Bitter v. Windsor Securities, LLC, 3:13-cv-05022

John L. Bitter, Jr. had a $2 million life policy; Windsor Securities (Windsor) financed premiums under agreements signed by the trustee (Barnes), Windsor, and beneficiary Carol Bitter (Bitter).
After John Bitter died, Barnes (trustee) sued Windsor in federal court (the "Bitter Trust Action") asserting Windsor’s beneficiary claim was procured by fraud; Pacific Life interpleaded the policy proceeds.
Windsor sent Bitter a July 16, 2013 "Notice of Dispute & Demand for Arbitration" including an unfiled arbitration demand, accusing Bitter of directing the trustee to file the Bitter Trust Action and threatening arbitration if unresolved.
Bitter denied involvement, requested Windsor retract and pay her fees; Windsor said it might have no claim if Bitter’s denials are true but would wait for discovery in the Bitter Trust Action. Discovery ended and Windsor has not sued Bitter or filed arbitration.
Bitter filed a declaratory judgment action seeking declarations she did not breach the agreements and is not liable for damages or Windsor’s fees; Windsor moved to dismiss for lack of subject-matter jurisdiction and for failure to meet the diversity amount-in-controversy requirement.

Issue	Plaintiff's Argument	Defendant's Argument	Held
1) Is there a case or controversy / is Bitter's declaratory action ripe?	Windsor's demand letter and unfiled arbitration demand create a substantial, immediate controversy warranting declaratory relief.	The demand was a pre-litigation step under contract dispute-resolution and thus did not create a ripe, adversarial controversy.	Held: Yes. The demand letter created an actual controversy; ripeness satisfied.
2) Should the court exercise discretion under Brillhart/Dizol (avoid duplicative/state-law resolution)?	Bitter: Federal declaratory relief is appropriate; no parallel state court proceeding; same judge oversees related federal Bitter Trust Action; relief will clarify rights.	Windsor: Federal court should decline under Brillhart because issues are largely state-law and related proceedings counsel abstention.	Held: Court exercises jurisdiction. Brillhart/Kearns/Dizol factors are neutral or favor federal adjudication.
3) Does the action satisfy diversity amount-in-controversy (> $75,000)?	The object of the suit includes Windsor’s attorneys’ fees in the Bitter Trust Action and potential liability (the $1.2M Windsor stands to lose), so > $75,000.	Windsor: Bitter’s amount allegations are speculative and not ripe.	Held: Amount-in-controversy satisfied. Fees and potential liability properly considered.

Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942) (discretionary abstention framework for declaratory actions)
Principal Life Ins. Co. v. Robinson, 394 F.3d 665 (9th Cir. 2005) (ripeness standard and application of Brillhart in declaratory-judgment context)
Gov’t Emps. Ins. Co. v. Dizol, 133 F.3d 1220 (9th Cir. 1998) (en banc) (factors for exercising declaratory-judgment jurisdiction)
St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283 (1938) (amount-in-controversy legal-certainty standard)
Hunt v. Wash. State Apple Advertising Comm’n, 432 U.S. 333 (1977) (measuring amount in controversy by value of the object of the litigation)