Opinion
No. CIV. S-06-356 WBS PAN (JFM).
June 2, 2006
MEMORANDUM AND ORDER RE: MOTION TO DISMISS OR STAY
Defendant Kimberly Sanders, joined by all co-defendants, moves the court to dismiss or stay this action, 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 federal court, seeking a declaratory judgment that, based on 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.
It is unclear whether this provision prevents the use 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.)
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 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 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 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., 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").
Given the facts in this case, the analysis of factors 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).
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 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 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 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 reactive, this suit is not necessarily reactive, because the 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) (citingBroadview 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.
"A declaratory judgment action by an insurance company 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.
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 amutual 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 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.