Opinion
No. C-00-4279 WHO
April 24, 2001
MEMORANDUM DECISION AND ORDER
In this diversity insurance action brought by plaintiff Unigard Insurance Company ("Unigard") against defendants Continental Warehouse and North Coast, Continental Warehouse now moves to dismiss the action for lack of subject matter jurisdiction, pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. For the reasons set forth hereinafter, the motion is granted, and the action is dismissed without prejudice.
I.
The following statement of facts is summarized from the allegations of the complaint, which was filed in this Court on November 16, 2000.
Continental Warehouse is incorporated in California and has its principal place of business in Burlingame, California. (Compl. ¶ 2.) North Coast does business in San Mateo County and has shipped inventory to Continental Warehouse. (Id. ¶¶ 3, 6.) Unigard is an insurance company licensed to do business in California. (Id. ¶ 1.) Unigard is incorporated in Washington, and has its principal place of business in Bellevue, Washington. (Id.) Unigard issued a liability policy to Continental Warehouse, which was in effect from September 2, 1996 through at least September 2, 2000. (Id. ¶ 11.)
During the course of 1999 and early 2000, between $350,000 and $400,000 of North Coast's inventory allegedly was stolen from the Continental Warehouse location. (Id. ¶ 6.) North Coast asserted a claim against Continental Warehouse for the lost inventory. (Id. ¶ 7.) Continental Warehouse contacted Unigard and requested that Unigard indemnify Continental Warehouse from the North Coast claim and, if a suit is filed, defend Continental Warehouse from the suit. (Id. ¶ 8.)
Unigard contends that it has no duty to indemnify or defend Continental Warehouse for the North Coast claim, and seeks declaratory relief to that effect. (Id. ¶¶ 15-22.) If North Coast files suit against Continental Warehouse, however, Unigard has agreed to defend Continental Warehouse under a full reservation of rights. (Id. ¶ 9.) Pursuant to that reservation of rights, Unigard seeks reimbursement of all fees and costs it incurs in defending Continental Warehouse from any such North Coast claim. (Id. ¶ 23.)
II.
Continental Warehouse now moves to dismiss the action for lack of subject matter jurisdiction, pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure.
In a letter dated February 27, 2001, Continental Warehouse informed Unigard that it "hereby withdraws its tender for damages sustained by it and/or North Coast under the policy issued by Unigard." (Grey Decl. ¶ 3, and Ex. 1.) Continental Warehouse contends that there is no current claim or request for insurance coverage against Unigard, and thus there is no current case or controversy for the Court to decide.
Continental Warehouse also contends that the case should be dismissed because the amount in controversy is insufficient, but this is simply a corollary of its argument that there is no case or controversy. Continental Warehouse contends that because there is no case or controversy, the amount in controversy is zero. Continental Warehouse concedes that if there is a case or controversy, the amount in controversy is more than the $75,000 minimum set forth in 28 U.S.C. § 1332(a).
Unigard's counsel, Mark G. Bonino ("Bonino"), attests that North Coast's attorney told him on March 6, 2001 that he intended to file suit against Continental Warehouse. (Bonino Decl. ¶ 1.) On March 16, 2001, North Coast's attorney told him that North Coast had reconsidered its position and was planning to negotiate the claim with Continental Warehouse. (Id. ¶ 2.) Bonino also attests that Continental Warehouse's attorney, Rebecca Grey, told him that Continental Warehouse was withdrawing its claim without prejudice to its right to retender the claim in the future. (Id. ¶ 3.) Grey told him that Continental Warehouse would not execute a release relieving Unigard of any obligation to defend or indemnify Continental Warehouse from the North Coast claim. (Id.) Unigard thus contends that a case or controversy does exist because North Coast has not settled with Continental Warehouse, and Continental Warehouse will not release Unigard from any liability to defend or indemnify Continental Warehouse against any claim by North Coast.
The Declaratory Judgment Act provides:
In 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, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.28 U.S.C. § 2201(a). A lawsuit seeking federal declaratory relief must first present an actual case or controversy within the meaning of Article III of the United States Constitution, and must also fulfill statutory jurisdictional prerequisites. Government Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1222-23 (9th Cir. 1998) (en banc) (citing Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-40 (1937) and Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 672 (1950)).
There unquestionably was an active case or controversy at the time the complaint was filed; Continental Warehouse did not withdraw its claim against the Unigard policy until February 27, 2001, more than three months after the complaint was filed. However, "[t]o qualify as a case fit for federal-court adjudication, `an actual controversy must be extant at all stages of review, not merely at the time the complaint is filed.'" Arizonans for Official English v. Arizona, 520 U.S. 43, 66 (1997) (quoting Preiser v. Newkirk, 422 U.S. 395, 401 (1975)).
The underlying dispute between North Coast and Continental Warehouse has not been resolved, and Continental Warehouse has not permanently withdrawn its claim for benefits under the Policy. Nonetheless, there is no certainty that Continental Warehouse will ever resubmit its claim to Unigard. The dispute between North Coast and Continental Warehouse may settle on terms that do not require Continental Warehouse to submit an insurance claim to Unigard, for example.
"The `basic rationale' of Article III ripeness doctrine "is to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements." Clinton v. Acequia, Inc., 94 F.3d 568, 572 (9th Cir. 1996) (quoting Abbott Labs. v. Gardner, 387 U.S. 136, 148 (1967). Thus, "a federal court normally ought not resolve issues `involv[ing] contingent future events that may not occur as anticipated, or indeed may not occur at all.'" Id. (quoting Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568, 580-81 (1985)). Accordingly, "a case is not ripe where the existence of the dispute itself hangs on future contingencies that may or may not occur." Id. There is no dispute between Continental Warehouse and Unigard unless and until Continental Warehouse resubmits a claim on the Unigard policy. This may never occur. Accordingly, Unigard's suit against Continental Warehouse and North Coast is not yet ripe and must be dismissed, without prejudice, for lack of subject matter jurisdiction.
The case is also moot, at least for the time being, because Continental Warehouse has withdrawn its claim for benefits under the Unigard policy. The only case the parties have located that is directly on point held that when an insurance claim is withdrawn, without prejudice to reasserting it at a later date, the insurer's declaratory judgment action seeking to determine whether the claim is covered under the policy is moot. State Farm Mutual Auto. Ins. Co., 550 F. Supp. 103, 105 (E.D. Pa. 1982). That Pennsylvania district court case relied upon authority from the Ninth Circuit and the United States Supreme Court in holding that "[m]ootness exists `when the issues presented are no longer "live" or the parties lack a legally cognizable interest in the outcome.'" Id. (quoting Williams v. Alioto, 549 F.2d 136, 140 (9th Cir. 1974) (quoting Powell v. McCormack, 395 U.S. 486, 496 (1969)).
None of the cases cited by Unigard hold that jurisdiction is proper in a case such as this. In Aetna Life Ins. Co., 300 U.S. 227, there was an active dispute about whether the insured was entitled to disability benefits which would keep the policy in force despite the insured's failure to pay the premium, and thus a present case or controversy existed between the parties. Id. at 238, 242; see also Calderon v. Ashmus, 523 U.S. 740, 746-47 (1998) (explaining the holding in Aetna Life, and holding that there is no case or controversy when a declaratory judgment is filed to determine the validity of a defense that may or may not be raised in the future) Here, there is no active dispute at all, only the possibility of a dispute that may never occur. In Bodenhamer v. Superior Court, 178 Cal.App.3d 180, 182 n. 2, 223 Cal.Rptr. 486, 487 n. 2 (1986), the California Court of Appeal merely cited a California statute which requires insurers to promptly investigate claims. Here, Continental Warehouse withdrew its claim, and thus there is no active claim against the Unigard policy that needs to be investigated unless and until Continental Warehouse reasserts the claim.
As the case is both unripe and moot, it does not present an active case or controversy within the meaning of Article III of the United States Constitution. Therefore, the Court lacks subject matter jurisdiction over the action. Should Continental Warehouse reassert its claim under the Unigard policy, Unigard may refile the action.
III.
Accordingly,
IT IS HEREBY ORDERED that Continental Warehouse's motion to dismiss the action, for lack of subject matter jurisdiction, is granted. The action is dismissed, without prejudice to reasserting it if and when Continental Warehouse reasserts a claim under the Unigard policy.