United States District Court, D. Oregon
H. Feig NICOLL BLACK & FEIG, PLLC Attorney for Plaintiff
Blake Mikkelsen Michael E. Farnell PARSONS FARNELL &
GREIN, LLP Attorneys for Defendants McCoy Foat & Co. and
Kurt Kraemer McEWEN GISVOLD LLP Attorney for Defendants Amy
& Anthony Pate and Fred & Christy Stockton
OPINION & ORDER
A. HERNANDEZ, UNITED STATES DISTRICT JUDGE.
Camico Mutual Insurance Company brings this declaratory
judgment action against its insured Defendant McCoy Foat
& Company ("MFC"), a professional accounting
firm, as well as the following individuals: Mark Foat, Amy
Pate, Anthony Pate, Fred Stockton, and Christy Stockton.
Foat, alleged in the Complaint to be "an
individual," is apparently one of three partners of MFC.
See Compl. ¶¶ 3, 13. The remaining
Defendants ("the Pate and Stockton Defendants") are
individuals who are preparing to file suit in state court
against MFC and Foat. Thus far, the Pate and Stockton
Defendants have drafted a complaint in that case ("the
Underlying Complaint" or "the Underlying
Lawsuit") but have not yet filed it. MFC and Foat,
however, have sought coverage for the defense of the
Underlying Lawsuit and for payment of the claims in the
Underlying Complaint, from Plaintiff. Plaintiff seeks a
declaratory judgment that its policy does not afford coverage
for the claims asserted against Foat and MFC as set forth in
the Underlying Complaint and that as a result, Plaintiff has
no duty to defend MFC and Foat in connection with those
claims. Plaintiff also brings an alternative claim for
Pate and Stockton Defendants move to dismiss the claims
against them, arguing that there is no actual controversy
between them and Plaintiff. I deny the motion.
motion to dismiss for failure to state a claim may be granted
only when there is no cognizable legal theory to support the
claim or when the complaint lacks sufficient factual
allegations to state a facially plausible claim for relief.
Shroyer v. New Cingular Wireless Servs., Inc., 622
F.3d 1035, 1041 (9th Cir. 2010). In evaluating the
sufficiency of a complaint's factual allegations, the
court must accept all material facts alleged in the complaint
as true and construe them in the light most favorable to the
non-moving party. Wilson v. Hewlett-Packard Co., 668
F.3d 1136, 1140 (9th Cir. 2012). However, the court need not
accept unsupported conclusory allegations as truthful.
Holden v. Hagopian, 978 F.2d 1115, 1121 (9th
Cir.1992); see also Warren v. Fox Family Worldwide,
Inc., 328 F.3d 1136, 1139 (9th Cir. 2003) ("we do
not necessarily assume the truth of legal conclusions merely
because they are cast in the form of factual
allegations") (internal quotation marks and alterations
Pate and Stockton Defendants argue that there is no actual
controversy between them and Plaintiff. They observe that the
Complaint mentions them only twice: first, in identifying
them as parties, and second, in describing the allegations in
the Underlying Complaint. Compl. ¶¶ 47, 9-15, ECF
1. They contend that the coverage dispute at issue in the
case exists only between Plaintiff and its insured and the
allegations describing that dispute do not mention them.
Id. ¶¶ 17-24. Neither the declaratory
judgment claim nor the reformation claim refer to any
controversy between Plaintiff and the Pates or Stocktons.
Id. ¶¶ 25-36. The declaratory judgment
claim refers only to the rights and obligations of Plaintiff
and its insured and the reformation claim refers only to
Plaintiff's and its insured's intentions under the
insurance policy at issue. Id. Additionally, the
Pate and Stockton Defendants note, the Underlying Lawsuit has
not yet been filed. Presently, it is an unfiled draft of a
state court complaint and nothing more. Based on these facts,
the Pate and Stockton Defendants argue that there is no basis
to conclude that an actual controversy exists between the
Pate and Stockton Defendants and Plaintiff. As a result, they
argue that there is no proper claim asserted against them and
they should be dismissed from the case. Finally, they argue
that the possibility of duplicative litigation with
inconsistent factual determinations requires this Court to
exercise its discretion and dismiss them from this case.
seeks a declaration of the parties' rights under the
Declaratory Judgment Act, 28 U.S.C. §§ 2201-02.
That Act provides: "In a case of actual controversy
within its jurisdiction, . . . any court of the United States
. . . may declare the rights and other legal relations of any
interested party seeking such declaration[.]" 28 U.S.C.
§ 2201(a). The Declaratory Judgment Act confers on
federal courts "unique and substantial discretion in
deciding whether to declare the rights of litigants."
Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995);
see also Am. Int'l Specialty Lines Ins. Co. v.
Remtech, Inc., No. 3:11-cv-93-AA, 2011 WL 13254507, at
*1 (D. Or. Aug. 15, 2011) ("[D]istrict courts may
exercise their discretion to resolve matters of insurance
coverage in declaratory actions.").
"actual controversy" requirement is satisfied where
the plaintiff alleges facts showing a substantial controversy
between parties with adverse legal interests that is
sufficiently immediate to warrant the issuance of declaratory
relief. Md. Cas. Co. v. Pac. Coal & Oil Co., 312
U.S. 270, 273 (1941). Generally, a case or controversy is
found when an insurer brings a declaratory judgment action
against its insured regarding the insurer's duty to
defend and indemnify. See, e.g., Am.
States Ins. Co. v. Kearns, 15 F.3d 142, 144 (9th Cir.
1994). Statutory jurisdictional requirements are also met in
this case because there is complete diversity between the
parties and the amount in controversy is more than $75, 000.
Gov't Emps. Ins. Co. v. Dizol, 133 F.3d 1220,
1222-23 (9th Cir. 1988) (en banc) (lawsuits seeking federal
declaratory relief "must first present an actual case or
controversy within the meaning of Article III, section 2 of
the United States Constitution" and "must also
fulfill statutory jurisdictional prerequisites"); 28
U.S.C. § 1332(a).
issue here, however, is not whether there is a case or
controversy between Plaintiff and its insured but whether
such case or controversy exists between Plaintiff and the
third-party claimants in the Underlying Lawsuit. Cases
recognize that third-party claimants are proper parties in
declaratory relief actions between an insurer and its insured
to determine the scope of insurance coverage. Navigators
Ins. Co. v. K & O Contracting, LLC, No.
3:12-cv-01324-ST, 2013 WL 1194722, at *2 (D. Or. Jan. 10,
2013) ("There is no doubt that a third-party claimant is
a proper party to a declaratory relief action
between the insurer and its insured to determine the scope of
insurance coverage") (citing Md. Cas. Co., 312
U.S. at 273-74; Franklin Life Ins. Co. v. Johnson,
157 F.2d 653, 658 (10th Cir. 1946); State Farm Fire &
Cas. Co. v. Reuter, 294 Or 446, 450-53, 657 P.2d 1231,
1233-34 (1983) (agreeing with Franklin Life Ins.
Co.); State Farm Fire & Cas. Co. v. Teyema,
No. Civ. 05-201-ST, 2005 WL 2244195, at *2-3 (Sept. 15, 2005)
(following Reuter )), adopted by J. Mosman, 2013 WL
1194715 (D. Or. Mar. 21, 2013).
Reuter, the Oregon Supreme Court "agree[d] with
the Tenth Circuit's discussion of the propriety of
joining potential third party claimants[.]" 294 Or. at
450, 657 P.2d at 1233. Quoting ...