General Star Indemnity Company v. Chabad of California

• Court: District Court, S.D. California
• Decided: April 7, 2022
• Docket: 3:21-cv-02062
• Status: Unknown

Opinion

8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10

12 GENERAL STAR INDEMNITY Case No. 3:21-cv-02062-L-MSB 13 COMPANY, a Delaware Corporation ORDER DISMISSING 14 COMPLAINT FOR Plaintiff DECLARATORY RELIEF [ECF 15 NO. 1.] vs. 16 CHABAD OF CALIFORNIA, a 17 California Corporation; and SIMCHA BACKMAN, an individual 18 Defendants 19

20 On December 9, 2021, Plaintiff General Star Indemnity Company (“General 21 Star”), filed a Complaint for Declaratory Relief seeking a judicial declaration that 22 it has no duty to defend or indemnify policy holders Chabad of California or Rabbi 23 Backman in pending state court litigation. 24 I. BACKGROUND 25 The Declaratory Judgment action in this Court stems from two separate 26 lawsuits filed in San Diego Superior Court. Defendants Chabad of California 27 (“Chabad”) and Rabbi Simcha Backman (“Backman”), were sued in Almog Peretz 28 v. San Diego Guns LLC; Chabad of California; Chabad of Poway; Simcha 1 Backman; John Earnest; John A. Earnest; Lisa C. Earnest, San Diego Superior 2 Court Case No. 37-2020-00047963-CU-PO-CTL (the “Peretz” lawsuit), and in 3 Noya Dahan, et al. v. Chabad of California; Chabad of Poway; Simcha Backman; 4 John T. Earnest, San Diego Superior Court Case No. 37-2021-00014378-CU-PO- 5 CTL (the “Dahan” lawsuit). 6 Both cases allege that on April 27, 2019, John T. Earnest entered Chabad of 7 Poway synagogue located at 16934 Chabad Way, Poway, California, and fired his 8 AR-15 assault rifle into the crowded room where congregants were engaged in 9 worship. The cases allege that Earnest shot and killed congregant, Lori Gilbert- 10 Kaye, and wounded Rabbi Yisroel Goldstein. Earnest retreated when his rifle 11 jammed. 12 The Peretz complaint alleges that Almog Peretz and his eight-year-old minor 13 niece, Noya Dahan, were hit by bullets and/or bullet fragments. The Dahan 14 complaint alleges that Dahan was hit by bullets and/or bullet fragments. The Peretz 15 lawsuit alleges a single cause of action for negligence against Chabad of California 16 and Backman. The Dahan lawsuit alleges causes of action for negligence and 17 negligent infliction of emotional distress against Chabad of California and 18 Backman. 19 On January 28, 2022, this Court issued an Order to Show Cause directing 20 each party to file a response explaining why the Court should not decline to 21 exercise jurisdiction and dismiss the action. (Doc. No. 10). The parties’ timely 22 filed responses. For the reasons outlined below, the Court declines to exercise 23 jurisdiction and dismisses the action. 24 II. LEGAL STANDARD 25 An action seeking federal declaratory relief must initially present an actual 26 case or controversy within the meaning of Article III, Section 2 of the United 27 States Constitution. Gov't Emps. Ins. Co. v. Dizol, 133 F.3d 1220, 1222-23 (9th 28 Cir. 1998). Federal district courts are courts of limited jurisdiction and have no 1 jurisdiction without specific constitutional or statutory authorization. Exxon Mobil 2 Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552 (2005). A party invoking the 3 federal court’s jurisdiction has the burden of proving the actual existence of 4 subject-matter jurisdiction. Thompson v. McCombe, 99 F.3d 352, 353 (9th Cir. 5 1996). Subject-matter jurisdiction is conferred on federal courts either through 6 federal question jurisdiction pursuant to 28 U.S.C. § 1331 or through diversity 7 jurisdiction pursuant to 28 U.S.C. § 1332. Peralta v. Hispanic Bus., Inc., 419 F.3d 8 1064, 1068 (9th Cir. 2005). Diversity jurisdiction exists when there is complete 9 diversity of citizenship between the parties, and the amount in controversy exceeds 10 $75,000. 28 U.S.C. § 1332(a); Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). 11 III. DISCUSSION 12 It appears the parties meet the requirements for diversity jurisdiction under 13 28 U.S.C. § 1332(a) because the amount in controversy exceeds $75,000 and there 14 is complete diversity among the parties.1 However, federal jurisdiction is 15 discretionary when the complaint is limited to claims under the Declaratory Relief 16 Act. Dizol, 133 F.3d at 1222-23. 17 The Declaratory Judgment Act permits a federal court to declare the rights 18 and other legal relations of any interested party seeking such declaration. 28 U.S.C. 19 § 2201(a). A district court has discretion to dismiss or stay the federal action where 20 the case only involves declaratory relief pursuant to the Declaratory Judgment Act. 21 Argonaut Insurance Company v. St. Francis Medical Center, 17 F.4th 1276, 1280 22 (9th Cir. 2021). “In the declaratory judgment context, the normal principle that 23 federal courts should adjudicate claims within their jurisdiction yields to 24 considerations of practicality and wise judicial administration.” Wilton v. Seven 25 Falls, Co., 515 U.S. 277, 288 (1995). If the complaint includes independent claims 26

27 1 Plaintiff General Star is a Delaware Corporation with its principal place of business in Stamford, Connecticut. Defendant Chabad of California is a California 28 Corporation with its principal place of business in Los Angeles, California. 1 seeking monetary relief a district court may exercise jurisdiction. United Nat'l Ins. 2 Co. v. R & D Latex Corp., 242 F.3d 1102, 1112-13 (9th Cir. 2001). 3 District courts may decide whether to exercise discretion even when no party 4 has raised the issue. Id. at 1223. In making that determination, the district court 5 considers the factors announced in Brillhart: "[t]he district court [1] should avoid 6 needless determination of state law issues; [2] should discourage litigants from 7 filing declaratory actions as a means of forum shopping; and [3] should avoid 8 duplicative litigation.” Dizol, 133 F.3d at 1225(citing Brillhart v. Excess Ins. Co., 9 316 U.S. 491 (1942). In addition, a court may consider: 10 whether the declaratory action will settle all aspects of the controversy; whether the declaratory action will serve a 11 useful purpose in clarifying the legal relations at issue; 12 whether the declaratory action is being sought merely for the purposes of procedural fencing or to obtain a “res 13 judicata” advantage; or whether the use of a declaratory 14 action will result in entanglement between the federal and state court systems. In addition, the district court might 15 also consider the convenience of the parties, and the 16 availability and relative convenience of other remedies. 17 Dizol. at 1225 n.5 (citation omitted). 18 1. Needless Determination of State Law Issues 19 A district court should decline to exercise jurisdiction where (1) the state law 20 issues at stake are “the subject of a parallel proceeding in state court,” (2) the 21 action concerns an “area of law that Congress has expressly left to the states,” and 22 (3) “there is no compelling federal interest.” Continental Cas. Co. v. Robsac 23 Industries, 947 F.2d 1367, 1371 (9th Cir. 1991)(overruled on other grounds in 24 Dizol, 133 F.3d at 1220); Maryland Casualty Co. v. Knight, 96 F.3d 1284, 1288 25 (9th Cir. 1996); see also Chamberlain v. Allstate Ins. Co., 931 F.2d 1361, 1366-67 26 (9th Cir. 1991)(“[i]f there are parallel state proceedings involving the same issues 27 and parties pending at the time the federal declaratory action is filed, there is a 28 1 generally decline jurisdiction in insurance coverage actions brought in federal 2 court that present only issues of state law while parallel proceedings are in state 3 court. Am. Nat. Fire Ins. Co. v. Hungerford, 53 F.3d 1012, 1017 (9th Cir. 1995), 4 (overruled in part by Dizol, 133 F.3d at 1220.) 5 a. Parallel State Court Proceedings 6 As noted above, there are two state court actions pending that involve the 7 same course of events allegedly giving rise to liability for the Defendants: Peretz 8 and Dahan. Plaintiff General Star seeks a declaration that it has no duty under the 9 Policy to defend or indemnify the Defendants in those actions and contends that 10 the actions of the shooter qualify as an “Act of Terrorism” which is excluded from 11 coverage under the policy. Resolution of the claims in this action necessarily 12 implicates the same underlying factual inquiries as in the state court actions, and 13 would rely on state law, therefore the state court is the more suitable forum. 14 Allowing the current action to proceed would result in a “needless determination of 15 state law issues.” Dizol, at 1225. Thus, this factor weighs against the court 16 exercising jurisdiction. 17 b. State Regulation of Insurance Law 18 It is well established that Congress has left insurance law to be regulated by 19 the states. Cont’l Cas. Co., 947 F.2d at 1371(“this case involves insurance law, an 20 area that Congress has expressly left to the states through the McCarran–Ferguson 21 Act. 15 U.S.C. §§ 1011–12 (1988)”). The present action concerns insurance 22 coverage, accordingly, this factor weighs in favor of declining jurisdiction. 23 c. No Compelling Federal Interest 24 The present case has no compelling federal interest. As the Ninth Circuit has 25 explained, “where, as in the case before us, the sole basis of jurisdiction is diversity 26 of citizenship, the federal interest is at its nadir. Thus, the Brillhart policy of 27 avoiding unnecessary declarations of state law is especially strong here.” Cont’l. 28 Cas. Co., 947 F.2d at 1371. Here, diversity is the sole basis of jurisdiction and the 1 claims concern state law issues regarding insurance, therefore there is no federal 2 interest at stake 3 Consequently, the components of the first Brillhart factor weigh in favor of 4 the Court declining jurisdiction. Dizol, 133 F.3d at 1225. 5 2. Discouraging Forum Shopping 6 The Court next considers whether there is evidence of forum shopping by 7 the Defendant. “This factor usually is understood to favor discouraging an insurer 8 from forum shopping, i.e., filing a federal court declaratory action to see if it might 9 fare better in federal court at the same time the insurer is engaged in a state court 10 action.” American Cas. Co. of Reading, Pennsylvania v. Krieger, 181 F.3d 1113, 11 1119 (9th Cir. 1999). The court must determine whether a suit seeking declaratory 12 relief is filed by an insurance company in reaction to an underlying state court 13 action. “A declaratory judgment action by an insurance company against its 14 insured during the pendency of a non-removable state court action presenting the 15 same issues of state law is an archetype of what we have termed “reactive” 16 litigation.” Cont’l Cas., 947 F.2d 1372. 17 Plaintiff contends there is no state court action seeking declaratory relief 18 pending, and as a result, there is no presumption for dismissal on the ground of 19 forum shopping. (Plaintiff Resp. OSC at 2). It is immaterial whether the pending 20 state court cases contain a claim for declaratory relief for purposes of the second 21 Brillhart factor. Instead, General Star filed the present action for declaratory relief 22 in reaction to Defendants’ request for indemnity in the underlying state court 23 actions, therefore, “permitting [this action] to go forward when there is a pending 24 state court case presenting [duplicative issues] would encourage forum shopping in 25 violation of the second Brillhart principle.” Cont’l Cas., 947 F.2d at 1373. This 26 factor thus weighs against the Court exercising jurisdiction. 27 3. Avoiding Duplicative Litigation 28 The final Brillhart factor directs a district court to avoid duplicative 1 litigation and wasting judicial resources. See Dizol, 133 F.3d at 1225. To determine 2 whether Plaintiff is obligated to indemnify and defend Defendants Chabad of 3 California and Rabbi Backman, the Court would look to the facts underlying the 4 events that form the basis of the state court actions. In the Peretz and Dahan 5 lawsuits, plaintiffs allege that Rabbi Backman and Chabad of California failed to 6 use additional funds to improve security at Chabad of Poway prior to the shooting. 7 (Peretz Compl. ¶¶ 33-44; Dahan Compl. ¶¶ 29-39). The plaintiffs in those actions 8 allege negligence, intentional infliction of emotional distress, and other claims 9 related to the events against all the defendants and seek damages. In the present 10 case, Plaintiff contends that Chabad of Poway, where the shootings occurred, is not 11 covered under the policy, and that neither Chabad of California, nor Rabbi 12 Backman, were covered under the policy for the events that occurred at Chabad of 13 Poway. (Compl. ¶¶ 21-42). 14 General Star’s obligations to defend Defendants Chabad of California and 15 Backman under the insurance policy can only be determined with reference to the 16 same set of facts as those involved in the state court proceedings concerning the 17 security measures taken prior to the shooting. As a result, it would waste judicial 18 resources for this Court to retain jurisdiction by allowing duplicative litigation. 19 Employers Reinsurance Corp., v. Karussos, 65 F.3d 796, 800 & no. 2 (9th Cir. 20 1995). 21 4. Dizol Factors 22 The remaining Dizol factors weigh in favor of this Court declining to 23 exercise jurisdiction. First, if this Court retained jurisdiction and decided the 24 declaratory relief issue, it would not settle all aspects of the litigation. Instead, it 25 could potentially lead to piecemeal litigation because it would concern only 26 defendants Rabbi Backman and Chabad of California, not the other named 27 defendants. Second, the declaratory action could potentially clarify the legal 28 relation between Plaintiff General Star and Defendants Rabbi Backman and 1 ||Chabad of California, but it would not address the relationships between all the 2 ||parties at issue and would unnecessarily entangle the state and federal court 3 |lsystems. Third, the California Superior Court, San Diego County provides as 4 |\convenient a forum as the Southern District of California. 5 When given the opportunity to defend jurisdiction in this Court, Plaintiff did 6 |!not address the factors above, but requested that the Court refrain from deciding 7 |\the jurisdictional issue until after the Defendants file their answer and potential 8 |counterclaims, to allow the parties more time to potentially settle the action and 9 |\resolve the issues. (Plaintiff General Star Resp. to OSC [Doc. No. 11.]) The Court 10 |\declines to defer resolution of this matter, and instead finds that the Brillhart and 11 | Dizol factors support dismissal of the action, as noted above. 12 IV. CONCLUSION AND ORDER 13 For the foregoing reasons, the Court declines to exercise jurisdiction over 14 | the present action that raises only claims for declaratory relief and DISMISSES 15 |) the action without prejudice. 16 IT IS SO ORDERED 17 Dated: April 6, 2022 fee beep 19 H . James Lorenz, United States District Judge 21 22 23 24 25 26 27 28

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