United States District Court, D. Oregon
Douglas F. Foley, Vernon S. Finley, Douglas Foley & Associates, PLLC., Vancouver, WA Attorneys for Plaintiff.
Seth H. Row, Parsons Farnell & Grein LLP., Portland, OR Attorney for Defendant.
FINDING AND RECOMMENDATION
JOHN JELDERKS, Magistrate Judge.
Plaintiff State Farm Fire and Casualty Company (State Farm) brings action seeking declaratory relief and confirmation of an arbitration award. Plaintiff's petition for confirmation of the arbitration award has already been resolved by this Court's order approving a stipulated motion to confirm the award. (Dkt. # 12) Plaintiff's claim for declaratory relief seeks a judgment declaring that Defendant The Meritage Homeowners' Association ("HOA") must follow the provisions of the Arbitration Agreement that led to the arbitration award. The HOA moves to dismiss State Farm's claim for declaratory relief pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim. For the reasons discussed below, the HOA's motion should be granted.
The allegations set out below are drawn from State Farm's Complaint and, for purposes of deciding the pending motion to dismiss, are accepted by the Court as true.
The HOA is a homeowners' association for the "Meritage" planned community situated in the City of Newport in Lincoln County, Oregon. State Farm issued a Condominium/Association Policy to the HOA. A copy of the certified policy is attached as Exhibit 1 to State Farm's Complaint.
The HOA was named as a defendant in a lawsuit filed in Lincoln County Circuit Court by homeowners in the Meritage planned community. The suit, titled Bahram Adrangi et al. vs. Kurt Freitag, Rita Schaeffer, Big Fish Partners I, and the Meritage Homeowners Association (the " Adrangi litigation"), included allegations against the HOA related to the management and maintenance of the development. The parties to the Adrangi litigation mediated their dispute and related litigation and reached a settlement in late 2012.
In December 2013, as a result of a dispute between State Farm and the HOA regarding the extent of State Farm's obligation to pay the HOA's legal expenses incurred in defending the Adrangi litigation, the parties entered into an Arbitration Agreement and agreed to submit the dispute to binding arbitration. An arbitration hearing was convened on February 10, 2014 and the arbitrator issued his opinion on March 2, 2014, finding that State Farm was not obligated to reimburse the HOA for the disputed defense costs it had incurred up until the time of arbitration.
After the Adrangi litigation purportedly settled, three homeowners in that case filed a Third Amended Complaint. This Third Amended Complaint alleges various claims for relief, including nullification of the Adrangi Settlement Agreement. In addition, there have been counterclaims asserted against the HOA in three of the related "lien litigation" lawsuits in which the HOA is seeking to collect unpaid Homeowners' Association assessments. State Farm has agreed, subject to a reservation of rights, to provide a defense for the HOA for the claims alleged in the Adrangi Third Amended Complaint and the counterclaims asserted in the "lien litigation."
State Farm now seeks a declaration from the Court that "Meritage has to follow the provisions of the Arbitration Agreement for the payment of additional legal expenses" and that State Farm "is not responsible for the payment of legal fees and costs that were adjudicated in the Arbitration... in the event that claim is made in the ongoing Adrangi litigation and related lien litigation cases." Complaint at ¶¶ 19.1, 19.2.
The HOA contends that State Farm's claim for declaratory relief should be dismissed for failure to state a claim because it does not allege an "actual controversy" sufficient to obtain relief under the Declaratory Judgment Act, 28 U.S.C. §2201. The HOA also argues that State Farm's Response to the motion to dismiss demonstrates that it is attempting to use this action and the terms of the Arbitration Agreement as a basis to terminate ...