Government Employees Ins. Co. v. Dizol, 95-17393

• Decision Date: 13 January 1998
• Docket Number: No. 95-17393,95-17393
• Parties: 98 Cal. Daily Op. Serv. 291, 98 Daily Journal D.A.R. 398 GOVERNMENT EMPLOYEES INSURANCE COMPANY, Plaintiff-Appellee, v. Alexander DIZOL, Special Administrator of the Estate of Kevin Tate Dizol, Deceased, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1220

133 F.3d 1220

98 Cal. Daily Op. Serv. 291, 98 Daily Journal

D.A.R. 398

GOVERNMENT EMPLOYEES INSURANCE COMPANY, Plaintiff-Appellee, v. Alexander DIZOL, Special Administrator of the Estate of Kevin Tate Dizol, Deceased, Defendant-Appellant.

No. 95-17393.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted July 24, 1997.

Decided Jan. 13, 1998.

James Ireijo, Hilo, Hawaii, for defendant-appellant.

Carleton B. Reid, Reid, Richards & Miyagi, Honolulu, Hawaii, for plaintiff-appellee.

Before: HUG, Chief Judge, FLETCHER, ALARCON, REINHARDT, BRUNETTI, KOZINSKI, FERNANDEZ, T.G. NELSON, KLEINFELD, TASHIMA, and THOMAS, Circuit Judges.

Opinion by Judge THOMAS; Dissent by Judge ALARCON.

THOMAS, Circuit Judge:

In this appeal, we consider the circumstances under which federal courts must make findings concerning the exercise of jurisdiction pursuant to the Uniform Declaratory Judgment Act, 28 U.S.C. § 2201 (1994). We conclude that once subject matter jurisdiction exists, the district court may proceed with a declaratory relief action without sua sponte raising the issue of whether it should be entertained. If, however, the court does raise the issue sua sponte, or is asked to decline to entertain the action by a party, then it must explain the basis for its decision on the record.

I

The automobile accident which draws our attention to this issue occurred on Mamalahoa Highway on the island of Hawaii, near Pu'uanahulu and Waikola. ¹ Both the intoxicated driver Vernell Adams and passenger Kevin Dizol were killed in the one-vehicle collision. Dizol's estate settled its tort claims against Adams' estate for $35,000, the limit of Adams' applicable insurance policy. The estate also settled its tort claims against the Highlands Bar and Grill, where Adams had been drinking prior to the accident, for $255,000, an amount less than the bodily injury liability insurance coverage available to Highlands. Dizol's estate also received $15,000 in no fault and $35,000 in underinsurance motorist benefits from USAA Insurance Company.

The instant controversy arises out of the estate's claim for underinsured motorist benefits under a Government Employees Insurance Company ("GEICO") insurance policy issued to Harvey Dizol, the decedent's brother, which covers relatives of the policyholder. Unable to resolve the dispute, GEICO filed a complaint in federal court pursuant to the Declaratory Judgment Act, seeking a declaration that Dizol's estate was not entitled to any recovery under Harvey Dizol's policy. Dizol's estate did not move for abstention and neither party objected to federal court jurisdiction.

GEICO moved for summary judgment arguing, inter alia, that the claims were barred by the applicable statute of limitations and that the estate had violated the policy's prohibition against unauthorized settlements. The district court rejected GEICO's statute of limitations defense, but granted summary judgment because the estate had failed to obtain GEICO's written consent for the Adams and Highlands Bar settlements. At the time of the judgment, there was no lawsuit pending in the state courts of Hawaii.

On appeal, a three judge panel of this court entered an opinion sua sponte remanding the case to the district court for the entry of findings to demonstrate the fitness of the action for resolution under the Declaratory Judgment Act. Dizol, 108 F.3d at 1012. Upon a majority vote of the nonrecused active members of the court, we ordered rehearing en banc.

II

In 1934, Congress authorized federal declaratory relief in the passage of the Declaratory Judgment Act. Subject to certain exceptions inapplicable here, the present form of the statute provides that:

In a case of actual controversy within its jurisdiction, [exceptions omitted] ... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.

28 U.S.C. § 2201(a).

The Declaratory Judgment Act embraces both constitutional and prudential concerns. A lawsuit seeking federal declaratory relief must first present an actual case or controversy within the meaning of Article III, section 2 of the United States Constitution. Aetna Life Ins. Co. of Hartford v. Haworth, 300 U.S. 227, 239-40, 57 S.Ct. 461, 463-64, 81 L.Ed. 617 (1937). ² It must also Of course, this discretion is not unfettered. "[A] District Court cannot decline to entertain such an action as a matter of whim or personal disinclination." Id. Prudential guidance for retention of the district court's authority is found in Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942), and its progeny.

fulfill statutory jurisdictional prerequisites. Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 672, 70 S.Ct. 876, 879, 94 L.Ed. 1194 (1950). If the suit passes constitutional and statutory muster, the district court must also be satisfied that entertaining the action is appropriate. This determination is discretionary, for the Declaratory Judgment Act is "deliberately cast in terms of permissive, rather than mandatory, authority." Public Serv. Comm'n of Utah v. Wycoff Co., 344 U.S. 237, 250, 73 S.Ct. 236, 243-44, 97 L.Ed. 291 (1952) (J. Reed, concurring). The Act "gave the federal courts competence to make a declaration of rights; it did not impose a duty to do so." Public Affairs Associates v. Rickover, 369 U.S. 111, 112, 82 S.Ct. 580, 581-82, 7 L.Ed.2d 604 (1962).

That this discretion is vested in the district courts, rather than with appellate judges, was resolved in Wilton v. Seven Falls Co., 515 U.S. 277, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995). As Justice O'Connor noted in her opinion for the Court:

We believe it more consistent with the statute to vest district courts with discretion in the first instance, because facts bearing on the usefulness of the declaratory judgment remedy, and the fitness of the case for resolution, are peculiarly within their grasp.

Id. at 289, 115 S.Ct. at 2143-44.

Wilton rejected de novo appellate review, citing the institutional advantage of trial courts in exercising discretion. Id. Thus, our review of a district court's decision to entertain an action under the Declaratory Judgment Act is deferential, under the abuse of discretion standard. Id. at 289-290, 115 S.Ct. at 2143-44.

When litigants have properly raised an objection to the district court's decision and the court has issued a written analysis detailing its reasoning, our appellate task is unstrained. However, the question posed by this appeal is how we should review the district court's exercise of its discretionary authority in the antipodal circumstance: when no party has objected and the court has not independently recorded a rationale. Does the district court commit reversible error if it does not provide a written explanation? Do we have a sua sponte obligation to examine the district court's exercise of its jurisdiction?

To date, we have answered these questions in the affirmative. Beginning with Continental Cas. Co. v. Robsac Indus., 947 F.2d 1367 (9th Cir.1991), and continuing with American Nat'l. Fire Ins. Co. v. Hungerford, 53 F.3d 1012 (9th Cir.1995), and Employers Reinsurance Corp. v. Karussos, 65 F.3d 796 (9th Cir.1995), we have assumed a sua sponte obligation to review and decide whether the district court has properly exercised its discretion even when no party has raised the issue. As a panel recently explained in Budget Rent-A-Car v. Crawford, 108 F.3d 1075, 1078 (9th Cir.1997):

Our initial duty, in reviewing an order granting declaratory relief in a diversity action involving questions of state law, is to determine whether the district court abused its discretion in determining that the relevant factors justified the exercise of its jurisdiction.

This jurisprudential approach has evolved through Golden Eagle Ins. Co. v. Travelers Companies, 103 F.3d 750 (9th Cir.1996), Polido v. State Farm Mut. Auto. Ins. Co., 110 F.3d 1418 (9th Cir.1997), and the panel decision in this case, into a requirement that the district court make written findings justifying its exercise of its discretionary jurisdiction or suffer reversal. As we recently summarized in St. Paul Fire & Marine Ins. Co. v. F.H., 117 F.3d 435, 437 (9th Cir.1997):

Under our recent precedent, the district court was required to consider the discretionary nature of its jurisdiction at the outset of the case. See Budget Rent-A-Car v. Crawford, 108 F.3d 1075, 1078 (9th This doctrine has not been without its practical, as well as philosophical, limitations. With increasing frequency, opportunists have seized on this rule for tactical maneuvering. Some litigants have initiated a federal declaratory action, then claimed error in the trial court's exercise of jurisdiction upon receiving an adverse decision by the trial court or on appeal. See, e.g., St. Paul Fire & Marine Ins. Co., 117 F.3d at 437. More often, lawsuits have been remanded sua sponte to state courts after years of federal litigation, defying the very principles of judicial economy and cooperative federalism the statute was designed to enhance. As we have observed, we "do the state no favor if, invoking the principle of comity, we reversed the district court and remanded this case simply to have it prosecuted again in state court on the same facts and the same law." Golden Eagle Ins. Co., 103 F.3d at 756. In those circumstances, we do no favor to the litigants, or our district judges, either. Thus, reexamination of our procedure is apropos.

Cir.1997). We have held that the district court has a duty, even though there is no state action pending at the time and the parties do not raise the issue, to determine on the record whether it should have exercised its...