Henstooth Ranch LLC v. The Burlington Insurance Company

Filing 24

ORDER DENYING PLAINTIFF'S MOTION TO STAY 15 . (Illston, Susan) (Filed on 3/27/2017)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 HENSTOOTH RANCH LLC, Plaintiff, 8 9 10 11 Case No. 17-cv-00006-SI ORDER DENYING PLAINTIFF'S MOTION TO STAY v. THE BURLINGTON INSURANCE COMPANY, Re: Dkt. No. 15 United States District Court Northern District of California Defendant. 12 13 Before the Court is plaintiff Henstooth Ranch LLC’s (“Henstooth’s”) motion to stay. Dkt. 14 No. 15. Pursuant to Civil Local Rule 7-1(b), the Court determines that this matter is appropriate 15 for resolution without oral argument and hereby VACATES the hearing scheduled for April 14, 16 2017. For the reasons set forth below, the Court DENIES plaintiff’s motion. 17 BACKGROUND 18 In November 2015, Sonoma Land Trust (“SLT”) sued Henstooth and its members, Peter 19 and Toni Thompson, in Sonoma County Superior Court for violation of a conservation easement 20 (the “SLT Action”). See SLT Action Complaint (Dkt. No. 1-1) at 88-106. SLT alleges that 21 Henstooth and the Thompsons violated the easement by constructing a new road, removing an old 22 oak tree, and causing other property damage. Id. SLT asserts three causes of action: (i) violation 23 of the conservation easement; (ii) breach of contract; and (iii) cutting, carrying off, or injuring 24 trees. Henstooth tendered the SLT Action to Burlington under a liability insurance policy and 25 Burlington denied coverage. Complaint (Dkt. No. 1-1) at ¶¶ 15-16. Trial in the SLT Action is set 26 to begin on June 2, 2017. Leslie Decl. (Dkt. No. 15-1) ¶ 6. 27 28 1 Henstooth filed this declaratory relief action in Contra Costa County Superior Court on 2 November 21, 2016 and served defendant Burlington Insurance Company (“Burlington”) on 3 December 20, 2016. See Notice of Removal (Dkt. No. 1) ¶ 6; id. Ex. 1, Complaint (Dkt. No. 1-1) 4 at 2-6.1 Burlington removed the action to this Court on January 3, 2017. The complaint seeks a 5 declaration of rights under liability insurance policies and that Burlington, as insurer, has a duty to 6 defend or indemnify Henstooth in the SLT Action. Id. Henstooth now moves to stay this case 7 pending resolution of the SLT Action. Mot. (Dkt. No. 15). 8 LEGAL STANDARD 9 “A district court has discretion to stay or dismiss an action for declaratory relief over 11 United States District Court Northern District of California 10 which it has jurisdiction.” Century Sur. Co. v. Byal, No. 10-3917-WHA, 2011 WL 2550832, at *2 12 (citing Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995)); see also Clinton v. Jones, 520 U.S. 13 681, 706 (1997) (“The District Court has broad discretion to stay proceedings as an incident to its 14 power to control its own docket.”). “If there are parallel state proceedings involving the same 15 issues and parties pending at the time the federal declaratory relief action is filed, there is a 16 presumption that the entire suit should be heard in state court.” Gov’t Emps. Ins. Co. v. Dizol, 133 17 F.3d 1220, 1225 (9th Cir. 1998) (citation omitted). However, “[t]he pendency of a state court 18 action does not, of itself, require a district court to refuse federal declaratory relief.” Id. “[T]here 19 is no presumption in favor of abstention in declaratory actions generally, nor in insurance 20 coverage cases specifically.” Id. 21 District courts in the Ninth Circuit utilize the Brillhart factors as their “philosophic 22 touchstone” in considering whether to stay or dismiss an action for declaratory relief. Id. & n.5; 23 see Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942); Am. States Ins. Co. v. Kearns, 15 24 F.3d 142 (9th Cir. 1994). 25 determination of state law issues; . . . discourage litigants from filing declaratory actions as a 26 means of forum shopping; and . . . avoid duplicative litigation.” The Brillhart factors guide district courts to “avoid needless Dizol, 133 F.3d at 1225. 27 28 1 Unless otherwise indicated, pinpoint citations are to ECF-generated page numbers. 2 1 Additionally, a court may consider “whether the declaratory action will settle all aspects of the 2 controversy”; whether it “will serve a useful purpose in clarifying the legal relations at issue”; 3 whether declaratory relief “is being sought merely for the purposes of procedural fencing or to 4 obtain a ‘res judicata’ advantage”; or whether the action “will result in entanglement between the 5 federal and state court systems.” Id. at 1225 n.5 (citing Kearns, 15 F.3d at 145 (Garth, J., 6 concurring)). “In addition, the district court might also consider the convenience of the parties, 7 and the availability and relative convenience of other remedies.” Id. 8 DISCUSSION 9 Neither party argues that the Court should dismiss this case under Wilton and its progeny. 11 United States District Court Northern District of California 10 Nor has plaintiff requested a remand; it seeks only to stay this action for its convenience. This 12 order focuses only on plaintiff’s request for a stay. 13 As an initial matter, the Court places particular emphasis on the fact that Henstooth filed 14 this declaratory relief action, not Burlington. Henstooth claims it filed this action to “preserve and 15 assert its rights under the policy,” yet it faced no imminent statutory or contractual deadline to file. 16 Mot. at 3. Now, much of Henstooth’s motion to stay this action is based upon the prejudice it will 17 purportedly face in having to “fight a two-front war.” The second “front” – this declaratory relief 18 action – is of Henstooth’s own creation. As such, Henstooth’s claims of prejudice in this regard 19 are unpersuasive. 20 The Court now turns to the relevant Brillhart factors to determine whether a stay is 21 appropriate here. Henstooth argues that this declaratory relief action would “require needless 22 determination of state law issues and duplicative litigation.” Mot. at 10. Henstooth argues that 23 many factual issues in this case will overlap with those in the SLT Action, such as “what 24 precipitated the tree removal and also the subsequent alleged property damage, what did 25 Henstooth Ranch and the Thompsons do, what were Henstooth Ranch and the Thompsons 26 supposed to do, who (if anyone) is at fault, and who is ultimately responsible.” Id. (citing Leslie 27 Decl. ¶ 10). 28 Based on the record, the Court does not see a significant overlap between the two actions. 3 The SLT Action will turn on, among other things, whether the defendants’ removing trees, 2 building a road, and damaging land violated SLT’s conservation easement. This declaratory relief 3 action turns on whether the property damage is a covered “occurrence” (i.e., accident) under the 4 Burlington insurance policy. In this action, Burlington will seek to prove that Henstooth acted 5 intentionally in building a road, moving a tree, and causing other damage. Findings on this issue 6 would not interfere with the state court’s determination of whether Henstooth or the Thompsons 7 violated the SLT easement. While some discovery will overlap between the two actions, the 8 overlap is not likely to be significant or prejudicial. In the Court’s view, this action can be 9 resolved without any prejudice to Henstooth in the SLT Action, especially where the SLT Action 10 will likely proceed to final judgment well ahead of this case. See Great Am. Ins. Co. v. Superior 11 United States District Court Northern District of California 1 Court, 178 Cal. App. 4th 221, 235 (2009). 12 Henstooth further argues that “[t]here is no inconvenience or prejudice to Burlington by 13 having to wait a few extra months” before proceeding with this declaratory relief action, but that 14 Henstooth will face significant prejudice in having to litigate two actions simultaneously. Reply 15 (Dkt. No. 23) at 4-5. As set forth above, however, Henstooth’s arguments about fighting a “two- 16 front war” lack persuasive force. Henstooth filed this action and, absent a concrete risk of 17 prejudice, this action will proceed. 18 Because Henstooth does not argue any other factors in favor of a stay, the Court ends its 19 analysis here. Henstooth’s motion to stay is hereby DENIED. If, however, a clear potential for 20 prejudice arises during discovery or motion practice, Henstooth may file a renewed motion. 21 22 CONCLUSION 23 For the foregoing reasons, plaintiff’s motion to stay is DENIED without prejudice. 24 This order resolves Dkt. No. 15. 25 IT IS SO ORDERED. 26 27 28 Dated: March 27, 2017 ______________________________________ SUSAN ILLSTON United States District Judge 4

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