United States District Court, D. Hawaii
ORDER ADOPTING AUGUST 17, 2016 FINDINGS AND
RECOMMENDATION TO DENY PLAINTIFF'S MOTION TO
Derrick K. Watson, Judge
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.
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.
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. Id. Ryan Churchill, one
of the named defendants, served as president of MLP and on
the board of the Project's Association of Apartment
Owners ("AOAO"). Id. The Underlying
Plaintiffs assert claims for breach of fiduciary duty;
"access to books and records" of the AOAO; and
injunctive/declaratory relief against MLP, Mr. Churchill, and
all other defendants. Id. at 32-34 (SAC ¶¶
96-103). In addition, the Underlying Plaintiffs assert the
following claims against MLP and the other developer
defendants: unfair and deceptive acts and practices;
intentional misrepresentation and/or concealment; negligent
misrepresentation and/or concealment; violations of
Hawaii's Condominium Property Act; unjust enrichment; and
civil conspiracy. Id. at 35-39 (SAC
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. Liberty also denied
indemnity and defense coverage for Mr. Churchill on the basis
that the claims against Mr. Churchill are asserted against
him in his capacity as director of the Project's AOAO,
and not as an officer of MLP. See Dkt. No. 10-1 at
9-12; Dkt. No. 16 at 11-12.
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.
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.").
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(9thCir. 1989).
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. Upon de novo review, the Court agrees with
the F&R's recommendation to exercise the Court's
discretion in favor of retaining jurisdiction over this
Avoiding Needless Determination of State Law
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. RobsacIndus., 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. ...