Great America Insurance Company et al v. Chang et al
Filing
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Order by Hon. Samuel Conti granting 53 Motion to Dismiss for Lack of Jurisdiction.(sclc1, COURT STAFF) (Filed on 4/16/2013)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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United States District Court
For the Northern District of California
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GREAT AMERICAN INSURANCE
COMPANY, and GREAT AMERICAN
INSURANCE COMPANY OF NEW YORK,
) Case No. 12-00833-SC
)
) ORDER GRANTING THIRD-PARTY
) DEFENDANT'S MOTION TO DISMISS
Plaintiffs,
)
)
v.
)
)
MICHAEL CHANG, d/b/a SUNRISE
)
CLEANERS, INC., and ROXANNE
)
CHANG, d/b/a, SUNRISE CLEANERS, )
INC.,
)
)
Defendants.
)
)
)
MICHAEL CHANG, d/b/a SUNRISE
)
CLEANERS, INC., and ROXANNE
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CHANG, d/b/a, SUNRISE CLEANERS, )
INC.,
)
)
Third-Party
)
Plaintiffs,
)
)
v.
)
)
FIREMAN'S FUND INSURANCE
)
COMPANY,
)
)
Third-Party
)
Defendant.
)
)
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I.
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INTRODUCTION
Now before the Court is Fireman's Fund Insurance Company's
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("FFIC") motion to dismiss and/or strike Michael and Roxanne
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Chang's (collectively, "the Changs") Amended Third-Party Complaint
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pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(6),
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and 41(b).
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Nos. 56 ("Opp'n"), 58 ("Reply"), and appropriate for determination
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without oral argument pursuant to Civil Local Rule 7-1(b).
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reasons set forth below, the Motion is GRANTED.
ECF No. 53 ("Mot.").
The Motion is fully briefed, ECF
For the
United States District Court
For the Northern District of California
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II.
BACKGROUND
This case involves an insurance coverage dispute arising from
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an underlying lawsuit filed against the Changs, Bilal Kartal v.
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Michael Chang, et al., Case No. CIV 458146, San Mateo Superior
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Court (hereinafter, the "Kartal Action").
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The Kartal action concerns the alleged contamination of a property
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owned by Michael Chang that is located on Baldwin Avenue in San
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Mateo, California.
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a related insurance dispute arising from claims that Michael Chang
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asserted in a different litigation in which he sought to recover
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pollution and investigation costs from the California Underground
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Storage Tank Fund (the "Storage Tank Fund Action").
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Id. ¶¶ 4, 6.
ECF No. 16 ("FAC") ¶ 11.
The instant action also involves
Id. ¶ 11.
The Changs tendered the underlying actions to Great American
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Insurance Company and Great American Insurance Company of New York
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(collectively, "Great American") for insurance benefits under two
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policies issued by Great American between 1977 and 1983.
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They also tendered insurance claims to FFIC pursuant to policies
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FFIC issued to the Changs' tenant, Christopher Chang, between 1984
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Id. ¶ 20.
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and 1987.
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12.
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under a reservation of rights and has advanced other claimed
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amounts, also under a reservation of rights.
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American alleges that it has no duty to defend or indemnify the
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Changs because, among other things, the Changs breached their duty
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to cooperate under the policies by attempting to manufacture a
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claim for insurance benefits.
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ECF No. 50 (Amended Third-Party Complaint ("Am. TPC")) ¶
Great American is defending the Changs in the Kartal action
FAC ¶¶ 12-19.
Great
Id. at 18.
Specifically, Great American points to a 2008 email from the
United States District Court
For the Northern District of California
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Changs' environmental consultant to the Changs' attorneys,
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suggesting that the Kartal action did not trigger Great American's
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duty to defend, but that Great American's duty might be triggered
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through a cross-complaint filed by third parties.
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The Changs subsequently filed a cross-complaint in the Kartal
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action against Christopher Chang and Grace and Kuneo Yamuguchi
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(collectively, the "Yamaguchis"), whose family had allegedly owned
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or operated a dry cleaning business at the Baldwin Avenue property
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since the 1930s.
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then encouraged Christopher Chang and the Yamuguchis to file cross-
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complaints against Michael Chang.
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cited in the FAC indicate that the Changs' attorneys and
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environmental consultant believed that these cross-complaints would
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trigger coverage by Great American and FFIC.
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Id. ¶ 57.
Id. at 53-54.
Great American alleges that the Changs
Id. ¶¶ 59-70.
Other emails
See id.
Great American filed this action (the "Great American Action")
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against the Changs in February 2012.
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seeks a declaration that it has no duty to defend or indemnify the
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Changs with respect to the Kartal Action or other pollution claims
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involving the Baldwin Avenue property.
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ECF No. 1.
Great American
FAC at 43-44 ("Prayer for
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Relief").
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in connection with the Changs' insurance claims.
Great American also seeks reimbursement of amounts paid
Id.
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In connection with the Great American Action, the Changs have
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filed a third-party complaint against FFIC for breach of contract,
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breach of the covenant of good faith and fair dealing, and
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declaratory relief.
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insurance agreements in bad faith by refusing to fulfill its duties
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to defend and investigate contamination at the Baldwin Avenue
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properties.
The Changs allege that FFIC breached its
See, e.g., Am. TPC ¶¶ 21-25.
The Changs also allege
United States District Court
For the Northern District of California
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that FFIC colluded with Great American to suppress the filing of
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cross-complaints against the Changs that would have triggered
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coverage under the relevant policies.
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things, the Changs seek damages resulting from FFIC's refusal to
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pay their claims and defend the Kartal Action and the Storage Tank
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Fund Action, as well as a judicial determination that FFIC has a
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duty to defend and indemnify the Changs in those actions.
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See id. ¶ 15.
Among other
FFIC moved to dismiss the Changs' original third-party
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complaint on the grounds that (1) the third-party complaint was not
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a proper impleader, (2) the court lacked subject matter
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jurisdiction, and (3) the Changs failed to meet Rule 8's pleading
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requirements.
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FFIC's motion to dismiss.
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Court rejected FFIC's impleader arguments but found that subject
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matter jurisdiction was lacking because the third-party complaint
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did not raise a federal question and diversity was lacking.
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4-6.
ECF No. 45.
On January 17, 2013, the Court granted
ECF No. 49 ("Jan. 17 Order").1
The
Id. at
The Court found that the Changs' assertion of supplemental
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Great Am. Ins. Co. v. Chang, 2013 WL 183976, 2013 U.S. Dist.
LEXIS 7435 (N.D. Cal. Jan. 17, 2013).
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jurisdiction presented a closer question due to the allegations
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concerning collusion between Great American and FFIC, and granted
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the Changs leave to amend so that they could assert proper grounds
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for supplemental jurisdiction.
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reach FFIC's Rule 8 arguments but noted concerns about the clarity
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and organization of the third-party complaint.
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Id. at 6-9.
The Court declined to
Id. at 10.
On February 15, 2013, the Changs filed their Amended Third-
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Party Complaint against FFIC.
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for lack of subject matter jurisdiction and failure to state a
FFIC subsequently moved to dismiss
United States District Court
For the Northern District of California
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claim.
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from the pleading, as well as thirty-nine exhibits attached
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thereto.
Alternatively, FFIC moves to strike dozens of paragraphs
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III. DISCUSSION
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As third-party plaintiffs, the Changs bear the burden of
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establishing the propriety of the Court's exercise of jurisdiction.
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See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377
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(1994).
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may properly exercise federal question or diversity jurisdiction.
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See Am. TPC ¶ 1.
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Third-Party Complaint, like their original third-party complaint,
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presents only questions of state law, and all parties to the third-
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party complaint appear to be California residents.
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for jurisdiction alleged in the Amended Third-Party Complaint is
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supplemental jurisdiction.
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The Changs have abandoned their contention that the Court
The reason for this is clear: The Changs' Amended
The only basis
See id.
Under 28 U.S.C. § 1367(a), "in any civil action of which the
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district courts have original jurisdiction, the district courts
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shall have supplemental jurisdiction over all other claims that are
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so related to claims in the action within such original
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jurisdiction that they form part of the same case or controversy .
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. . ."
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enable state and federal suits to be consolidated in federal court
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whenever ordinary notions of judicial economy would make that a
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desirable result, but instead should be reserved for cases where
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failure to exercise federal jurisdiction would prevent a party from
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obtaining justice."
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F.2d 377, 381-82 (7th Cir. 1988).
Supplemental jurisdiction should not be invoked "merely to
Hartford Acc. & Indem. Co. v. Sullivan, 846
Thus, a district court may only
United States District Court
For the Northern District of California
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assert supplemental jurisdiction over claims between non-diverse
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parties when those claims arise out of the "same transaction or
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occurrence" as the claim over which the court has unquestioned
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federal jurisdiction.
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Id. at 382.
In its January 17 Order, the Court noted that there was some
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factual overlap between the Great American Action and the claims
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asserted in the Changs' initial third-party complaint, since both
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actions arise out of the alleged contamination at the Baldwin
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Avenue property.
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that this factual overlap was insufficient to support the exercise
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of supplemental jurisdiction, since the Changs' third-party
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complaint and the Great American Action concerned different
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insurance policies and thus distinct transactions.
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suggested that the Changs' allegations that Great American and FFIC
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colluded by refusing to file cross-complaints against one another
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on behalf of their insureds could potentially support the exercise
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of supplemental jurisdiction.
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original third-party complaint, these allegations were "conclusory
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and otherwise incoherent."
Jan. 17 Order at 8.
Id.
Id.
However, the Court found
Id.
The Court
However, as pled in the Chang's
The Court also noted that it was
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entirely unclear why Great American and FFIC were obligated to file
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cross-complaints against each other.
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Id.
The Changs have amended their third-party complaint to add
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more factual allegations concerning FFIC and Great American's
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handling of the underlying actions.
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explaining how Great American and FFIC allegedly colluded in
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suppressing the filing of cross-complaints that would have
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triggered coverage under the relevant policies.
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duty to file cross-complaints, the Changs' allegations concerning
They have also added facts
Absent a legal
United States District Court
For the Northern District of California
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collusion between Great American and FFIC are irrelevant to the
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Changs' claims for bad faith and breach of insurance contract.
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However, it remains unclear why FFIC and Great American had a duty
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to file cross-complaints.
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control the defense of its insured.
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Ins. Exch., 91 Cal. App. 4th 1093, 1105-06 (Cal. Ct. App. 2001).
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Accordingly, an insurer does not have a duty to prosecute a
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counterclaim or a cross-complaint on behalf of the insured absent
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some contractual provision requiring such action.
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06.
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An insurer generally has a right to
See James 3 Corp. v. Truck
See id. at 1104-
The Changs have not pointed to provisions in any of the
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relevant policies that would have required either FFIC or Great
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American to file cross-complaints in the underlying actions.
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have they pointed to any authority that would give rise to an
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independent duty to take such actions.
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concerning FFIC's purported duty to file cross-complaints is
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circular: the cross-complaints were "standard and expected" and
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Nor
The Changs' only argument
See Opp'n at 9.2
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necessary to trigger coverage under the policies.
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But the Changs have cited no authority suggesting that FFIC was
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required to file cross-complaints merely because the cross-
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complaints may have triggered coverage under the Changs' policies.
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Thus, the Court finds that the Changs have failed to meet
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their burden of establishing grounds for the exercise of
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supplemental jurisdiction over the Amended Third-Party Complaint.
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Since the Court has already granted the Changs leave to amend on
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this very same issue once before, it declines to grant leave to
United States District Court
For the Northern District of California
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amend again.
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dismiss for failure to state a claim or its motion to strike.
The Court also declines to address FFIC's motion to
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IV.
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CONCLUSION
For the foregoing reasons, the Court GRANTS Fireman's Fund
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Insurance Company's motion to dismiss for lack of subject matter
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jurisdiction.
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Chang's third-party complaint against FFIC without prejudice to the
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Changs' right to bring this complaint in state court.
The Court DISMISSES the Michael Chang and Roxanne
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IT IS SO ORDERED.
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Dated:
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April 15, 2013
UNITED STATES DISTRICT JUDGE
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The Changs also argue that the Court should exercise supplemental
jurisdiction because it previously found that the original third
party complaint was a proper impleader. Id. at 10-11. However, as
the Court stated in its January 17 Order, "when assessing
supplemental jurisdiction, the issue of whether a party has been
properly impleaded . . . is not dispositive." Jan. 17 Order at 7
(citing Galt G/S V. Hapag Lloyd A.G., 60 F.3d 1370, 1374 (9th Cir.
1995)).
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