Principal Life v. Robinson , 394 F.3d 665 ( 2005 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
PRINCIPAL LIFE INSURANCE CO., an 
Iowa corporation; PETULA
ASSOCIATES LTD., an Iowa
corporation; EQUITY FC LTD., an
Iowa corporation,
No. 03-35376
Plaintiffs-Appellants,
v.  D.C. No.
CV-00-01345-BR
CONSTANCE A. ROBINSON; CHESTER
OPINION
L. ROBINSON, individually and as
trustee of the CHESTER ROBINSON
TRUST; LYNN ROBINSON; KAY BELL;
THEA WOOD; DEE HANSON,
Defendants-Appellees.

Appeal from the United States District Court
for the District of Oregon
Anna J. Brown, District Judge, Presiding
Argued and Submitted
November 3, 2004—Portland, Oregon
Filed January 6, 2005
Before: Stephen S. Trott, Andrew J. Kleinfeld,
Circuit Judges, and Louis H. Pollak,* Senior Judge.
Opinion by Judge Trott
*Hon. Louis H. Pollak, Senior U.S. District Judge for the Eastern Dis-
trict of Pennsylvania, sitting by designation.
165
168 PRINCIPAL LIFE INS. v. ROBINSON
COUNSEL
G. Frank Hammond, Cable Huston Benedict Haagensen &
Lloyd LLP, Portland, Oregon, for the plaintiffs-appellants.
Lainie Block, Larkins Vacura LLP, Portland, Oregon, for the
defendants-appellees.
OPINION
TROTT, Circuit Judge:
Principal Life Insurance Company, Equity FC Ltd., and
Petula Associates Ltd., a subsidiary of Principal, (collectively
“Principal”) appeal the district court’s dismissal of Principal’s
PRINCIPAL LIFE INS. v. ROBINSON 169
action for declaratory relief relating to a material dispute over
a rent recalculation provision in a ground lease. The district
court concluded that the case was not ripe for adjudication
and thus that it lacked subject-matter jurisdiction. Because the
district court arrived at this conclusion by mistakenly apply-
ing a ripeness standard derived from cases involving adminis-
trative agencies, we reverse the district court’s jurisdictional
determination.
This case presents an actual controversy, between parties
having adverse legal interests, and with sufficient immediacy
ordinarily to warrant the issuance of a declaratory judgment.
Nevertheless, the district court had discretion to accept juris-
diction or not depending on an application of the Brillhart
factors. Brillhart v. Excess Ins. Co., 316 U.S. 491 (1942).
Because the district court did not articulate reasons for its pro-
visional declination to exercise jurisdiction pursuant to Brill-
hart and its progeny, we remand to allow the district court to
address the relevant factors and then to exercise its discretion.
Consequently, we vacate also the award of fees and costs.
BACKGROUND
The Chester Robinson Trust, Kay Bell, Thea Wood, Dee
Hanson, and Constance, Chester, and Lynn Robinson (collec-
tively, “the Robinsons”) own property in Washington County,
Oregon. In 1978, they entered into a ninety-nine-year ground
lease agreement with MTR Company, which assigned its
interest in the ground lease to Koll Interreal a year later. Dur-
ing lease renegotiations between Koll Interreal and the Robin-
sons in 1985, it became apparent to both parties that they
disagreed as to the interpretation of Section 2.1 of the ground
lease, which is a pivotal rent recalculation provision.
Section 2.1 of the ground lease provides for rent adjustment
in the thirty-first year (2008) and sixty-first year of the lease
term. The Robinsons contended that two critical variables
affecting the amount of rent will change when the rent is
170 PRINCIPAL LIFE INS. v. ROBINSON
recalculated in the thirty-first and sixty-first years: (1) the
base property value of the land and (2) the ratio for recalculat-
ing the rental amount. Koll Interreal, on the other hand,
claimed that only the ratio variable would change. This dis-
pute affects not only the amount of rent, but also the commer-
cial value of the lease.
Unable to resolve the dispute in 1985, Koll Interreal and
the Robinsons agreed to preserve their respective positions
and resolve it in the future. The dispute was memorialized in
a lease amendment. With full knowledge of the existence of
this dispute, a subsidiary of Principal purchased a portion of
Koll Interreal’s interest in the ground lease in 1986.
Principal attempted to sell its entire interest in the ground
lease for the first and only time in 1998, creating a portfolio
of properties that included it. Two investors, Transwestern
and PS Business Parks, made offers on the leasehold interest.
Principal pursued the Transwestern offer because it was sig-
nificantly higher and offered a “smoother closing.” During
those sale negotiations, Transwestern sought a reduction in
price because of the unresolved lease dispute with the Robin-
sons and attempted also to resolve the dispute with the Robin-
sons. These attempts at resolving the contract dispute proved
fruitless, and Transwestern withdrew its offer. Principal has
made no other attempts to sell the interest.
Without a definitive way to calculate the value of the lease,
Principal found itself unable to make a reasonable business
decision as to what to do with it, i.e., sell it, develop the prop-
erty, or purchase the property. Accordingly, Principal sought
a declaratory judgment, asking the district court to resolve the
controversy and to declare that Principal’s interpretation of
section 2.1 is correct.
The district court determined that a “substantial controver-
sy” exists between the parties, but it determined nevertheless
that it lacked subject-matter jurisdiction because Principal had
PRINCIPAL LIFE INS. v. ROBINSON 171
failed to prove that it would suffer “a direct and immediate
hardship that is more than possible financial loss.” Moreover,
the district court noted that it would decline to exercise juris-
diction even if it had it because “[d]iscretionary access to
judicial resources should be reserved for those controversies
that parties do not invite.”
Principal moved the district court to reconsider, arguing
that this “hardship” standard derived from cases involving
administrative agencies and was inappropriate in an insular
private party contract action. The district court maintained its
original position regarding ripeness, and again asserted that
even if the case were ripe, the court would decline to exercise
jurisdiction, citing its earlier statement regarding “controver-
sies that parties do not invite.”
DISCUSSION
[1] The Declaratory Judgment Act states, “In a case of
actual controversy within its jurisdiction . . . any court of the
United States . . . may declare the rights and other legal rela-
tions of any interested party seeking such declaration.” 28
U.S.C. § 2201(a). Consequently, we have long held that the
district court must first inquire whether there is an actual case
or controversy within its jurisdiction. American States Ins.
Co. v. Kearns, 15 F.3d 142, 143 (9th Cir. 1994). Second, if
the court finds that an actual case or controversy exists, the
court must decide whether to exercise its jurisdiction by ana-
lyzing the factors set out in Brillhart v. Excess Ins. Co., 316
U.S. 491 (1942), and its progeny. Kearns, 15 F.3d at 143-44.
A. Standard of Review
We review de novo the first prong of the Kearns inquiry,
i.e., the question of ripeness and subject-matter jurisdiction.
Laub v. United States Dep’t of the Interior, 342 F.3d 1080,
1084 (9th Cir. 2003); Kearns, 15 F.3d at 143. Beyond the
threshold jurisdictional question, we review discretionary
172 PRINCIPAL LIFE INS. v. ROBINSON
decisions about the propriety of hearing declaratory judgment
actions for abuse of discretion. Wilton v. Seven Falls Co., 515
U.S. 277, 289-90 (1995). However, if the district court does
not provide reasoning under the discretionary prong of the
inquiry, we must remand the case to allow the district court
to properly exercise its discretion. Gov’t Employees Ins. Co.
v. Dizol, 133 F.3d 1220, 1225 (9th Cir. 1998) (en banc) (“If
on appeal the record is devoid of reasoning . . . the case must
be remanded to the district court to record its reasoning in a
manner sufficient to permit the ‘proper application of the
abuse of discretion standard on appellate review.’ ” (citation
omitted)).
B. Appropriate Standard for Determining Ripeness
[2] The requirement that a case or controversy exist under
the Declaratory Judgment Act is “identical to Article III’s
constitutional case or controversy requirement.” Kearns, 15
F.3d at 143. If a case is not ripe for review, then there is no
case or controversy, and the court lacks subject-matter juris-
diction. Id. Consequently, the first question we must answer
is what standard should be applied to determine whether this
private contract dispute is ripe.
[3] The district court applied a standard unique to cases
involving administrative agencies and, as a result, found that
it lacked subject-matter jurisdiction. In the context of admin-
istrative actions, the prudential aspect of the ripeness doctrine
is well-settled: whether administrative action is ripe requires
the court to evaluate (1) the fitness of the issues for judicial
decision; and (2) the hardship to the parties of withholding
court consideration. Abbott Labs. v. Gardner, 387 U.S. 136,
148-49 (1967), overruled on other grounds by Califano v.
Sanders, 430 U.S. 99, 105 (1977). We further announced in
Western Oil & Gas Ass’n v. Sonoma County, 905 F.2d 1287,
1291 (9th Cir. 1990), reh’g denied, that the hardship element
of the Abbott Labs standard is not met unless a litigant shows
that “withholding review would result in ‘direct and immedi-
PRINCIPAL LIFE INS. v. ROBINSON 173
ate’ hardship and would entail more than possible financial
loss.”
The Abbott Labs and Western Oil standards find their roots
in cases involving administrative agencies and recognize that
judicial action should be restrained when other political
branches have acted or will act. See, e.g., United States v.
Braren, 338 F.3d 971, 975 (2003) (listing administrative cases
applying the Abbott Labs standard); Village of Gambell v.
Babbit, 999 F.2d 403 (9th Cir. 1993) (applying the Western
Oil financial loss standard to a case involving an administra-
tive agency); WRIGHT & MILLER, FEDERAL PRACTICE AND PRO-
CEDURE, § 3532.1 (2d ed. 1984 & Supp. 2004) (“The values of
avoiding unnecessary constitutional determinations and estab-
lishing proper relationships between the judiciary and other
branches of the federal government lie at the core of ripeness
policies.”).
Recognizing this controlling principle of allocation of
authority, we have embraced the rationale behind the Abbott
Labs standard in the administrative context:
The ripeness doctrine “is intended ‘to prevent the
courts, through avoidance of premature adjudication,
from entangling themselves in abstract disagree-
ments over administrative policies, and also to pro-
tect the agencies from judicial interference until an
administrative decision has been formalized and its
effects felt in a concrete way by the challenging par-
ties.’ ” Trustees for Alaska v. Hodel, 806 F.2d 1378,
1381 (9th Cir. 1986) (quoting Abbott Laboratories v.
Gardner, 387 U.S. 136, 148-49, 87 S. Ct. 1507,
1515, 18 L. Ed. 2d 681 (1967)).
To ascertain whether an administrative action is
ripe “requires an evaluation of the ‘fitness of the
issues for judicial decision and the hardship to the
174 PRINCIPAL LIFE INS. v. ROBINSON
parties of withholding court consideration.’ ” Id.(quoting Abbott Laboratories, 387 U.S. at 149).
California Dep’t of Educ. v. Bennett, 833 F.2d 827, 833 (9th
Cir. 1987) (emphasis added).
It is true that Principal does not point to, and we have not
found, a case limiting the application of the Abbott Labs and
Western Oil standards to the administrative context. But it is
equally true that the Robinsons do not point to, and we have
not found, a case applying the standard outside this context.
We must decide therefore whether to extend the standard to
cases in which a private party to a contract seeks a declaratory
judgment on a contract.
[4] There is no legal or logical requirement compelling the
extension of Abbott Labs and Western Oil to cases involving
only private contracts. Importantly, a single administrative
action has consequences for many members of the general
public, not just those directly in the immediate controversy.
For that reason, it is prudent for courts to limit their review
of such actions to those involving the possibility of concrete
injury greater than speculative or remote financial contingen-
cies. But that logic does not extend to a private party contract
action. The contingency of wide-ranging and remote adverse
consequences does not exist in a private contract case — there
either is or is not a financial consequence in the private party
context. This case perfectly demonstrates that distinction: the
only possible harm to Principal, both now and in 2008, is pos-
sible financial uncertainty and loss. To escape this predica-
ment, Principal’s only potential remedy is to bring an action
for declaratory relief. Indeed, this is precisely the type of case
for which declaratory relief is appropriate.
Moreover, the concerns over judicial entanglement in
administrative agency actions before the agencies have had an
opportunity to take action or make decisions do not exist in
private party contract cases. No other action or decision is
PRINCIPAL LIFE INS. v. ROBINSON 175
forthcoming. And, allocation of authority concerns that pre-
sent themselves in administrative actions are entirely absent.
Furthermore, the fundamental role of the courts is to resolve
concrete and present disputes between parties.
[5] For these reasons, application of the Abbott Labs and
Western Oil standards is inappropriate in a case such as this.
Accordingly, we conclude that the appropriate standard for
determining ripeness of private party contract disputes is the
traditional ripeness standard, namely, whether “there is a sub-
stantial controversy, between parties having adverse legal
interests, of sufficient immediacy and reality to warrant the
issuance of a declaratory judgment.” Maryland Cas. Co. v.
Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941).
C. Ripeness
[6] The contract dispute between Principal and the Robin-
sons over the critical rent recalculation provision is not an
abstract or hypothetical disagreement. This is a typical con-
tract dispute under which the parties’ interests are clearly
adverse, and a decision will affect the value of the lease. The
district court so found, and the Robinsons do not seriously
dispute this conclusion. Section 2.1 in the ground lease con-
tract exists; the parties have always disagreed as to what it
means; the dispute involves measurable financial conse-
quences; and the parties have always known that the dispute
would eventually need resolution. Regrettably, the parties
have not resolved the dispute on their own and have now
asked the courts to resolve it for them. The only question,
therefore, is whether, at this point, the controversy has
become sufficiently immediate, such that the district court has
Article III jurisdiction to decide it. We conclude that it has.
[7] Owing to this dispute, Principal has had some difficulty
selling its interest. Transwestern’s failed attempt as a possible
buyer at resolving the dispute in the lease, and its attempt to
seek a price reduction, suggest that Principal will continue to
176 PRINCIPAL LIFE INS. v. ROBINSON
have difficulty selling the interest. Additional attempts to sell
are likely to waste time and resources. From Principal’s point
of view, the correct way to price the interest for sale accu-
rately is on the assumption that rent would be calculated in
accordance with its interpretation of the rent recalculation
provision. From a potential buyer’s point of view, however,
a less favorable possibility is a reality should the Robinsons’
interpretation prevail. Under these conditions, the value of the
lease is unascertainable, and the price is therefore unpredict-
able.
[8] This was precisely what happened in the Transwestern
deal, illustrating that there is sufficient immediacy to warrant
resolution. Were we to conclude otherwise, the property value
of all long-term leases would be significantly diminished
because disputes over these leases could not be promptly
resolved by the courts. Moreover, because Principal is unable
accurately to estimate the value of the interest, a decision
whether to sell the interest or keep and develop it is impracti-
cable. Without knowing how rent will be recalculated, Princi-
pal is unable to estimate which path will be the most
profitable. These difficulties create a dispute that is suffi-
ciently immediate to warrant the issuance of a declaratory
judgment.
[9] The district court’s inclination to find this suit unripe is
understandable, given that Principal knew it was buying this
uncertainty when it bought its interest in the ground lease. But
this circumstance does not support the conclusion that the
case fails to present a justiciable controversy and conse-
quently that the court lacks subject-matter jurisdiction. Noth-
ing in the 1985 lease amendment suggests that the parties did
not intend to resolve this dispute until 2008, and nothing sug-
gests that waiting until then would change anything. The par-
ties did not “invite” this problem any more than does any
party finding itself in an unavoidable dispute over the mean-
ing of a contract. Courts exist to resolve such disputes. Thus,
we conclude that the case is ripe.
PRINCIPAL LIFE INS. v. ROBINSON 177
D. Exercise of Discretion
[10] Despite a conclusion that the case is ripe, the Declara-
tory Judgment Act requires further analysis in connection
with the district court’s discretion, in line with Brillhart, as to
whether or not to exercise jurisdiction. Kearns, 15 F.3d at
143. If the district court should decline to exercise its jurisdic-
tion, it must “explain the basis for its decision on the record.”
Dizol, 133 F.3d at 1221. The district court’s discretion to hear
declaratory actions over which it has jurisdiction is guided by
the Supreme Court’s announcements in Brillhart.
[11] The Brillhart factors are non-exclusive and state that,
“[1)] [t]he district court should avoid needless determination
of state law issues; [2)] it should discourage litigants from fil-
ing declaratory actions as a means of forum shopping; and
[3)] it should avoid duplicative litigation.” Dizol 133 F.3d at1225 (citing Robsac, 947 F.2d at 1371-73). “Essentially, the
district court ‘must balance concerns of judicial administra-
tion, comity, and fairness to the litigants.’ ” Kearns, 15 F.3d
at 144 (quoting Chamberlain v. Allstate Ins. Co., 931 F.2d
1361, 1367 (9th Cir. 1991)). We have noted additional and
potentially relevant considerations such as:
whether the declaratory action will settle all aspects
of the controversy; whether the declaratory action
will serve a useful purpose 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 reme-
dies.
Dizol, 133 F.3d at 1225, n.5 (quoting Kearns, 15 F.3d at 145(J. Garth, concurring)).
178 PRINCIPAL LIFE INS. v. ROBINSON
[12] The Robinsons argue that we should look to the dis-
trict court’s statements and questions in the oral record and
conclude that the court demonstrated adequate reasoning
under Brillhart for us to affirm. We need not determine
whether any oral findings may supplement the court’s written
statements, however, because we conclude that the district
court made no oral findings explaining the basis for a decision
to exercise its jurisdiction. We note that the extent to which
the district court declined, in its written opinion, to exercise
its jurisdiction was dicta because the court had concluded that
it lacked subject-matter jurisdiction.
There is no doubt that the district court was aware of its
duty to apply the Brillhart considerations and make findings
in deciding whether to exercise its discretion to hear the case.
During oral argument, the court recited the factors Brillhart
commands the district court to consider. The judge stated:
With regard to the Court’s discretion, I am supposed
to balance, among other things, the concerns of judi-
cial administration. . . . it seems to me that the bal-
ancing that I am supposed to employ relative to
judicial administration weighs in favor of taking
jurisdiction.
I’m supposed to balance so-called “comity” issues
. . . I don’t know what that means in the context of
this case, so I invite you to enlighten me.
I am supposed to balance the fairness to the liti-
gants in the exercise of discretion. . . . And I would
like collaboration [sic] on that point. I don’t under-
stand what the unfairness is. . . . I really want to
know what it is about the process that is — the Court
ought to conclude is unfair in the exercise of discre-
tion.
Well, those are my questions.
PRINCIPAL LIFE INS. v. ROBINSON 179
Counsel for the Robinsons then pointed out, citing Dizol, that
the judge was to make “findings on the record as to why you
think it’s appropriate to exercise your discretion in this case,”
to which the court responded, “I’m clearly keyed into that and
. . . I’m trying to lay out what I think the various tests and fac-
tors are — I think are in issue.”
With that background, the parties presented arguments as to
these and other Brillhart and Dizol considerations, and the
court repeatedly asked pointed questions on the issues. Never-
theless, the court’s inquiries made in an attempt to sort out the
issues are not tantamount to findings or reasoning. The only
possible finding arises from the court’s statement during oral
argument that “judicial administration weighs in favor of tak-
ing jurisdiction.” (emphasis added).
Moreover, the district court’s written opinion provides no
guidance as to its evaluation of Brillhart. At footnote five of
its written jurisdiction opinion, the court stated:
Although the Court does not reach the second part
of the Kearns inquiry, the Court notes nonetheless,
it would exercise its discretion and decline to adjudi-
cate this controversy at this time because Plaintiffs
voluntarily acquired their leasehold interests with
full knowledge of the outstanding dispute. Discre-
tionary access to judicial resources should be
reserved for those controversies that the parties do
not invite.
(emphasis added). On reconsideration, the court noted that
whatever standard the court applied to determine ripeness
under the first prong of the inquiry, “the end result would be
the same.” The court pointed to footnote five of the original
opinion and order, but again failed to provide any analysis as
to the factors. The only inference of reasoning we can make
is that the district court found questionable notions of fairness
to weigh dispositively against accepting jurisdiction because
180 PRINCIPAL LIFE INS. v. ROBINSON
Principal “bought the problem.” The court’s problematic
statement that “judicial resources should be reserved for con-
troversies that parties do not invite,” without any analysis of
other factors, provides us with no guidance as to the court’s
weighing under Brillhart.
Finally, we note that, despite any possible concerns about
fairness, a proper application of the Brillhart factors suggests
that an exercise of discretion to hear the case would be appro-
priate. A reasoned analysis, however, belongs, in the first
instance, to the district court.
E. Attorneys’ Fees and Costs
The ground lease provides for attorneys’ fees to be awarded
to the prevailing party in litigation. Given our conclusion that
the case is ripe, this litigation is ongoing. Consequently, at
this point there is no prevailing party under Oregon law, and
the award of attorneys’ fees must be vacated. Flying Tiger
Line, Inc. v. Portland Trading Co., 290 Or. 605, 609 (1981).
The award of costs under Federal Rule of Civil Procedure
54(b) is likewise vacated.
CONCLUSION
[13] For the foregoing reasons, we reverse the district
court’s conclusion that it lacked subject-matter jurisdiction,
remand for a proper application of the Brillhart factors, and
vacate the award of costs and fees.
REVERSED AND REMANDED.