Century Surety Co. v. Belmont Seattle, LLC ( 2017 )

FILED
NOT FOR PUBLICATION
MAY 24 2017
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
CENTURY SURETY COMPANY, an No. 14-36002
Ohio corporation,
D.C. No. 2:12-cv-00823-MJP
Plaintiff-Appellee,
v. MEMORANDUM*
BELMONT SEATTLE, LLC, a California
limited liability company,
Defendant-Appellant.
Appeal from the United States District Court
for the Western District of Washington
Marsha J. Pechman, Senior District Judge, Presiding
Submitted May 18, 2017**
Seattle, Washington
Before: GOULD and PAEZ, Circuit Judges, and LEMELLE,*** District Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
***
The Honorable Ivan L.R. Lemelle, United States Senior District Judge
for the Eastern District of Louisiana, sitting by designation.
Belmont Seattle appeals the district court’s judgment in favor of Century Surety
Company. The district court found that summary judgment was appropriate because
the exception to the alienated premises exclusion did not apply and Century Surety
never insured Belmont Seattle. Belmont Seattle argued in its appeal that the district
court erred on four grounds: (1) it refused to dismiss Century Surety’s declaratory
judgment cause of action for lack of subject matter jurisdiction; (2) it refused to
award Belmont Seattle Olympic Steamship attorney’s fees under Washington state
law; (3) it ruled that the exception to the alienated premises exclusion did not apply
on the basis of an erroneous definition of premises and interpretation of rental income;
and (4) it concluded that Belmont Seattle was never insured under the policy with
Century Surety.
We find that the district court erred when it exercised subject matter
jurisdiction over Century Surety’s declaratory judgment action.1 Nonetheless, the
district court correctly decided that Belmont Seattle is not entitled to Olympic
Steamship attorney’s fees. We reverse in part and affirm in part.
1
Coverage issues will not be discussed given that subject matter jurisdiction
is not present.
2
We review de novo a district court’s grant of a motion for summary
judgment. Bergt v. Ret. Plan for Pilots Employed by MarkAir, Inc., 293 F.3d 1139,
1142 (9th Cir. 2002) (citing Lang v. Long-Term Disability Plan of Sponsor Applied
Remote Tech., 125 F.3d 794, 797 (9th Cir. 1997)). We also review de novo a
district court’s decision on subject-matter jurisdiction, including questions of
mootness. Sample v. Johnson, 771 F.2d 1335, 1338 (9th Cir. 1985). Finally, the
district court’s denial of attorney’s fees is reviewed for an abuse of discretion. K.C.
v. Torlakson, 762 F.3d 963, 966 (9th Cir. 2014).
Under the Declaratory Judgment Act federal courts are empowered, “[i]n a case
of actual controversy within its jurisdiction,” to “declare the rights and other legal
relations” of parties. 28 U.S.C. § 2201(a). This refers to matters that are justiciable
under Article III of the United States Constitution. MedImmune, Inc. v. Genentech,
Inc., 549 U.S. 118, 126-127 (2007). A case is not justiciable if it is moot. Campbell
v. Wood, 18 F.3d 662, 680 (9th Cir. 1994). In the instant controversy, the underlying
action that gave rise to the declaratory judgment action found resolution while the
parties in this matter were first on appeal before this Court. The declaratory judgment
action became moot after third parties settled Belmont Seattle’s claims regarding the
duty to defend that Century Surety contested in the separate action.
3
The lower court relied on Washington law to find Belmont Seattle’s claim
for attorney’s fees prevented the declaratory judgment action from being dismissed
as moot. See Allstate Ins. Co. v. Bowen, 91 P.3d 897 (Wash. Ct. App. 2004).
Nonetheless, subject matter jurisdiction in federal court is determined by the
narrow standards delineated in Article III of the United States Constitution.
“Federal courts are courts of limited jurisdiction. They possess only that power
authorized by Constitution and statute. . .” Kokkonen v. Guardian Life Ins. Co. of
Am., 511 U.S. 375, 377 (1994). Conversely, Washington superior courts are
“courts of general jurisdiction and are not constrained by subject matter
jurisdiction under Article III.” To-Ro Trade Shows v. Collins, 997 P.2d 960, 963
(Wash. Ct. App. 2000), aff’d, 27 P.3d 1149 (Wash. 2001). Jurisdictional analyses
regarding federal subject matter jurisdiction by state appellate courts interpreting
state constitutions are not instructive for this Court. Furthermore, attorney’s fees
do not jurisdictionally preserve a case that otherwise has become moot on appeal.
As the Supreme Court has explained, an “interest in attorney’s fees is, of course,
insufficient to create an Article III case or controversy where none exists on the
merits of the underlying claim.” Lewis v. Cont’l Bank Corp., 494 U.S. 472, 480
(1990).
4
However, attorney’s fees, though ancillary to the underlying action, survive
independently under the Court’s equitable jurisdiction. United States v. Ford, 650
F.2d 1141, 1143-1144 (9th Cir. 1981). The lower court determined that Belmont
Seattle was not entitled to attorney’s fees and we affirm on different grounds.
Attorney’s fees in insurance disputes under Washington state law, Olympic
Steamship fees, are only available to the prevailing party. McRory v. Northern Ins.
Co. of N.Y., 980 P.2d 736, 738 (Wash. 1999). Belmont Seattle contends that the
loss of subject matter jurisdiction renders them the prevailing party and therefore
entitles them to attorney’s fees. The fact that other parties settled the claims that
formed the basis for Century Surety’s declaratory judgment action does not
establish whether the underlying coverage action was meritorious. Settlement
agreements by third parties do not make Belmont Seattle the prevailing party
against Century Surety in an independent declaratory action. Given the disposition
of the coverage action this Court does not find it appropriate to award attorney’s
fees to Belmont Seattle and therefore affirms the district court decision on other
grounds.
5
REVERSE IN PART AND AFFIRM IN PART.
6