The opinion of the court was delivered by: CHARLES BREYER, District Judge
In this diversity declaratory relief action, plaintiff Great
American, an automobile insurer, seeks a declaration that it has
no duty to defend or indemnify Dana McCormick. Now pending are
defendants' motion to have this Court, in its discretion, dismiss
the insurer's action without prejudice. After carefully
considering the papers filed by the parties, the Court concludes
that oral argument is unnecessary, see Local Rule 7-1(b), and
GRANTS the motions to dismiss without prejudice.
On the evening on May 24, 2004, Lee Breschini drove a Chevy
Yukon owned by his father to a lake in Monterey County, where
Breschini met up with a group of young people. While Breschini
was on a boat on the lake, McCormick, who was drunk, came into
possession of the keys to the Yukon and drove away. McCormick
crashed the Chevy Yukon into a car carrying a family of five. The
accident injured all the occupants of the other car, killing Jada Benge, the mother of three young children. It also
killed a passenger in the Yukon, Haley Bettencourt.
The Benge family and the Bettencourt families (the "state court
plaintiffs") each filed wrongful death actions against McCormick,
Lee Breschini, Richard Breschini and others. The cases were
related in state court. Among other things, the state court
plaintiffs allege that Lee Breschini negligently permitted
McCormick to drive the Yukon or, in the alternative, that he
negligently failed to secure his keys such that McCormick was
able to obtain them. Lee Breschini contends that McCormick asked
if she could drive the car and he refused.
Plaintiff Great American insured the Yukon for Richard
Breschini. McCormick made a demand on Great American for coverage
on the theory that she was driving the Yukon with Lee Breschini's
permission. Great American is defending McCormick under a
reservation of rights.
Several months after the state court actions were filed, Great
American filed this diversity declaratory judgment action. Great
American seeks a declaration that McCormick did not have
Breschini's permission to drive the Yukon and therefore it owes
her no coverage. Now pending before the Court are McCormick's and
the state plaintiffs' motions to dismiss this action pursuant to
the Court's discretion.
A lawsuit seeking federal declaratory relief must first present
an actual case or controversy within the meaning of Article III.
It must also fulfill statutory jurisdictional prerequisites. Even
if a lawsuit fulfills both of those prerequisites, the district
court must also be satisfied that entertaining the action is
appropriate. See G.E.I.C.O. v. Dizol, 133 F.3d 1220, 1222-23
(9th Cir. 1998) (en banc). This last determination is
discretionary. See id.; see also Huth v. Hartford Ins.
Co. of the Midwest, 298 F.3d 800, 802 (9th Cir. 2002) ("The
exercise of jurisdiction under the Federal Declaratory Judgment
Act, 28 U.S.C. § 2201(a), is committed to the sound discretion of the federal district courts.
Even if the district court has subject matter jurisdiction, it is
not required to exercise its authority to hear the case.").
The issue on defendants' motions is whether it is appropriate
for this federal district court to entertain this state law
action. The Supreme Court's decision in Brillhart v. Excess Ins.
Co. of Am., 316 U.S. 491, 494-95 (1942) "sets forth the primary
factors for consideration." Huth, 298 F.3d at 803. "A 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
In American National Fire Ins. Co. v. Hungerford,
53 F.3d 1012 (9th Cir. 1995), for example, an insurance company brought
an action for declaratory relief in federal court seeking a
declaration of non-coverage in a case currently pending against
its insured in state court ("the state court action"). Id. at
1014. The Ninth Circuit noted that the insurer was not a party to
the state court action, and that the federal declaratory relief
action presented different legal issues than those in the state
court action. The court nonetheless held "that when an ongoing
state proceeding involves a state law issue that is predicated on
the same factual transaction or occurrence involved in a matter
pending before a federal court, the state court is the more
suitable forum" for the insurer to bring a related claim. Id.
The Hungerford court's holding was based on several concerns.
First, since the coverage decision depended, in part, on the
facts developed in the state court action, hearing the case in
federal court "would simply result in waste of federal resources
at every level of the decision making process." Id. at 1018.
Second, since the state (California) offered the same remedy,
that is, a declaratory judgment remedy, to exercise jurisdiction
of the federal action "would only be encouraging forum shopping."
Id. Finally, declining to exercise jurisdiction of the purely
state law issues was in the interest of comity. Id.
Hungerford was overruled in part by the Ninth Circuit in
Dizol. The en banc court held that a district court need not
sua sponte determine whether it should exercise jurisdiction of a
declaratory judgment action. 133 F.3d at 1227. The court also
explained that the "pendency of a state court action does not, of
itself, require a district court to refuse federal declaratory relief." Id. at 1225. It reaffirmed, however, that
"federal courts should generally ...