Argonaut Ins. Co. v. St. Francis Medical Center

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ARGONAUT INSURANCE COMPANY, No. 19-17314
an Illinois Corporation,
Plaintiff-Appellant, D.C. No.
1:18-cv-00498-
v. HG-WRP
ST. FRANCIS MEDICAL CENTER, a
non-profit Hawaii Corporation, OPINION
Defendant-Appellee,
and
JOHN DOES, 1–10; JANE DOES, 1–10;
DOE CORPORATIONS, 1–10; DOE
ENTITIES, 1–20,
Defendants.
Appeal from the United States District Court
for the District of Hawaii
Helen W. Gillmor, District Judge, Presiding
Argued and Submitted February 3, 2021
Honolulu, Hawaii
Filed November 16, 2021
Before: Richard R. Clifton, Ryan D. Nelson, and
Daniel P. Collins, Circuit Judges.
Opinion by Judge R. Nelson
2 ARGONAUT INS. V. ST. FRANCIS MED. CTR.
SUMMARY *
Declaratory Relief / Jurisdiction
The panel affirmed the district court’s order declining to
exercise jurisdiction over a declaratory-relief claim brought
under 28 U.S.C. § 2201 and dismissing a diversity insurance
coverage action.
Generally, a district court has discretion to decline
jurisdiction over a declaratory-relief claim brought under
28 U.S.C. § 2201, so long as it reasonably considers the
relevant factors from Brillhart v. Excess Ins. Co. of Am., 316
U.S. 491 (1942), and Gov’t Emps. Ins. Co. v. Dizol, 133 F.3d
1220 (9th Cir. 1998) (en banc). But when a declaratory
claim is joined with an independent monetary one, the
district court usually must retain jurisdiction over the entire
action.
Argonaut Insurance Company sued St. Francis Medical
Center (“SFMC”) for declaratory relief, and SFMC filed an
answer asking the district court to decline jurisdiction and
counterclaimed for declaratory and monetary relief, but only
if the district court first exercised jurisdiction over
Argonaut’s claims.
The panel held that Dizol’s mandatory jurisdiction rule
did not apply in this case. Because parties can plead a
conditional counterclaim and still preserve objections to
jurisdiction, such conditionally pled counterclaims, without
*
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
ARGONAUT INS. V. ST. FRANCIS MED. CTR. 3
more, did not trigger mandatory jurisdiction over declaratory
claims.
The panel’s conclusion was grounded in several Federal
Rules of Civil Procedure, which do not require that threshold
defenses always be pled by motion. Rules 12(b) and 12(h)
provide that a defendant must assert its defense, absent a pre-
answer motion, in a responsive pleading if one is required
and that it may choose to assert a defense by answer without
risking forfeiture of that defense. Here SFMC asserted a
threshold defense in its answer. Rule 13 directs a defendant
to assert compulsory and permissive counterclaims in its
answer; and because the Rules allow threshold defenses
(such as improper declaratory jurisdiction) to be pled by
answer, those defenses are preserved even if coupled with
counterclaims.
The panel agreed with the district court that SFMC’s
counterclaims were conditional. SFMC’s assertion of its
counterclaims against Argonaut, together with its answer,
was subject to SFMC’s threshold objections. The panel held
that Argonaut’s arguments to the contrary were
unpersuasive. Because SFMC did not waive its threshold
defense, the district court still had discretionary jurisdiction.
Having held that SFMC’s bad faith counterclaim did not
invoke the district court’s mandatory jurisdiction, the panel
next addressed whether the district court abused its
discretion by declining jurisdiction in response to SFMC’s
threshold defense. Because the district court thoroughly
considered and correctly concluded that each Brillhart and
Dizol factor favored declining jurisdiction and dismissing,
the panel affirmed. Here, the district court properly noted
that the declaratory claims could be filed in state court and
that deciding them would not settle all aspects of the
4 ARGONAUT INS. V. ST. FRANCIS MED. CTR.
controversy or clarify the parties’ legal relationships. The
district court’s discussion of the Brillhart and Dizol factors
was sufficient to allow for appellate review of its decision to
dismiss rather than stay, and the court did not abuse its
discretion by not separately discussing whether to dismiss or
stay the case.
COUNSEL
Jeffrey J. Bouslog (argued) and Patrick M. Fenlon, Fox
Rothschild LLP, Minneapolis, Minnesota; Alan Van Etten,
Deeley King Pang & Van Etten, Honolulu, Hawaii; for
Plaintiff-Appellant.
Jordon J. Kimura (argued) and David J. Minkin,
McCorriston Miller Mukai MacKinnon LLP, Honolulu,
Hawaii; Stephen F. English, Perkins Coie LLP, Portland,
Oregon; for Defendant-Appellant.
ARGONAUT INS. V. ST. FRANCIS MED. CTR. 5
OPINION
R. NELSON, Circuit Judge:
Ordinarily, a district court has discretion to decline
jurisdiction over a declaratory-relief claim brought under
28 U.S.C. § 2201. But when a declaratory claim is joined
with an “independent” monetary one, the district court, in
most cases, must retain jurisdiction over the entire action.
Gov’t Emps. Ins. Co. v. Dizol, 133 F.3d 1220, 1225 & n.6
(9th Cir. 1998) (en banc). Argonaut Insurance Company
sued St. Francis Medical Center (“SFMC”) in federal court
for declaratory relief. In response, SFMC filed an answer
asking the district court to decline jurisdiction and
counterclaimed for declaratory and monetary relief, but only
if the district court first exercised jurisdiction over
Argonaut’s claims.
Because parties can plead a conditional counterclaim and
still preserve objections to jurisdiction, we hold that such
conditionally pled counterclaims, without more, do not
trigger mandatory jurisdiction over declaratory claims. And
because the district court properly exercised its discretion in
deciding to dismiss, we affirm.
I
This insurance dispute stems from underlying litigation
in Hawaii state court (“Hawaii litigation”). Former students
sued Kamehameha Schools, alleging sexual abuse by a
doctor from the late 1950s through the early 1980s. Because
the doctor had practiced on SFMC’s campus, Kamehameha
Schools filed crossclaims against SFMC, which sent these
crossclaims to its insurer, Argonaut, to defend and indemnify
it. Argonaut initially denied coverage, concluding the
Hawaii litigation was not covered by SFMC’s policies, but
6 ARGONAUT INS. V. ST. FRANCIS MED. CTR.
ultimately agreed to represent SFMC subject to a reservation
of rights.
Neither Argonaut nor SFMC could determine the terms
and conditions of the relevant policies from decades earlier.
Argonaut sought declaratory relief in federal court under
28 U.S.C. § 2201, as to (1) what policies Argonaut had
issued to SFMC during the relevant period; (2) the terms and
conditions of those policies; and (3) what rights and duties,
if any, Argonaut owed SFMC.
In its answer, SFMC asserted a threshold affirmative
defense that the district court should decline jurisdiction over
Argonaut’s declaratory claim, reasoning that jurisdiction
over Argonaut’s declaratory action was “inappropriate
because the claim presents solely issues of state law during
the pendency of parallel proceedings in state court.” At the
same time, it filed two counterclaims. The first mirrored
Argonaut’s declaratory requests. The second sought
monetary relief and alleged Argonaut had breached its duty
of good faith. SFMC asserted its counterclaims only “[i]f
the Court asserts jurisdiction over Argonaut’s declaratory
relief claim.” One month later, SFMC filed a separate
motion again asking the district court to decline jurisdiction
over Argonaut’s declaratory claims and dismiss the case.
The district court granted SFMC’s motion, holding that
notwithstanding SFMC’s monetary counterclaim, it had
discretionary jurisdiction over Argonaut’s declaratory
claims and the relevant factors supported declining
jurisdiction. Argonaut appealed.
II
Whether the district court has mandatory or discretionary
jurisdiction over a declaratory claim is reviewed de novo.
ARGONAUT INS. V. ST. FRANCIS MED. CTR. 7
United Nat’l Ins. Co. v. R&D Latex Corp., 242 F.3d 1102,
1112 (9th Cir. 2001). We review the district court’s decision
to decline jurisdiction over a declaratory claim for abuse of
discretion. Wilton v. Seven Falls Co., 515 U.S. 277, 289–90
(1995); Dizol, 133 F.3d at 1223. We may affirm the district
court’s order declining jurisdiction on any ground supported
by the record. See City of St. Paul v. Evans, 344 F.3d 1029,
1033 (9th Cir. 2003).
III
Under the Declaratory Judgment Act, “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.” 28 U.S.C. § 2201(a)
(emphasis added). This provision “confer[s] on federal
courts unique and substantial discretion in deciding whether
to declare the rights of litigants,” even if the declaratory
claim “otherwise satisfies subject matter jurisdictional
prerequisites.” Wilton, 515 U.S. at 282, 286. In other words,
a district court is “under no compulsion to exercise [its]
jurisdiction” over declaratory claims. Brillhart v. Excess
Ins. Co. of Am., 316 U.S. 491, 494 (1942); see also Dizol,
133 F.3d at 1223 (“The Act gave the federal courts
competence to make a declaration of rights; it did not impose
a duty to do so.” (internal quotation marks and citation
omitted)). So long as it reasonably considers the relevant
factors from Brillhart and Dizol, “a district court is
authorized” as a matter of discretion to “stay or to dismiss an
action seeking a declaratory judgment.” See Wilton,
515 U.S. at 288; Dizol, 133 F.3d at 1223, 1225 & n.5.
Jurisdiction over a declaratory claim is not always
discretionary, however: “when other claims [for monetary
relief] are joined with an action for declaratory relief . . . the
8 ARGONAUT INS. V. ST. FRANCIS MED. CTR.
district court should not, as a general rule, remand or decline
to entertain the claim for declaratory relief.” Dizol, 133 F.3d
at 1225. If a monetary claim is “independent,” district courts
have a “virtually unflagging obligation to exercise
jurisdiction over these claims.” Id. at 1225 n.6 (internal
quotation marks and citation omitted). A monetary claim is
“independent” (and triggers mandatory jurisdiction) if it
satisfies subject matter jurisdiction on its own and is not
required to be brought with a declaratory claim. Id.; United
Nat’l Ins., 242 F.3d at 1113. Take SFMC’s bad faith
monetary counterclaim as an example. The parties agree the
bad faith counterclaim independently satisfies diversity
jurisdiction, 1 and Hawaii law allows a plaintiff to file a bad
faith claim without appending it to a declaratory claim.
Given mandatory jurisdiction over the monetary claim,
Dizol’s rule would ordinarily suggest retaining jurisdiction
over the related declaratory action “to avoid piecemeal
litigation.” 133 F.3d at 1226.
IV
The question presented here is whether the mandatory
jurisdiction rule applies when the defendant both asserts a
1
SFMC contends that its bad faith counterclaim was not
independent because it was contingent on the court retaining jurisdiction
over the declaratory claims. See Snodgrass v. Provident Life & Accident
Ins. Co., 147 F.3d 1163, 1167–68 (9th Cir. 1998) (per curiam) (court
must inquire whether claims added to declaratory action “would continue
to exist if the request for a declaration simply dropped from the case”).
SFMC’s counterclaim is independent insofar as it independently satisfies
diversity jurisdiction and need not be filed with a declaratory action. See
id. We note that even though “independent” and “conditional” are
usually at odds, because “independent” in this context is a term of art,
the counterclaim here can be both independent and conditional on the
court exercising its jurisdiction over Argonaut’s declaratory claims.
ARGONAUT INS. V. ST. FRANCIS MED. CTR. 9
threshold defense that the district court should decline
jurisdiction under Brillhart and asserts a monetary
counterclaim if the court retains jurisdiction. We hold that
Dizol’s mandatory rule does not apply here.
A
Our conclusion is grounded in several Federal Rules of
Civil Procedure. The Rules do not require that threshold
defenses always be pled by motion. Rather, Rules 12(b) and
12(h) provide that a defendant must assert its defense, absent
a pre-answer motion, in a responsive pleading if one is
required and that it may choose to assert a defense by answer
without risking forfeiture of that defense. See Fed. R. Civ.
P. 12(h)(1)(B) (in absence of any “motion under this rule,” a
defense is waived by “failing to . . . include it in a responsive
pleading or in an amendment allowed by Rule 15(a)(1) as a
matter of course”); see also Fahey v. O’Melveny & Myers,
200 F.2d 420, 451 n.9 (9th Cir. 1952) (it is “basic under Rule
12(b)” that a defense of personal jurisdiction “may be joined
with a defense on the merits without any waiver resulting”).
Here, SFMC asserted a threshold defense in its answer.
In addition, Rule 13 directs a defendant to assert
compulsory and permissive counterclaims in its answer, and
it follows that because the Rules allow threshold defenses
(such as improper venue, personal jurisdiction, or, as here,
improper declaratory jurisdiction) to be pled by answer,
those defenses are preserved even if coupled with
counterclaims. See Hillis v. Heineman, 626 F.3d 1014, 1018
(9th Cir. 2010) (“holding that the mere assertion of a
counterclaim will not waive a defense of improper venue
that was explicitly asserted in an answer filed
contemporaneously with the counterclaim”); Gates Learjet
Corp. v. Jensen, 743 F.2d 1325, 1330 n.1 (9th Cir. 1984)
(“[W]e hold that the filing of a permissive counterclaim does
10 ARGONAUT INS. V. ST. FRANCIS MED. CTR.
not constitute a waiver of a personal jurisdiction defense
asserted in the same pleading.”). As we explained in Hillis,
“allowing a defendant in effect to plead alternatively a
counterclaim and one or more threshold defenses conserves
judicial resources, for if one of the defenses proves
successful, the parties need not litigate a claim that the
defendant presumably has no interest in asserting
independently.” 626 F.3d at 1019 (quoting 5C Charles Alan
Wright & Arthur R. Miller, Federal Practice and Procedure
§ 1397 (3d ed. 2004)).
B
The district court dismissed Argonaut’s claims for
declaratory relief because SFMC asserted its counterclaims
only “[i]f the [district court] asserts jurisdiction over
Argonaut’s declaratory relief claim.” The court first noted
that conditional pleadings are a recognized part of federal
practice even if not expressly addressed in the Federal Rules
of Civil Procedure. See, e.g., Evans, 344 F.3d at 1033 n.6.
Then, relying on Knapp-Monarch Co. v. Dominion Electric
Corp., 365 F.2d 175, 177 (7th Cir. 1966), the district court
found that “a plaintiff may not rely on a defend[ant’s]
conditional counterclaim to invoke federal subject-matter
jurisdiction.” 2 The parties’ briefs focus on the conditional
nature of the counterclaim. Argonaut argues that SFMC’s
monetary counterclaim made the district court’s
discretionary jurisdiction mandatory; and SFMC argues that
2
Other circuits have reached conclusions about conditional
counterclaims much like Knapp-Monarch, albeit in different contexts.
See, e.g., Gen. Contracting & Trading Co. v. Interpole, Inc., 940 F.2d
20, 25 (1st Cir. 1991) (explaining conditionally pled counterclaims “will
not undercut a preserved jurisdictional defense” because “the
counterclaim is put forward as a conditional position and will not be
independently pressed if the primary action is dismissed”).
ARGONAUT INS. V. ST. FRANCIS MED. CTR. 11
its counterclaims were conditional, not independent, and did
not invoke mandatory jurisdiction.
We agree with the district court that SFMC’s
counterclaims were conditional. By pairing its objection to
jurisdiction with what are “in effect” a set of “alternatively”
pled counterclaims, SFMC did not invoke the district court’s
mandatory jurisdiction. See Hillis, 626 F.3d at 1019 (citation
omitted). Rather, SFMC’s assertion of its counterclaims
against Argonaut, together with its answer, was subject to
SFMC’s threshold objections. To hold otherwise would be
to allow one of SFMC’s pleadings to defeat the other, even
though SFMC pleaded them in a manner explicitly allowed
by the Rules. If SFMC had moved to decline jurisdiction
before filing its answer and counterclaims, see Wilton,
515 U.S. at 280, there would have been no counterclaim to
trigger mandatory jurisdiction, as Argonaut concedes.
Asking the district court to decline jurisdiction in the answer,
and later by separate motion, makes no difference, and the
alternatively asserted counterclaims should be disregarded
in addressing that objection. 3
C
Argonaut’s arguments to the contrary are unpersuasive.
Argonaut argues that under Spectacor Management Group
v. Brown, 131 F.3d 120 (3d Cir. 1997), a counterclaim is
brought within a district court’s jurisdiction if filed as part of
an answer. In Spectacor, the Third Circuit held that the
3
Argonaut has not contended that SFMC was not authorized under
the rules to raise its objection by motion after filing its answer. Cf. Fed.
R. Civ. P. 12(b), (h)(1)(B)(i). Its position is instead that the post-answer
motion should have been denied on the merits because, in light of
SFMC’s monetary counterclaim, Dizol’s mandatory jurisdiction rule
applied.
12 ARGONAUT INS. V. ST. FRANCIS MED. CTR.
defendant by “assert[ing] a compulsory counterclaim against
the plaintiff” in an answer rather than moving to dismiss, had
“thereby place[d] the amount of the counterclaim into
controversy.” Id. at 125. But Spectacor is inapposite. It
addressed a counterclaim’s impact on satisfying subject
matter jurisdiction, see id. at 121, not whether the district
court had discretion to decline jurisdiction when
jurisdictional requirements were otherwise satisfied. 4 If
SFMC had included in its pleadings a factual allegation or
admission with jurisdictional significance, that bell could
not be unrung when it came to resolving SFMC’s
jurisdictional objection. But that does not mean, as
Argonaut would have it, that SFMC’s assertion of
counterclaims defeated its simultaneous objection to
retaining jurisdiction.
Argonaut also argues that under Cooter & Gell v.
Hartmarx Corp., 496 U.S. 384, 395 (1990), the district
court’s jurisdiction was “invoked by the filing” of a
pleading. But Cooter also does not apply. Cooter involved
a district court’s jurisdiction over a complaint for Rule 11
purposes, not a declaratory claim. See generally id. Thus,
Cooter does not provide guidance on a district court’s
discretion to decline jurisdiction over declaratory claims.
Moreover, Argonaut contends that SFMC waived its
objection to jurisdiction because of its litigation conduct
after filing its answer and counterclaims. But we disagree.
4
Microsoft Corp. v. GeoTag, Inc., 817 F.3d 1305 (Fed. Cir. 2016),
and Microsoft Corp. v. DataTern, Inc., 755 F.3d 899 (Fed. Cir. 2014),
are likewise inapposite. Like Spectacor, these cases involved whether
plaintiff-filed declaratory claims satisfied subject matter jurisdiction, not
whether a district court retained discretion to decline jurisdiction
otherwise satisfied. See GeoTag, 817 F.3d at 1311–12; DataTern,
755 F.3d at 906.
ARGONAUT INS. V. ST. FRANCIS MED. CTR. 13
Argonaut points out that SFMC insisted that its
counterclaims be included in the discovery plan, filed a
scheduling conference statement focusing only on its
counterclaims, and demanded a jury trial on its
counterclaims, all without mentioning that its counterclaims
were conditional. By accepting these filings, Argonaut
argues, the district court exercised jurisdiction over the bad
faith counterclaim and thus satisfied SFMC’s conditions
precedent and triggered mandatory jurisdiction.
Though “[m]ost defenses . . . may be waived as a result
of the course of conduct pursued by a party during
litigation,” Peterson v. Highland Music, Inc., 140 F.3d 1313,
1318 (9th Cir. 1998), the party generally must have engaged
in “conduct inconsistent with raising or maintaining the
defense” for such waiver to be found, Lazar v. Kroncke, 862
F.3d 1186, 1200–01 (9th Cir. 2017). An objection to
personal jurisdiction, for example, has been forfeited where,
after properly preserving the objection in its answer, a
defendant then “fully participated in litigation of the merits
for over two-and-a-half years without actively contesting
personal jurisdiction.” Cont’l Bank v. Meyer, 10 F.3d 1293,
1297 (7th Cir. 1993); see also Barnes v. Sea Hawaii Rafting,
LLC, 889 F.3d 517, 530 (9th Cir. 2018) (“[D]efendants had
clearly waived any objection to in rem jurisdiction by
litigating the merits of Barnes’s claims for more than
15 months.”).
SFMC’s routine post-answer and pre-discovery conduct
did not waive its objection to jurisdiction because its conduct
was not inconsistent with maintaining its threshold defense.
SFMC did not waive its defense by engaging in what would
be necessary litigation procedures in the event the district
court retained jurisdiction and SFMC’s counterclaims
moved forward. A district court has discretion to decline
14 ARGONAUT INS. V. ST. FRANCIS MED. CTR.
jurisdiction “before trial or after all arguments have drawn
to a close.” Wilton, 515 U.S. at 288. 5 Accordingly, because
SFMC did not waive its threshold defense, the district court
still had discretionary jurisdiction.
V
Having held that SFMC’s bad faith counterclaim did not
invoke the district court’s mandatory jurisdiction, we turn to
whether the court abused its discretion by declining
jurisdiction in response to SFMC’s threshold defense.
Because the district court thoroughly considered and
correctly concluded that each factor favored declining
jurisdiction and dismissing, we affirm.
A
When, as here, a district court has discretion to decline
jurisdiction over a declaratory claim, “[t]he Brillhart factors
remain the philosophic touchstone for the district court.”
Dizol, 133 F.3d at 1225. Under Brillhart, district courts must
“avoid needless determination of state law issues,”
“discourage litigants from filing declaratory actions as a
means of forum shopping,” and “avoid duplicative
litigation.” Id. Dizol suggested additional considerations:
whether the declaratory action will settle all
aspects of the controversy; whether the
declaratory action will serve a useful purpose
5
That said, the longer a case progresses, a district court in its
discretion may be less inclined to entertain such a motion. See, e.g.,
Emps. Mut. Cas. Co. v. N. Am. Specialty Flooring, Inc., 424 F. Supp. 3d
958, 972 (E.D. Cal. 2019) (rejecting motion to decline brought “after
discovery ha[d] closed and after [plaintiff] ha[d] brought a motion for
summary judgment”).
ARGONAUT INS. V. ST. FRANCIS MED. CTR. 15
in clarifying the legal relations at issue;
whether the declaratory action is being
sought merely for the purposes of procedural
fencing or to obtain a “res judicata”
advantage; or whether the use of a
declaratory action will result in entanglement
between the federal and state court systems.
In addition, the district court might also
consider the convenience of the parties, and
the availability and relative convenience of
other remedies.
Id. at 1225 n.5 (citation omitted). If, as here, “a party
properly raises the issue [of discretionary jurisdiction] in the
district court, the district court must make a sufficient record
of its reasoning to enable appropriate appellate review.” Id.
at 1225. District courts, however, retain “substantial
latitude” in deciding whether to decline jurisdiction, even if
a state proceeding is the basis for declining jurisdiction.
Wilton, 515 U.S. at 286.
B
The district court properly evaluated the Brillhart and
Dizol factors: it noted that (1) there was related litigation in
state court involving SFMC; (2) insurance law is an area
regulated by the states; (3) there is no compelling federal
interest in this case; (4) dismissing this case would
discourage forum shopping; (5) dismissal would avoid
duplicative litigation on any overlapping issues;
(6) proceeding with this case in federal court “would
entangle the state and federal court systems”; and (7) state
court would be as convenient a forum as federal court for
this case.
16 ARGONAUT INS. V. ST. FRANCIS MED. CTR.
Argonaut does not contend that, if Dizol’s mandatory
rule does not apply, the district court should have still
exercised its discretion to go forward with adjudicating
Argonaut’s declaratory-relief claim. Instead, Argonaut
argues that the district court abused its discretion by failing
to explain adequately why it dismissed Argonaut’s claims
rather than stay them.
Related to the first Brillhart and Dizol factors (avoiding
state law issues and settling the whole controversy),
Argonaut contends that because its declaratory claims are
not part of the Hawaii litigation, the district court could have
stayed its claims without needlessly deciding all aspects of
the state lawsuits. But, if the proceedings share the same
factual predicates and the issues depend on state law, “the
state court is the more suitable forum for a petitioner to bring
a related claim,” and the district court did not abuse its
discretion by declining jurisdiction. Am. Nat’l Fire Ins. Co.
v. Hungerford, 53 F.3d 1012, 1016–17 (9th Cir. 1995)
(identical issues unnecessary), overruled in part on other
grounds by Dizol, 133 F.3d at 1227; see also Golden Eagle
Ins. Co. v. Travelers Cos., 103 F.3d 750, 754–55 (9th Cir.
1996) (citations omitted) (identical parties unnecessary),
overruled in part on other grounds by Dizol, 133 F.3d
at 1227. Here, as recognized by the district court,
Argonaut’s claims involve a matter of state law, and the
declaratory claims are related to the Hawaii litigation, even
if the proceedings do not share the same issues or parties.
As to the second Brillhart factor, Argonaut argues that
allowing counterclaims to be pled conditionally would lead
to forum shopping. See Dizol, 133 F.3d at 1225. Even
assuming that the second factor encompasses such a
concern, Argonaut provides no basis for concluding that
ARGONAUT INS. V. ST. FRANCIS MED. CTR. 17
SFMC was, in fact, forum shopping when Argonaut filed in
federal court first.
Related to the third Brillhart factor (avoiding duplicative
litigation), Argonaut argues that dismissing wastes judicial
resources since Argonaut could remove the action to federal
court based on diversity jurisdiction should SFMC file its
bad faith counterclaim as a freestanding action in Hawaii
state court. Though this argument was raised below, the
district court did not address the argument in its order.
This omission was not an abuse of discretion. If the
district court’s order were “devoid of reasoning,” generally
we would remand for further consideration. Id. But the
district court analyzed every Brillhart and Dizol factor
before dismissing. True, these factors are not exhaustive, id.at 1225 n.5, and the possibility of removal is likely relevant
to overarching considerations of “practicality and wise
judicial administration,” see Wilton, 515 U.S. at 288. But
we decline to find abuse of discretion where the district court
aptly considered the relevant enumerated Brillhart and Dizol
factors and reached a reasonable conclusion. Id. at 286.
Finally, Argonaut claims the district court erred by
dismissing, rather than staying, the declaratory claims. But
it provides no authority suggesting that a district court
abuses its discretion by dismissing rather than staying.
When it has discretionary jurisdiction, the district court can
choose to stay an action (i.e., the “postponement of [a]
decision”) or “decline to exercise jurisdiction altogether by
either dismissing the suit or remanding it to state court.”
Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 721 (1996)
(citation omitted); see also United Nat’l Ins., 242 F.3d
at 1107 (“[T]he district court declined to exercise
discretionary jurisdiction under the Declaratory Judgment
Act, and therefore dismissed the [declaratory claim] without
18 ARGONAUT INS. V. ST. FRANCIS MED. CTR.
prejudice.”). Although we recognize “that where the basis
for declining to proceed is the pendency of a state
proceeding, a stay will often be the preferable course,”
Wilton described a district court’s discretion to decline
jurisdiction as the ability “to stay or to dismiss an action
seeking a declaratory judgment.” 515 U.S. at 288 & n.2; see
also Brillhart, 316 U.S. at 494 (describing the district court’s
discretion as the ability to dismiss a declaratory claim).
Only limited overlap between the coverage litigation and
the underlying claims would seem to weigh against a
potentially lengthy stay of the coverage litigation pending
the outcome of the state litigation. Letting the case go
forward supports dismissal, which would allow the coverage
litigation to be refiled and proceed in state court. See Haw.
Rev. Stat. § 632-1 (2020) (providing that parties may file
declaratory judgment actions); see also Allstate Ins. Co. v.
Mercier, 913 F.2d 273, 278–79 (6th Cir. 1990) (holding that
an insurer’s federal declaratory action should be dismissed
in part because the insurer “could have presented the issues
that it brought to federal court in a separate action to the
same court that will decide the underlying tort action”).
* * *
Here, the district court properly noted that the
declaratory claims could be filed in state court and that
deciding them would not settle all aspects of the controversy
or clarify the parties’ legal relationships. Its discussion of
the Brillhart and Dizol factors was sufficient to allow for
appellate review of its decision to dismiss rather than stay.
See Dizol, 133 F.3d at 1225. And the district court did not
ARGONAUT INS. V. ST. FRANCIS MED. CTR. 19
abuse its discretion by not separately discussing whether to
dismiss or stay the case. 6
AFFIRMED.
6
We give no weight to the typographical error in the district court
opinion’s subheading, which read, “The Dizol Factors Favor Staying
Proceedings.” The other headings in the same division stated that the
court favored dismissal, and the district court’s holding and analysis are
otherwise clear.