596 F.2d 914 (9th Cir. 1979), 76-2892, Fidelity & Cas. Co. v. Reserve Ins. Co.

Docket Nº:76-2892.
Citation:596 F.2d 914
Party Name:The FIDELITY & CASUALTY COMPANY of New York, a corporation, Plaintiff- Appellant, v. RESERVE INSURANCE COMPANY et al., Defendants-Appellees. C. W. McGRATH, INC., a corporation, Counter-Claimant, v. NATIONAL INDEMNITY COMPANY et al., Counter-Defendants, National Indemnity Company, Appellee.
Case Date:May 14, 1979
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 914

596 F.2d 914 (9th Cir. 1979)

The FIDELITY & CASUALTY COMPANY of New York, a corporation,

Plaintiff- Appellant,

v.

RESERVE INSURANCE COMPANY et al., Defendants-Appellees.

C. W. McGRATH, INC., a corporation, Counter-Claimant,

v.

NATIONAL INDEMNITY COMPANY et al., Counter-Defendants,

National Indemnity Company, Appellee.

No. 76-2892.

United States Court of Appeals, Ninth Circuit

May 14, 1979

Page 915

[Copyrighted Material Omitted]

Page 916

James L. English, San Francisco, Cal., for plaintiff-appellant.

Charles I. Eisner, Oakland, Cal., Allan Lee Rudick, San Diego, Cal., for defendants-appellees.

Appeal from the United States District Court for the Eastern District of California.

Before DUNIWAY and SNEED, Circuit Judges and SPENCER WILLIAMS [*], District Judge.

SPENCER WILLIAMS, District Judge:

The Fidelity & Casualty Company of New York appeals from a declaratory judgment entered against it by the district court for the Eastern District of California. On June 18, 1974 the United States filed suit against C. W. McGrath, Inc., who was insured by Fidelity, to recover damages for the cost of suppressing a fire allegedly caused by McGrath on federal lands. Rather than seeking to intervene in that suit Fidelity instituted this separate action against Reserve Insurance Company, another McGrath insurer, for a declaratory judgment as to which policy covered the possible liability to the United States. McGrath and the United States were also named as defendants.

Although the parties do not question the district court's jurisdiction, we see as a major issue the question of whether the court was empowered to hear the case at all. We conclude the district court did not have jurisdiction on the basis alleged in Fidelity's complaint, but that jurisdiction based upon diversity of citizenship would be established by dismissal of the United States as a defendant. Having found a basis for federal jurisdiction we affirm on the merits.

JURISDICTION

Fidelity's first amended complaint asserts jurisdiction under 28 U.S.C. § 1345 which provides in pertinent part: "the district courts shall have original jurisdiction of all civil actions, suits or proceedings commenced by the United States." The district court denied a motion by the government to dismiss for lack of subject matter jurisdiction. It reasoned the United States was a contingent beneficiary of the insurance policies and therefore a necessary party to the litigation; in its view, jurisdiction could be predicated on 28 U.S.C. § 1345 because the government had filed the underlying lawsuit. Whether § 1345 establishes jurisdiction for a suit Against the United States, by drawing its essence from a separate action previously commenced By the United States appears to be a question of first impression.

The Declaratory Judgment Act, 28 U.S.C. § 2201, does not itself confer federal subject matter jurisdiction. Skelly Oil v. Phillips Petroleum,339 U.S. 667, 70 S.Ct. 876, 94 L.Ed. 1194 (1950). In supplementary briefing requested by this court, Fidelity has argued federal jurisdiction over the United States under the Declaratory Judgment Act is proper if there is an indication of waiver of sovereign immunity as to the underlying aspects of the case. Support for this proposition it claims, is found in Pennsylvania R. Co. v. United States, 111 F.Supp. 80 (D.N.J.1953) and Luckenbach Steamship Co. v. United States, 292 F.2d 913, 155 Ct.Cl. 81 (1961).

The Pennsylvania R. Co. case arose from a disastrous explosion in South Amboy, New Jersey that caused damage to some eight to ten thousand persons. The plaintiff railway instituted a declaratory judgment

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action naming all potentially responsible parties as well as representatives of various classes of potential claimants. In part, the plaintiff sought a judgment declaring whether the plaintiff and any other claimants or defendants were entitled to judgment against, or contribution or indemnity from the United States. Noting the plaintiff could sue directly under the Federal Tort Claims Act for damages against the United States, the court held it could entertain a suit for preliminary declaratory relief which was merely a procedural device used to seek a remedy clearly within the scope of the government's waiver of sovereign immunity. 111 F.Supp. at 86.

In Luckenbach Steamship Co. v. United States, 292 F.2d 913, 155 Ct.Cl. 81 (1961) the Court of Claims transferred a maritime action to the district court, disregarding the plaintiff's contention it could not obtain declaratory relief against the government in an admiralty proceeding. The court cited the Pennsylvania R. Co. case in a footnote and argued when the United States has established a remedy against itself by statute, a plaintiff may use a declaratory judgment as a procedural device to secure that remedy. 292 F.2d at 916 n.5. These cases are distinguishable because the plaintiff in each instance was authorized by statute to institute a suit in federal court against the United States. Section 1345 authorizes no such action. Neither does it follow that because the United States may have waived its sovereign immunity as to the subject matter of this action, the district court had jurisdiction to decide the matter. See Marcus Garvey Square v. Winston Burnett Const. Co., 595 F.2d 1126 at 1131 (9th Cir. 1979).

Generally speaking, when the United States files suit it may subject itself to various compulsory and permissive counterclaims for recoupment or set-off. 1 This court...

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