642 F.3d 849
9th Cir.2011Background
- MGIC challenges district court remand of declaratory judgment action about Flow Policy interpretation.
- Flow Policy forbids coverage for loans with material misrepresentations and allows reduction for fraud, misrepresentation, or negligence by Countrywide.
- Flow Policy includes arbitration clause but permits declaratory judgment on policy interpretation.
- Countrywide filed DJA suit in California state court; MGIC removed to federal court based on diversity and amount in controversy.
- District court remanded to state court, suggesting arbitration issues should be addressed there; MGIC appealed under collateral order doctrine.
- Court later held FAA mandatory proceedings must be considered before DJA remand; reversed and remanded for FAA consideration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether DJA discretion allows declining to address FAA relief | MGIC argues DJA discretion cannot bar FAA review | Countrywide argues DJA discretion encompasses arbitrability as part of declaratory relief | FAA required to be considered first; DJA discretion cannot preclude FAA |
| Whether FAA §3 stay must be decided before remand | MGIC contends §3 stay can be decided in federal court before remand | Countrywide contends DJA remand can proceed before FAA ruling | FAA §3 mandates stay when reference to arbitration is proper; district court must decide merits before remand |
| Whether DJA affects district court jurisdiction | MGIC asserts DJA does not alter underlying independent diversity jurisdiction | Countrywide contends DJA discretion governs remand independent of jurisdiction | DJ A does not confer/deny jurisdiction; jurisdiction exists independently; DJA merely affects discretion to grant declaratory relief |
| Whether district court must address FAA before remand given diversity jurisdiction | MGIC argues FAA can independently be litigated if jurisdiction exists | Countrywide argues FAA relief is not mandatory if DJA abstains | FAA relief is mandatory where jurisdiction is proper; court must consider before remand |
| Whether MGIC’s FAA motion could be independently entertained apart from DJA action | MGIC could pursue FAA relief separately under §4 or §3 | Countrywide emphasizes FAA relief tied to declaratory action | Potential independence exists but FAA’s mandatory language controls; court must decide |
Key Cases Cited
- Brillhart v. Excess Ins. Co. of America, 316 U.S. 491 (U.S. 1942) (declaratory judgments; discretion to stay/remand; not mandatory)
- GOV'T Emps. Ins. Co. v. Dizol, 133 F.3d 1220 (9th Cir. 1998) (DJA discretion; stay or dismissal of declaratory actions)
- Snodgrass v. Provident Life & Accident Ins. Co., 147 F.3d 1163 (9th Cir. 1998) (analysis for DJA remand; independent non-declaratory claims)
- United Nat. Ins. Co. v. R & D Latex Corp., 242 F.3d 1102 (9th Cir. 2001) (non-declaratory claims; independent basis for jurisdiction under DJA)
- Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667 (1950) (DJ A remedial powers; jurisdiction not modified)
- Wilton v. Seven Falls Co., 515 U.S. 277 (1995) (DJ A remedial nature; stay/dismiss discretion)
- Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213 (1985) (FAA §3; mandatory stay; no discretion to avoid arbitration)
- Vaden v. Discover Bank, 129 S. Ct. 1262 (U.S. 2009) (independent jurisdiction to hear §4 petition to compel arbitration)
- AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) (FAA stay in arbitration; interpretation of §3)
- Lifescan, Inc. v. Premier Diabetic Servs., Inc., 363 F.3d 1010 (9th Cir. 2004) (FAA limits on discretion in ordering arbitration)
- Brandt v. Village of Winnetka, 612 F.3d 647 (7th Cir. 2010) (distinction between jurisdiction and discretion to issue declaratory relief)