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State Farm Mutual Automobile Insurance Co. v. Garcia

United States District Court, D. Nevada

July 9, 2014

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff,
v.
GABRIEL MARIE GARCIA; JOYCE KING, Defendants.

ORDER

GLORIA M. NAVARRO, Chief District Judge.

Pending before the Court is the Motion to Dismiss for Lack of Jurisdiction (ECF No. 7) filed by Defendant Gabriel Marie Garcia ("Garcia"). Plaintiff State Farm Mutual Automobile Insurance Company ("Plaintiff") filed a Response (ECF No. 9) and Garcia filed a Reply (ECF No. 10). Also pending before the Court is Plaintiff's Motion for Leave to File Supplemental Briefing on Defendant Gabriel Garcia's Motion to Dismiss. (ECF No. 15.) Garcia filed a Response (ECF No. 17) and Plaintiff filed a Reply (ECF No. 18).

I. BACKGROUND

This case arises from an automobile accident between Defendant Joyce King ("King"), the driver, and Garcia, a pedestrian. (Compl. ¶ 6.) At the time of the accident, King held an automobile insurance policy with Plaintiff. ( Id. ¶ 5.) Thereafter, on March 28, 2011, Garcia's attorney sent a letter to Plaintiff demanding recovery in the amount of the policy limits of King's insurance policy. ( Id. ¶ 9.) After Plaintiff completed its investigation, it "decided to place its entire $50, 000 bodily injury policy limit on the file to resolve [Garcia's] claim, " as previously requested by Garcia's attorney. ( Id. ¶ 14.) However, Garcia's attorney later provided a "covenant not to execute and assignment" that included terms that Plaintiff deemed unreasonable and that were allegedly never discussed during Plaintiff's prior communications with Garcia's attorney. ( Id. ¶ 16.) As a result, Plaintiff declined to execute this covenant and assignment and Garcia filed an action in Nevada state court. ( Id. ) As a result of the state court action, Garcia obtained a jury verdict against King in excess of $230, 000.00. ( Id. ¶ 20.)

Plaintiff now asserts that, Garcia is seeking to recover the entire $230, 000.00 judgment from Plaintiff. ( Id. ¶ 24.) For this reason, Plaintiff requests a variety of judicial declarations related to its rights and obligations in relation to King's insurance policy and its $50, 000 policy limit. ( Id. ¶¶ 24-30.) After Plaintiff initiated the instant action, Garcia filed a Motion to Dismiss, in which Garcia argues that this Court lacks subject matter jurisdiction for two primary reasons. (Mot. to Dismiss 2:16-21, ECF No. 7.) First, Garcia asserts that "there is no justiciable controversy ripe for judicial determination." ( Id. at 2:17-18.) Second, Garcia contends that "the Court lacks diversity jurisdiction as the amount in controversy does not exceed $75, 000." ( Id. at 2:18-19.)

II. DISCUSSION

The Declaratory Judgment Act (the "Act") provides that "[i]n a case of actual controversy within its jurisdiction, ... 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." 28 U.S.C. § 2201(a) (emphasis added). To determine whether to hear an action filed under the Act, courts undertake a two-step inquiry. First, the Court determines "whether there is an actual case or controversy within its jurisdiction." Principal Life Ins. Co. v. Robinson, 394 F.3d 665, 669 (9th Cir. 2005). Second, "the court must decide whether to exercise its jurisdiction by analyzing the factors set out in Brillhart v. Excess Ins. Co., 316 U.S. 491, 494 (1942) and its progeny." Principal Life, 394 F.3d at 669. For the reasons discussed below, the Court concludes that Plaintiff has not demonstrated the existence of an actual controversy within the Court's jurisdiction. Furthermore, even to the extent that this case did present such a controversy, the Court declines to hear this case under Brillhart.

A. Actual Case or Controversy Within this Court's Jurisdiction

1. Diversity Jurisdiction: Amount in Controversy

"Federal courts are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). "It is to be presumed that a cause lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction." Id. Here, Plaintiff asserts that jurisdiction is proper because the requirements for diversity jurisdiction are present. District courts have subject matter jurisdiction over civil actions where no plaintiff is a citizen of the same state as a defendant and the amount in controversy exceeds $75, 000. 28 U.S.C. § 1332(a). Although neither party disputes that the complete diversity requirement is met, Garcia asserts that Plaintiff has failed to establish that the amount in controversy exceeds $75, 000. The Court agrees.

Specifically, Plaintiff requests a series of declarations that relate to Plaintiff's maximum liability under King's insurance policy. (Compl. ¶¶ 24-26, 28.) Namely, Plaintiff asserts that its liability is capped by the $50, 000 policy limit in King's insurance policy. ( Id. ) In its Response to Defendant's Motion, Plaintiff asserts that "by being required to post the appeal bond for the amount of the judgment, and not for the amount of its policy limit, the amount in controversy is the actual amount of the judgment, and not for the amount of its policy limit." (Resp. 17:7-9, ECF No. 9.) However, as discussed below, the required amount of a supersedeas bond in a state court proceeding is not the province of this Court. Thus, the amount of an appellate bond in state court is irrelevant in the jurisdictional analysis. At bottom, the amount in controversy in the declarations that Plaintiff seeks is $50, 000, the face value of the insurance policy. See Budget Rent-A-Car, Inc. g. Higashiguchi, 109 F.3d 1471, 1473 (9th Cir. 1997) (noting that the "maximum liability under [an insurance policy] is relevant to determining the amount in controversy only if... the value of the underlying tort claims exceeds the liability ceiling.").

2. Actual Case or Controversy: Ripeness

"The requirement that a case or controversy exist under the Declaratory Judgment Act is identical to Article III's constitutional case or controversy requirement. If a case is not ripe for review, then there is no case or controversy, and the court lacks subject-matter jurisdiction." Principal Life Ins. Co., 394 F.3d at 669 (internal quotation marks and citation omitted). To establish that a given action is ripe, Plaintiff must show that "there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maryland Cas. Co. v. P. Coal & Oil Co., 312 U.S. 270, 273 (1941).

Plaintiff first asserts that this action is ripe by relying on several cases in which courts found an actual controversy between an insurance provider and its insured. See, e.g., Dizol, 133 F.3d at 1222 n.2. However, the footnote in Dizol on which Plaintiff relies recognizes only that the Ninth Circuit "ha[s] consistently held that a dispute between an insurer and its insureds over the duties imposed by an insurance contract satisfies Article III's case and controversy requirement." Id. (emphasis added); see also Am. States Ins. Co. v. Kearns, 15 F.3d 142, 144 (9th Cir. 1994) (holding that the actual controversy requirement was met when the insurer "brought its declaratory judgment action to establish whether it had a duty to defend and to indemnify [the defendant-insured]."). In Kearns, for example, the ...


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