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Maui Land and Pineapple Co., Inc. v. Liberty Insurance Underwriters Inc.

United States District Court, D. Hawaii

November 10, 2016

MAUI LAND AND PINEAPPLE CO., INC., Plaintiff,
v.
LIBERTY INSURANCE UNDERWRITERS INC., et al., Defendants.

          ORDER ADOPTING AUGUST 17, 2016 FINDINGS AND RECOMMENDATION TO DENY PLAINTIFF'S MOTION TO REMAND

          Derrick K. Watson, Judge

         Maui 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.

         On 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.

         BACKGROUND

         This 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.[1] 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 ¶¶104-133).

         In 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.[2] 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.

         On May 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.

         STANDARD OF REVIEW

         A 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.").

         Under a 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).

         DISCUSSION

         At 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.[3] 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 action.

         I. Avoiding Needless Determination of State Law Issues

         The 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. ...


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