, [the court] may declare the
rights and other legal relations of any interested party
seeking such declaration, whether or not further relief is or
could be sought.” 28 U.S.C. §2201(a). When
determining whether to exercise jurisdiction over a
declaratory judgment action, the Brillhart v. Excess Ins.
Co. of Am., 316 U.S. 491(1942), factors are the
“philosophic touchstone.” Gov. Emp. Ins. Co.
v. Dizol, 133 F.3d 1220, 1225 (9th Cir. 1998). The
Brillhart factors state that the court “should
avoid needless determination of state law issues; it should
discourage litigants from filing declaratory actions as a
means of forum shopping; and it should avoid duplicative
litigation.” Id. (citation omitted). These
factors are non-exhaustive. Id. at 1225 n.5.
Washington State Supreme Court routinely approves of insurers
filing declaratory judgment actions where their coverage
liability is uncertain. See Woo v. Fireman's Fund
Ins. Co., 161 Wn.2d 43, 54 (2007) (“When an
insured is uncertain of its duty to defend, it may defend
under a reservation of rights while seeking a declaratory
judgment relieving it of its duty.” (Truck Ins.
Exch. v. VanPort Homes, Inc., 147 Wn.2d 751, 761
(2002)). The Ninth Circuit has likewise instructed that
“there is no presumption in favor of abstention in
declaratory actions generally, nor in insurance coverage
cases specifically.” Dizol, 133 F.3d at 1225.
all of the Brillhart factors favor retention of
jurisdiction over this action. First, the Court is not asked
to make needless determinations of state law. Where the
“state tort case did not involve the same legal issues
as the federal declaratory action, which [is] centered on the
coverage dispute rather than liability issues, ” the
Ninth Circuit has declined to abstain. Am. Cas. Co. of
Reading, Penn. v. Krieger, 181 F.3d 1113, 1119 (9th Cir.
1999). Defendants argue that insurance law is an area
traditionally left to the states and that in a diversity
action, such as this, the federal interest in hearing a case
is at its lowest. Defendants correctly note that this is not
a parallel proceeding to the underlying state court tort
action, as the Court is merely asked to determine the
coverage liability issues. There is no implication that the
Court would be required to decide unsettled issues of state
law, and the coverage liability determination is squarely
within this Court's competence.
this action cannot be said to amount to forum shopping. The
issue of coverage liability has not been litigated in any
other forum. Plaintiff could have filed this action in state
court, but it was not required to.
Defendants contend that the issues in the present declaratory
action overlap with issues in the underlying state court
lawsuit. Namely, Defendants assert that the Court may be
required to determine whether Lilac City Vapor, as a
retailer, may have the liability of a manufacturer as defined
by the Washington Products Liability Act (WPLA). However, it
is apparent that the Court will not be required to make any
factual findings on that point. Typically, an insurer's
duty to defend is evaluated based on the allegations
contained in the complaint. Truck Ins. Exch., 147
Wn.2d at 760. Ruling on the issue of coverage, thus, is
purely a matter of interpretation of the insurance contract.
Brillhart factors weigh in favor of retention of
jurisdiction, Defendants' motion to abstain is
seeking a stay of proceedings “must make out a clear
case of hardship or inequity in being required to go forward,
if there is even a fair possibility that the stay for which
he prays will work damage to someone else.” Landis
v. N. Am. Co., 299 U.S. 248, 254 (1936). When
determining whether to grant a party's motion to stay,
“the competing interests which will be affected by the
granting or refusal to grant a stay must be weighed.”
CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir.
1962). Typically, this balancing test requires the court to
consider (1) “the possible damage which may result from
the granting of a stay;” (2) “the hardship or
inequity which a party may suffer in being required to go
forward;” and (3) “the orderly course of justice
measured in terms of simplifying or complicating the issues,
proof, and questions of law which could be expected to result
from a stay.” Id. (citing Landis, 299
U.S. at 254-55).
the damage of granting a stay clearly falls on Plaintiff.
Plaintiff is currently tendering a defense under a
reservation of rights and seeks a judicial determination that
it is not required to do so. Staying this action simply
delays the coverage liability determinations that will be
made at some point. The hardship of denying the stay falls on
Defendants, who will be required to litigate on two fronts.
However, a judicial resolution of this action will simplify
the issues. This Court is not asked to make factual
determinations that could impact the underlying state court
lawsuit. Rather, there is no overlap between the state and
federal court proceedings. Adjudicating the rights of the