Neither the California Supreme Court, the Commissioner, nor the plaintiffs in the state court actions have identified any provisions of the Insurance Code or the Administrative Procedure Act that are reasonably susceptible of an interpretation that would require the Commissioner to admit evidence and entertain arguments at the administrative hearings that the rates are confiscatory as applied. There is therefore no unclear issue of state law that warrants Pullman abstention on plaintiffs' Due Process claims.
D. Colorado River Abstention
In Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 47 L. Ed. 2d 483, 96 S. Ct. 1236 (1976), a case involving water rights, the Supreme Court held that although the case did not fit within any of the other traditional abstention doctrines, dismissal was appropriate in deference to parallel state court proceedings, based on considerations of "wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation." Id. at 817 (quoting Kerotest Mfg. Co. v. C-O-Two Fire Equipment Co., 342 U.S. 180, 183, 96 L. Ed. 200, 72 S. Ct. 219, 92 U.S.P.Q. (BNA) 1 (1952)). The Court cautioned that in
the absence of weightier considerations of constitutional adjudication and state-federal relations, the circumstances permitting the dismissal of a federal suit due to the presence of a concurrent state proceeding for reasons of wise judicial administration are considerably more limited than the circumstances appropriate for abstention.
Id. at 818.
The Court identified several factors relevant to determine whether such "exceptional" circumstances exist: (1) whether either court has assumed jurisdiction over a res ; (2) the relative inconvenience of the forums; (3) the desirability of avoiding piecemeal litigation; and (4) the order in which the state and federal courts acquired jurisdiction. Id. at 818. In Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983), the Court identified two additional factors, (5) whether state or federal law provides the rule of decision on the merits, and (6) whether the state court proceedings are adequate to protect the parties' rights. Id. at 23-27. See also, Nakash v. Marciano, 882 F.2d 1411, 1415 (9th Cir. 1989) (listing factors).
Addressing the manner in which this nonexclusive
list of factors should be applied, the Court stated that:
No one factor is necessarily determinative; a carefully considered judgment taking into account both the obligation to exercise jurisdiction and the combination of factors counselling against that exercise is required.
Colorado River, 424 U.S. 818 at 818-19 . In Moses Cone, the Court clarified that:
the decision whether to dismiss a federal action because of parallel state-court litigation does not rest on a mechanical checklist, but on a careful balancing of the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction. The weight to be given to any one factor may vary greatly from case to case, depending on the particular setting of the case.
460 U.S. at 16.
The Ninth Circuit has recognized a seventh factor, improper forum shopping: " Forum shopping weighs in favor of a stay when the party opposing the stay seeks to avoid adverse rulings made by the state court or to gain a tactical advantage from the application of federal court rules." Travelers, 914 F.2d at 1371. The Commissioner argues that plaintiffs have filed these suits in federal court because state courts have thus far been inhospitable to the insurers' challenges. Indeed, Judge Janavs has consistently held that challenges to the regulations are premature until "there is a final administrative determination on the ultimate issue of rollback liability."
The Commissioner argues that:
Like tag-team wrestlers, the hundreds of insurance companies subject to Proposition 103 have taken turns suing the Commissioner, apportioning legal arguments, coordinating attacks, all under the careful handling of common legal representatives. As a result, a comprehensive regulatory program enacted by the voters has been tied up in a full-Nelson for over three years. Now, as there is finally tangible evidence of progress in implementing the initiative, the companies bring their brawl to federal court, seeking to pin the Commissioner before he can render his administrative decisions.
Insurers doing business in California certainly have a right to challenge any unconstitutional aspects of the rate making process which have been forced on them by the initiative. But the multiple and over-lapping assertions of these challenges in state court, before the Commissioner, and in this court causes this court to question those tactics. Numerous insurers are involved in these multiple challenges, some represented by the same law firms. Some challenges are filed in state court and some are filed in federal. The challenges are at the same time identical, separate and overlapping. Some of that appears to be coordinated and calculated (for example, the filing of the two complaints in these actions minutes apart). And most of the significant issues in these two cases are already pending in state court. The net result is to bring this court into an already complex and protracted process of litigation. Is that forum-shopping, or deliberate complexity, or merely the difficulty of the issues?
In keeping with the flexible and pragmatic approach taken to Colorado River analysis, the Ninth Circuit has loosened the requirement that the suits pending in state and federal court involve exactly the same parties or the same claims: "exact parallelism . . . is not required. It is enough if the two proceedings are 'substantially similar.'" Nakash v. Marciano, 882 F.2d at 1416. This court agrees that "if ever there were an exceptional case, this must be it," and that the policy of "wise judicial administration" underlying Colorado River compels abstention.
The Ninth Circuit has held that "the Colorado River test . . . does not apply where the Declaratory Judgments Act, 28 U.S.C. § 2201, is involved." Chamberlain v. Allstate Ins. Co., 931 F.2d 1361, 1366 (9th Cir. 1991). Plaintiffs argue that because they have requested declaratory as well as injunctive relief, Colorado River is inapplicable to their cases in toto. This court does not read so broadly. In Chamberlain, an insured sued his insurer in state court alleging a bad faith refusal to defend him in an underlying suit. The insured filed a second suit in state court. The insurer removed the first suit to federal court, and filed a counterclaim seeking a declaration of no coverage. The district court granted summary judgment for the insurer on both the bad faith claim and the counterclaim. On appeal, the Ninth Circuit held that where parallel actions for declaratory relief are pending in both state and federal courts, the decision to exercise jurisdiction should not be analyzed under Colorado River, but under the related doctrine of Brillhart v. Excess Ins. Co., 316 U.S. 491, 86 L. Ed. 1620, 62 S. Ct. 1173 (1942). Accord, Continental Casualty Co. v. Robsac Indus., 947 F.2d 1367 (9th Cir. 1991).
The Brillhart doctrine
stems from the fact that by its express terms the Declaratory Judgments Act makes the granting of declaratory relief discretionary. 28 U.S.C. § 2201(a) ("any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration").
Continental Casualty, 947 F.2d 1367, 1369 (9th Cir. 1991) (emphasis added).
Because the relief sought is discretionary, the requirements for abstention under Brillhart represent a downward departure from the standards of Colorado River, which applies in the ordinary case where the district court has the "virtually unflagging obligation" to exercise its jurisdiction. Chamberlain, 931 F.2d at 1366 (quoting Colorado River, 424 U.S. at 817). Brillhart creates "a presumption " that "when a party requests declaratory relief in federal court and a suit is pending in state court presenting the same state law issues, . . . the entire suit should be heard in state court." Chamberlain, 931 F.2d 1366 at 1366-67 (emphasis added). If the strictures of Colorado River are satisfied, then a fortiori, the requirements under Brillhart should be met.
In this case, plaintiffs seek a declaration that the regulations adopted by the Commissioner are unconstitutional, and an injunction against their use or enforcement. The court would have to determine that the regulations are unconstitutional in order to grant injunctive relief. The identical issues are raised in both declaratory and injunctive relief. It would elevate form over substance for this court to apply two different tests to determine whether it should exercise jurisdiction over what are essentially indivisible claims for relief. While district courts ordinarily have discretion to grant declaratory relief, in this case determining whether plaintiffs are entitled to that relief is a necessary incident of adjudicating the merits of their claims.
The Supreme Court has left open the question of "whether a dismissal or a stay should ordinarily be the preferred course of action when a district court finds that Colorado River counsels in favor of deferring to a parallel state-court suit." Moses Cone, 460 U.S. at 28; see also, Arizona v. San Carlos Apache Tribe, 463 U.S. 545, 570, 77 L. Ed. 2d 837, 103 S. Ct. 3201 n.21 (1983). In Attwood v. Mendocino Coast Dist. Hosp., 886 F.2d 241, 242-46 (9th Cir. 1989), the Ninth Circuit held that a stay of the federal proceedings, rather than a dismissal, was appropriate. The court's reason for that distinction in Attwood, to protect the plaintiff from being time-barred if she returned to federal court, is not present here.
Having examined each of the trees, it is appropriate for the court to stand back and take a look at the forest; or more specifically, at the boundary line between the state and the federal preserves.
This litigation arises from an initiative originated and passed by the voters of California. Its implementation requires regulations to be adopted by the California Insurance Commissioner, which regulations are still in the process of being defined. It also requires hearings by the Commissioner. The issues here are already being litigated in California state court, and include questions of state law. The ultimate determination to be made is what premiums insurers may charge to the citizens of the state, and what premiums they are required to pay back to the state's citizens. And insurance is an industry whose regulation has generally been committed by Congress to the states.
That broad view of the forest looks like a state preserve. It is therefore appropriate to let state law and state procedures be applied before a federal court interjects itself. An aggrieved party can complain about violations of federal law or the federal constitution, either in state court or by petitioning the United States Supreme Court for writ of certiorari. Perhaps the aggrieved parties can return to this court if the ripeness and abstention roads through the forest have been charted. After the issues have been addressed in state court, many of the claims may be resolved, and at least a more complete record will be developed. At that point, it may be appropriate for a federal court to address any outstanding issues over which it has jurisdiction. But that is for another day.
IT IS THEREFORE ORDERED that defendant's motion to dismiss is granted, and a JUDGMENT of dismissal is hereby entered in favor of defendant and against plaintiffs.
Dated: March 6, 1992.
Amended: April 13, 1992.
CHARLES A. LEGGE
UNITED STATES DISTRICT JUDGE