Peerless Insurance Company et al v. Intex Forms, Inc. et al

Filing 31

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS. Granting 4 Motion to Dismiss. Signed by Judge Maxine M. Chesney. (mmclc2, COURT STAFF) (Filed on 3/29/2011)

Peerless Insurance Company et al v. Intex Forms, Inc. et al

Doc. 31

1 2 3 4 5 6 7 8 9 10 For the Northern District of California 11 12 Plaintiffs, 13 v. 14 INTEX FORMS, INC., et al., 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The remaining defendant in the instant action, Intex Forms, Inc., has neither joined SCP's motion, nor responded to Peerless's complaint.
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IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

United States District Court

PEERLESS INSURANCE COMPANY; GOLDEN EAGLE INSURANCE COMPANY,

No. C-10-5339 MMC ORDER GRANTING DEFENDANTS' MOTION TO DISMISS

Defendants.

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Before the Court is defendants Granite Silver Development Partners, LP, FC-Silver Canyon, Inc, American Nevada Seven Hills Limited Partnership, SS Seven Hills, Inc., and Silver Canyon Partnership's (collectively, "SCP") motion, filed December 28, 2010, to dismiss plaintiffs' Complaint for Declaratory Relief. Plaintiffs Peerless Insurance Company and Golden Eagle Insurance Company (collectively, "Peerless") have filed opposition, to which SCP has replied.1 The matter came on regularly for hearing on March 18, 2011. Nicholas Salerno of Lincoln, Gustafson & Cercos appeared on behalf of SCP; Jay Framson of Lewis Brisbois Bisgaard & Smith LLP appeared on behalf of Peerless. Having read and considered the papers filed in support of and in opposition to the motion, and having considered the arguments of counsel, the Court rules as follows.

Dockets.Justia.com

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BACKGROUND According to the Complaint, Peerless issued insurance policies to Intex Forms, Inc. ("Intex") between 1997 and 2002, which policies required Peerless to defend and indemnify Intex in certain circumstances. (See Compl. ¶¶ 13, 14, 15.) Peerless seeks a declaration that it has no duty to defend or indemnify Intex in a pending Nevada state court action arising from allegedly defective work performed by Intex and SCP in construction of the Seven Hills Development, and in which action SCP filed third-party claims against Intex ("the Seven Hills Litigation"). (See Compl. ¶¶ 16-18; see also Framson Aff. Ex. 1 (SCP Third-Party Complaint).) Prior to the Seven Hills Litigation, Intex filed for Chapter 11 bankruptcy in the Northern District of California. See generally In re Intex Forms Inc., No. 4-33095 (Bankr. N.D. Cal. 2004). In September 2009, SCP sought relief from the automatic stay of litigation against Intex, stating SCP sought such relief "solely to establish liability against Intex'[s] liability carriers that have declined their obligation to defend and indemnify Intex." (See Compl. ¶¶ 20, 21; see also Framson Aff. Ex. 2 at 2:5-8.) On July 13, 2010, the bankruptcy court terminated the automatic stay against Intex (1) to permit the Seven Hills Litigation "to proceed to final decision against [Intex] for all purposes . . . , except that any money judgment may be enforced against [Intex] only via insurance proceeds; and (2) to allow any insurer to take any action necessary to contest its obligation to pay or to defend [Intex]." (See Compl. Ex. 8.) LEGAL STANDARD The Declaratory Judgment Act ("DJA") provides: "In a case of actual controversy within its jurisdiction, . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201(a). "Jurisdiction to award declaratory relief exists only in a case of actual controversy." Am. States Ins. Co. v. Kearns, 15 F.3d 142, 143 (9th Cir. 1994). The "actual controversy"

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requirement "is identical to Article III's constitutional case or controversy requirement." Id. 2 The requirement obligates a district court to determine "whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 126 (2007). "[A] party seeking a declaratory judgment has the burden of establishing the existence of an actual case or controversy." Id. at 140. "If there is a case or controversy within its jurisdiction, the court must decide whether to exercise that jurisdiction" as "[t]he statute gives discretion to courts in deciding whether to entertain declaratory judgments." Kearns, 15 F.3d at 143-44. "Essentially, the district court must balance concerns of judicial administration, comity, and fairness to the litigants." Id. at 144 (internal quotation and citation omitted) (noting "Supreme Court has provided guidance for the exercise of the district court's discretion"; citing Billhart v. Excess Ins. Co., 316 U.S. 491 (1942)). DISCUSSION Peerless contends an actual controversy exists between Peerless, on the one hand, and Intex and SCP, on the other, as to whether Peerless has a duty to defend Intex in the Seven Hills Litigation, and to indemnify Intex for any judgment obtained against it by SCP in said litigation. I. Case or Controversy: Intex In the typical action brought by an insurance company for relief under the DJA with respect to its duty to defend and indemnify an insured, the insured has tendered its defense and/or claim for indemnity to the insurer. See, e.g., Aetna Cas. and Sur. Co. Co. v. Merritt, 974 F.2d 1196, 1198 (9th Cir. 1992) (noting insured "tendered the defense of [state action] to Aetna"). In such cases, an actual controversy exists between the insured and insurer. See id. at 1199 (finding district court properly exercised jurisdiction over The action "must also fall under one of the foundations of federal jurisdiction." Kearns, 15 F.3d at 143. Here, jurisdiction is predicated on diversity of citizenship. 3
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insurer's declaratory relief action). Here, Peerless alleges that it "wrote to Intex denying defense or indemnity" under the relevant policies "for the claims asserted in the Seven Hills Litigation." (See Compl. ¶ 19 (italics omitted).) Peerless neither alleges nor presents any evidence, however, that Intex requested Peerless either defend or indemnify Intex, or that Intex objected to Peerless's refusal to do so. See Nat'l Union Fire Ins. Co. of Pittsburg v. ESI Ergonomic Solutions, 342 F. Supp. 2d 853, 862 (D. Ariz. 2004) (finding no actual controversy between insured and insurer where insurer "d[id] not allege that [insured] disputes [insurer's] denial of coverage"). Indeed, Intex has not appeared in this action to assert any rights it may possess under the policies. Rather, the letters Peerless alleges it "wrote to Intex" were in fact written to counsel for Granite Silver Development Partners, LP and American Nevada Company, LLC (collectively "ANC") and refer to a request by ANC, not Intex. (See Compl. Exs. 6, 7 (referring to "tender of defense you forwarded to us on behalf of . . . ANC"; concluding Peerless "will not provide [Intex] and ANC with a defense or indemnification").) Even assuming ANC requested Peerless defend Intex,3 Peerless provides no authority by which ANC's request would establish a justiciable controversy as to Intex. Cf. Gov't Emp. Ins. Co. v. Dizol 133 F.3d 1220, 1222 n.2 (9th Cir. 1998) (noting Ninth Circuit has "consistently held that a dispute between an insurer and its insureds over the duties imposed by an insurance contract satisfies Article III's case and controversy requirement" (emphasis added)). II. Case or Controversy: SCP Peerless alleges SCP has sufficiently threatened litigation to enforce against Peerless any judgement SCP obtains against Intex in the Seven Hills Litigation. (See Compl. ¶ 22.) In support thereof, Peerless submits the motion SCP filed in Intex's bankruptcy action, in which motion SCP stated it was seeking relief from the abovereferenced stay "solely to establish liability against Intex'[s] liability carriers that have

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Peerless did not submit the letter(s) sent by ANC to Peerless. 4

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declined their obligation to defend and indemnify Intex." (See Framson Aff. Ex. 2 at 2:5-8.) "If the defendant's actions cause the plaintiff to have a real and reasonable apprehension that he will be subject to liability, the plaintiff has presented a justiciable case or controversy." Spokane Indian Tribe v. U.S., 972 F.2d 1090, 1092 (9th Cir. 1992). Here, although SCP, in its motion before the bankruptcy court, arguably stated an intent to enforce against Intex's "liability carriers" any judgment obtained against Intex (see Framson Aff. Ex. 2 at 2:7), the motion is directed at Gemini Insurance Company, the one Intex insurer identified therein as having defended Intex in the Seven Hills Litigation, but then, according to SCP, "suddenly withdrew their defense" in what was a collaborative effort with Intex to defeat SCP's rights under a stipulation entered between Intex and SCP in the bankruptcy court (see id. Ex. 2 at 5:9-13, 7:8-16, 9:22-10:2). By its motion, SCP sought to "modify" such stipulation (see id. Ex. 2 at 1), explaining that "the judgment [against Intex] will be enforced only against [Intex's] carriers who have had more than a year to investigate, defend, and potentially resolve this claim, but have now chosen to withdraw their defense" (see id. at 11:9-13). Under such circumstances, and when read in context, SCP's use of the plural "carriers" cannot reasonably be understood as a threat against Peerless. Nor has Peerless submitted any evidence to show that, in the year and a half since SCP's filing of the above-discussed motion, SCP has otherwise made such a threat. In sum, Peerless has failed to demonstrate a "substantial controversy . . . of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." See MedImmune, 549 U.S. at 126. Accordingly, SCP's motion to dismiss is hereby GRANTED, and the above-titled action is hereby DISMISSED in its entirety. IT IS SO ORDERED.

Dated: March 29, 2011 MAXINE M. CHESNEY United States District Judge

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