In Osseous Technologies of America v. DiscoveryOrtho Partners, LLC (Case No. G042747, December 28, 2010), the California Court of Appeal,affirmed a demurrer to an "offensive" declaratory relief action by a company that expected to be sued for breach of contract, and shortly thereafter was sued, in federal court.  In the opinion, the court surveyed the case law on the scope of a trial court's discretion to entertain or dismiss declaratory relief actions that consist mainly or totally of a completed breach of contract.    

At page *13, the court expressly added forum shopping to the list of considerations for cases that present the trial court with a discretionary choice whether to entertain declaratory relief: "Finally, though California courts have not focused on this factor, one aspect of the “necessary or proper” section 1061 analysis by trial courts should be whether a potential defendant is seeking to preempt a breach of contract plaintiff by filing suit in a preferred venue.  Several federal district courts have exercised discretion under the federal Declaratory Judgment Act (28 U.S.C. § 2201(a)), to dismiss preemptive declaratory relief actions filed by plaintiffs faced with imminent breach of contract actions... California trial courts may consider in their section 1061 analysis whether the timing of the declaratory relief action suggests litigation strategy motivated the filing rather than a concern that judicial guidance was needed and would not be forthcoming absent the filing of a declaratory relief action."

However, the court seemed to regard coverage actions as a different situation.  On page *10, the court noted with approval that "[i]nsurers often bring declaratory actions to determine coverage obligations despite the right of insured parties to bring actions for breach of contract."   The court then cautioned against the use of precedents approving such actions in "a commercial breach of contract context."

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Osseous Technologies

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