Opinion
Civil No. 01-711-KI
September 7, 2001
J. Philip Parks, Parks Bauer Sime Winkler, Salem, Oregon, Attorney for Plaintiff.
OPINION AND ORDER
DISCUSSION
All defendants except Finch seek to be dismissed from this action because they contend that they are not necessary parties. State Farm originally filed this action in Multnomah County Circuit Court. It was then removed to this court. A state statute provides:
I. When declaratory relief is sought, all persons shall be made parties who have or claim any interest which would be affected by the declaration, and no declaration shall prejudice the rights of persons not parties to the proceeding.
The moving defendants contend that the issue in this action is interpretation of the insurance contract between State Farm and Finch. They argue that they have no interest in that issue and that their interests in the discrimination actions will not be prejudiced in any way if they are not parties to this insurance coverage dispute.
State Farm contends that all defendants are potential claimants under the policy. It also notes that the United States and Fair Housing Council have an interest in how the statutes are interpreted by this court, particularly concerning Finch's intent.
I disagree with the contention that the results of this coverage dispute will affect how the United States and Fair Housing Council prosecute the housing discrimination laws.
The connection is too attenuated to have an effect.
State Farm points to Oregon case law which holds that potential claimants against a third party's insurance policy are necessary parties to a declaratory judgment action determining if the policy covers the conduct. State Farm Fire Casualty Co. v. Reuter, 294 Or. 446, 657 P.2d 1231 (1983) (rape victim who filed a civil suit against the convicted rapist is a necessary party in a coverage dispute between insurer and its insured, the rapist). The court was concerned that the rape victim had the right under an Oregon statute to compel the insurer to pay the judgment unless the victim was a party in a binding proceeding establishing whether coverage existed. State Farm does not want to litigate this issue a second time against the moving defendants.
The moving defendants have not made a claim against the policy and contend that they do not care how Finch pays her attorney fees or any damages awarded to them. In Wright v. Hazen Investments, Inc., 293 Or. 259, 648 P.2d 360 (1982), the court held that ORS 28.110 did not require joinder of a lessor and sublessor in a dispute on ownership of the leasehold between the assignee and subassignee of the lease. The court reasoned that the lessor could still look to the sublessor for performance and the sublessor could still look to its assignee. The outcome of the dispute before the court did not affect those interests. Id. at 262-64. As in Wright, the moving defendants before me can still look to Finch for satisfaction of any judgment awarded against her, whether or not State Farm has a duty to defend or indemnify.
If this were a state court, Reuter would be dispositive and all defendants would need to remain in the case. Under the Erie doctrine, federal courts sitting in diversity apply state substantive law and federal procedural law. In re Larry's Apartment, L.L.C., 249 F.3d 832, 837 (9th Cir. 2001). Declaratory judgment actions in this court are controlled by the Declaratory Judgment Act, 28 U.S.C. § 2201. The procedural statute, ORS 28.110, has no effect in this court. Consequently, if the moving defendants do not wish to be involved in the dispute between State Farm and Finch, I will dismiss them. If the question comes before me in the future, however, I would find that the moving defendants are estopped from contending that State Farm must indemnify Finch. They have their chance to weigh in on that issue in this action and they are not interested in doing so.
CONCLUSION
The motion to dismiss by the United States (#6) is granted. The motion to dismiss by Sherwood, Sarah and Lars Johnson, and the Fair Housing Council of Oregon (#13) is granted. IT IS SO ORDERED.