Safeco Ins. Co. of Am. v. Nelson, Case No. 20-cv-00211-MMA (AHG)

• Citation: 468 F.Supp.3d 1291
• Decision Date: 24 June 2020
• Docket Number: Case No. 20-cv-00211-MMA (AHG)
• Parties: SAFECO INSURANCE COMPANY OF AMERICA, a New Hampshire Corporation, Plaintiff, v. Larry NELSON, an individual, Tracy Irene Golden, an individual, Sylena Sanders, an individual, the United States of America, and Does 1 – 5, Defendants.
• Court: United States District Courts. 9th Circuit. United States District Court (Southern District of California)

468 F.Supp.3d 1291

SAFECO INSURANCE COMPANY OF AMERICA, a New Hampshire Corporation, Plaintiff,

v.Larry NELSON, an individual, Tracy Irene Golden, an individual, Sylena Sanders, an individual, the United States of America, and Does 1 – 5, Defendants.

Case No. 20-cv-00211-MMA (AHG)

United States District Court, S.D. California.

Signed June 24, 2020

Frank Falzetta, Sheppard, Mullin, Richter & Hampton, LLP, Los Angeles, CA, Katherine C. Sample, Sheppard, Mullin Richter, Costa Mesa, CA, for Plaintiff.

Peter J. Schulz, Schulz Brick & Rogaski, San Diego, CA, for Defendant Larry Nelson.

Danielle Marie Tailleart, Legal Aid Society of San Diego, San Diego, CA, for Defendant Sylena Sanders.

U.S. Attorney CV, Leslie Marie Gardner, U.S. Attorneys Office, San Diego, CA, for Defendant The United States of America.

ORDER GRANTING THE UNITED STATES' MOTION TO DISMISS

MICHAEL M. ANELLO, United States District Judge

On January 31, 2020, Plaintiff Safeco Insurance Company of America ("Plaintiff") filed a complaint against Larry Nelson ("Nelson"), Tracy Irene Golden, Sylena Sanders, and the United States of America. See Doc. No. 1. Plaintiff seeks a declaratory judgment from the Court declaring, amongst other things, that it has no duty to defend its insured, Larry Nelson, in any of the pending suits filed against him by the respective defendants. See Doc. No. 1. at 29–30.¹

The United States moves to dismiss for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). See Doc. No. 12. Plaintiff filed an opposition to the United States' motion, to which the United States replied. See Doc. Nos. 14, 17. The Court took the matter under submission on the papers and without oral argument pursuant to Civil Local Rule 7.1.d.1. See Doc. No. 18; Fed. R. Civ. P. 78(b). For the reasons set forth below, the Court GRANTS the United States' motion.

BACKGROUND

The root of this dispute is a suit between two of the defendants in Plaintiff's declaratory judgment action, the United States and Nelson. See Doc. No. 1; Doc. No. 1-2 ("Ex. A"). The United States filed a civil enforcement suit against Nelson on June 11, 2019 alleging numerous violations of Title VIII of the Civil Rights Act of 1968, as amended, 42 U.S.C. §§ 3601 et seq. ("the Fair Housing Act"). See Doc. No. 1 ¶ 8; Ex. A. These allegations include "that Nelson has subjected tenants of his residential rental properties to discrimination, based on sex" as well as allegations of sexual harassment towards Nelson's female tenants. Doc. No. 1 ¶12, 12(a)–(j).

Plaintiff is not a party to the United States' suit against Nelson. See Ex. A. Plaintiff relates to that suit only in that it issued Nelson several insurance policies covering the rental properties at which the alleged statutory violations occurred. See Doc. No. 1 ¶¶ 24–38; Ex. A. Plaintiff agreed to defend Nelson in the United States' suit against him but subjected that defense "to a full and complete reservation of rights." Doc. No. 1 ¶ 39. The United States' suit against Nelson is ongoing. See S.D. Cal. Case. No. 19cv1087-CAB-WVG.

Meanwhile, Plaintiff initiated this action against Nelson, the United States, and other individuals who have also sued Nelson based on similar allegations to those of the United States. See Doc. No. 1. Plaintiff alleges that the Court has subject matter jurisdiction over the United States pursuant to 28 U.S.C. § 1332 and the Administrative Procedure Act, 5 U.S.C. § 702. See id. ¶¶ 1, 6. Plaintiff seeks a declaration and corresponding judgment establishing that it has no duty to defend or indemnify Nelson against any of the claims brought against him by the United States. See id. ¶ 57.

The United States moves to dismiss Plaintiff's claim against it for lack of subject matter jurisdiction on three grounds. See Doc. No. 12. First, the United States argues that no case or controversy exists between it and Plaintiff. See id. at 3–5. Second, the United States asserts that it has not waived its sovereign immunity and is therefore immune from Plaintiff's suit. See id. at 5–6. Finally, the United States contends that Plaintiff's reliance on section 702 of the Administrative Procedure Act "to circumvent the jurisdictional failures in its complaint ... is also misplaced." Id. at 6.

In response, Plaintiff sets forth two arguments. See Doc. No. 14. First, Plaintiff asserts that a case or controversy exists between it and the United States because the United States is "a third-party claimant and potential judgment creditor under California Insurance Code section 11580(b)(2)." Id. at 5; see id. at 5–7. Second, Plaintiff contends that section 702 of the Administrative Procedure Act constitutes a waiver of sovereign immunity for actions seeking declaratory relief and the United States is properly subject to suit as a result. See id. at 5, 7–9.

LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(1) allows for dismissal of a complaint for lack of subject matter jurisdiction. "[F]ederal courts are courts of limited jurisdiction." Owen Equip. & Erection Co. v. Kroger , 437 U.S. 365, 374, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978), superseded by statute on other grounds , 28 U.S.C. § 1367, as recognized in LaSalle Nat'l Trust, NA v. Schaffner , 818 F. Supp. 1161, 1165 (N.D. Ill. 1993). "A federal court is presumed to lack jurisdiction in a particular case unless the contrary affirmatively appears." Stock West, Inc. v. Confederated Tribes of the Colville Reservation , 873 F.2d 1221, 1225 (9th Cir. 1989) (citing Cal. ex rel. Younger v. Andrus , 608 F.2d 1247, 1249 (9th Cir. 1979) ). Subject matter jurisdiction must exist when the action is commenced. Morongo Band of Mission Indians v. Cal. State Bd. of Equalization , 858 F.2d 1376, 1380 (9th Cir. 1988) (citing Mollan v. Torrance , 22 U.S. (9. Wheat.) 537, 538, 6 L.Ed. 154 (1824) ). Further, subject matter jurisdiction may be raised "at any stage of the litigation." Arbaugh v. Y&H Corp. , 546 U.S. 500, 506, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006) ; see also Fed. R. Civ. P. 12(h)(3) ("If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.").

A facial attack on jurisdiction asserts that the allegations in a complaint are insufficient to invoke federal jurisdiction. Safe Air for Everyone v. Meyer , 373 F.3d 1035, 1039 (9th Cir. 2004). In resolving a facial challenge to jurisdiction, a court accepts the allegations of the complaint as true and draws all reasonable inferences in favor of the plaintiff. Doe v. Holy See , 557 F.3d 1066, 1073 (9th Cir. 2009) (citing Wolfe v. Strankman , 392 F.3d 358, 362 (9th Cir. 2004) ).

DISCUSSION

I. Sovereign Immunity

The United States moves for dismissal on the grounds that it has not waived its sovereign immunity from suit and Plaintiff's reliance on the Administrative Procedure Act ("APA") to establish such a waiver is inapposite. See Doc. No. 12 at 5–7. Plaintiff responds by reiterating its reliance on the general waiver of sovereign immunity articulated in section 702 of the APA. Plaintiff asserts that the United States' "coercive action against [Plaintiff's] insured" constitutes a "final agency action" subjecting the United States to suit within the meaning of the APA. See Doc. No. 14 at 9.

It is an unquestioned principle that the United States is a sovereign entity that is not amenable to suit without its consent. See, e.g., McGuire v. United States , 550 F.3d 903, 910 (9th Cir. 2008). It is also well-established that the burden of overcoming sovereign immunity lies with the party bringing suit against a sovereign. See Dunn & Black P.S. v. United States , 492 F.3d 1084, 1088 (9th Cir. 2007) (citing Cunningham v. United States , 786 F.2d 1445, 1446 (9th Cir. 1986) ). That is, absent a positive demonstration that sovereign immunity does not apply, this Court must presume that the United States is not amenable to suit. See Gilbert v. DaGrossa , 756 F.2d 1455, 1458 (9th Cir. 1985) ("Where a suit has not been consented to by the United States, dismissal of the action is required."); see also United States v. Mitchell , 463 U.S. 206, 212, 103 S.Ct. 2961, 77 L.Ed.2d 580 (1983) ("It is axiomatic that the United States may not be sued without its consent and that the existence of consent is a prerequisite for jurisdiction.").

The question, then, is whether Plaintiff has affirmatively pleaded around the United States' sovereign immunity. The Court concludes that Plaintiff has not.

In its opposition to the United States' motion, Plaintiff offers two statutory grounds for establishing a waiver of sovereign immunity, the Declaratory Judgment Act, 28 U.S.C. § 2201, and section 702 of the APA. See Doc. No. 14 at 7. However, the Declaratory Judgment Act functions solely as a procedural mechanism. See Aetna Life Ins. Co. of Hartford v. Haworth , 300 U.S. 227, 240, 57 S.Ct. 461, 81 L.Ed. 617 (1937) ("[T]he operation of the Declaratory Judgment Act is procedural only."). The Declaratory Judgment Act is neither a waiver of sovereign immunity nor an independent grant of jurisdiction. See Brownell v. Ketcham Wire & Mfg. Co. , 211 F.2d 121, 128 (9th Cir. 1954) ; see also Fiedler v. Clark , 714 F.2d 77, 79 (9th Cir. 1983) (per curiam) ("The Declaratory Judgment Act does not provide an independent jurisdictional basis for suits in federal court."); Walton v. Fed. Bureau of Prisons , 533 F. Supp. 2d 107, 114 (D.D.C. 2008) (citing Balistrieri v. United States , 303 F.2d 617, 618 (7th Cir. 1962) ) (finding that the Declaratory Judgment Act does not waive sovereign immunity). Rather, it "merely provides an additional remedy in cases where jurisdiction is otherwise established." Staacke v. U.S. Sec'y of Labor , 841 F.2d 278, 280 (9th Cir. 1988) (citing Luttrell v. United States , 644 F.2d 1274, 1275 (9th Cir. 1980) ).

Additionally, Plaintiff alleges that section 702 of the APA establishes the United States' waiver of sovereign immunity. Section 702 states in relevant part:

A person suffering

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