United States District Court, D. Arizona
Honorable John J. Tuchi United States District Judge.
issue is Defendant Lynda Faye Downie's Motion to Dismiss
(Doc. 14, Mot.), to which Plaintiff Scottsdale Indemnity
Company (“SIC”) filed a Response (Doc. 16,
Resp.), and Defendant filed a Reply (Doc. 17, Reply).
31, 2015, Travis Wade O'Conner, a bouncer at The Lodge
Sports Bar and Grill in Pinetop, Arizona, used force to
escort Lynda Faye Downie out of the bar after Downie got into
a physical altercation with other patrons. As O'Conner
tried to remove Downie from the bar, Downie fell and
sustained injuries. On January 26, 2016, Downie filed suit
against O'Conner and Epic Developments, the bar's
owner, in Navajo County Superior Court. On February 24, 2016,
SIC, the bar's insurer, agreed to defend O'Conner and
Epic under a limited Reservation of Rights, in which SIC
reserved its right to refuse to indemnify for any amount
above a $25, 000 assault and battery liability limit in the
August 2017, O'Conner and Epic entered into a Morris
Agreement with Downie in which O'Conner and Epic
stipulated to a $400, 000 judgment and assigned their rights
against SIC under the Policy to Downie, and Downie agreed not
to execute the stipulated judgment against O'Conner and
Epic. After SIC intervened, in June 2018, the Superior Court
held a three-day evidentiary hearing in Holbrook, Arizona to
determine the reasonableness of the stipulated judgment
amount. On June 12, 2018, the Superior Court issued a ruling
that a reasonable judgment amount is $275, 000, and the next
day the Superior Court entered judgment for Downie and a writ
of garnishment in the amount of $275, 000.
filed the present action against Downie in this Court on June
13, 2018, raising two counts under the Declaratory Judgment
Act, 28 U.S.C. §§ 2201, 2202. SIC asks the Court to
declare that insurance coverage for Downie's injury is
limited to $25, 000 and that no coverage for punitive or
exemplary damages applies under the policy. On June 29, 2018,
SIC answered the writ of garnishment in the Superior Court
matter by denying liability above the $25, 000 limit, and SIC
moved to stay the garnishment proceeding pending this
Court's resolution of the present matter, which motion
the Superior Court granted.
now asks this Court to exercise its discretion under the
Declaratory Judgment Act and dismiss this action in favor of
the pending state court proceedings involving the same
parties and issues.
the Declaratory Judgment Act, district courts have the
“unique and substantial discretion” to decide
whether to issue a declaratory judgment. Wilton v. Seven
Falls Co., 515 U.S. 277 (1995). The Declaratory Judgment
Act states that “courts may declare the rights
and other legal relations of any interested party seeking
such declaration.” 28 U.S.C. § 2201(a) (emphasis
added). Accordingly, a district court is under no compulsion
to exercise jurisdiction. Brillhart v. Excess Ins. Co. of
Am., 316 U.S. 491, 494 (1942).
parallel state proceedings exist, “there is a
presumption that the entire suit should be heard in state
court.” Gov't Employees Ins. Co. v. Dizol,
133 F.3d 1220, 1225 (9th Cir. 1998) (citation omitted).
Federal courts should avoid gratuitous interference, and a
federal court's decision to proceed with a declaratory
judgment action where parallel state proceedings exist may be
uneconomical and vexatious. Wilton, 515 U.S. at
282-83 (citation omitted). However, the existence of a
pendent state action does not automatically bar a request for
federal declaratory relief. Chamberlain v. Allstate Ins.
Co., 931 F.2d 1361, 1367 (9th Cir. 1991).
consider a number of factors in determining whether to
exercise jurisdiction or dismiss or stay the declaratory
judgment proceeding. These factors include the need to: (1)
avoid unnecessary determination of state law issues; (2)
discourage litigants from filing declaratory actions in an
attempt to forum shop; and (3) avoid duplicative litigation.
Dizol, 133 F.3d at 1225; Chamberlain, 931
F.2d at 1367. In addition to the foregoing factors, the Ninth
Circuit has adopted the following additional considerations:
[W]hether the declaratory action will settle all aspects of
the controversy; whether the declaratory action will serve a
useful purpose in clarifying the legal relations at issue;
whether the declaratory action is being sought merely for the
purposes of procedural fencing or to obtain a “res
judicata” advantage; or whether the use of a
declaratory action will result in entanglement between the
federal and state court systems. In addition, the district
court might also consider the convenience of the parties and
the availability and relative convenience of other remedies.
Dizol, 133 F.3d at 1225 n.5 (citation omitted).
declining to exercise jurisdiction, the district court is
“authorized . . . to stay or dismiss” ...