Opinion
NO. CIV. S-00-2289 WBS/PAN.
February 5, 2001
MEMORANDUM AND ORDER RE MOTION OF WISCONSIN-CALIFORNIA FOREST PRODUCTS TO DISMISS OR STAY ACTION
Plaintiff Legion Insurance Co. ("Legion") seeks a declaration of its rights and obligations under its policies numbered CP1-0513027, CP2-0531027, and CP3-0531027, naming as defendants: Wisconsin-California Forest Products ("Wisconsin-Cal"), and California Sportfishing Protection Alliance ("CSPA"). Defendant Wisconsin-Cal moves to dismiss this matter, or in the alternative to stay the matter pending resolution of the underlying lawsuit pursuant to the court's discretion under the Uniform Declaratory Judgment Act, 28 U.S.C. § 2201 ("the Act").
I. Factual and Procedural Background
On or about July 12, 2000 defendant CSPA filed a citizen suit against defendant Wisconsin-Cal pursuant to the Clean Water Act, 33 U.S.C. § 1365, in this court ("the underlying suit").California Sportfishing Protection Alliance v. Wisconsin-California Forest Products, E.D. Cal. Civ S-00-1490 WBS/JFM. CSPA alleges that on or about April 6, 2000 Wisconsin-Cal received a Notice of Violation from the California Regional Water Quality Control Board. CSPA further alleges that as of July 12, 2000, Wisconsin-Cal was engaging in ongoing violations of National Pollutant Discharge Elimination System ("NPDES") Permit No. 97-221, thereby directly affecting the recreational and environmental interests of its members.
Specifically, CSPA alleges that on October 24, 1997 Wisconsin-Cal obtained a permit to discharge identified pollutants into the Sacramento River. CSPA further alleges that Wisconsin-Cal was discharging "stormwater and non-stormwater runoff, with zinc, tannins, lignins, water with excessive turbidity, suspended solids, and low pH through surface runoff leading to the Sacramento River" in violation of its permit. (Def.'s Ex. 1 at 2, Attached to Decl. of David F. Mangini). CSPA seeks declaratory and injunctive relief, an order requiring Wisconsin-Cal to make a payment toward an environmental fund approved by the court, civil penalties of $27,500 per day of violation for each violation, and reasonable attorney's fees and costs pursuant to the Clean Water Act. (Def.'s Ex. 1 at 3, Attached to Decl. of David F. Mangini).
Wisconsin-Cal was insured by plaintiff Legion under a commercial general liability policy at the time of its alleged NPDES violation and at the time of the issuance of the Notice of Violation by the Water Board. Wisconsin-Cal tendered defense of the underlying suit to Legion. Legion, in a letter dated October 4, 2000, agreed to defend Wisconsin-Cal pursuant to the terms of the policy, but reserved its right to file a declaratory relief action to determine its rights and duties, to withdraw from its defense, and to seek reimbursement and/or allocation of any and all defense fees attributable to the defense of uncovered claims.
On or about October 18, 2000 Legion filed its complaint for declaratory relief in this court. On or about November 14, 2000, Wisconsin-Cal filed its motion to dismiss or, in the alternative, to stay this action pending resolution of the underlying suit. Wisconsin-Cal requests that the court dismiss Legion's action for declaratory relief pursuant to the court's discretion.
II. Discussion
Before a federal court may hear an action for declaratory relief pursuant to the Declaratory Judgment Act, "a lawsuit must present an actual case or controversy within the meaning of Article III, section 2 of the United States Constitution."Government Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1222 (9th Cir. 1998). The lawsuit "must also fulfill statutory jurisdictional prerequisites." Id. at 1223. Once the constitutional and statutory requirements have been met, the court must "be satisfied that entertaining the action is appropriate." Id.
A. Article III and Statutory Requirements
The Ninth Circuit has "consistently held that a dispute between an insurer and its insureds over the duties imposed by an insurance contract satisfies Article III's case and controversy requirement." Dizol, 133 F.3d at 1223 n. 2 (citing American Nat'l Fire Ins. V. Hungerford, 53 F.3d 1012, 101-16 (9th Cir. 1995)). This is exactly the dispute before the court, and thus, Legion has Article III standing.
An action for declaratory relief satisfies the standing requirements of the Declaratory Judgment Act, 28 U.S.C. § 2201, if "the facts alleged, under all circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maryland Casualty Co. v. Pacific Coal Oil Co. et al., 312 U.S. 270, 273 (1941). Legion's complaint presents just such a controversy. CSPA is seeking a judgment against Wisconsin-Cal in the underlying suit, which Wisconsin-Cal claims is covered by its policy with Legion. See Maryland, 312 U.S. at 273 (finding an actual controversy exists when a potential third party claimant seeks judgment against insured and insurer seeks declaratory relief regarding coverage). Thus, Legion also has statutory standing.
B. The Court's Discretion
The federal district courts have discretion to determine whether it is appropriate to maintain jurisdiction over an action for declaratory relief. See Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995) ("Since its inception, the Declaratory Judgment Act has been understood to confer on federal courts unique and substantial discretion in deciding whether to declare the rights of litigants."). The Act itself provides that a court " may declare the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C. § 2201(a) (emphasis added).
Thus, the Act "gave the federal courts competence to make a declaration of rights; it did not impose a duty to do so." Public Affairs Associates v. Rickover, 369 U.S. 111, 112 (1962). And, the federal courts may, "in the exercise of [their] sound discretion, . . . stay or . . . dismiss an action seeking a declaratory judgment before trial or after all arguments have drawn to a close." Wilton, 515 U.S. at 288. The courts' discretion, however, is not unfettered. Dizol, 133 F.3d at 1223. District courts cannot refuse to hear declaratory actions "as a matter of whim or personal disinclination." Id., at 1223.
Wisconsin-Cal argues that the "Brillhart factors" described by the Ninth Circuit in Dizol, compel the court to dismiss or stay this action. See Dizol, 133 F.3d at 1225. However, this court is unaware of any case in which a court has ever dismissed or stayed a federal action based on these factors in the absence of a parallel state proceeding.
"The district 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." Dizol, 133 F.3d at 1225.
The Ninth Circuit held that "when a party seeks declaratory relief in federal court and a suit is pending in state court presenting the same state law issues, there exists a presumption that the entire suit should be heard in state court." See Chamberlain, 931 F.2d at 1367 (finding that before a court may retain jurisdiction over a declaratory action when there is parallel state litigation pending, the court must balance these important interests). On the other hand, when there is no parallel state proceeding pending, it would likely be an abuse of discretion for a district court to refuse jurisdiction over a declaratory action. See Wilton, 515 U.S. at 290 ("We do not at this time attempt to delineate the outer boundaries of [the district courts'] discretion in other cases, for example, cases raising issues of federal law or cases in which there are no parallel state proceedings.").
The underlying suit in this matter is a citizen suit filed by CSPA against Wisconsin-Cal under the Clean Water Act. See 33 U.S.C. § 1365. There is no parallel state proceeding pending. Thus, the court does not risk the "gratuitous interference with the orderly and comprehensive disposition of state court litigation" by maintaining jurisdiction over the action.Brillhart, 316 U.S. at 495. Therefore, the Brillhart factors are inapplicable. See Chamberlain, 931 F.2d 1367; see also Dizol, 133 F.3d at 1225.
Wisconsin-Cal also argues there are novel issues of state law in this action, compelling the court to abstain. Specifically Wisconsin-Cal suggests that resolution of this matter would require the court to determine: (1) "whether rainwater comes within [the] policy definitions of pollutant"; and (2) how a state court would deal with "personal injury coverage for nuisance liability, when a pollution exclusion has been added to [the] coverage." (Def.'s Mot. at 3:9-14).
The court expresses no opinion at this time as to whether these issues, as framed by Wisconsin-Cal, would necessarily need to be decided to resolve this action. However, even if the court did need to decide these issues, it is not persuaded that these issues would be more appropriately decided by a state court.
III. Conclusion
"The purpose of the Declaratory Judgment Act is to afford an added remedy to one who is uncertain of his rights and who desires an early adjudication thereof without having to wait until his adversary should decide to bring suit, and to act at his peril in the interim." See Shell Oil Co., 290 F.2d at 692 (citing Aetna Casualty Surety Co. v. Quarles, 92 F.2d 321 (4th Cir. 1937). A dismissal or stay of this action would subject plaintiff to just such peril. Accordingly, the court chooses not to exercise its discretion to stay or dismiss this action.
IT IS THEREFORE ORDERED that defendant Wisconsin-California Forest Products' motion to dismiss, or in the alternative to stay this action be, and the same hereby is, DENIED.