DERRICK K. WATSON, District Judge.
Maui Land and Pineapple Co., Inc. ("MLP") filed this action in Hawaii state court against its insurer, Liberty Insurance Underwriters Inc. ("Liberty"), seeking a declaration that Liberty is obligated to pay for MLP's defense costs and/or indemnify MLP in a separate Hawaii state action that names MLP and MLP President Ryan Churchill as defendants. Liberty removed the action to this Court, and MLP now seeks remand.
On August 17, 2016, United States Magistrate Judge Richard L. Puglisi entered his Findings and Recommendation to Deny Plaintiff's Motion for Remand ("F&R"), finding that the Court should retain jurisdiction after balancing the factors set forth by the United States Supreme Court in Brillhart v. Excess Insurance Company of America, 316 U.S. 491 (1942), and by the Ninth Circuit in Government Employees Insurance Co. v. Dizol, 133 F.3d 1220 (9th Cir. 1998) (en banc). After unsuccessfully moving for reconsideration, MLP filed its objections to the F&R, arguing that the first and third Brillhart factors command returning jurisdiction to the state. Based on the following, the Court ADOPTS the August 17, 2016 F&R and DENIES MLP's Motion to Remand.
This case arises out of a lawsuit initiated in the Circuit Court of the Second Circuit, State of Hawaii, Narayan, et al. v. Marriott International Inc., et al., Civil No. 12-1-0586(3) (the "Underlying Lawsuit"). The plaintiffs in the Underlying Lawsuit ("Underlying Plaintiffs") are condominium owners at The Residences at Kapalua Bay in Maui (the "Project"). See Dkt. No. 10-3 (Second Amended Complaint ("SAC") in the Underlying Lawsuit). The Underlying Plaintiffs brought claims against MLP and other defendants allegedly involved in the development of the Project.
In 2012, MLP tendered the Underlying Lawsuit to Liberty. However, Liberty denied indemnity coverage for MLP on the basis that the Underlying Lawsuit does not constitute a securities action or a shareholder derivative suit, as required under the policy at issue.
On May 6, 2016, MLP initiated this coverage action in the Circuit Court of the Second Circuit, State of Hawaii. See Dkt. No. 1-1 at 2. Liberty filed its notice of removal on May 31, 2016, bringing the action to this Court. Dkt. No. 1. Thereafter, MLP sought remand (Dkt. No. 10), which the Magistrate Judge recommended denying. Dkt. No. 18. The Magistrate Judge also denied MLP's Motion for Reconsideration. Dkt. No. 21.
A motion to remand is a case-dispositive motion, requiring the issuance of a findings and recommendation if initially reviewed by a magistrate judge. See Flam v. Flam, 788 F.3d 1043, 1047 (9th Cir. 2015); Keown v. Tudor Ins. Co., 621 F.Supp.2d 1025, 1029 (D. Haw. 2008). When a party objects to a magistrate judge's findings or recommendations, the district court must review de novo those portions to which the objections are made and "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1); see also United States v. Raddatz, 447 U.S. 667, 673 (1980); United States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en banc) ("[T]he district judge must review the magistrate judge's findings and recommendations de novo if objection is made, but not otherwise.").
Under a de novo standard, this Court reviews "the matter anew, the same as if it had not been heard before, and as if no decision previously had been rendered." Freeman v. DirecTV, Inc., 457 F.3d 1001, 1004 (9th Cir. 2006); United States v. Silverman, 861 F.2d 571, 576 (9th Cir. 1988). Although the district court need not hold a de novo hearing, it is the Court's obligation to arrive at its own independent conclusion about those portions of the magistrate judge's findings or recommendation to which a party objects. United States v. Remsing, 874 F.2d 614, 618 (9th Cir. 1989).
At issue is whether the Court should decline to exercise its discretion to retain jurisdiction over this matter. The parties agree that jurisdiction is not mandatory, and that courts in the Ninth Circuit apply the discretionary standards articulated by the United States Supreme Court in Brillhart v. Excess Insurance Company of America, 316 U.S. 491 (1942), and by the Ninth Circuit in Government Employees Insurance Co. v. Dizol, 133 F.3d 1220 (9th Cir. 1998) (en banc). The Brillhart factors to be considered are: (1) avoiding needless determination of state law issues; (2) discouraging litigants from filing declaratory actions as a means of forum shopping; and (3) avoiding duplicative litigation. In addition, the Court may consider additional factors enumerated in Government Employees Insurance Co. Because MLP limits its objections to the Magistrate Judge's analysis of the first and third Brillhart factors, the Court does likewise.
The first Brillhart factor focuses on whether the retention of jurisdiction is likely to result in this Court needlessly determining state law issues. "A needless determination of state law may involve an ongoing parallel state proceeding regarding the precise state law issue, an area of law Congress expressly reserved to the states, or a lawsuit with no compelling federal interest (e.g., a diversity action)." Keown v. Tudor Ins. Co., 621 F.Supp.2d 1025, 1031-32 (D. Haw. 2008) (citing Continental Case. Co. v. Robsac Indus., 947 F.2d 1367, 1371-72 (9th Cir. 1991), overruled in part on other grounds by Dizol, 133 F.3d at 1225). The Court acknowledges that in this diversity action, there are no compelling federal interests, and that insurance is an area of law that Congress has expressly reserved to the states. See Nat'l Union Fire Ins. Co. of Pittsburgh, PA v. Simpson Mfg. Co., 829 F.Supp.2d 914, 922 (D. Haw. 2011) (citing 15 U.S.C. §§ 1011-12). "However, there is no presumption in favor of abstention in declaratory actions generally, nor in insurance coverage cases specifically." Dizol, 133 F.3d at 1225.
As to whether there is an ongoing parallel state proceeding:
Allstate Ins. Co. v. Davis, 430 F.Supp.2d 1112, 1120 (D. Haw. 2006).
In the instant action, MLP brings a claim for Declaratory Judgment against Liberty, arguing that:
Complaint ¶ 14.
It is quite clear, and the parties do not dispute, that the legal issues in this declaratory action involve the interpretation of the policy issued by Liberty. It is well-established that courts in this district have, on numerous occasions, interpreted insurance policies pursuant to state law to determine the scope of an insurer's duties to an insured. See, e.g., Allstate, 430 F. Supp. 2d at 1120 ("The issues before the Court in this action do not implicate novel or unsettled matters of state law. On numerous occasions, the United States District Court in the District of Hawaii has interpreted insurance policies pursuant to Hawaii state law to determine the scope of an insurer's duties to an insured.").
Moreover, after carefully reviewing the exhibits that the parties attached from the Underlying Lawsuit, including the underlying complaint,
On balance, the first Brillhart factor counsels in favor of retaining jurisdiction.
The third Brillhart factor, avoiding duplicative litigation, also favors retaining jurisdiction. "[D]uplicative litigation may be a concern if this Court's determination regarding [an insurer's] duties hinges on a finding that will also be addressed in the state court." Allstate, 430 F. Supp. 2d at 1121.
First, as to Liberty's duty to advance defense costs, the Court agrees with the Magistrate Judge's conclusion that the Court can generally ascertain whether this duty exists by examining the Second Amended Complaint in the Underlying Lawsuit and the relevant policy language. See Dairy Road Partners v. Island Ins. Co., Ltd., 992 P.2d 93, 108 (Haw. 2000) (holding that the duty to defend "is purely contractual and depends, in the first instance, on the language of the particular policy involved"); AIG Hawaii Ins. Co. v. Smith, 891 P.2d 261, 265 (Haw. 1995) ("The well established general rule is that the allegations in the complaint in the underlying action determine an insurer's duty to defend its insured.") (citation omitted). In other words, determining Liberty's duty to advance defense costs does not hinge on a factual determination to be made by the state court. See Allstate, 430 F. Supp. 2d at 1121.
Second, as to Liberty's duty to indemnify, the Court acknowledges that this requires a fact-specific analysis. See id. at 1122. As the Magistrate Judge pointed out, "Liberty's duty to indemnify Mr. Churchill turns on whether Mr. Churchill's alleged liability is based on his conduct as a board member or his conduct as the president of MLP, or both." Dkt. No. 19 at 11 (citing Dkt. No. 10-3, Narayan v. Marriott International, Inc., et. al, SAC ¶ 26(d)). The Court agrees, however, that if there is an actual concern regarding the capacity in which Mr. Churchill is being sued, the Court can defer decision on the indemnity issue until the capacity issue is resolved in the Underlying Lawsuit.
In sum, the Court finds that this factor also weighs in favor of retaining jurisdiction. After balancing the relevant factors,
The Court hereby ADOPTS the August 17, 2016 F&R (Dkt. No. 18) and DENIES MLP's Motion to Remand (Dkt. No. 10).
IT IS SO ORDERED.