Axis Reinsurance Company v. Telekenex, Inc. et al

Filing 101

Order by Hon. Samuel Conti granting in part and denying in part 85 Motion for Leave to File.(sclc1, COURT STAFF) (Filed on 4/10/2013)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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For the Northern District of California

United States District Court

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AXIS REINSURANCE COMPANY,
Plaintiff,

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v.
TELEKENEX, INC.; ANTHONY ZABIT;
KAREN SALAZAR; BRANDON CHANEY;
DEANNA CHANEY; MARK PRUDELL; JOY
PRUDELL; MARK RADFORD; NIKKI
RADFORD; JOSHUA SUMMERS; JULIA
SUMMERS; IXC HOLDINGS, INC.;
STRAITSHOT COMMUNICATIONS, INC.;
and STRAITSHOT RC, LLC,

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Defendants.
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Case No. 12-2979 SC
ORDER GRANTING IN PART AND
DENYING IN PART MOTION FOR
LEAVE TO FILE SECOND
AMENDED COUNTERCLAIM

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Axis Reinsurance Company ("Axis") brings this action against

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the above-captioned Defendants to obtain a judicial declaration

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that the insurance policy it issued to Telekenex, Inc. does not

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cover any amounts awarded in an underlying action captioned

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Straitshot Communications, Inc. v. Telekenex, Inc., et al., No.

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C10-268 TSZ (W.D. Wash).

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Inc., Anthony Zabit, Karen Salazar, Brandon Chaney, and Deanna

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Chaney (the "Telekenex Defendants") now move for leave to file a

Defendants Telekenex, Inc., IXC Holdings,

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second amended counterclaim.

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pleading would add one new fact paragraph and a sixth entitlement

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to relief under Washington's Insurance Fair Conduct Act, Wash Rev.

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Code § 48.30.

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the motion on the ground that the amended pleading would be futile,

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ECF No. 90 ("Opp'n), and the Telekenex Defendants have filed a

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reply in support of the motion, ECF No. 92 ("Reply").

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finds this matter appropriate for determination without oral

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argument.

United States District Court

For the Northern District of California

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ECF No. 85 ("Mot.").

The amended

Plaintiff Axis Reinsurance Company ("Axis") opposes

Civ. L.R. 7-1(b).

The Court

For the reasons set forth below, the

motion is GRANTED in part and DENIED in part.
Under Federal Rule of Civil Procedure 15(a)(1), a party may

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amend its pleading as a matter of course within twenty-one days

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after serving it or twenty-one days after the filing of a

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responsive pleading or a Rule 12(b), (e), or (f) motion.

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Thereafter, "a party may amend its pleading only with the opposing

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party's written consent or the court's leave."

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15(a)(2).

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leave [to amend] when justice so requires," and the Ninth Circuit

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has stressed Rule 15's policy of favoring amendments.

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Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989).

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However, leave need not be granted "where the amendment of the

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complaint would cause the opposing party undue prejudice, is sought

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in bad faith, constitutes an exercise in futility, or creates undue

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delay."

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Fed. R. Civ. P.

Rule 15(a)(2) provides that courts should "freely give

Ascon

Id.

The Court finds that the Telekenex Defendants' proposed new

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cause of action would be futile in light of the Court's prior

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ruling.

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Washington's Insurance Fair Conduct Act.

Telekenex seeks to add a new counterclaim under

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However, in ruling on

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Axis's prior motion for partial summary judgment, the Court already

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found that California's insurance statute, rather than Washington

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law, governed the Telekenex Defendants' insurance claims.

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68 ("Dec. 19 Order") at 18-21.1

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"a separate conflict of laws inquiry must be made with respect to

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each issue in the case."

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Cal. 4th 906, 920 (Cal. 2001).

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fail to enunciate why the choice-of-law issues presented here

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differ from those at issue in the Court's prior ruling.

ECF No.

As the Telekenex Defendants argue,

Wash. Mut. Bank, FA v. Super. Ct., 24
However, the Telekenex Defendants

In that

United States District Court

For the Northern District of California

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ruling, the Court used the governmental-interest analysis to

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determine that California Insurance Code section 533 applied to

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this case.

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of-law analysis is practically identical to the analysis for

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determining the applicability of the Washington Insurance Fair

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Conduct Act.2

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case, and the Court declines to depart from it.

Dec. 19 Order at 18-21.

Unsurprisingly, that choice-

The Court's prior analysis is now the law of the

The only other amendment proposed by the Telekenex Defendants

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is the addition of a single fact paragraph. See ECF No. 86-1

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("Proposed Second Amended Counterclaim") ¶ 64 ("Axis has breached

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its duties, resulting in actual harm and consequential damages to

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Axis Reinsurance Co. v. Telekenex, Inc., -- F. Supp. 2d. --, 2012
WL 6632180, 2012 U.S. Dist. LEXIS 179647 (N.D. Cal. 2012).

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Under the governmental-interest analysis, the Court must first
determine whether the applicable law of California and Washington
materially differ. Frontier Oil Corp. v. RLI Ins. Co., 153 Cal.
App. 4th 1436, 1442-43 (2007). There does not appear to be any
dispute that they do. Under the second and third steps the Court
needs to determine whether both California and Washington have an
interest in applying their own law and, if they do, which state's
interest would be more impaired if its law were not applied. Id.
at 1454-55. The Court already addressed these issues at length in
its prior order, See Dec. 19 Order at 19-21, and does not revisit
them here.

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the Telekenex Defendants in an amount to be proven at trial.").

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Axis does not oppose this amendment and there is no indication that

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it is contrary to the Court's prior ruling.

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GRANTS the Telekenex Defendants leave to add this paragraph.

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According, the Court

Axis also objects to the Telekenex Defendants' proposed

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second amended counterclaim on the ground that a number of its

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other paragraphs are contrary to the Court's December 19 Order.

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Opp'n at 9-11.

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the Telekenex Defendants' original pleading and, thus, do not

That may be so, but these paragraphs appeared in

United States District Court

For the Northern District of California

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constitute amendments.

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Proposed Second Amended Counterclaim.

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declines to strike them now.

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Compare ECF No. 65 ("Counterclaim") with
Accordingly, the Court

For the foregoing reasons, the Telekenex Defendants' motion

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for leave to amend is GRANTED in part and DENIED in part.

The

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Telekenex Defendants may amend their counterclaim to add the

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proposed paragraph 64.

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cause of action under the Washington Insurance Fair Conduct Act.

However, they may not amend to plead a new

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IT IS SO ORDERED.

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Dated: April 10, 2013
UNITED STATES DISTRICT JUDGE

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