Nucor Corp. v. Emp'rs Ins. Co. of Wausau
| Decision Date | 07 August 2012 |
| Docket Number | No. CV-12-678-PHX-GMS,CV-12-678-PHX-GMS |
| Parties | Nucor Corporation, a Delaware corporation, Plaintiff, v. Employers Insurance Company of Wausau, a Wisconsin corporation, Defendant. |
| Court | U.S. District Court — District of Arizona |
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Pending before the Court is Plaintiff's Motion for Remand (Doc. 15). For the reasons discussed below, Plaintiff's motion is denied.
For a period of time in the 1960s, Plaintiff Nucor Corporation owned and operated a facility on West Osborn Road in Phoenix, Arizona (the "West Osborn Complex") where it manufactured electronic components. As part of its manufacturing process, Nucor used a solvent called trichloroethylene ("TCE") to clean and degrease machinery.
During the 1980s, TCE was discovered in groundwater in the west-central area of Phoenix, Arizona. As a result, four different actions have been filed against Nucor by parties claiming to have been affected by Nucor's use of TCE. The first three suits werefiled in the 1990s. The fourth suit, which is the subject of the instant coverage action, was filed in 2010 by the Roosevelt Irrigation District against Nucor and three other defendants.
Nucor had purchased general liability insurance from several insurers, including Defendant Employers Insurance Company of Wausau ("Wausau"). Wausau apparently agreed to defend or indemnify Nucor in two of the three suits brought against Nucor in the 1990s, and approved of Nucor's retention of Fennemore Craig as counsel in these two actions. In 1997, Nucor filed a coverage action against Wausau and its other insurers in Arizona Superior Court in which Wausau filed cross-claims against the other insurers (the "First Coverage Action"). The First Coverage Action progressed through various stages over the next 13 years, and by 2010, the Superior Court had issued final judgments with respect to all the claims and cross claims. Nucor, Wausau, and one of the other insurers have since appealed the First Coverage Action, and this appeal is pending in Arizona state court. The issues appealed include whether Wausau's duty to defend was independent from that of the other insurers and whether the defense costs incurred by Nucor were reasonable.
On February 9, 2010, the Roosevelt Irrigation District ("RID") filed its complaint against Nucor in the U.S. District of Arizona, alleging that Nucor's disposal of TCE at the West Osborn Complex had contaminated some of the RID's wells. Wausau apparently agreed to defend and/or indemnify Nucor for this lawsuit.
On February 22, 2012, Nucor filed its Complaint in the instant action in Maricopa County Superior Court, bringing claims against Wausau for declaratory relief, breach ofcontract, and bad faith. (Doc. 1-1). In the Complaint, Nucor alleges, among other things, that Wausau has refused to indemnify Nucor's counsel at the rate established in the First Coverage Action, has marked down various defense expenses, and has attempted to appoint counsel different than Nucor's chosen counsel. (Id.). On February 24, 2012, Nucor served the Complaint on the Director of the Arizona Department of Insurance ("ADOI"), Wausau's statutory agent for service of process. The DOI forwarded the Complaint to Wausau, which received the Complaint on February 28, 2012.
On March 29, 2012, exactly 30 days after receiving the Complaint, Wausau removed the action to this Court.1 Nucor now moves to remand this case to state court.
Nucor first contends that the Court should remand this action to the state court pursuant to the Brillhart abstention doctrine. In Brillhart v. Excess Ins. Co. of America, the Supreme Court held that a federal court's jurisdiction over a declaratory judgment claim is discretionary, not obligatory. 316 U.S. 491, 494-95 (1942) () (internal citation omitted). The Supreme Court recently reaffirmed this doctrine:
[A] district court is authorized, in the sound exercise of its discretion, to stay or to dismiss an action seeking a declaratory judgment before trial or after all arguments have drawn to a close. In the declaratory judgment context, the normal principle that federal courts should adjudicate claims within their jurisdiction yields to considerations of practicality and wise judicial administration.
Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995). This abstention doctrine typically applies only where parallel proceedings are pending in state court. See Wilton, 515 U.S. at 290 (); Gov't Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir. 1998) (). In addition, "when other claims are joined with an action for declaratory relief (e.g., bad faith, breach of contract, breach of fiduciary duty, rescission, or claims for other monetary relief), the district court should not, as a general rule, remand or decline to entertain the claim for declaratory relief." Id. (emphasis added). "Because claims of bad faith, breach of contract, breach of fiduciary duty and rescission provide an independent basis for federal diversity jurisdiction, the district court is without discretion to remand or decline to entertain these causes of action." Id. at 1225 n. 6. See also Chamberlain v. Allstate Ins. Co., 931 F.2d 1361, 1367 (9th Cir. 1991) ().
The Ninth Circuit has carved out a small exception to this general rule. In Employers Reinsurance Corp. v. Karussos, a plaintiff filed a claim for declaratory relief in federal court while related claims were pending in state court. 65 F.3d 796 (9th Cir. 1995), overruled on other grounds by Dizol, 133 F.3d 1220. The Ninth Circuit determined that the district court should remand the action even though the plaintiff had, in connection with its declaratory relief claim, requested monetary relief, holding that "simply asking for a share of the defense costs to date" does not "transform[ ] a declaratory relief action over which jurisdiction is discretionary into a case which the district court is obligated to hear." Id. at 801. Similarly, in Golden Eagle Ins. Co. v. Travelers Companies, the Ninth Circuit held that a plaintiff's requests for contribution and indemnification in connection with its declaratory relief claim did not affect the discretionary nature of the court's jurisdiction over the claim. 103 F.3d 750, 755 (9th Cir. 1996) , overruled on other grounds by Dizol, 133 F.3d 1220. The court explained that where a Id.
Nucor seizes upon this "wholly dependent" language, arguing that its breach of contract and bad faith claims are ultimately dependent on any declaratory relief granted by the Court and therefore that the Court's jurisdiction over the entire action is discretionary. (Doc. 27 at 2-3). The Ninth Circuit has specified, however, that theexception carved out in Karussos and Golden Eagle applies only where the non-declaratory relief claims "would continue to exist if the request for a declaration simply dropped from the case." Snodgrass v. Provident Life and Acc. Ins. Co., 147 F.3d 1163, 1168 (9th Cir. 1998). In other words, where non-declaratory relief claims "could be litigated in federal court even if no declaratory claim had been filed," the Brillhart abstention doctrine does not apply. United Nat. Ins. Co. v. R&D Latex Corp., 242 F.3d 1102, 1113 (9th Cir. 2001). In this case, Nucor's breach of contract and bad faith claims could be litigated in federal court on diversity jurisdiction grounds even if Nucor had not filed its declaratory judgment claim. The Court will not, therefore, depart from the general rule that "when other claims are joined with an action for declaratory relief . . . the district court should not . . . remand or decline to entertain the claim for declaratory relief." Dizol, 133 F.3d 1220, 1225.
To be sure, in 1997 when this issue was raised and then appealed in the First Coverage Action, the Ninth Circuit stated, citing Golden Eagle, that the district court could decline to exercise jurisdiction over Nucor's contract and bad faith claims because they were "'wholly dependent' upon the outcome of the action for declaratory relief." Nucor Corp. v. Aetna Cas. & Sur. Co., 110 F.3d 69 (Table), 1997 WL 151726, at *1-2 (9th Cir. 1997). The Ninth Circuit's decision in that action, however, is unpublished, and as such does not weigh strongly in the Court's decision. See U.S. Ct. of App. 9th Cir. Rule 36-3(a), (c) ( that "[u]npublished dispositions and orders of this Court are not precedent" and that "[u]npublished dispositions and orders issued before January 1, 2007 may not be cited to the courts of this circuit"). Moreover, the decision in that actionwas issued prior to the Ninth Circuit's determination in Dizol that "the district court is without discretion" to remand "claims of bad faith [or] breach of contract." 133 F.3d at 1225 n. 6. The Ninth Circuit's holding in the First Coverage Action was also issued prior to the circuit's clarification in Snodgrass a...
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