Prometheus Real Estate Group, Inc. v. Terminix International, Inc., et al

Filing 41

ORDER by Judge Haywood S. Gilliam, Jr. DENYING DEFENDANTS 28 MOTION TO STAY; SETTING CASE MANAGEMENT CONFERENCE. (ndrS, COURT STAFF) (Filed on 4/15/2016)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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PROMETHEUS REAL ESTATE GROUP,
INC.,

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Plaintiff,

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United States District Court
Northern District of California

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v.
TERMINIX INTERNATIONAL
COMPANY LIMITED PARTNERSHIP, et
al.,

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Case No. 15-cv-02234-HSG
ORDER DENYING DEFENDANTS’
MOTION TO STAY; SETTING CASE
MANAGEMENT CONFERENCE
Re: Dkt. No. 28

Defendants.

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Before the Court is the motion to stay the case filed by Defendants Terminix International,

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Inc. and The Terminix International Company LP (together, “Defendants”). Dkt. No. 28 (“Mot.”).

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Plaintiff Prometheus Real Estate Group, Inc. (“Plaintiff”) is seeking indemnification and damages

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from Defendants as well as declaratory relief regarding a state court judgment. Defendants argue

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that a stay of this case is warranted pending Plaintiff’s appeal of that judgment. Plaintiff has filed

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an opposition, Dkt. No. 33 (“Opp.”), and Defendants have filed a reply, Dkt. No. 34 (“Reply”).
For the reasons set forth below, the Court DENIES Defendant’s motion to stay and SETS

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a case management conference for April 19, 2016, at 2:00pm, to discuss scheduling.

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I.

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BACKGROUND
This case arises from a state court action filed against Plaintiff, a property lessor, by two of

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its tenants regarding allegedly defective insect spraying that Plaintiff hired Defendants to perform

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in its building. Dkt. No. 1-2 (“Compl.”) ¶¶ 10-11, 14-18. Following a jury trial, the state court

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entered a monetary judgment against Plaintiff, including damages and attorneys’ fees. Id. ¶ 20.

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Plaintiff’s contract with Defendants governing the services at issue had an indemnification

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and guaranty provision that allegedly insulates Plaintiff from the state court judgment against it, as

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well as from the costs of defense incurred defending that action. Id. ¶¶ 10-13, 24. Accordingly,

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Plaintiff sued Defendants in state court, seeking indemnification and declaratory relief. Id. ¶¶ 21-

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48. Plaintiff also alleges that Defendants were negligent in failing to maintain certain documents

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that it needed to adequately defend itself at trial and seeks damages on that basis. Id. ¶ 49-55.

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Defendants removed the case to this Court on diversity grounds, Dkt. No. 1 ¶¶ 6-11, and move to

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stay the case pending the resolution of Plaintiff’s appeal of the underlying state court judgment.

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II.

REQUEST FOR JUDICIAL NOTICE
Defendant requests judicial notice of Plaintiff’s appeal of the state court judgment. Dkt.

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No. 30 (“RJN”) at 1 & Ex. 1. The Court may take judicial notice of documents “not subject to

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reasonable dispute.” Fed. R. Evid. 201(b). Proceedings, including orders and filings, in other

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United States District Court
Northern District of California

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courts, including state courts, are also the proper subject of judicial notice when directly related to

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the case. Tigueros v. Adams, 658 F.3d 983, 987 (9th Cir. 2011) (internal citations omitted).
To the extent that Plaintiff’s opening appellate brief contains allegations or factual findings

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by the state court, the Court declines to take notice of them for the truth of the matters they assert.

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See Lasar v. Ford Motor Co., 399 F.3d 1101, 1117, n.14 (9th Cir. 2005) (declining to take judicial

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notice of findings made in a state court proceeding “because [the requesters were] offering the

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factual findings contained in the order for the purpose of proving the truth of the factual findings

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contained therein”). But to the extent that the brief explains the procedural posture of this case,

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including the existence of filings made by a party to this action, the Court takes judicial notice.

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See Tigueros, 658 F.3d at 987 (taking judicial notice of “directly related” state court documents).
Because it is directly relevant to this motion, the Court also sua sponte takes judicial notice

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of the fact that briefing is complete in the state court appeal and is pending scheduling of oral

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argument. Docket (Register of Actions), Hjelm v. Prometheus Real Estate Group, Inc., Case No.

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A142723, http://appellatecases.courtinfo.ca.gov/, last accessed April 15, 2016; see also Haskins v.

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Fuller-O’Brien, Inc., No. 11-cv-05142, 2013 WL 1789672, at *1 n.2 (N.D. Cal. Apr. 26, 2013).

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III.

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LEGAL STANDARD
A district court’s “power to stay proceedings is incidental to the power inherent in every

court to control the disposition of the causes on its docket with economy of time and effort for
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itself, for counsel, and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). Using this

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power, one case may be stayed in favor of another. Leyva v. Certified Grocers of Cal., Ltd., 593

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F.2d 857, 863-64 (9th Cir. 1997) (“A trial court may, with propriety, find it is efficient for its own

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docket and the fairest course for the parties to enter a stay of an action before it, pending

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resolution of independent proceedings which bear upon the case. This rule applies whether the

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separate proceedings are judicial, administrative, or arbitral in character, and does not require that

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the issues in such proceedings are necessarily controlling of the action before the court.”).

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“In the typical Landis stay case, a federal court postpones resolution of the case pending

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some related proceeding [that] typically serves only to narrow the factual or legal issues for the
federal court.” Stoltz v. Fry Foods, Inc., 60 F. Supp. 3d 1132, 1136 (D. Idaho 2014); see also

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United States District Court
Northern District of California

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Landis, 299 U.S. at 250-51 (recognizing that the related case “may not settle every question of fact

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and law” in the stayed federal action); CMAX, Inc. v. Hall, 300 F.2d 265, 269 (9th Cir. 1962)

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(affirming Landis stay pending related agency proceeding because the agency action “provide[d] a

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means of developing comprehensive evidence bearing upon the highly technical tariff questions

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which [were] like to arise in the district court case.”). “Furthermore, a Landis stay is generally of

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a limited duration.” Stoltz, 60 F. Supp. 3d at 1136-37; see also Landis, 299 U.S. at 256 (stating

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that a district court abuses its discretion by entering a “stay of indefinite duration in the absence of

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a pressing need”); Dependable Highway Exp., Inc. v. Navigators Ins. Co., 498 F.3d 1059, 1066-67

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(9th Cir. 2007) (reversing district court for imposing Landis stay of indefinite nature). In these

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ways, a stay under Landis is not an abstention of jurisdiction, but only an administrative device.

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In order to determine whether a Landis stay should be implemented, courts consider: (1)

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“the possible damage which may result from the granting of a stay,” (2) “the hardship or inequity

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which a party may suffer in being required to go forward,” and (3) “the orderly course of justice

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measured in terms of the simplifying or complicating of issues, proof, and questions of law which

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could be expected to result from a stay.” CMAX, 300 F.2d at 268 (citing Landis, 299 U.S. at 254-

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55). Whether to grant a stay request is a matter entrusted to the discretion of the district court. See

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Landis, 299 U.S. at 254 (“How this can best be done calls for the exercise of judgment, which

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must weigh competing interests and maintain an even balance.”).
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When weighing the relevant interests, courts must be mindful that “if there is even a fair

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possibility that the stay for which he prays will work damage to some one else,” the moving party

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“must make out a clear case of hardship or inequity in being required to go forward.” Id. at 255.

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And that hardship must be something more than the inherent inconvenience that arises from being

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involved in litigation. Lockyer v. Mirant Corp., 398 F.3d 1098, 1112 (9th Cir. 2005).

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IV.

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DISCUSSION
Defendants contend that a Landis stay is warranted in this case because “there is a very real

possibility that this matter will be rendered moot” by Plaintiff’s state court appeal. Mot. at 3.

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Plaintiff has appealed not only the amount of the judgment against it, but also the validity of the

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verdict. RJN, Ex. 1 at 51-62. If Plaintiff were to succeed in reversing the judgment, Defendants

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United States District Court
Northern District of California

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contend that it would be a waste of judicial and party resources to determine whether they have

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any duty to indemnify Plaintiff. In addition, Defendants assert that they will suffer substantial

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harm if a stay is not granted because they needlessly will be required to litigate in this Court. Id.

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at 4. Finally, Defendants argue that Plaintiff would not be injured by the stay. Id.

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Applying the Landis factors, the Court finds that a stay pending resolution of Plaintiff’s

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state court appeal is not warranted. First, Plaintiff persuasively argues that it would be injured by

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delaying adjudication of its indemnification claims against Defendants because, in the event that

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its appeal is unsuccessful, the verdict would become immediately due and payable. If it has a

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declaratory judgment against Defendants before that time, then it would be able to avoid any

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claimed obligation to make immediate payment to the state court plaintiffs. The Ninth Circuit has

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consistently noted that where there is a risk of prospective injury to the party opposing the stay

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that could be cured by declaratory or injunctive relief, there is a “fair possibility” that the stay will

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“work damage,” weighing in favor of denial. See Lockyer, 398 F.3d at 1112 (explaining that the

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Ninth Circuit affirmed a Landis stay in CMAX, 398 F.3d at 268-69, because the plaintiff’s suit

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“alleged no continuing harm and sought no injunctive or declaratory relief[, meaning that] [d]elay

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of [the plaintiff’s] suit would result, at worst, in a delay in its monetary recovery”). Accordingly,

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this factor weighs heavily against the stay.

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Second, in light of that finding of potential hardship to Plaintiff, Defendants are required to
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“make out a clear case of hardship or inequity in being required to go forward.” See Lockyer, 398

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F.3d at 1112. The only hardship that Defendants assert they would incur flows from litigating in

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this Court. But the Ninth Circuit has been clear that hardship must be something more than the

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intrinsic inconvenience arising from the litigation sought to be stayed. Id. Accordingly, the lack

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of corresponding hardship on Defendants weighs decisively against the stay.

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Furthermore, the indefinite stay that Defendants request would be inappropriate under
these circumstances. Even if the state court appeal is resolved in the coming months, a reversal

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for Plaintiff might require a retrial. See RJN, Ex. 1 at 59-62 (Plaintiff alleges reversible

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instructional error on appeal). Landis is generally not the appropriate mechanism for indefinite

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stays of federal actions in favor of state court proceedings. See Landis, 299 U.S. at 256 (stating

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United States District Court
Northern District of California

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that a district court abuses its discretion by entering a “stay of indefinite duration in the absence of

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a pressing need”); Dependable Highway Exp., Inc. v. Navigators Ins. Co., 498 F.3d 1059, 1066-67

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(9th Cir. 2007) (reversing Landis stay of “indefinite” nature); Yong v. INS, 208 F.3d 1116, 1119

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(9th Cir. 2000) (remanding stay order for reconsideration “because the stay terminates upon the

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resolution of [an] appeal . . . the stay could remain in effect for a lengthy period of time, perhaps

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for years if . . . reversed and the case is remanded for further proceedings”). Defendants have not

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shown a pressing need for an indefinite stay in this case.

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Finally, the Court considers whether staying this case pending resolution of the state court

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appeal results in any judicial efficiency. Although Defendants are correct that Plaintiff’s appeal, if

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successful, might moot its indemnification claims with respect to the state court verdict, the appeal

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cannot moot Plaintiff’s indemnification claim for costs incurred defending the underlying state

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court action, including attorneys’ fees, investigative expenses, and costs of suit. See Compl. ¶ 24

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(“[Defendants] agree[] to indemnify, defend with counsel selected by Owner and [Plaintiff] . . .

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against any claims . . . and attorneys’ fees arising out of this Contract or the performance of Work

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by [Defendants.]”); id. ¶¶ 29-31, 40 & 44 (“[Plaintiff] . . . has incurred attorneys’ fees and other

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foreseeable defense costs[.]”). Without prejudging the merits of Defendants’ case, the Court does

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not currently see how this action can be conclusively resolved by the state courts given this costs-

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of-defense indemnification claim. Additionally, Plaintiff asserts a negligence claim based on
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Defendant’s provision of allegedly inadequate pest control services and its failure to maintain

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documents properly. Id. ¶¶ 49-55. Because this action would move forward regardless of the

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outcome of the state court appeal, this factor also weighs against the stay.
In sum, because each factor under the Landis stay test weighs against staying this action

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pending resolution of the pending state court appeal, the Court denies Defendants’ motion.

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V.

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CONCLUSION
For the foregoing reasons, the Court hereby DENIES Defendants’ motion to stay and

SETS a further case management conference for April 26, 2016, at 2:00pm, to discuss scheduling.

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United States District Court
Northern District of California

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IT IS SO ORDERED.
Dated: April 15, 2016

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HAYWOOD S. GILLIAM, JR.
United States District Judge

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