757BD LLC v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA

• Decision Date: 07 June 2016
• Docket Number: No. CV-14-01312-PHX-DJH,CV-14-01312-PHX-DJH
• Citation: 330 F.Supp.3d 1153
• Parties: 757BD LLC, Plaintiff, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendant.
• Court: U.S. District Court — District of Arizona

330 F.Supp.3d 1153

757BD LLC, Plaintiff,

v.NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendant.

No. CV-14-01312-PHX-DJH

United States District Court, D. Arizona.

Signed June 7, 2016

Emil John Kotalik, Jr., Tracy R. Nadzieja, Peshkin & Kotalik PC, Phoenix, AZ, for Plaintiff.

Ralph Stuart LaMontagne, Jr., Thomas T. Carpenter, Eric A. Amador, LaMontagne & Amador LLP, Pasadena, CA, Timothy R. Hyland, Cavanagh Law Firm PA, Phoenix, AZ, for Defendant.

ORDER

Honorable Diane J. Humetewa, United States District Judge

After finding that complete diversity of citizenship exists between plaintiff 757BD LLC ("757BD") and defendant National Union Fire Insurance Company of Pittsburgh, PA ("National Union"), the Court allowed 757BD to renew its motion to remand pursuant to 28 U.S.C. § 1447(c) (Doc. 20). 757BD timely did so and this renewed motion is fully briefed. (Docs. 13, 21, 22 and 25). The Court now rules as follows.¹

I. Background

A. First Superior Court Action

In 2008, 757BD commenced a lawsuit in the Superior Court for the State of Arizona in Maricopa County ("Superior Court") against Aero Jet Service, LLC ("Aero Jet") and others (the "underlying action"). (Doc. 1-1 at 2² , ¶ 3) The underlying action related to the sale and maintenance of a jet aircraft which 57BD had purchased in January 2005. (Doc. 13 at 1:26). In that underlying action, 757BD alleged numerous causes of action against Aero Jet. See (Doc. 1-1 at 3, ¶ 4). Ultimately, in February 2012, the parties entered into a stipulated judgment on two causes of action. (Id. ). That judgment was in favor of 757BD and against Aero Jet in the amount of $591,496.61, plus interest. (Id. ).

National Union insured Aero Jet under two polices, but for a host of reasons it refused to defend Aero Jet in the underlying action and refused to indemnify it for the judgment therein. (Doc. 1-1 at 3-4, ¶¶ 5-7). These reasons include National Union's determinations that: (1) 757BD's claims did not involve "property damage" within the meaning of the policies; (2) the underlying lawsuit did not allege "an occurrence" or "property damage" during the policy period. (Id. at 3, ¶ 7). 757BD disputed National Union's reasons for denying coverage under the policies and for refusing to defend and indemnify it in the underlying action. (Id. at 3, ¶ 8). Subsequently, Aero Jet assigned to 757BD all of "Aero Jet's rights, claims and causes of action against National Union relating to National Union's failure to defend and indemnify Aero Jet in connection" with the underlying action. (Id. at 4-5, ¶ 9).

B. First Federal Court Action

During the pendency of the underlying action, in 2011, National Union filed an action in this District Court under the Federal Declaratory Judgment Act ("FDJA"), 28 U.S.C. §§ 2201, et seq. National Union sued Aero Jet and 757BD and sought a "declaratory judgment that it had no obligation to defend or indemnify its insured, Aero Jet[,]" in the then pending underlying state court action. Nat'l Union Fire Ins. Co. v. Pittsburgh v. Aero Jet Servs., LLC , 2011 WL 4708857, at *1 (D.Ariz. Oct. 7, 2011) (" Nat'l Union I "). In moving to dismiss, 757BD and Aero Jet argued that the Court "should abstain from exercising its jurisdiction over the FDJA claim because Plaintiff could bring its request for declaratory judgment in state court." ( Id. ) (citation omitted). Agreeing, the Court dismissed on abstention grounds reasoning, inter alia , that National Union "could have filed its action in state court under the Arizona Declaratory Judgment statute, A.R.S. § 12-1831 [ (the "Arizona DJA") ]." Id. at *4.

After prevailing on its motion to dismiss in Nat'l Union I , 757BD sought and was awarded its attorneys' fees relating thereto. Nat'l Union Fire Ins. Co. of Pittsburgh v. Aero Jet Servs., LLC , 2012 WL 510490 (D.Ariz. 2012). National Union unsuccessfully appealed the attorneys' fees award only. Nat'l Union Fire Ins. Co. of Pittsburgh v. 757BD, LLC , 560 Fed.Appx. 657 (9th Cir. 2014). Although National Union could have, as the Court observed in Nat'l Union I , it did not file an action in Superior Court under the Arizona DJA.

C. Second Superior Court Action

On February 19, 2014, while National Union's appeal was pending in the Ninth Circuit, 757BD filed a complaint entitled "Declaratory Judgment" in Superior Court.³ By this time, the underlying action had been resolved through the February 2012 stipulated judgment. The crux of this most recent lawsuit by 757BD is that National Union improperly "refused to defend Aero Jet and has refused to pay the judgment against Aero Jet in connection with the [u]nderlying [l]awsuit[.]" (Doc. 1-1 at 3, ¶ 7). 757BD alleges that it is "entitled to have determined the construction of [National Union's] Policies" and "to obtain a declaration of its rights, status and legal obligations thereunder pursuant to" the Arizona DJA. (Id. at 5, ¶ 11).

In its prayer for relief, 757BD seeks three closely related declarations. First, it seeks a declaration that National Union's policies required it to defend Aero Jet in the underlying action. Second, 757BD seeks a declaration that National Union's policies required it to indemnify Aero Jet for the judgment entered against Aero Jet in the underlying action. Third, 757BD seeks a declaration that "National Union must pay the judgment entered in favor of 757BD and against Aero Jet in the underlying" action. (Id. at 5, ¶ 3). In addition to this purported declaratory relief, 757BD is seeking its reasonable attorneys' fees and costs and "such other and further relief including a monetary judgment as the Court deems just and proper pursuant to A.R.S. § 12-1838 or principles of law or equity." (Id. at 5, ¶ 6).

D. Second Federal Court Action

In accordance with 28 U.S.C. §§ 1441 and 1446, National Union timely removed that second Superior Court action to this Court purportedly on the basis of diversity jurisdiction, 28 U.S.C. § 1332. Thereafter, Plaintiff timely filed a motion to remand pursuant to 28 U.S.C. § 1447(c). As alluded to at the outset, the Notice of Removal was defective in that it did not properly allege diversity jurisdiction under section 1332. After pointing out this defect, the Court allowed National Union to file a supplemental notice of removal, which it did. Based upon this supplementation, this Court explicitly found "that complete diversity of citizenship exists between Plaintiff and Defendant for purposes of 28 U.S.C. § 1332. (Doc. 20 at 1:20-21). 757BD then timely renewed its motion to remand.

II. Summary of Arguments

Moving for remand, 757BD argues that this Court has "broad discretion to refuse to exercise jurisdiction under the [FDJA]." (Doc. 13 at 3:10) (emphasis omitted). Framing its analysis based upon the factors set forth in Hoelbl v. GEICO , 2010 WL 5463389 (D.Ariz. Dec. 29, 2010), and heavily relying upon that Court's analysis, 757BD argues that, as did the Hoelbl Court, this Court should remand this action to Superior Court.

National Union takes the antithetical view: this Court has "no discretion to remand" because 757BD's complaint is, "in reality, one for breach of contract, not declaratory judgment[.]" (Doc. 22 at 10:10-13) (emphasis omitted). Or, minimally, National Union contends that this action "includes an independent claim for damages for breach of contract." (Id. at 24:8-9) (emphasis omitted). Either way, National Union asserts that it has an "unconditional right to remain in this Court." (Id. at 9:9) (emphasis omitted). Accordingly, this Court must deny 757BD's remand motion.

Alternatively, even if this Court deems the present action to be "one for pure declaratory judgment," in exercising its discretion, National Union urges this Court to find that "the relevant factors ... overwhelmingly favor retention[.]" (Doc. 22 at 15:1-2) (emphasis omitted). From National Union's standpoint, the "relevant factors" are not those set forth in Hoelbl , but rather those set forth in Brillhart v. Excess Ins. Co. of Am. , 316 U.S. 491, 494-95, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942) ; and Gov't Employees Ins. Co. v. Dizol , 133 F.3d 1220, 1223 (9th Cir. 1998) (en banc).

757BD acknowledges that it is seeking monetary relief herein. Nonetheless, 757BD counters that in its discretion this Court should remand because that relief "is wholly dependent on a favorable declaratory judgment[.]" Reply (Doc. 15) at 2:4-5 (emphasis omitted). Then, whether the Court relies upon Hoelbl or the so-called Brillhart factors, 757BD steadfastly maintains that remand is "appropriate[.]" (Id. at 4:17) (emphasis omitted).

Before addressing these arguments, the Court must consider the effect of removal upon 757BD's claim brought pursuant to the Arizona DJA. Upon removal, this "state law claim must be converted to a claim brought under the [FDJA], 28 U.S.C. § 2201." Mardian Equip. Co. v. St. Paul Fire & Marine Ins. Co. , 2006 WL 2456214, at *4 (D. Ariz. 2006) (citing, inter alia , Inst. for Studies Abroad, Inc. v. Int'l Studies Abroad, Inc. , 263 F.Supp.2d 1154, 1156 (S.D.Ind.2001) ("The federal, rather than the state, Declaratory Judgment Act controls this litigation, despite the fact that this litigation was brought pursuant to [an] Indiana statute[.]") ). "This is so because under the Erie doctrine, federal courts sitting in diversity apply state substantive law and federal procedural law, and the Act is a procedural statute." Id. (citing, inter alia , Erie R.R. Co. v. Tompkins , 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ; West Publ'g Co. v. McColgan , 138 F.2d 320, 324 (9th Cir. 1943) ("The Federal Declaratory Judgment Act was not a jurisdiction-conferring statute, but an act to establish a new procedure in the federal courts.... ‘Thus, the operation of the Declaratory Judgment Act is procedural only.’ ") (citing Aetna Life Ins. Co. v. Haworth , 300 U.S. 227, 240, 57 S.Ct. 461, 81 L.Ed. 617 (1937) ). With this clarification, the Court will next consider whether it has jurisdiction to entertain this action.

III. Discuss...