The Burlington Insurance Company v. Alan et al

Filing 60

ORDER GRANTING PLAINTIFF'S MOTION FOR LEAVE TO FILE FIRST AMENDED COMPLAINT; VACATING HEARING; RESETTING BRIEFING SCHEDULE AND HEARING ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT; DENYING DEFENDANT'S MOTION TO CONTINUE HEARING 42 45 (Illston, Susan) (Filed on 3/5/2013)

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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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THE BURLINGTON INSURANCE
COMPANY,

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United States District Court
For the Northern District of California

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No. C 12-03372 SI

Plaintiff,
v.
TERRANCE J. ALAN, et al.,
Defendants.

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ORDER GRANTING PLAINTIFF’S
MOTION FOR LEAVE TO FILE FIRST
AMENDED COMPLAINT; VACATING
HEARING; RESETTING BRIEFING
SCHEDULE AND HEARING ON
PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT; DENYING DEFENDANT’S
MOTION TO CONTINUE HEARING

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Now before the Court is plaintiff Burlington Insurance Company’s motion for leave to file a first

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amended complaint. Defendant Terrance J. Alan has filed an opposition, to which plaintiff has replied.

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Pursuant to Civil Local Rule 7-1(b), the Court finds this matter appropriate for resolution without oral

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argument and therefore VACATES the hearing currently scheduled for March 8, 2013. Having

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considered the parties’ arguments, the Court hereby GRANTS plaintiff’s motion for leave, for the

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reasons set forth below.

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BACKGROUND

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This cases arises out of the June 27, 2009, shooting death of Harris Fulbright outside The Pink

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Diamonds, an adult entertainment nightclub in San Francisco, California. Compl. ¶ 13. Fulbright’s

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surviving spouse and three children have filed an action in San Francisco County Superior Court against

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D.H.S. Global Investments, LLC, dba The Pink Diamonds, and Terrance J. Alan, for wrongful death.

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See Compl. Ex. B, Delashon Monique Green, et al. v. D.H.S. Global Investments, LLC, et al., Case No.

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CGC-11-512028 (“Green complaint” or “Green action”). Burlington insured Club Paree, LLC, a

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“Gentlemen’s Club located at 220 Jones Street, San Francisco, California.” See Compl. Ex. A, Certified

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Policy 160B002986 (“Policy”). Club Paree, LLC, shares the same address as The Pink Diamonds adult

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entertainment nightclub implicated in the Green action. See Green Compl. ¶ 5 (listing the address of

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The Pink Diamonds as 220 Jones Street, San Francisco, California).
Burlington agreed to participate in Alan’s legal defense in the Green action subject to a complete

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reservation of its rights, including the right to seek a declaration of no coverage and reimbursement of

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all sums incurred by Burlington in the defense of Alan. Compl. ¶ 15; Morgan Decl., Ex. B. On June

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28, 2012, Burlington filed this action (“coverage action”) against Alan, D.H.S., Club Paree, LLC, and

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the spouse and children of the decedent, Delashon Monique Green, Sariyah Fulbright, Ana’staja

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Fulbright, and Te’janaey Scott – plaintiffs in the Green action. See Compl. (Dkt. 1). The coverage

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action seeks reimbursement from Alan, declaratory relief that Burlington has no duty to defend Alan,

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United States District Court
For the Northern District of California

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D.H.S., and Club Paree in the Green action, and declaratory relief that Burlington has no duty to

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indemnify any of the defendants.

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On February 1, 2013, Burlington filed the instant motion for leave to amend in order to add

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Scottsdale Insurance Company (“Scottsdale”) as a defendant because Scottsdale allegedly insured Club

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Paree and Alan. Alan opposes the motion asserting that Burlington made the motion in bad faith,

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because it should have known about Scottsdale seven months ago.

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DISCUSSION

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Federal Rule of Civil Procedure 15(a) provides that a party may amend after obtaining leave of

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the court, or by consent of the adverse party. Leave to amend is generally within the discretion of the

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district court. In re Daisy Sys. Corp., 97 F.3d 1171, 1175 (9th Cir. 1996). Rule 15 advises the court that

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“leave shall be freely given when justice so requires.” The case law advises that this policy is “to be

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applied with extreme liberality.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir.

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2003) (quoting Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 2001)).

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Despite this liberality, leave to amend should not be granted automatically. Jackson v. Bank of

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Hawaii, 902 F.2d 1385, 1387 (9th Cir. 1990). A trial court should consider four factors when deciding

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whether to give leave to amend: “(1) bad faith on the part of the plaintiffs; (2) undue delay; (3)

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prejudice to the opposing party; and (4) futility of the proposed amendment.” Lockheed Martin Corp.

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v. Network Solutions, Inc., 194 F.3d 980, 986 (9th Cir. 1999). However, the consideration of prejudice

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to the opposing party carries the greatest weight. Eminence Capital, LLC, 316 F.3d at 1052.
In its moving papers, Burlington contends that it learned that Scottsdale insured Alan and Club

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Paree on or around January 25, 2013, and that Scottsdale was not defending Alan in the Green action.

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Witte Decl. ¶¶ 2, 4.1 In its opposition, Alan directly contradicts Burlington’s contentions with the

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declaration of Michele Lonati-Gilbert, a Claims Specialist at Scottsdale, in which she asserts that

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Burlington knew of the Scottsdale policy as early July 2012, when Burlington agreed to a cost-sharing

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agreement with Scottsdale to equally share in Alan’s defense costs in the Green action. Lonat-Gilbert

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United States District Court
For the Northern District of California

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Decl. ¶ 5. Given this evidence, Alan contends that Burlington’s motion for leave is made in bad faith

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and that there was undue delay in bringing it.

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The Court disagrees. In its reply, Burlington submits the declaration of Clinton Thute, Regional

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Claims Manager at Burlington, in which he asserts that Burlington erected an ethical wall to prevent the

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adjustment of a claim from being influenced by an insurance coverage dispute regarding the same claim.

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Thute Decl. ¶ 4. Accordingly, the unit responsible for coverage litigation was not advised that

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Scottsdale had been in contact with Burlington and that Scottsdale had in fact agreed to defend Alan.

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To the extent Burlington asserted erroneous facts in its moving papers, the Court finds that it was not

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done in bad faith. Moreover, there is no evidence of undue delay in discovering the existence of

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Scottsdale as an additional insurer.

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Most significant, however, the Court finds that there has been no showing of undue prejudice.

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No trial date has been set in this action nor has there been even an initial case management conference.

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Alan objects to ¶¶ 2 and 4 of Witte’s Declaration on the grounds that Witte, an attorney, does
not have personal knowledge of when his client “Burlington learned” of the existence of Scottsdale and
of “Burlington’s knowledge” that Scottsdale was not defending Alan in the Green action. However,
Alan undermines his own objection by submitting independent evidence confirming the existence of
Scottsdale and its role in insuring and defending Alan. See Lonati-Gilbert Decl. Accordingly, the Court
need not address this objection because even assuming Witte had no personal knowledge, there has been
no showing of undue prejudice where Alan himself admits the core facts that justify leave to amend –
that another insurer may be responsible for defending Alan.

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Scottsdale and Alan will not be unduly prejudiced because each will have sufficient time to prepare their

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defense. Absent a showing of undue prejudice, the Court concludes that leave to amend is appropriate

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here, where Burlington has potentially meritorious claims against Scottsdale.
If the Court permits Burlington to add Scottsdale as a defendant, Alan urges the Court to dismiss

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Burlington’s reimbursement cause of action against Alan. In Alan’s view, “contribution from a co-

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insurer, not reimbursement from its insured, is the correct vehicle by which Burlington should seek

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recovery of costs incurred in defending Alan.” Opp. at 6. First, this issue is not properly before the

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Court. Alan is free to make that argument once Burlington does in fact file an amended complaint. But

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more important, the Court is skeptical of Alan’s argument, which cites to no legal authority for the

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United States District Court
For the Northern District of California

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proposition that Burlington cannot seek both reimbursement from the insured for costs it has already

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paid and contribution from the insurer. Accordingly, the Court denies Alan’s request to dismiss this

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cause of action.

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Finally, Alan asks that the Court vacate the April 2, 2013, hearing date on Burlington’s pending

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motion for summary judgment and require Burlington to re-file the motion. Burlington opposes on the

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grounds that Scottsdale is in privity with Alan and that Scottsdale has been a shadow defendant all

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along. The Court declines to vacate the hearing date but does agree that a short continuance is

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appropriate to allow sufficient time for defendants to oppose the summary judgment motion.

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CONCLUSION

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For the foregoing reasons the Court hereby GRANTS plaintiff’s motion for leave to file an

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amended complaint. The amended complaint shall be filed with the Court no later than March 13,

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2013. Plaintiff’s may supplement or re-file their motion for summary judgment no later than March

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22, 2013; any additional opposition from any defendant (including, if necessary, any declaration under

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FRCP 56(d)) is due no later than March 29, 2013; and any reply no later than April 5, 2013. The

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Court hereby CONTINUES the hearing on plaintiff’s motion for summary judgment (Docket No. 33)

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to April 15, 2013, at 9 a.m. In addition, the Court DENIES AS MOOT defendant’s motion to continue

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the hearing on plaintiff’s motion for leave. This Order resolves Docket Nos. 42 and 45.

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IT IS SO ORDERED.

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Dated: March 5 , 2013
SUSAN ILLSTON
United States District Judge

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United States District Court
For the Northern District of California

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