The Ohio Casualty Insurance Company v. D&R Excavating Inc

W.D. Washington

The Ohio Casualty Insurance Company v. D&R Excavating Inc

DecidedMarch 21, 2023

Docket2:22-cv-00137

StatusUnknown

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The Ohio Casualty Insurance Company v. D&R Excavating Inc, (W.D. Wash. 2023).

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Opinion

HONORABLE RICHARD A. JONES 1

6 UNITED STATES DISTRICT COURT 7 WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 THE OHIO CASUALTY INSURANCE 9 COMPANY, 10 Case No. 22-137RAJ Plaintiff,

11 ORDER DENYING MOTION TO v. DISMISS, OR IN 12 ALTERNATIVE, STAY THE D & R EXCAVATING, INC., a ACTION 13 Washington corporation, et al., 14 Defendants. 15 16 I. INTRODUCTION 17 This matter comes before the Court on Defendant CPM Development Corp.’s 18 Motion to Dismiss the Complaint, or Alternatively to Stay the Action. Dkt. # 23. Plaintiff 19 opposes the motion. Dkt. # 28. For the reasons below, the Court DENIES the motion. 20 II. BACKGROUND 21 This is an insurance dispute arising from litigation over the 2018 Vashon Island 22 Highway SW Pavement Preservation Project (the “Project”). Dkt. # 1, ¶ 12. As part of the 23 Project, asphalt from Vashon Highway SW would be removed and disposed. Id., ¶ 15.1. 24 Vashon Island is designated as a “Critical Aquifer Recharge Area” in the King 25 County Code. Dkt. 1, ¶ 22.1. Because of that designation, asphalt millings could not be 26 disposed anywhere on Vashon Island. Dkt. Id. Defendant ICON secured the contract with 27 the County and subcontracted with defendant D&R Excavating, Inc. (“D&R”) to dispose of the asphalt millings. Id., ¶¶ 12, 13. During the Project, the County learned that D&R 1 stockpiled and disposed of the millings at various regarding properties on Vashon Island. 2 Id. ¶ 15.9. After ICON’s demands to D&R went unanswered, ICON remediated the 3 damage at several properties on Vashon Island. Id. ¶¶ 15.11, 15.12. 4 The County filed suit against ICON in the Underlying Action in King County 5 Superior Court. Id. ¶ 15.15. ICON, in turn, filed an Answer and Third-Party Complaint 6 against D&R, alleging D&R breached the subcontract, both by improperly disposing of 7 the asphalt millings and by failing to defend and indemnify ICON against the County’s 8 claims. Id. ¶ 15.16. The County then filed a counterclaim (the “Counterclaim”) against 9 D&R directly, alleging that D&R’s disposal of the millings violated the King County 10 Code. See id. ¶ 17.5. 11 D & R tendered the claims asserted against it in the Underlying Action to Ohio 12 Casualty for defense and indemnity coverage under two policies, the CGL Policy and the 13 Umbrella Policy. Id. ¶ 22. In letters dated August 21, 2020, and February 3, 2022, Ohio 14 Casualty agreed to defend D & R in the Underlying Action subject to a reservation of 15 rights. Id. ¶ 25. In this action, Ohio Casualty seeks declaratory relief under the 16 Declaratory Judgments Act that it has no duty to defend or indemnify D & R in the 17 Underlying Action under either the CGL Policy and the Umbrella Policy. Id. ¶¶ 38, 44. 18 In July 2022, Defendant ICON filed the pending motion to dismiss, or 19 alternatively, motion to stay pending the outcome of the Underlying litigation under the 20 abstention doctrine in Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 492 (1942). 21 Dkt. # 36. In its response to ICON’s motion, Ohio contends that because the Court can 22 resolve coverage without finding any facts of consequence to the underlying state court 23 lawsuit, Brillhart abstention is unwarranted. Dkt. # 28. 24 III. DISCUSSION 25 A district court “has broad discretion to stay proceedings as an incident to its 26 power to control its own docket.” Clinton v. Jones, 520 U.S. 681, 706 (1997). The 27 moving party bears the burden of establishing that a stay is necessary. Id. at 708. 1 This matter involves the Declaratory Judgments Act, 28 U.S.C. § 2201, under 2 which a federal court “may declare the rights and other legal relations of any interested 3 party seeking such declaration, whether or not further relief is or could be sought.” The 4 Supreme Court in Brillhart held that in a situation in which another proceeding was 5 pending in state court in which the matters at issue before the federal court could be fully 6 adjudicated, “a declaratory judgment in the federal court was unwarranted.” Id. at 495. 7 The Supreme Court explained its reasoning accordingly: 8 Ordinarily it would be uneconomical as well as vexatious for 9 a federal court to proceed in a declaratory judgment suit 10 where another suit is pending in a state court presenting the same issues, not governed by federal law, between the same 11 parties. Gratuitous interference with the orderly and comprehensive disposition of a state court litigation should be 12 avoided. 13 Id. at 495. 14 Over fifty years later, the Supreme Court reinforced the “unique and substantial 15 discretion [of district courts] in deciding whether to declare the rights of litigants” under 16 the Declaratory Judgments Act. Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995). In 17 Wilton, the Court concluded that the district court had acted properly when it stayed an 18 action for declaratory relief “when parallel proceedings, presenting opportunity for 19 ventilation of the same state law issues, were underway in state court.” Id. at 290. 20 In determining whether to exercise its discretion to retain jurisdiction over such a 21 declaratory judgment action, a district court should “ascertain whether the questions in 22 controversy between the parties to the federal suit, and which are not foreclosed under the 23 applicable substantive law, can better be settled in the proceeding pending in the state 24 court.” Brillhart, 316 U.S. at 495. This evaluation, the Supreme Court explained, may 25 involve an inquiry as to the scope of the pending state court claims, the nature of 26 defenses, and whether the claims of all parties can be adjudicated satisfactorily in the 27 1 state proceeding. Id. Specifically, a district court’s exercise of discretion should be 2 guided by three factors: (1) the court should avoid unnecessary determination of state 3 issues; (2) it should discourage the filing of declaratory actions as a means of forum 4 shopping; and (3) it should not engage in duplicative litigation. Am. Cas. Co. of Reading, 5 Pennsylvania v. Krieger, 181 F.3d 1113, 1118 (9th Cir. 1999) (internal citation omitted). 6 Here, ICON moves the Court to exercise its discretion to dismiss the action, or 7 alternatively, to stay this action until factual determinations have been made in the 8 Underlying Action in line with the Brillhart-Wilton doctrine. Dkt. # 36 at 2. The Court 9 finds that such a stay is unwarranted. 10 With respect to the first factor, the Court finds that it need not engage in 11 unnecessary determination of state issues. The question of whether the Policy covers 12 D&R for the alleged actions and damages in the Underlying Action is not before the state 13 court. Dkt. # 28 at 10. See American Cas. Co. of Reading, Penn. v. Krieger, 181 F.3d 14 1119 (9th Cir. 1999) (holding that “[b]ecause the state court case did not include the 15 coverage issue, and because the coverage issue in the federal action was not contingent 16 on any further state court proceedings, the district court found good cause to continue to 17 exercise its jurisdiction”). Indeed, the legal issues before the state court are distinct from 18 the declaratory judgment sought here. The issues before the state court involve whether 19 Defendants engaged in the alleged conduct, and if so, whether they are liable to King 20 County based on that conduct. Dkt. # 1, ¶ 15. The issues before this Court, on the other 21 hand, are whether the Policy covers D&R, assuming that the allegations are true.

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HONORABLE RICHARD A. JONES 1

6 UNITED STATES DISTRICT COURT 7 WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 THE OHIO CASUALTY INSURANCE 9 COMPANY, 10 Case No. 22-137RAJ Plaintiff,

11 ORDER DENYING MOTION TO v. DISMISS, OR IN 12 ALTERNATIVE, STAY THE D & R EXCAVATING, INC., a ACTION 13 Washington corporation, et al., 14 Defendants. 15 16 I. INTRODUCTION 17 This matter comes before the Court on Defendant CPM Development Corp.’s 18 Motion to Dismiss the Complaint, or Alternatively to Stay the Action. Dkt. # 23. Plaintiff 19 opposes the motion. Dkt. # 28. For the reasons below, the Court DENIES the motion. 20 II. BACKGROUND 21 This is an insurance dispute arising from litigation over the 2018 Vashon Island 22 Highway SW Pavement Preservation Project (the “Project”). Dkt. # 1, ¶ 12. As part of the 23 Project, asphalt from Vashon Highway SW would be removed and disposed. Id., ¶ 15.1. 24 Vashon Island is designated as a “Critical Aquifer Recharge Area” in the King 25 County Code. Dkt. 1, ¶ 22.1. Because of that designation, asphalt millings could not be 26 disposed anywhere on Vashon Island. Dkt. Id. Defendant ICON secured the contract with 27 the County and subcontracted with defendant D&R Excavating, Inc. (“D&R”) to dispose of the asphalt millings. Id., ¶¶ 12, 13. During the Project, the County learned that D&R 1 stockpiled and disposed of the millings at various regarding properties on Vashon Island. 2 Id. ¶ 15.9. After ICON’s demands to D&R went unanswered, ICON remediated the 3 damage at several properties on Vashon Island. Id. ¶¶ 15.11, 15.12. 4 The County filed suit against ICON in the Underlying Action in King County 5 Superior Court. Id. ¶ 15.15. ICON, in turn, filed an Answer and Third-Party Complaint 6 against D&R, alleging D&R breached the subcontract, both by improperly disposing of 7 the asphalt millings and by failing to defend and indemnify ICON against the County’s 8 claims. Id. ¶ 15.16. The County then filed a counterclaim (the “Counterclaim”) against 9 D&R directly, alleging that D&R’s disposal of the millings violated the King County 10 Code. See id. ¶ 17.5. 11 D & R tendered the claims asserted against it in the Underlying Action to Ohio 12 Casualty for defense and indemnity coverage under two policies, the CGL Policy and the 13 Umbrella Policy. Id. ¶ 22. In letters dated August 21, 2020, and February 3, 2022, Ohio 14 Casualty agreed to defend D & R in the Underlying Action subject to a reservation of 15 rights. Id. ¶ 25. In this action, Ohio Casualty seeks declaratory relief under the 16 Declaratory Judgments Act that it has no duty to defend or indemnify D & R in the 17 Underlying Action under either the CGL Policy and the Umbrella Policy. Id. ¶¶ 38, 44. 18 In July 2022, Defendant ICON filed the pending motion to dismiss, or 19 alternatively, motion to stay pending the outcome of the Underlying litigation under the 20 abstention doctrine in Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 492 (1942). 21 Dkt. # 36. In its response to ICON’s motion, Ohio contends that because the Court can 22 resolve coverage without finding any facts of consequence to the underlying state court 23 lawsuit, Brillhart abstention is unwarranted. Dkt. # 28. 24 III. DISCUSSION 25 A district court “has broad discretion to stay proceedings as an incident to its 26 power to control its own docket.” Clinton v. Jones, 520 U.S. 681, 706 (1997). The 27 moving party bears the burden of establishing that a stay is necessary. Id. at 708. 1 This matter involves the Declaratory Judgments Act, 28 U.S.C. § 2201, under 2 which a federal court “may declare the rights and other legal relations of any interested 3 party seeking such declaration, whether or not further relief is or could be sought.” The 4 Supreme Court in Brillhart held that in a situation in which another proceeding was 5 pending in state court in which the matters at issue before the federal court could be fully 6 adjudicated, “a declaratory judgment in the federal court was unwarranted.” Id. at 495. 7 The Supreme Court explained its reasoning accordingly: 8 Ordinarily it would be uneconomical as well as vexatious for 9 a federal court to proceed in a declaratory judgment suit 10 where another suit is pending in a state court presenting the same issues, not governed by federal law, between the same 11 parties. Gratuitous interference with the orderly and comprehensive disposition of a state court litigation should be 12 avoided. 13 Id. at 495. 14 Over fifty years later, the Supreme Court reinforced the “unique and substantial 15 discretion [of district courts] in deciding whether to declare the rights of litigants” under 16 the Declaratory Judgments Act. Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995). In 17 Wilton, the Court concluded that the district court had acted properly when it stayed an 18 action for declaratory relief “when parallel proceedings, presenting opportunity for 19 ventilation of the same state law issues, were underway in state court.” Id. at 290. 20 In determining whether to exercise its discretion to retain jurisdiction over such a 21 declaratory judgment action, a district court should “ascertain whether the questions in 22 controversy between the parties to the federal suit, and which are not foreclosed under the 23 applicable substantive law, can better be settled in the proceeding pending in the state 24 court.” Brillhart, 316 U.S. at 495. This evaluation, the Supreme Court explained, may 25 involve an inquiry as to the scope of the pending state court claims, the nature of 26 defenses, and whether the claims of all parties can be adjudicated satisfactorily in the 27 1 state proceeding. Id. Specifically, a district court’s exercise of discretion should be 2 guided by three factors: (1) the court should avoid unnecessary determination of state 3 issues; (2) it should discourage the filing of declaratory actions as a means of forum 4 shopping; and (3) it should not engage in duplicative litigation. Am. Cas. Co. of Reading, 5 Pennsylvania v. Krieger, 181 F.3d 1113, 1118 (9th Cir. 1999) (internal citation omitted). 6 Here, ICON moves the Court to exercise its discretion to dismiss the action, or 7 alternatively, to stay this action until factual determinations have been made in the 8 Underlying Action in line with the Brillhart-Wilton doctrine. Dkt. # 36 at 2. The Court 9 finds that such a stay is unwarranted. 10 With respect to the first factor, the Court finds that it need not engage in 11 unnecessary determination of state issues. The question of whether the Policy covers 12 D&R for the alleged actions and damages in the Underlying Action is not before the state 13 court. Dkt. # 28 at 10. See American Cas. Co. of Reading, Penn. v. Krieger, 181 F.3d 14 1119 (9th Cir. 1999) (holding that “[b]ecause the state court case did not include the 15 coverage issue, and because the coverage issue in the federal action was not contingent 16 on any further state court proceedings, the district court found good cause to continue to 17 exercise its jurisdiction”). Indeed, the legal issues before the state court are distinct from 18 the declaratory judgment sought here. The issues before the state court involve whether 19 Defendants engaged in the alleged conduct, and if so, whether they are liable to King 20 County based on that conduct. Dkt. # 1, ¶ 15. The issues before this Court, on the other 21 hand, are whether the Policy covers D&R, assuming that the allegations are true. Based 22 on the distinct legal issues before this Court and the state court, this Court’s analysis will 23 not involve a “needless determination of state law issues.” Id. This weighs against a stay 24 or dismissal. 25 With respect to the second factor, there is no evidence of forum-shopping. Absent 26 evidence of forum-shopping, this factor leans slightly against a stay. 27 Finally, with respect to the third factor, the Court finds that a stay is not warranted 1 to avoid duplicative litigation. Indeed, as already discussed, the legal issues before this 2 court in the declaratory action are distinct from those before the state court. The federal 3 court action, therefore, is not duplicative of the state court action. This factor weights 4 against a stay. 5 Based on the foregoing analysis, the Court hereby finds that the Brillhart factors 6 do not weigh in favor of a dismissal or stay here. 7 IV. CONCLUSION 8 For the reasons above, Defendant’s Motion is DENIED. Dkt. # 23. 9 10 DATED this 21st day of March, 2023. 11 A 12

13 The Honorable Richard A. Jones 14 United States District Judge 15

16 17 18 19 20 21 22 23 24 25 26 27

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