Integon Preferred Insurance v. Camacho, et al.

Filing 106

ORDER PARTIALLY GRANTING MOTION TO STAY, 102 . Valley Garlic's motion to stay under Landis is GRANTED. Valley Garlic's motion to stay under Brillhart, Colorado River, and California's abstention doctrines is DENIED. This lawsuit is STAYED until March 22, 2019. Valley Garlic and Integon shall FILE a joint status report concerning the status of the state lawsuit by April 1, 2019. Order signed by District Judge Anthony W. Ishii on 12/18/2018`. (Timken, A)

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1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 EASTERN DISTRICT OF CALIFORNIA 8 9 Integon Preferred Insurance Company, 10 11 CASE NO. 1:16-cv-01496-AWI-SAB Plaintiff, ORDER PARTIALLY GRANTING MOTION TO STAY v. 12 Isabella Alvarez Camacho, et al., 13 Defendants. (Doc. No. 102) 14 15 This is a declaratory judgment lawsuit brought by an insurer, Plaintiff Integon Preferred 16 Insurance Company (“Integon”), alleging that it is not required to provide insurance coverage 17 under a commercial policy to its insured, Defendant X-Treme Ag Labor (“X-Treme”), as well as 18 Defendant Valley Garlic, Inc. (“Valley Garlic”), for damages arising from an automobile accident 19 that injured and killed several of X-Treme’s employees. Some of Integon’s arguments for why it 20 is not required to provide coverage — for example, that the accident falls into one or more of the 21 policy’s exclusions — are, to some extent, at issue in a pending lawsuit in California state court. 22 The plaintiffs of the California lawsuit are the employees (and families and representatives of the 23 employees) who were injured or killed in the automobile accident, and they are claiming that the 24 negligence of X-Treme and Valley Garlic caused the accident. 25 Before the Court is Valley Garlic’s motion to stay, which asks the Court to stay this federal 26 lawsuit until the state lawsuit has concluded. See Doc. No. 102. The Court will partially grant the 27 motion by staying this lawsuit until March 22, 2019. 28 I. Factual Background 1 2 X-Treme is a farm labor contractor doing business in California. Isabella Camacho is a 3 principal of X-Treme. In March 2014, Camacho submitted an insurance application to Integon for 4 commercial auto insurance for X-Treme. Integon accepted the application and issued a 5 commercial auto insurance policy to Camacho d/b/a X-Treme. See Doc. No. 95, Ex. 4. Under the 6 policy, Integon agreed to pay damages for which X-Treme was legally liable because of bodily 7 injury and property damage caused by an accident and arising out of the ownership, maintenance, 8 or use of an insured car, subject to the policy’s exclusions. See id. 9 The policy contained several exclusions, such as the exclusion that states that the policy 10 does not cover “bodily injury to an employee of an insured . . . arising out of or within the course 11 of employment,” or the exclusion that states that the policy does not cover “bodily injury or 12 property damage arising out of the ownership, maintenance or use of an auto, other than your 13 insured auto, which is owned by or furnished or available for regular use by you,” or the exclusion 14 that states that the policy does not cover “bodily injury or property damage caused when your 15 insured auto is used to carry persons for a fee.” See id. at 57-58.1 On June 20, 2015 — at which time the policy was in effect — several of X-Treme’s 16 17 employees traveled home together in a van after a day’s work at one of Valley Garlic’s farms in 18 Gilroy, California. See id. at 48 (“Policy Period: 4/3/2015 – 4/3/2016”); Doc. No. 103 at 6. The 19 driver of the van, Enrique Franco, was allegedly an employee of X-Treme who, as part of his 20 employment, had been instructed by Camacho to drive the employees home. While driving the 21 van eastbound on California State Route 152, Franco allegedly fell asleep, causing the van to 22 swerve right onto the shoulder of the road. Then, Franco allegedly awoke and overcorrected the 23 van, thereby causing the van to violently roll. Several passengers — all of whom were allegedly 24 employees of X-Treme — were injured and four were killed. See Doc. No. 95. 25 26 The injured passengers and the estates and families of the killed passengers filed six separate negligence lawsuits in California state court against X-Treme, Camacho, Valley Garlic, 27 28 1 Unless stated otherwise, when this order references page numbers of documents filed through the CM/ECF system, the page reference is to the ECF page number shown on the top-right corner of the document. 2 1 and Franco, amongst others. See Doc. No. 95. Three of the lawsuits were filed in February 2016; 2 one in August 2016; one in November 2016; and the last one in February 2017. The six lawsuits 3 were consolidated into a single lawsuit, which is captioned Sandoval v. Valley Garlic, Inc., Case 4 No. 16CV-00315 in the Superior Court of California, County of Merced. See Doc. No. 102-1. 5 Trial in the consolidated state lawsuit is scheduled to begin on January 22, 2019. See Doc. No. 6 103 at 12. In the state lawsuit, Integon is providing a defense for X-Treme, Camacho, Valley 7 Garlic, and Franco under a reservation of rights. See id. at 5-6; Doc. No. 102-1 at 2. 8 9 The plaintiffs in the state lawsuit alleged that Franco was operating the van as part of his employment with X-Treme. They also alleged that the van ride was provided to the X-Treme 10 employees by X-Treme and Valley Garlic as part of X-Treme’s and Valley Garlic’s employment 11 operations. They also alleged that the van ride was provided by X-Treme and Valley Garlic to the 12 employees for a fee, and X-Treme and Valley Garlic deducted the fee from the employees’ 13 paychecks. 14 In October 2016, Integon filed this federal lawsuit against X-Treme, Camacho, Franco, and 15 the some of the named plaintiffs in the consolidated state lawsuit. See Doc. No. 1. Integon 16 subsequently amended its complaint three times to add additional defendants, including Valley 17 Garlic. See Doc. No. 95. In the third amended complaint, Integon alleged that Camacho and X- 18 Treme failed to disclose material facts to Integon when Camacho submitted the application for 19 insurance. See id. Specifically, Integon alleged that Camacho and X-Treme failed to disclose that 20 X-Treme would provide transportation to its employees, such as the employees who were injured 21 and killed in the van accident. Id. Based on these allegations, Integon pleaded a claim for 22 rescission of the insurance policy. 23 Integon also alleged that, for multiple reasons, any liability and damages arising from the 24 claims in the state lawsuit are not covered by the insurance policy. For example, Integon 25 suggested that the van accident is not covered by the insurance policy because the accident falls 26 into one or more of the policy’s exclusions. See id. On this basis, Integon pleaded two claims for 27 declaratory judgment, one of which is for a declaration that Integon has no duty to indemnify X- 28 Treme, Camacho, Valley Garlic, or Franco in the state lawsuit, and the other of which is for a 3 1 declaration that Integon has no duty to defend in the state lawsuit. The third amended complaint 2 does not specify the statutory basis for the two declaratory judgment claims, but the Court 3 construes the claims as being brought under 28 U.S.C. § 2201(a).2 4 In addition to the rescission and two declaratory judgment claims, Integon pleaded a claim 5 for recoupment of the defense costs that it has expended in the state lawsuit. Additionally, Integon 6 pleaded a claim for recoupment of any payments that Integon may make in the future to indemnify 7 X-Treme, Camacho, Valley Garlic, or Franco. 8 The Court issued a scheduling order in June 2017, but the deadlines and trial date in that 9 order were vacated because the Court learned that Valley Garlic intended to file a motion to stay 10 this federal lawsuit until the conclusion of the state lawsuit. See Doc. No. 101. Consequently, 11 there is currently no dispositive motion deadline or scheduled trial date in this federal lawsuit. By 12 contrast, in the state lawsuit, motions for summary judgment have been filed and heard and, as 13 previously noted, trial is scheduled for January 22, 2019, which is approximately one month away. 14 See Doc. 102-1 at 16; Doc. No. 103 at 12. 15 16 Valley Garlic filed the pending motion to stay; Integon filed an opposition; and Valley Garlic filed a reply. See Doc. Nos. 102-104. II. Valley Garlic’s Motion 17 18 In the motion to stay, Valley Garlic argues that this federal lawsuit should be stayed or 19 dismissed until the completion of the state lawsuit. Valley Garlic based this argument on four 20 separate doctrines and principles: (1) Brillhart abstention;3 (2) Colorado River abstention;4 (3) 21 abstention under California law; and (4) a Landis stay.5 22 23 In opposition, Integon argued that none of the foregoing doctrines and principles support staying or dismissing this federal lawsuit. 24 25 26 27 28 In Integon’s opposition to Valley Garlic’s motion to stay, Integon refers to 28 U.S.C. § 2201(a) when discussing its declaratory judgment claim. See Doc. No. 103 at 12-13. 3 Brillhart abstention derives from Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942). 4 Colorado River abstention derives from Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976). 5 A Landis stay derives from Landis v. N. Am. Co., 299 U.S. 248 (1936). 2 4 III. Discussion 1 2 3 1. Brillhart abstention Brillhart abstention provides that a federal district court may, in its discretion, abstain from 4 hearing a declaratory judgment claim when a related lawsuit is pending in state court. See 5 Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 495 (1942); Scotts Co. LLC v. Seeds, Inc., 688 6 F.3d 1154, 1158 (9th Cir. 2012). To determine whether Brillhart abstention is appropriate, the 7 court must weigh several factors. 8 Here, however, an analysis of the Brillhart factors is not required. This is because in the 9 Ninth Circuit, Brillhart abstention is not appropriate if the federal lawsuit includes a claim that is 10 “independent” of the declaratory judgment claim. Seneca Ins. Co., Inc. v. Strange Land, Inc., 862 11 F.3d 835, 840 (9th Cir. 2017); Scotts Co. LLC v. Seeds, Inc., 688 F.3d 1154, 1158 (9th Cir. 2012). 12 A claim is independent of a declaratory judgment claim if the claim could be brought in federal 13 court even if the declaratory judgment claim had not been brought or, similarly, the claim could 14 continue to be maintained in federal court even if the declaratory judgment claim was dropped 15 from the lawsuit. Seneca Ins. Co., Inc., 862 F.3d at 840; United Nat. Ins. Co. v. R&D Latex 16 Corp., 242 F.3d 1102, 1113 (9th Cir. 2001). In other words, if the federal court has subject matter 17 jurisdiction over the claim, and if the claim does not need to be joined with a declaratory judgment 18 claim in order to be maintained in federal court, then the claim is independent. Id. In the context 19 of insurance coverage lawsuits, independent claims may include bad faith, breach of fiduciary 20 duty, rescission of the policy, injunctive relief, specific performance, and monetary relief, such as 21 reimbursement of defense costs. Seneca Ins. Co., Inc., 862 F.3d at 841; Vasquez v. Rackauckas, 22 734 F.3d 1025, 1040 (9th Cir. 2013); R&D Latex Corp., 242 F.3d at 1114; Gov’t Employees Ins. 23 Co. v. Dizol, 133 F.3d 1220, 1225 & n.6 (9th Cir. 1998); First State Ins. Co. v. Callan Assocs., 24 Inc., 113 F.3d 161, 163 (9th Cir. 1997). 25 Here, Integon pleaded claims that are independent of the declaratory judgment claims — 26 namely, claims for rescission of the policy and reimbursement of defense costs. Therefore, it 27 would be improper for the Court to abstain under Brillhart. For this reason, the Court will deny 28 Valley Garlic’s motion to abstain under Brillhart. 5 1 2. Colorado River abstention 2 Colorado River abstention provides that under truly exceptional circumstances a federal 3 district court may abstain from adjudicating a lawsuit out of deference to a pending and parallel 4 state lawsuit. Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 813 5 (1976). To determine whether Colorado River abstention is appropriate, the federal district court 6 must evaluate and weigh eight factors. Seneca Ins. Co., Inc., 862 F.3d at 841. 7 The eight factors, which the Court will analyze below, are as follows: (1) which court first 8 took jurisdiction over any property at stake; (2) whether the federal forum is inconvenient; (3) 9 whether abstention will help avoid piecemeal litigation; (4) which court first obtained jurisdiction; 10 (5) whether the state lawsuit can adequately protect the rights of the federal litigants; (6) whether 11 state law controls the decision on the merits; (7) whether abstention will help avoid forum 12 shopping; and (8) whether the state lawsuit will resolve all issues in the federal lawsuit. Id. at 13 841-42. 14 A. 15 This factor is irrelevant here because this lawsuit does not involve a specific piece of Which court first took jurisdiction over any property at stake 16 property. See R.R. St. & Co. Inc. v. Transp. Ins. Co., 656 F.3d 966, 979 (9th Cir. 2011) (calling 17 this factor “irrelevant” when the dispute does not involve a specific piece of property). Therefore, 18 this factor does not weigh in favor of abstention. 19 B. 20 This factor is neutral because the federal and state courthouses are in relatively close Whether the federal forum causes inconvenience 21 proximity to each other and the state forum is located within this Court’s federal district. See id. 22 Any inconvenience of appearing in the federal forum will be nearly equal to the inconvenience of 23 appearing in the state forum. Therefore, this factor does not weigh in favor of abstention. 24 C. 25 In the context of Colorado River abstention, “[p]iecemeal litigation occurs when different Whether abstention will avoid piecemeal litigation 26 tribunals consider the same issue, thereby duplicating efforts and possibly reaching different 27 results.” Seneca Ins. Co., Inc., 862 F.3d at 842. Nearly all lawsuits that are prone to a Colorado 28 6 1 River analysis will be susceptible to creating some extent of piecemeal litigation. Id. Therefore, 2 for this factor to weigh in favor of abstention, there must also be “exceptional circumstances.” Id. 3 Exceptional circumstances exist when there is a “special or important rationale or 4 legislative preference for resolving [all] issues in a single proceeding.” Id. at 843; see also United 5 States v. Morros, 268 F.3d 695, 706–07 (9th Cir. 2001) (“[I]t is evident that the avoidance of 6 piecemeal litigation factor is met, as it was in Colorado River itself, only when there is evidence of 7 a strong federal policy that all claims should be tried in the state courts.”). For example, in 8 Colorado River, exceptional circumstances existed because there was a strong federal policy for 9 adjudicating the water rights claims in a single proceeding, as was evidenced by the McCarran 10 Amendment, 43 U.S.C. § 666. See Colorado River, 424 U.S. at 819 (1976). Exceptional 11 circumstances do not arise simply because a lawsuit involves multiple defendants, numerous 12 claims, and complex state tort, insurance, or contract issues. See Seneca Ins. Co., 862 F.3d at 843. 13 Here, piecemeal litigation will possibly result if the Court does not abstain. This is 14 because, as Valley Garlic points out, in both the federal and state lawsuits some of the same 15 questions of law and fact will likely be answered. For example, in both the federal and state 16 lawsuits, there appears to be a question of whether the van ride was operated and provided by X- 17 Treme or Valley Garlic as a part of X-Treme’s or Valley Garlic’s employment operations. In the 18 federal lawsuit, the answer to this question may be material because if X-Treme or Valley Garlic 19 was responsible for providing the van ride as part of its employment operations, then (1) a policy 20 exclusion may be triggered and (2) this finding may be circumstantial evidence that Camacho was 21 not truthful on the insurance application. Likewise, in the state lawsuit, the answer to this question 22 may be material because if X-Treme or Valley Garlic was responsible for providing the van ride as 23 part of its employment operations, then the state plaintiffs could argue that X-Treme or Valley 24 Garlic owed the van passengers a duty of care and the state defendants could argue that workers 25 compensation is the exclusive remedy. 26 However, even though piecemeal litigation will possibly result if the Court does not 27 abstain, there are no exceptional circumstances here. Valley Garlic contends that insurance and 28 contract law are largely governed by state law and, therefore, state courts are best suited to handle 7 1 such disputes. But this argument falls short of demonstrating an exceptional circumstance because 2 it fails to demonstrate that there is a special or important rationale or federal legislative preference 3 for resolving all issues in a single proceeding. That a body of law, such as tort, insurance, or 4 contract law, is largely the product of the states does not lead to the conclusion that Congress 5 intended for tort, insurance, or contract disputes to be resolved in a single state proceeding. As the 6 Ninth Circuit has stated, “adjudications of tort and insurance disputes — they are the stuff of 7 diversity jurisdiction. Nothing about [such] dispute[s] evinces a special or important rationale or 8 legislative preference for resolving these issues in a single proceeding.” Seneca Ins. Co., 862 F.3d 9 at 843; see also Dizol, 133 F.3d at 1225 (“[T]here is no presumption in favor of abstention in 10 declaratory actions generally, nor in insurance coverage cases specifically. We know of no 11 authority for the proposition that an insurer is barred from invoking diversity jurisdiction to bring 12 a declaratory judgment action against an insured on an issue of coverage.”); Travelers Indem. Co. 13 v. Madonna, 914 F.2d 1364, 1369 (9th Cir. 1990) (“This case involves ordinary contract and tort 14 issues and is thus unlike Colorado River where important real property rights were at stake and 15 where there was a substantial danger of inconsistent judgments.”). 16 Therefore, because there is not a special or important rationale or legislative preference for 17 resolving the issues in this federal lawsuit in a single state proceeding, this factor does not weigh 18 in favor of abstention. 19 Additionally, it is worth noting that when the pending state lawsuit has not yet decided the 20 questions of law and fact that overlap with the federal lawsuit, the possibility of piecemeal 21 litigation is lessened. This is because the state lawsuit could settle before trial, in which case the 22 overlapping questions would not be answered in the state lawsuit, or the federal lawsuit could 23 answer the overlapping questions before the state court, thereby possibly imposing issue 24 preclusion constraints on the state lawsuit. See Madonna, 914 F.2d at 1369 (“Since at the time of 25 the district court’s stay order the state court had made no rulings whatsoever in regard to this 26 dispute, there is no certainty that duplicative effort would result.”). Here, it appears that the state 27 lawsuit has not yet answered the overlapping questions identified supra. Therefore, although 28 8 1 piecemeal litigation is possible if this federal lawsuit is not abstained, piecemeal litigation is not 2 certain. This lessens any weight that this factor could have contributed towards abstention. 3 D. 4 This factor is concerned with protecting against wasting judicial resources. Madonna, 914 5 F.2d 1364 at 1370. Therefore, beyond merely asking whether the state court or federal court took 6 jurisdiction first, this factor considers the extent to which the state and federal lawsuits have 7 progressed. Seneca Ins. Co., 862 F.3d at 843; Madonna, 914 F.2d 1364 at 1370. The more a 8 federal lawsuit has progressed, the less this factor weighs in favor of abstention; and the less a 9 state lawsuit has progressed, the less this factor weighs in favor of abstention. 10 Which court first obtained jurisdiction Here, the state lawsuit has progressed far more than this federal lawsuit. In the state 11 lawsuit, discovery has concluded, the summary judgment deadline has passed, and trial is 12 scheduled to commence on January 22, 2018, which is approximately one month away. By 13 contrast, in this federal lawsuit, discovery has not concluded, the summary judgment deadline has 14 not expired, and there is not yet a scheduled trial date. Therefore, abstention would not cause a 15 substantial waste of this Court’s judicial resources. Consequently, this factor does not weigh 16 against abstention. 17 E. 18 The presence of federal law issues in a federal lawsuit weighs against abstention, and the Whether state or federal law provides the rule of decision on the merits 19 presence of state law issues in a federal lawsuit weighs in favor of abstention only if the state law 20 issues are complex and difficult issues better resolved by the state court. Seneca Ins. Co., Inc., 21 862 F.3d at 844. Complex and difficult issues better resolved by the state court do not usually 22 include disputes over insurance coverage, breach of contract, misrepresentation, indemnification, 23 or subrogation. Id. Federal courts are fully capable of dealing with these issues. Id. 24 Here, the claims and defenses in this federal lawsuit derive from insurance and contract 25 law, both of which are largely the product of the states. But the claims and defenses do not 26 involve complex and difficult issues better resolved by the state court. Therefore, this factor does 27 not weigh in favor of abstention. 28 /// 9 1 2 F. Whether the state lawsuit can adequately protect the rights of the federal litigants If the state lawsuit cannot adequately protect the rights of the federal litigants, then this 3 factor weighs against abstention. R.R. St. & Co. Inc., 656 F.3d at 981; see also Seneca Ins. Co., 4 Inc., 862 F.3d at 845 (“[T]he adequacy factor pertains to whether there is an impediment to the 5 state court protecting the litigants’ federal rights.”). A state lawsuit cannot adequately protect the 6 rights of the federal litigants if the federal litigants would not be able to raise and enforce their 7 claims in the state lawsuit. Id. For example, a state lawsuit might be inadequate if the state court 8 will refuse to compel arbitration under the Federal Arbitration Act per the federal litigant’s 9 request, see Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 27 (1983), or if 10 the state court lacks jurisdiction to hear the federal litigant’s claim. See Holder v. Holder, 305 11 F.3d 854, 869 n.5 (9th Cir. 2002). This factor carries weight only if it weighs against abstention, 12 which means that even if the state lawsuit can adequately protect the rights of the federal litigants, 13 this factor does not weigh in favor of abstention. Seneca Ins. Co., Inc., 862 F.3d at 845. 14 Here, Integon’s claims are for a declaration of the rights and responsibilities under the 15 insurance policy, rescission of the policy, and reimbursement of expended defense costs and future 16 indemnification payments. Neither Valley Garlic nor Integon have argued that these claims would 17 be impeded if they were brought before the state court, and the Court foresees no “adequacy” 18 impediment to these claims if they were brought before the state court. Therefore, this factor is 19 neutral. 20 G. 21 If the plaintiff in the federal lawsuit is forum shopping, then this factor weighs in favor of Whether abstention will avoid forum shopping 22 abstention. R.R. St. & Co. Inc., 656 F.3d at 976; see also Seneca Ins. Co., Inc., 862 F.3d at 846. 23 Forum shopping refers to “[t]he practice of choosing the most favorable jurisdiction or court in 24 which a claim might be heard.” R.R. St. & Co. Inc., 656 F.3d at 981. But forum shopping does 25 not entail a party acting within its rights by filing a lawsuit in the forum of its choice. Seneca Ins. 26 Co., Inc., 862 F.3d at 846. “The desire for a federal forum is assured by the constitutional 27 provision for diversity jurisdiction and the congressional statute implementing Article III.” R.R. 28 St. & Co. Inc., 656 F.3d 966 at 982. Therefore, the Ninth Circuit is cautious about labeling as 10 1 forum shopping a plaintiff’s desire to bring previously unasserted claims in federal court. Id. 2 However, when a party improperly seeks more favorable rules in its choice of forum or pursues 3 suit in a new forum after facing setbacks in an earlier proceeding, then this conduct may evidence 4 forum shopping. Seneca Ins. Co., Inc., 862 F.3d at 846. 5 Here, there is no evidence before the Court that Integon chose this federal forum to benefit 6 from more favorable rules or after facing setbacks in an earlier proceeding in a different forum. In 7 other words, there is no evidence before the Court that Integon forum shopped. That Integon filed 8 its claims in this federal forum after the filing of the state lawsuit does not, by itself, indicate 9 forum shopping. Therefore, this factor does not weigh in favor of abstention. 10 H. 11 If there is a substantial doubt that the state lawsuit will completely and promptly resolve all 12 issues in the federal lawsuit, then this factor precludes abstention. Id. at 845; see also Cone Mem’l 13 Hosp., 460 U.S. at 28; Intel Corp. v. Advanced Micro Devices, Inc., 12 F.3d 908, 913 (9th Cir. 14 1993) (“[A] district court may enter a Colorado River stay order only if it has ‘full confidence’ 15 that the parallel state proceeding will end the litigation.”) (quoting Gulfstream Aerospace Corp. v. 16 Mayacamas Corp., 485 U.S. 271, 277 (1988)). In other words, this factor seeks to ensure that, 17 assuming the federal lawsuit is abstained and the state lawsuit is concluded, the federal court has 18 nothing further to do in resolving any substantive part of the federal claims. Holder, 305 F.3d at 19 868 (quoting Moses H. Cone, 460 U.S. at 28). For example, in Intel Corp., the Ninth Circuit 20 concluded that a stay was inappropriate when there was a good chance that the federal district 21 court would have to eventually adjudicate the federal lawsuit because the state lawsuit would not 22 resolve all issues in the federal lawsuit. Intel Corp., 12 F.3d at 913. Similarly, in Holder, the 23 Ninth Circuit reversed a stay because the federal plaintiff likely could not have maintained his 24 federal claim in the state lawsuit. Holder, 305 F.3d at 868-70. 25 Whether the state lawsuit will resolve all issues in federal lawsuit A test for analyzing this factor is to assume the state court decision is made before the 26 federal court decision and has preclusive effect on the federal lawsuit. Then, if the federal lawsuit 27 would not be resolved by simply according preclusive effect to the state decision, then this means 28 that there is not a complete resolution. Holder, 305 F.3d at 868. Accordingly, this factor requires 11 1 “parallelism” between the state and federal lawsuits. Seneca Ins. Co., Inc., 862 F.3d at 845. 2 Substantial similarity, not exact parallelism, between the claims in the state and federal lawsuits is 3 required for the state lawsuit to be capable of resolving all issues in the federal lawsuit. Id. 4 While this factor is dispositive if the state lawsuit will not resolve all issues in the federal 5 lawsuit, Holder, 305 F.3d at 870, this factor cannot weigh in favor of abstention. In other words, 6 if the state lawsuit can completely and promptly resolve all issues in the federal lawsuit, then this 7 factor is neutral. Seneca Ins. Co., Inc., 862 F.3d at 845. 8 Here, there is a substantial doubt that the state lawsuit will completely and promptly 9 resolve all issues in this federal lawsuit. For example, whether Camacho made misrepresentations 10 on the insurance application is a fundamental question to Integon’s rescission claim in this federal 11 lawsuit, but there is no certainty that the issue will be decided in the state lawsuit, which does not 12 include claims that focus on the issuance and interpretation of the insurance policy. Likewise, 13 there is a substantial doubt that the state lawsuit will decide the coverage questions that are 14 fundamental to Integon’s declaratory judgment claims in this federal lawsuit — e.g., whether the 15 van accident falls into an insurance exclusion and whether Integon has a duty to indemnify or 16 defend X-Treme or Valley Garlic or Franco. While there may be findings made in the state 17 lawsuit that bear on the coverage questions in this federal lawsuit, such as whether the van ride 18 was provided to the passengers as a part of X-Treme’s or Valley Garlic’s employment operations, 19 those findings will not completely decide the coverage claims in this federal lawsuit. 20 Consequently, because there is a substantial doubt that the state lawsuit will completely and 21 promptly resolve all issues in this federal lawsuit, this factor precludes abstention. 22 I. 23 The analysis of the factors begins with the scales being heavily tilted in favor of the federal Balancing of factors 24 court not abstaining. Id. at 842. The factors do not constitute a mechanical checklist, and some 25 factors may be applicable to a lawsuit while others are not. Id. 26 Here, the balance of the factors weighs heavily against abstention, and this is made clear 27 by the following three points. First, the final factor — that there is a substantial doubt that the 28 state lawsuit will completely and promptly resolve all issues in this federal lawsuit — precludes 12 1 abstention. Second, the only factor that weighs in favor of abstention is that the state court took 2 jurisdiction before this Court took jurisdiction. Third, all the other factors are either neutral or 3 weigh against abstention. Thus, in sum, the scales weigh heavily in favor of not abstaining under 4 Colorado River. For this reason, the Court will not abstain under Colorado River and Valley 5 Garlic’s motion to abstain under Colorado River will be denied. 6 3. Abstention under California law 7 Valley Garlic argues that abstention is warranted under certain abstention doctrines 8 established by the California courts. For example, Valley Garlic cites to Montrose Chem. Corp. v. 9 Superior Court, 6 Cal. 4th 287 (1993) [hereinafter Montrose I], in which the California Supreme 10 Court stated that “[t]o eliminate the risk of inconsistent factual determinations that could prejudice 11 the insured, a stay of the declaratory relief action pending resolution of the third party suit is 12 appropriate when the coverage question turns on facts to be litigated in the underlying action.” Id. 13 at 301. Valley Garlic also cites to Haskel, Inc. v. Superior Court, 33 Cal. App. 4th 963 (1995), in 14 which the California Court of Appeal stated that “[i]t is only where there is no potential conflict 15 between the trial of the coverage dispute and the underlying [coverage] action that an insurer can 16 obtain an early trial date and resolution of its claim that coverage does not exist.” Id. at 979 17 (emphasis in original). 18 Despite Valley Garlic’s heavy reliance on California’s abstention doctrines, Valley Garlic 19 failed to explain why a federal district court would be bound or guided by state abstention 20 doctrines. Valley Garlic allocated only a single sentence to this issue, asserting that “[f]ederal 21 courts in California have followed state court precedents in determining whether to stay insurance 22 coverage cases under identical circumstances.” Doc. No. 102-1 at 8. To support this assertion, 23 Valley Garlic cited, but did not discuss, only two federal district court decisions, neither of which 24 are binding on the Court. Valley Garlic did not cite any binding or persuasive federal appellate 25 authority to support its assertion. 26 The Court rejects the premise from Valley Garlic that this federal Court — which has 27 subject matter jurisdiction over Integon’s claims pursuant to Article III of the Constitution, 28 28 U.S.C. § 1332, and 28 U.S.C. § 2201 (with respect to Integon’s declaratory judgment claims) — 13 1 should be guided by California’s abstention doctrines when deciding whether to exercise 2 jurisdiction over Integon’s claims. This is because federal abstention doctrines are narrowly, 3 sparingly, and carefully crafted by the Supreme Court, not the state courts. If the federal courts 4 were to follow California’s judicially-created abstention doctrines — some of which are more 5 liberal in allowing abstention than the Supreme Court’s abstention doctrines — then the carefully- 6 crafted narrowness of the Supreme Court’s abstention doctrines would be blunted. 7 Compare, for example, the Supreme Court’s Brillhart abstention doctrine with California’s 8 abstention doctrine applied in Montrose I and Haskel. Both doctrines specifically apply to the 9 situation wherein a defendant in a liability lawsuit is insured and the insurer files a separate 10 lawsuit with a declaratory judgment claim on the issue of whether the insurance policy covers the 11 defendant in the liability lawsuit. What commonly arises in that situation is the question of 12 whether, as Valley Garlic’s motion to stay illustrates here, the declaratory judgment lawsuit should 13 be stayed until the completion of the liability lawsuit. The Supreme Court’s Brillhart abstention 14 doctrine and the Ninth Circuit’s treatment of that doctrine answer the question by requiring the 15 federal district court to apply a multi-factor balancing test. Additionally, the Ninth Circuit holds 16 that Brillhart abstention of the declaratory judgment claim is not appropriate if the declaratory 17 judgment claim co-exists with other independent claims, such as claims for bad faith, breach of 18 fiduciary duty, rescission of the policy, injunctive relief, specific performance, and monetary 19 relief, such as reimbursement of defense costs. Seneca Ins. Co., Inc., 862 F.3d at 841; Vasquez, 20 734 F.3d at 1040; R&D Latex Corp., 242 F.3d at 1114; Dizol, 133 F.3d at 1225 & n.6; Callan 21 Assocs., Inc., 113 F.3d at 163. By contrast, California’s abstention doctrine for declaratory 22 judgment coverage claims, as it is discussed in Montrose I and Haskel, does not include the multi- 23 factor balancing test or the rule that the existence of other independent claims precludes 24 abstention. Thus, California’s abstention doctrine would swallow up the Brillhart abstention 25 doctrine if it were adhered to by the Court in this lawsuit. That would be an encroachment upon 26 the Court’s procedural rules and law. 27 In other words, Valley Garlic’s position contravenes the Erie doctrine, which provides that 28 federal courts sitting in diversity jurisdiction follow state substantive law, but not state procedural 14 1 law. See Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938). This is precisely the reason that 2 Judge Nguyen of the Ninth Circuit stated that she was “doubtful that the California equitable 3 abstention doctrine is a substantive rule that must apply in a federal diversity jurisdiction case.” 4 MacRae by & through Watters v. HCR Manor Care Servs., LLC, 691 F. App’x 476, 479 (9th Cir. 5 2017) (Nguyen, J., concurring). In MacRae, the federal district court sitting in California had 6 diversity jurisdiction over the federal lawsuit. The plaintiff took the position that California’s 7 abstention doctrines could be applied to the federal lawsuit. But in Judge Nguyen’s concurring 8 opinion, Judge Nguyen objected to this position. (Judge Nguyen wrote her concurrence 9 specifically to address the state abstention doctrine issue, an issue that was not addressed in the 10 majority opinion.) Judge Nguyen began by recognizing the limited scope of the federal abstention 11 doctrines, stating that federal abstention “is permissible only in a few carefully defined situations 12 with set requirements.” Id. at 478 (citing United States v. Morros, 268 F.3d 695, 703 (9th Cir. 13 2001)). Judge Nguyen then stated that “I am aware of no appellate authority — and [the plaintiff] 14 has identified none — holding that the California abstention doctrine qualifies as one such 15 carefully defined situation.” Id. Judge Nguyen then explained that the plaintiff’s position — 16 which is akin to Valley Garlic’s position here — runs afoul of the Erie doctrine because “federal 17 courts sitting in diversity jurisdiction follow state substantive law, but not state procedural law,” 18 and California’s abstention doctrine appeared to be procedural. Id. at 478-79. Judge Nguyen 19 concluded by citing the Seventh Circuit, which had reversed a federal district court that had 20 applied a liberal state abstention doctrine instead of the applicable federal abstention doctrine. 21 Stated Judge Nguyen, 22 Where the requirements for federal abstention were not met, the Seventh Circuit has reversed on Erie grounds the dismissal of a claim under a state rule providing for discretionary dismissal. The state rule and the federal abstention doctrine at issue conflicted because they both addressed the problem of parallel litigation in multiple venues, but the state rule applied “liberally,” whereas the federal abstention doctrine was “reserved for exceptional circumstances.” The [Seventh Circuit] held that application of the state rule in federal court would violate Erie 23 24 25 26 /// 27 28 15 because the state rule was akin to other rules involving venue and therefore was procedural rather than substantive. 1 2 (citing AXA Corp. Solutions v. Underwriters Reinsurance Corp., 347 F.3d 272, 277-78 (7th Cir. 3 2003)). 4 Here, in harmony with the reasoning of Judge Nguyen in McRae and the Seventh Circuit 5 in AXA Corp. Solutions, the Court will not apply California’s abstention doctrines to this federal 6 lawsuit. Therefore, the Court will deny Valley Garlic’s motion to stay under California abstention 7 doctrines. 8 4. 9 Landis stay A federal district court has inherent power to stay a lawsuit based on considerations of 10 economy of time and effort for the court, counsel, and litigants. Landis v. N. Am. Co., 299 U.S. 11 248, 254-55 (1936). If there is a pending proceeding that is independent of but related to the 12 federal lawsuit, then in certain circumstances the federal district court may stay the federal lawsuit 13 while the independent proceeding moves forward. Dependable Highway Exp., Inc. v. Navigators 14 Ins. Co., 498 F.3d 1059, 1066 (9th Cir. 2007); Leyva v. Certified Grocers of California, Ltd., 593 15 F.2d 857, 863 (9th Cir. 1979). The independent proceeding need not be controlling of the federal 16 lawsuit to be considered related. Id. at 863-64. Rather, an independent proceeding is related to 17 the federal lawsuit if the proceeding will likely settle and simplify issues in the federal lawsuit. 18 Landis, 299 U.S. at 256. 19 Here, the state lawsuit is related to this federal lawsuit under Landis. This is because the 20 state lawsuit will likely narrow, settle, or simplify some of the issues in this federal lawsuit. For 21 example, the state lawsuit will likely decide questions about whether X-Treme or Valley Garlic 22 was responsible for providing the van transportation as part of its employment operations. The 23 state lawsuit’s treatment of and answer to such questions, even if not controlling on this federal 24 lawsuit, will likely narrow and simplify the parties’ treatment and the Court’s understanding of 25 those questions in this lawsuit — questions that appear to be relevant to Integon’s claims in this 26 federal lawsuit. 27 /// 28 16 1 A. 2 To determine whether to impose a Landis stay, the federal district court should weigh the Weighing competing interests 3 following “competing interests”: (1) whether there is a fair possibility that a stay will cause 4 damage; (2) whether a party may suffer hardship or inequity if a stay is not imposed; and (3) 5 whether a stay will contribute to the orderly course of justice. CMAX, Inc. v. Hall, 300 F.2d 265, 6 268 (9th Cir. 1962). Additionally, a Landis stay (4) cannot be imposed only for judicial economy 7 and (5) cannot be indefinite and result in undue delay. Dependable Highway Exp., Inc., 498 F.3d 8 at 1066-67. 9 i. 10 Whether fair possibility that stay will cause damage If there is even a fair possibility that a stay will work damage to someone other than the 11 movant, then a stay may be inappropriate absent a showing of hardship or inequity to the movant. 12 Landis, 299 U.S. at 255. Here, there is not a fair possibility that Integon6 will be damaged by 13 staying this lawsuit until March 22, 2019, which is approximately 90 days away. Integon argues 14 that it will be damaged because it will continue to provide a defense to Valley Garlic in the state 15 lawsuit during a stay. But this claim is unavailing for two distinct reasons. 16 First, Integon is voluntarily providing a defense to Valley Garlic in the state lawsuit, and 17 Integon has not demonstrated that it could not simply discontinue providing the defense if it 18 wanted to. Integon’s fear of being subject to a bad faith claim is a fear that Integon is responsible 19 for; it is a fear inherent in Integon’s chosen line of work. 20 Second, assuming for the sake of argument that Integon was forced to provide a defense 21 through March 22, 2019, there is still not a fair possibility that Integon will be damaged by the 22 stay. The trial in the state lawsuit is scheduled to begin on January 22, 2019, and the Court 23 assumes — based on its extensive experience with trials and its understanding of the claims in the 24 state lawsuit — that the trial will not last more than 60 days. Sixty days from January 22, 2019, is 25 approximately March 22, 2019. The Court is virtually certain that Integon’s claims in this federal 26 lawsuit will not be decided by March 22, 2019, even if a stay were not imposed. Therefore, even 27 if a stay were not imposed, it is very likely that Integon will not receive a decision from the Court 28 6 Integon is the only party that filed an opposition to Valley Garlic’s motion to stay. 17 1 on its declaratory judgment claims by the close of trial in the state lawsuit. This means that 2 Integon will be providing a defense in the state lawsuit through the completion of the state trial 3 regardless of whether this federal lawsuit is stayed until March 22, 2019. 4 5 6 7 Accordingly, because there is not a fair possibility that Integon will be damaged by staying this lawsuit until March 22, 2019, this competing interest does not weigh against a Landis stay. ii. Whether movant will suffer hardship or inequity if stay is not imposed This competing interest comes into play if there is a fair possibility that a stay will cause 8 damage to a party opposing the stay. Id. The Court already concluded that Integon will not be 9 damaged by staying this federal lawsuit until March 22, 2019, so this factor does not come into 10 play. But for the sake of argument, the Court will address this competing interest anyway. 11 Valley Garlic offers two explanations for how it will suffer hardship or inequity if a stay is 12 not imposed. First, Valley Garlic explains that it will be required to fight a two-front court battle, 13 defending itself in the state lawsuit while also defending itself in this federal lawsuit. This 14 explanation is unavailing because being required to defend oneself in an independent proceeding 15 does not consist of a hardship or inequity under Landis. See Lockyer v. Mirant Corp., 398 F.3d 16 1098, 1112 (9th Cir. 2005). Additionally, some courts posit that an insured does not truly bear the 17 burden of fighting a two-front court battle if its insurer is the one providing the defense in the 18 independent proceeding, see, e.g., Great Am. Assurance Co. v. M.S. Indus. Sheet Metal, Inc., 19 2011 WL 13228037, at *3 (C.D. Cal. Sept. 22, 2011), which is the case here. 20 Second, Valley Garlic explains that Integon and the plaintiffs in the state lawsuit will take 21 information gained in the federal lawsuit and use that information in the state lawsuit to Valley 22 Garlic’s detriment. States Valley Garlic, 23 24 25 [Integon will seek] baseless and inappropriate discovery in this [federal] regarding the alleged operations of Camacho regarding transportation of farm labor contractor employees, its insureds [sic] relationships with the underlying plaintiff, and conduct taken by Camacho, on her own behalf, on behalf of X-Treme and on behalf of Valley Garlic, it could be aiding the underlying plaintiffs. 26 Doc. No. 102-1 at 10. These statements from Valley Garlic, however, are too vague and 27 speculative for the Court to find a clear case of hardship and inequity in them. The Court, 28 therefore, does not find this explanation persuasive. 18 1 In sum, it is not clear that Valley Garlic will suffer hardship and inequity if this federal 2 lawsuit is not stayed. Therefore, if this competing interest were at play (which it is not), then it 3 would not weigh in favor of a Landis stay. 4 iii. Whether imposing a stay will contribute to the orderly course of justice 5 The third competing interest is whether imposing a stay will contribute to the orderly 6 course of justice. CMAX, Inc., 300 F.2d at 268. A stay contributes to the orderly course of justice 7 if it will simplify the issues, evidence, or questions of law before the federal court. Id. This can 8 occur, for example, when the related proceeding will help develop comprehensive evidence that 9 bears on the questions at issue in the federal lawsuit. Id. at 269. This remains true even when the 10 federal court is not bound by the findings and conclusions drawn from the related proceeding, so 11 long as the related proceeding provides valuable assistance to the federal lawsuit. Lockyer, 398 12 F.3d at 1111. 13 Here, as discussed supra, the adjudication of the state lawsuit will likely develop evidence 14 and findings that bear on questions at issue in this federal lawsuit. Therefore, the Court and the 15 parties can be assisted by the state lawsuit’s development of the evidence and findings, regardless 16 of whether this federal Court is bound by such evidence and findings. Accordingly, this 17 competing interest weighs in favor of a Landis stay. 18 iv. Whether the stay is only for judicial economy “[C]ase management standing alone is not necessarily a sufficient ground to stay 19 20 proceedings.” Dependable Highway Exp., Inc., 498 F.3d at 1066. Here, the Court will not impose 21 a Landis stay simply to assist with case management, as is demonstrated by the analysis of the 22 foregoing competing interests. Therefore, this competing interest does not weigh against a Landis 23 stay. 24 25 v. Whether the stay is indefinite or would result in undue delay If a stay under Landis is indefinite or would result in undue delay, then the stay is 26 inappropriate. Id. at 1066-67. The length of a Landis stay should be short or a reasonable amount 27 of time. Id. 28 19 1 Valley Garlic did not request a specific length of time for the requested Landis stay, other 2 than to suggest that that the stay should last until the state lawsuit has concluded. As already 3 stated, the Court assumes that if the state trial begins on January 22, 2019, then the state trial will 4 conclude by March 22, 2019. For this reason, the Court will construe Valley Garlic’s requested 5 stay as lasting from now until March 22, 2019, which is approximately 90 days away. 6 Here, a Landis stay until March 22, 2019, is reasonably short, is not indefinite, and will not 7 cause undue delay. Therefore, this competing interest does not weigh against a 90-day Landis 8 stay. 9 vi. Balancing of competing interests 10 None of the relevant competing interests weigh against a Landis stay of approximately 90 11 days, and the third competing interest weighs in favor of a Landis stay. Therefore, a Landis stay 12 of approximately 90 days is appropriate.7 The Court will grant Valley Garlic’s motion to stay 13 under Landis, and the Court will stay this lawsuit until March 22, 2019. 14 ORDER 15 Accordingly, IT IS HEREBY ORDERED that: 16 1. Valley Garlic’s motion to stay under Landis is GRANTED; 17 2. Valley Garlic’s motion to stay under Brillhart, Colorado River, and California’s abstention 18 doctrines is DENIED; 19 3. This lawsuit is STAYED until March 22, 2019; and 20 4. Valley Garlic and Integon shall FILE a joint status report concerning the status of the state 21 lawsuit by April 1, 2019. 22 23 24 IT IS SO ORDERED. Dated: December 18, 2018 SENIOR DISTRICT JUDGE 25 26 27 28 Even if the second competing interest — whether Valley Garlic will suffer hardship if a stay is not imposed — were at play here, the weight of this competing interest would not change the Court’s conclusion that the totality of the competing interests weighs in favor of a 90-day Landis stay. 7 20

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