Colony Insurance Company v. Fladseth et al

Filing 59

ORDER GRANTING PLAINTIFFS MOTION FOR SUMMARY JUDGMENT. Signed by Judge Claudia Wilken on 4/3/2013. (ndr, COURT STAFF) (Filed on 4/3/2013)

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1 IN THE UNITED STATES DISTRICT COURT 2 FOR THE NORTHERN DISTRICT OF CALIFORNIA 3 4 COLONY INSURANCE COMPANY, 5 Plaintiff, 6 7 8 v. DOUGLAS FLADSETH; and LAW OFFICES OF DOUGLAS C. FLADSETH, ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT (Docket No. 42) Defendants. 9 10 No. C 12-1157 CW ________________________________/ United States District Court For the Northern District of California Plaintiff Colony Insurance Company moves for summary judgment 11 finding that two state court actions do not fall within the 12 coverage terms of its policy insuring Defendants Douglas Fladseth 13 and the Law Offices of Douglas C. Fladseth and that it has no duty 14 to defend or indemnify Defendants in those actions. Defendants 15 oppose Plaintiffs’ motion. Having considered the papers filed by 16 the parties and their arguments at the hearing on this motion, the 17 Court GRANTS Plaintiff’s motion. 18 BACKGROUND 19 20 I. Plaintiff insured the Law Offices of Douglas C. Fladseth 21 22 23 24 The insurance policy under Lawyers Professional Liability Policy number EO404193, valid from August 20, 2010 to August 20, 2011. 7. Fine Decl. ¶ 5, Ex. A, The policy provides in relevant part, 25 SECTION I - COVERAGES 26 1. Insuring Agreement 27 28 a. We will pay, in excess of the Deductible shown in the Declarations, those sums any insured becomes legally obligated to pay as “damages” because of an act, error or omission arising out of your “legal 1 2 3 4 services” rendered or that should have been rendered. We will have the right and duty to defend any insured against a “claim” seeking those “damages.” However, we will have no duty to defend any insured against any “claim” seeking “damages” for “legal services” to which this insurance does not apply. . . . 5 2. Exclusions 6 This Policy does not apply to any “claim”: 7 . . . 8 d. Based on or directly or indirectly arising out of the rights or duties under any agreement including disputes over fees for services; 9 United States District Court For the Northern District of California 10 . . . 11 j. Based on or directly or indirectly arising out of or resulting from: 12 . . . 13 14 (2) The gaining by any insured of any personal profit, gain or advantage to which an insured is not legally entitled; 15 . . . 16 However, we shall defend such allegations against any insured if it involves a “claim” otherwise covered under the Policy until final adjudication. 17 18 . . . 19 20 21 22 23 24 25 26 27 28 Id. at 9-11. The policy defines “claim” to mean “a demand for monetary ‘damages’ arising out of a ‘legal service’ made against any insured by service of suit, the institution of arbitration or administrative proceedings or otherwise, but does not include a demand for equitable or non-pecuniary relief.” Id. at 17. “‘Damages’ means judgments, awards and settlements an insured is legally obligated to pay as a result of a ‘claim’ to which this policy applies.” Id. “Legal services” means in relevant part the 2 2 usual and customary services of a licensed lawyer in good standing acting by or on behalf of the “Named Insured” described in the Declarations of this Policy . . . 3 Id. 4 SECTION I--COVERAGES, 2. Exclusions is amended and the following added: 1 5 The policy also contains an addendum that provides, 6 This insurance does not apply to any “claim” for or awards of: 7 1. Punitive, exemplary or multiple damages; or 8 2. Equitable or non-pecuniary relief; 9 including any fines, penalties, court imposed sanctions, return or restitution of legal fees, costs or other expenses associated with such awards. United States District Court For the Northern District of California 10 11 12 13 14 15 16 17 18 19 Id. at 21. II. The state court actions The instant case seeks to resolve whether Plaintiff has a duty to defend and indemnify Defendants in two ongoing state court cases, Scholz v. Fladseth, Sonoma County Case No. SCV249442 (the Scholz action), and Christiansen v. Fladseth, Sonoma County Case No. SCV250126 (the Christiansen action). A. The Scholz action On April 4, 2011, Mary Scholz, as trustee for the Amanda 20 Greene Trust, filed the Scholz action in state court against 21 Fladseth. Coelho Decl. ¶ 3, Ex. B.1 On April 27, 2011, Scholz 22 filed a first amended complaint (1AC) in the action. Coelho Decl. 23 ¶ 3, Ex. C (Scholz 1AC). 24 25 26 1 27 28 In their opposition brief, Defendants state that the Scholz action was filed on January 11, 2012. Opp. at 4. However, the document that they cite shows a filing date of April 4, 2011. Coelho Decl. ¶ 3, Ex. B. 3 1 In the Scholz 1AC, Scholz alleges that Fladseth successfully 2 represented her daughter, Amanda Greene, in arbitration 3 proceedings with Kaiser arising from the failure to diagnose and 4 treat her colon cancer, in which the arbitrator awarded her 5 $475,000. 6 wrongfully represented to Amanda that he was “entitled to a fee 7 based on the total or gross recovery instead of the net sum 8 recovered after deducting costs,” as required by California 9 Business and Professions Code section 6146 for attorneys’ fees in Id. at ¶¶ 1, 3, 15. She contends that Fladseth United States District Court For the Northern District of California 10 medical malpractice and health care professional negligence 11 actions.2 Id. at ¶¶ 10-11, 16. She alleges that, when he 12 13 2 14 (a) An attorney shall not contract for or collect a contingency fee for representing any person seeking damages in connection with an action for injury or damage against a health care provider based upon such person’s alleged professional negligence in excess of the following limits: 15 16 17 This statute provides in relevant part, (1) Forty percent of the first fifty thousand dollars ($50,000) recovered. 18 19 (2) Thirty-three and one-third percent of the next fifty thousand dollars ($50,000) recovered. 20 (3) Twenty-five percent of the next five hundred thousand dollars ($500,000) recovered. 21 22 (4) Fifteen percent of any amount on which the recovery exceeds six hundred thousand dollars ($600,000). 23 24 26 The limitations shall apply regardless of whether the recovery is by settlement, arbitration, or judgment, or whether the person for whom the recovery is made is a responsible adult, an infant, or a person of unsound mind. 27 . . . 28 (c) For purposes of this section: 25 4 1 disbursed the award to her, Fladseth wrongfully withheld amounts 2 exceeding the statutorily allowable fee. 3 29-30. 4 fiduciary duty to disclose to clients the legal limitations on 5 attorneys’ fees in such actions. 6 Scholz also alleges that Fladseth improperly charged office- 7 overhead expenses as costs in order to subvert the statutory 8 limitations on attorneys’ fees, for example, by charging for 9 secretarial and paralegal services under the guise of expert Id. at ¶¶ 10-11, 16-17, She accuses Defendants of violating their statutory and Id. at ¶¶ 12, 17. In her 1AC, United States District Court For the Northern District of California 10 consultant services. 11 difference between the Scholz 1AC and the original complaint filed 12 in that action. Id. at ¶ 22. This appears to be the only 13 Scholz asserts six claims against Fladseth: (1) professional 14 negligence, based on the failure to advise Amanda properly of the 15 maximum attorneys’ fees and costs, misrepresenting this to her, 16 taking a greater portion of her recovery than permitted by law, 17 and breaching the ethical duties of good faith and fidelity 18 through these actions, id. at ¶¶ 25-26; (2) money had and 19 received, seeking to void the contingency fee agreement and 20 disgorge the wrongfully taken fees and costs, id. at ¶¶-29-32; 21 (3) fraud, based on Fladseth’s intentional misrepresentation of 22 the amount of attorneys’ fees and costs to which he was legally 23 24 25 26 27 28 (1) “Recovered” means the net sum recovered after deducting any disbursements or costs incurred in connection with prosecution or settlement of the claim. Costs of medical care incurred by the plaintiff and the attorney’s office-overhead costs or charges are not deductible disbursements or costs for such purpose. Cal. Bus. & Prof. Code § 6146. 5 1 entitled, id. at ¶¶ 34-37; (4) conversion, for taking the 2 additional amount and refusing to turn it over to Amanda and 3 Scholz, id. at ¶¶ 39-43; (5) accounting of the legal fees and 4 costs, id. at ¶¶ 45-47; and (6) violation of California’s Unfair 5 Competition Law (UCL) by the acts alleged in the complaint, 6 including charging fees in excess of those allowed under state law 7 and falsely representing that this was permissible, id. at 8 ¶¶ 49-53. 9 requests for general and special damages, an accounting and a Her prayer for relief includes, among other things, United States District Court For the Northern District of California 10 return of the amount that was improperly charged and interest on 11 that amount. 12 Trial in the Scholz action was set to take place on November 13 30, 2012. 14 represented that discovery in the Christiansen action is 15 incomplete, see id. ¶ 6, they have made no such claim about 16 discovery in the Scholz action. 17 Kingsbury Decl. ¶ 7. Although Defendants have In response to Fladseth’s motion for summary adjudication in 18 the Scholtz action, Scholz’s retained expert, Linda Fermoyle Rice, 19 submitted a declaration dated September 25, 2012. 20 ¶ 9, Ex. 1 (Rice Decl.). 21 medical negligence claims involve the use of expert witnesses,” to 22 “testify on issues of standard of care, causation and/or damages,” 23 which are “legitimate case costs that are routinely billed to the 24 client and deducted from any gross settlement, judgment or 25 arbitration award before attorneys’ fees are calculated.” 26 Decl. ¶ 9. 27 expert under those circumstances typically will include that 28 expert’s overhead costs, for example typing reports or notes which Kingsbury Decl. In it, she opined, “Virtually all Rice She also stated that the “hourly fee paid to the 6 1 may be done by the expert’s secretarial staff.” 2 further stated that it “is not appropriate or within the standard 3 of care for a medical malpractice lawyer to assign routine 4 clerical jobs, which can and are done in-house, to a third party, 5 then bill them to the client as case costs,” and that this was 6 what Defendants had done. 7 8 9 United States District Court For the Northern District of California 10 11 Id. at ¶ 10. Id. However, she She summarized, Mr. Fladseth was using an outside vendor to shift overhead costs to his clients, which is not acceptable, appropriate, or the standard of care for lawyers handling medical malpractice cases. By doing so, Mr. Fladseth deprived his clients of money to which they were entitled. He compounded the injury to his clients by calculating his attorneys’ fees based on the gross recovery obtained for them, in violation of the law. Id. at ¶ 13. 12 B. The Christiansen action 13 On August 3, 2011, Tammy Christiansen, Lori Wilson, Ronald 14 Wanamaker, and Kristina Fontaine filed a putative class action 15 complaint against Fladseth and another attorney, Richard Sax. 16 Coelho Decl. ¶ 5, Ex. D. On September 26, 2012, the state court 17 granted the plaintiffs’ motion to amend their complaint to add two 18 new claims. 19 Kingsbury Decl. ¶ 3; see Charlston Reply Decl. ¶ 5, Ex. A (Christiansen 1AC).3 20 In the Christiansen 1AC, the plaintiffs’ substantive 21 allegations against Fladseth are nearly identical to those in the 22 23 24 25 26 27 28 3 The Kingsbury declaration represents that the state court granted the motion on September 26, 2011. Kingsbury Decl. ¶ 3. This date appears to be erroneous. The declaration, which was dated October 3, 2012, also states that the motion to amend was filed “recently” and that, as of October 3, 2012, Defendants had not yet been served with a copy of the order granting the motion or the 1AC. Id. In addition, the copy of the Christiansen 1AC that Defendants provided to Plaintiff by email on October 4, 2012 is dated July 27, 2012. Charlston Decl. ¶ 5, Ex. A. 7 1 Scholz action. 2 for money had and received, fraud, conversion, accounting, and 3 violation of the UCL as those in the Scholz action, and two 4 additional claims for breach of fiduciary duty and constructive 5 fraud. 6 for professional negligence as Scholz did. 7 breach of fiduciary duty, the Christiansen plaintiffs allege that 8 Fladseth breached his duties towards them and the class by 9 misrepresenting to them the amounts of attorneys’ fees and costs The plaintiffs assert the same causes of action See Christiansen 1AC ¶¶ 29-78. They do not bring a claim In their claim for United States District Court For the Northern District of California 10 that he was allowed to charge. 11 constructive fraud, the plaintiffs allege that each fee agreement 12 “specifically recited that defendant Fladseth was entitled to the 13 attorneys’ fees set forth in the contingency fee agreement by 14 virtue of Business and Professions Code § 6146,” that Fladseth 15 failed to disclose the fact that the fee agreements in fact 16 violated that section, and that they would not have entered into 17 the fee agreements if they had known such facts. 18 As relief for the claims for breach of fiduciary duty and 19 constructive fraud, the plaintiffs seek awards of general and 20 special damages, exemplary and punitive damages, and disgorgement 21 of fees. 22 23 Id. at ¶¶ 58-71. In the claim for Id. at ¶¶ 73-78. Id. at ¶¶ 69-71, 76-78.4 The plaintiffs and putative class members in the Christiansen action testified in depositions as to their feelings about 24 25 4 26 27 28 The parties have represented that, after the instant motion was fully briefed and heard, the trial court granted a motion by the plaintiffs to file a second amended complaint (2AC). Docket Nos. 56 and 57. The only apparent difference between the Christiansen 1AC and 2AC appears to be the addition of two new plaintiffs. See Docket No. 56, Ex. A (Christiansen 2AC) ¶¶ 5-6. 8 Fladseth’s handling of their cases. 2 Darling Wolfe testified that she was “a little disappointed” that 3 Fladseth “wasn’t a little bit more aggressive” and that he seemed 4 to change his mind about taking her case “midstream” after the 5 case had progressed too far along for her to be able to find a new 6 attorney. 7 Christiansen also testified that she felt that Fladseth “gave up” 8 and “lost interest” in her case. 9 Putative class member Lila Ann Schoonmaker Bollmann testified that 10 United States District Court For the Northern District of California 1 she was “angry” and “very disappointed” in the representation that 11 Fladseth had provided her. 12 plaintiff Lori Ann Wilson testified that, in the middle of 13 arbitration with Walgreens, Fladseth said to Sax that he was not 14 being aggressive enough, “that the arbitration should stop” and 15 that Sax should “shut up.” 16 “the emotions had gotten so high” at the arbitration made her 17 “upset.” 18 III. Tender of defense and history of the instant action 19 Putative class member Lynn Kingsbury Decl. ¶ 10, Ex. 2. Named plaintiff Tammy Kingsbury Decl. ¶ 13, Ex. 5. Kingsbury Decl. ¶ 11, Ex. 3.5 Kingsbury Decl. ¶ 12, Ex. 4. Named That Id. On April 19, 2011, Plaintiff received a claim sent by the 20 Egloff Insurance Agency on behalf of Defendants for defense and 21 indemnity regarding the Scholz action. Fine Decl. ¶ 6, Ex. B. 22 23 5 24 25 26 27 28 Defendants also assert that Bollman testified that Fladseth claimed he would be able to reverse a cause of death finding on her husband’s death certificate so that she could recover on his life insurance policy, but that he was unable to do so. Opp. at 6. In the transcript offered into evidence, Bollman in fact testified that Fladseth said he “felt” that he could get the cause of death changed, not that he would be certainly be able to do it. Kingsbury Decl. ¶ 11, Ex. 3, 55:1-4. The testimony offered into evidence also does not reveal whether Fladseth was or was not able to have the cause of death finding reversed. 9 On May 10, 2011, Plaintiff sent Defendants a letter, stating 2 that it would defend them in the Scholz action, but that it would 3 do so under a reservation of rights. 4 the letter, Plaintiff stated that it reserved the rights “to file 5 a declaratory relief action to determine its rights and duties 6 under the policy” and “to withdraw from the defense and seek 7 recoupment of defense fees and costs if it is determined during 8 the course of the lawsuit that Colony has no coverage.” 9 further notified Defendants that “because Colony has reserved 10 United States District Court For the Northern District of California 1 rights on this matter you are entitled to associate counsel of 11 your choice with this case.” 12 Fine Decl. ¶ 7, Ex. C. Id. In It Id. On May 31, 2011, the Egloff Insurance Agency forwarded 13 Plaintiff a letter dated May 16, 2011 it received from Defendants. 14 Fine Decl. ¶ 8, Ex. D. 15 copy of the 1AC in the Scholz action and asserted that the “basis 16 for the claim is for a miscalculation of the esoteric medical 17 malpractice attorney fees which have now been paid in full.” 18 Defendants also state, “In fact, we did not know the medical 19 malpractice fee was to be calculated only after deducting all of 20 our costs,” and that “this amounted to about a $20,000 difference 21 in the fee calculation,” which they had since paid into Scholz’s 22 new attorney’s State Bar trust account. 23 represent that “Colony Insurance offered Cumis Counsel and Mike 24 Watters is so acting.” 25 With the letter, Defendants provided a Id. Id. They further Id. On August 8, 2011, Plaintiff received a claim sent by the 26 Egloff Insurance Agency on behalf of Defendants for defense and 27 indemnity regarding the Christiansen action. 28 E. 10 Fine Decl. ¶ 9, Ex. 1 On August 10, 2011, Plaintiff sent Defendants a letter 2 stating that it would defend them in the Christiansen action, but 3 that it would do so under a reservation of rights. 4 ¶ 10, Ex. F. 5 Fine Decl. Plaintiff initiated this action on March 8, 2012 and filed 6 its 1AC on April 10, 2012. 7 Plaintiff seeks a declaration that it does not owe a defense or 8 indemnity to Defendants for the claims asserted in the Scholz and 9 Christiansen actions. United States District Court For the Northern District of California 10 Docket Nos. 1, 9. In the 1AC, On April 24, 2012, Defendants moved to dismiss or stay these 11 proceedings pending resolution of the Scholz and Christiansen 12 actions. 13 will be duplicative of the state court actions, because the legal 14 and factual questions here are the same as in those actions. 15 Docket No. 12. Defendants argued that the instant case On June 11, 2012, the Court denied Defendants’ motion to 16 dismiss or stay, finding that the coverage question is unrelated 17 to the issues that will be determined in the underlying actions, 18 that this litigation is not duplicative of the state court action, 19 that it was not filed as a means of forum shopping and that it 20 would serve a useful purpose to clarify Plaintiff’s legal 21 obligations in the underlying state actions. 22 Docket No. 39. On June 20, 2012, the Court held a case management 23 conference. 24 2013 as the deadline to hear all case-dispositive motions and set 25 a schedule for the filing of such motions. 26 Docket No. 41. At that time, the Court set March 7, Id. On September 12, 2012, Plaintiff filed an early motion for 27 summary judgment on its claims against Defendants and noticed it 28 for hearing on October 25, 2012. Docket No. 42. 11 In its 1 supporting documents, Plaintiff provided evidence that, as of 2 September 11, 2012, it had paid $110,518.63 to O’Brien, Watters & 3 Davis LLP, Defendants’ chosen law firm, for the defense of the 4 Scholz and Christiansen actions. Fine Decl. ¶ 12, Ex. G. 5 On September 12, 2012, the Court issued an order, noting that 6 Plaintiff had filed an early summary judgment motion, and stating, 7 The Court prefers to hear all case-dispositive motions at one time, absent a good reason to do otherwise. Plaintiff’s motion may be heard on the date noticed as long as Defendants are prepared to oppose it and neither party intends to file another case-dispositive motion to be heard at a later date. The parties shall meet and confer about the schedule and file an appropriate motion under L.R. 7-11 if they are unable to agree. 8 9 United States District Court For the Northern District of California 10 11 Docket No. 44. 12 On September 21, 2012, the parties filed a stipulation to 13 extend the time for Defendants to respond to the motion for 14 summary judgment from September 26, 2012 to October 3, 2012, 15 because Defendants’ counsel had to travel in September for work on 16 other cases. Docket No. 45. The Court granted the stipulation on 17 September 25, 2012. Docket No. 46. Defendants did not represent 18 in the stipulation that they were unprepared to oppose the motion 19 for summary judgment and did not file an administrative motion 20 seeking to delay the hearing or briefing on the motion for summary 21 judgment. 22 On October 3, 2012, Defendants filed their opposition. 23 Docket No. 47. In their opposition, Defendants argued, among 24 other things, that they have not conducted sufficient discovery in 25 the underlying actions and this case and thus summary judgment is 26 premature at this time. Opp. at 16-17. They did not file an 27 affidavit or declaration pursuant to Federal Rule of Procedure 28 12 1 56(d). 2 to stay “in light of the discovery developed in the underlying 3 action[s].” Defendants also requested permission to renew their motion Id. at 18. 4 In the declaration of Deirdre Taber Kingsbury, which 5 Defendants submitted in support of their opposition, she stated 6 that a motion to amend the complaint in the Christiansen action 7 had recently been granted. 8 Plaintiff requested a copy of the Christiansen 1AC to review it 9 for coverage, which Defendants then provided. Kingsbury Decl. ¶ 3. In response, Charlston Decl. United States District Court For the Northern District of California 10 ¶¶ 4-5. 11 determined that the amendments still did not create the 12 possibility for coverage. 13 After reviewing the Christiansen 1AC, Plaintiff Id. at ¶ 5. On February 28, 2013 and March 1, 2013, the parties filed 14 case management statements representing that the trial court in 15 the Christiansen action granted a motion to file a 2AC in that 16 action. 17 not change anything relevant to the present action. 18 56. Docket Nos. 56 and 57. Plaintiff stated that the 2AC did Docket No. 19 LEGAL STANDARD 20 Summary judgment is properly granted when no genuine and 21 disputed issues of material fact remain, and when, viewing the 22 evidence most favorably to the non-moving party, the movant is 23 clearly entitled to prevail as a matter of law. 24 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); 25 Eisenberg v. Ins. Co. of N. Am., 815 F.2d 1285, 1288-89 (9th Cir. 26 1987). 27 28 Fed. R. Civ. P. The moving party bears the burden of showing that there is no material factual dispute. Therefore, the court must regard as 13 1 true the opposing party’s evidence, if supported by affidavits or 2 other evidentiary material. 3 815 F.2d at 1289. 4 in favor of the party against whom summary judgment is sought. 5 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 6 587 (1986); Intel Corp. v. Hartford Accident & Indem. Co., 952 7 F.2d 1551, 1558 (9th Cir. 1991). 8 9 Celotex, 477 U.S. at 324; Eisenberg, The court must draw all reasonable inferences Material facts which would preclude entry of summary judgment are those which, under applicable substantive law, may affect the United States District Court For the Northern District of California 10 outcome of the case. The substantive law will identify which 11 facts are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 12 242, 248 (1986). 13 14 DISCUSSION Plaintiff seeks judgment that it is not required either to 15 defend or to indemnify Defendants in the state court actions. 16 Plaintiff argues the state court actions fall outside of, or are 17 excluded from, the coverage provisions of the policy for four 18 reasons: the relief sought in the underlying actions consists of 19 restitution, not damages; the claims asserted are not based on 20 Defendants’ provision of “legal services,” as defined in the 21 policy; the claims are based on and arise out of a dispute over 22 fees; and the claims are based on and arise out of Defendants 23 gaining a personal profit or advantage to which they were not 24 entitled. 25 A “liability insurer owes a broad duty to defend its insured 26 against claims that create a potential for indemnity.” 27 Mann Ins. Co. v. Barbara B., 4 Cal. 4th 1076, 1081 (1993) (citing 28 Gray v. Zurich Ins. Co., 65 Cal. 2d 263 (1966)). 14 Horace An “insured is 1 entitled to a defense if the underlying complaint alleges the 2 insured’s liability for damages potentially covered under the 3 policy, or if the complaint might be amended to give rise to a 4 liability that would be covered under the policy.” 5 Corp. v. Superior Court, 6 Cal. 4th 287, 299 (1993) (emphasis in 6 original and citation omitted). 7 only a showing of a potential for liability is “one reason why it 8 is often said that the duty to defend is broader than the duty to 9 indemnify.” United States District Court For the Northern District of California 10 Montrose Chem. That the duty to defend requires Id. at 299. To show that a duty to defend has attached, an insured “must 11 prove the existence of a potential for coverage.” 12 Cal. 4th at 300 (emphasis in original). 13 no duty exists, “the insurer must establish the absence of any 14 such potential.” 15 the insured need only show that the underlying claim may fall 16 within policy coverage; the insurer must prove it cannot.” 17 (emphasis in original). 18 Montrose, 6 In contrast, to show that Id. (emphasis in original). “In other words, Id. A duty to defend may exist “even where coverage is in doubt 19 and ultimately does not develop.” 20 internal quotation marks omitted). 21 inferable in the complaint, or otherwise known or discovered by 22 the insurer, suggest a claim potentially covered by the policy, 23 the insurer’s duty to defend arises and is not extinguished until 24 the insurer negates all facts suggesting potential coverage.” 25 Scottsdale Ins. Co. v. MV Transp., 36 Cal. 4th 643, 655 (2005). 26 However, the “duty to defend cannot be adjudged on the basis of 27 hindsight.” 28 176 Cal. App. 3d 598, 610 (1986). Id. at 295 (citation and “If any facts stated or fairly CNA Casualty of California v. Seaboard Surety Co., 15 Instead, “it must be determined 1 from the facts and inferences known to an insurer from the 2 pleadings, available information and its own investigations at the 3 time of the tender of defense.” 4 I. 5 Id. Coverage provisions “Insurance policies are written in two parts: an insuring 6 agreement which defines the type of risks being covered, and 7 exclusions, which remove coverage for certain risks which are 8 initially within the insuring clause.” 9 Ins. Co., 56 Cal. App. 4th 1489, 1497 (1997). Rosen v. Nations Title “Before even United States District Court For the Northern District of California 10 considering exclusions, a court must examine the coverage 11 provisions to determine whether a claim falls within [the policy 12 terms].” 13 (2004) (brackets in original; internal quotation marks and 14 citation omitted). 15 claims fall within the scope of coverage, and the insurer bears 16 the burden of proving that otherwise covered claims fall within an 17 exclusion. 18 (1995). 19 whereas clauses identifying coverage are interpreted broadly.” 20 Garvey v. State Farm Fire & Casualty Co., 48 Cal. 3d 395, 406 21 (1989). 22 Atl. Mut. Ins. Co. v. Ruiz, 123 Cal. App. 4th 1197, 1208 The insured bears the burden of showing that Waller v. Truck Ins. Exchange, Inc., 11 Cal. 4th 1, 16 Further, “exclusionary clauses are interpreted narrowly, Under the policy, to be covered, the state court actions must 23 be “claims” seeking “damages” on “an act, error or omission 24 arising out of [Defendants’] legal services rendered or that 25 should have been rendered.” 26 contends that the state court complaints do not state claims based 27 on providing “legal services” and they seek equitable or non- Fine Decl. ¶ 5, Ex. A, 9. 28 16 Plaintiff 1 pecuniary relief instead of monetary damages. 2 both arguments. Defendants dispute 3 A. Providing “legal services” 4 The parties dispute whether any claims in the state law cases 5 are based on providing legal services. 6 billing and administrative practices do not fall within the 7 meaning of legal services. 8 that, even if they do not, claims based on providing legal 9 services have been alleged. United States District Court For the Northern District of California 10 Plaintiff argues that Defendants contend that they do, and The policy’s definition of “legal services” is set forth in 11 relevant part above. 12 “usual and customary services of a licensed lawyer in good 13 standing.” In summary, this phrase encompasses the Id. at 17. 14 Plaintiff contends that this definition limits coverage to 15 claims that arise out of the provision of law-related services, 16 not all acts or omissions that occur in the general running of a 17 business that provides legal services, such as administration or 18 billing. 19 phrase “legal services” and the more general phrase “professional 20 services” have recognized a distinction between skills or 21 knowledge specific to the profession, and administrative tasks, 22 such as billing, inherent to all businesses, and have found that 23 the latter is not encompassed with these terms. 24 Co. v. Donald T. Bertucci, Ltd., 399 Ill. App. 3d 775, 782-788 25 (2010) (holding the accusation that an attorney withheld more than 26 the permissible amount of fees under Illinois law in a medical 27 malpractice case was not an action arising from an act or omission 28 in the rendering of legal services and thus was not covered by his Plaintiff points out that courts interpreting both the 17 See Cont’l Cas. 1 professional liability insurance coverage); see also Gregg & 2 Valby, LLP v. Great Am. Ins. Co., 316 F. Supp. 2d 505, 513 (S.D. 3 Tex. 2003) (finding that billing and fee-setting are not 4 “professional services” because they do not “require specialized 5 legal skill and knowledge, nor are they acts particular to the 6 legal profession”); Tana v. Professionals Prototype I Ins. Co., 47 7 Cal. App. 4th 1612, 1619 (1996) (distinguishing between “acts or 8 omissions in the course of representing his clients” and “business 9 practices, such as attorney-client fee arrangements and disputes United States District Court For the Northern District of California 10 arising thereunder” in discussing the insured’s reasonable 11 expectation of coverage under a lawyers’ professional liability 12 policy). 13 The Ninth Circuit has explained, “A professional obviously 14 performs many tasks that do not constitute professional services,” 15 but that, “to be considered a professional service, the conduct 16 must arise out of the insured’s performance of his specialized 17 vocation or profession.” 18 977, 981 (9th Cir. 1981); see also Harad v. Aetna Casualty & 19 Surety Co., 839 F.2d 979, 985 (3d Cir. 1988) (“the practice of law 20 . . . has two very different and often overlooked components--the 21 professional and the commercial. 22 practice obviously involves the rendering of legal advice to and 23 advocacy on behalf of clients for which the attorney is held to a 24 certain minimum professional and ethical standards. 25 commercial aspect involves the setting up and running of a 26 business, i.e., securing office space, hiring staff, paying bills 27 and collecting on accounts receivable, etc., in which capacity the 28 attorney acting as businessperson is held to the same reasonable Bank of California v. Opie, 663 F.2d The professional aspect of a law 18 The 1 person standard as any other.”). 2 lawyers are not considered ‘professional services’ if they are 3 ordinary activities that can be completed by those lacking legal 4 knowledge and skill.” 5 “Thus, even tasks performed by Gregg & Valby, 316 F. Supp. 2d at 513. Defendants seek to distinguish the cases offered by Plaintiff 6 because some of them interpret the meaning of “professional 7 services” rather than “legal services.” 8 have considered the interpretation of professional services to be 9 informative where the definition of legal services, “apart from However, other courts United States District Court For the Northern District of California 10 its focus on a lawyer’s activities, is not substantively different 11 from the definitions for ‘professional services’ set out in the 12 case law.” 13 (D. Mass. 2011); see also Cont’l Cas. Co., 399 Ill. App. 3d at 14 785-87 (interpreting the term “legal services” and discussing 15 cases that applied the term “professional services”). 16 substantive difference between the definition at issue here and 17 the definitions for “professional services” other than the fact 18 the definition here is focused on the services of a lawyer instead 19 of a generic professional. 20 Clermont v. Cont’l Cas. Co., 778 F. Supp. 2d 133, 139 There is no Defendants argue that the definition here includes the usual 21 and customary services of a lawyer but does not limit those 22 services to only those performed in their capacity as a lawyer. 23 Opp. at 15. 24 encompass all acts that a lawyer performs in the course of 25 rendering services, including both administrative and professional 26 acts. 27 28 They contend that the term should be interpreted to Opp. at 15-16. However, the definition at issue here, which encompasses “the services of a licensed lawyer,” is not written more broadly than 19 1 the definitions at issue in the cases discussed above and 2 unambiguously refers to those acts that a lawyer performs that use 3 his or her specialized training and knowledge. 4 Tana, the policy defined “professional services” in relevant part 5 as “[t]hose services rendered or that should have been rendered 6 for others as a lawyer.” 7 offer no principled difference between the definition in Tana, 8 which encompasses the services “of a lawyer,” and the definition 9 at issue here, which addresses those rendered “as a lawyer.” For example, in 47 Cal. App. 4th at 1617. Defendants United States District Court For the Northern District of California 10 Further, because there is no ambiguity in the term, Defendants’ 11 reliance on the principle that ambiguities should be construed in 12 favor of coverage is unavailing. 13 Defendants also argue that the complaints at issue here do 14 allege “claims for acts, errors or omissions in connection with 15 the legal services rendered by defendants.” 16 Defendants apparently refer to the professional negligence claim 17 asserted in the Scholz 1AC, in which the plaintiff asserted that 18 Fladseth committed legal malpractice because he failed to advise 19 Amanda properly of the maximum attorneys’ fees and costs allowed 20 under state law. 21 negligence or malpractice claim does not alter that the billing 22 and fee-setting acts at issue are administrative tasks and not the 23 usual and customary services of a lawyer. 24 Opp. at 16. However, that this was phrased as a professional Accordingly, there is no dispute of material fact that the 25 underlying complaints do not create the potential for coverage 26 because they are not based on providing legal services. 27 28 20 1 B. Damages 2 Plaintiff also argues that there is no coverage under the 3 policy because the state court actions seek only restitution or 4 disgorgement of funds improperly gained, which cannot constitute 5 covered “damages” under insurance policies in California. 6 Unified W. Grocers, Inc. v. Twin City Fire Ins. Co., 457 F.3d 7 1106, 1115 (9th Cir. 2006) (“California case law precludes 8 indemnification and reimbursement of claims that seek the 9 restitution of an ill-gotten gain.”); Bank of the West v. Superior See United States District Court For the Northern District of California 10 Ct., 2 Cal. 4th 1254, 1268 (1992) (holding that public policy 11 requires that “insurable damages do not include costs incurred in 12 disgorging money that has been wrongfully acquired”). 13 Defendants have not disputed this doctrine. Instead, they 14 argue that the plaintiffs in the state court actions have not 15 limited their claims to equitable relief. 16 fact that the state court plaintiffs have demanded special damages 17 and general damages according to proof to show that they are not 18 just asking for restitution or disgorgement. 19 label of ‘restitution’ or ‘damages’ does not dictate whether a 20 loss is insurable.” 21 Instead, what matters is “whether the claim seeks to recover only 22 the money or property that the insured wrong- fully [sic] 23 acquired.” 24 Defendants point to the However, “[t]he Unified W. Grocers, 457 F.3d at 1115. Id. In the Scholz case, the plaintiff brings a claim for 25 professional negligence, alleging that, by breaching his duty of 26 fidelity, fairness and good faith toward his client, Fladseth 27 committed legal malpractice. 28 seeks an award of “special and general damages in an amount Scholz 1AC ¶ 26. 21 The plaintiff 1 according to proof” for this claim. 2 claim, the plaintiff also seeks recovery of “general and special 3 damages in an amount according to proof by reason of said wrongful 4 taking.” 5 submitted in the Scholz case to argue that the damages sought go 6 beyond restitution of the amount based on the miscalculation of 7 attorneys’ fees based on the gross recovery under Cal. Bus. & 8 Prof. Code § 6146(a) and request compensation because Fladseth 9 breached the standard of care for lawyers handling medical Id. at ¶ 36. Id. at ¶ 27. In the fraud Defendants cite Rice’s expert declaration United States District Court For the Northern District of California 10 malpractice claims. 11 clear that these claims seek return of the money wrongfully taken 12 as fees. 13 to shift overhead costs to his clients, which is not acceptable, 14 appropriate, or the standard of care for lawyers handling medical 15 malpractice cases,” and, “By doing so, Mr. Fladseth deprived his 16 clients of money to which they were entitled.” 17 & Prof. Code § 6146(c)(1) (“the attorney’s office-overhead costs 18 or charges are not deductible disbursements or costs” under the 19 statute). 20 costs, they would be able to charge customers for these expenses 21 in addition to the fees charged for their services that are 22 subject to a statutory cap in section 6146(a). 23 to nothing in the pleading or the Rice declaration that would 24 support an award of damages beyond the compensation of the money 25 that Fladseth is alleged to have acquired wrongfully, apart from 26 the request for exemplary and punitive damages. 27 Court finds, for this additional reason, that there is no dispute Opp. at 2. However, Rice’s declaration makes Rice opines, “Mr. Fladseth was using an outside vendor See also Cal. Bus. If attorneys were to label office-overhead expenses as 28 22 Defendants point Accordingly, the 1 of material fact that the Scholz action did not create a potential 2 for coverage. 3 In the Christiansen action, the plaintiffs allege that 4 Fladseth breached his fiduciary duties towards them by failing to 5 advise them that the fee agreements that he entered into with them 6 violated state law, that they would not have entered into these 7 agreements had he disclosed this fact, and that this breach 8 created a conflict of interest between them and Fladseth that 9 infected their entire relationship. Christiansen 1AC ¶¶ 63-66, United States District Court For the Northern District of California 10 74. 11 Fladseth on the basis “that he is not entitled to be paid when he 12 has not provided the fidelity that he bargained for and promised” 13 and that he should pay “a penalty” for his breach. 14 78. 15 money that Fladseth wrongfully charged in excess of the statutory 16 limit. 17 of any potential for coverage on this alternative basis in the 18 Christiansen action. 19 basis for coverage for that case because the claims made were not 20 based on Defendants’ providing of legal services. 21 II. 22 They request disgorgement of some or all of the fees paid to Id. at ¶¶ 71, Thus, their complaint may go beyond seeking recovery of the Plaintiff has not met its burden to establish the absence However, as discussed above, there is no Exclusions from coverage Even if there were coverage for either case, there is no 23 material dispute of fact that the claims in both state court 24 actions fall into two different exclusions contained in the 25 policy, for disputes over fees for services and the gaining of 26 personal profit or advantage to which the insured was not 27 entitled. 28 23 1 A. Dispute over fees 2 Plaintiff contends that the claims asserted in the state 3 court actions are excluded from coverage as “[b]ased on or 4 directly or indirectly arising out of the rights or duties under 5 any agreement including disputes over fees for services.” 6 Defendants respond that the Scholz plaintiff made claims for 7 negligence in providing legal services and that the Christiansen 8 plaintiffs assert that the defendants represented and gave advice 9 concerning the propriety of their fees, which goes beyond United States District Court For the Northern District of California 10 allegations simply based on the miscalculation of fees. 11 9-10. 12 the claims in the underlying cases may have been disputes over 13 fees, they were not based on “any agreement.” 14 contend that the pleadings in both cases may be amended to add 15 other claims that are not within this exclusion. 16 Opp. at At the hearing, Defendants further argued that, although Defendants also Both the Scholz and Christiansen actions “directly or 17 indirectly” arise out of disputes over agreements, including over 18 fees. 19 based on Fladseth’s improper withholding of fees and costs in 20 violation of state law. 21 allegation that Fladseth wrongfully represented to Amanda the 22 amount of fees and costs that he could charge her and that, as a 23 result, she signed a disbursement statement permitting him to 24 withhold the excessive amounts. 25 negligence claim brought in the Scholz case and argue that it was 26 not subject to this exclusion, even narrowly construed, the 27 allegations made in that claim clearly arise directly or 28 indirectly out of disputes over fees. All six of the claims made in the Scholz pleadings are Each claim is based on the plaintiff’s Although Defendants point to the 24 In the professional 1 negligence claim the plaintiff alleges that Defendants “were 2 negligent in the representation of AMANDA, failing to properly 3 advise her regarding the maximum attorney’s fees and costs allowed 4 by law and of the appropriate manner of calculating costs and 5 fees, attempting to improperly take a greater portion of AMANDA’S 6 recovery as attorney’s fees and costs than is permitted by law, 7 and misrepresenting and fraudulently representing that defendants 8 were entitled to greater attorney’s fees and reimbursement of 9 costs than allowed by law.” Scholz 1AC ¶ 25. The claim also United States District Court For the Northern District of California 10 alleges that, “by charging excessive and unlawful fees and costs,” 11 Defendants committed legal malpractice by breaching the “ethical 12 duties of good faith and fidelity.” 13 expert declaration, which Defendants also cite in this context, 14 Rice attests that Defendants improperly classified items as 15 deductible costs that should have been included in the attorneys’ 16 fees amounts, which are subject to the statutory cap. 17 all indisputably claims regarding disputes over fees. 18 Id. Similarly, in the Rice These are To the extent that Defendants contend that the exclusion does 19 not apply because the dispute was about fees but not about an 20 agreement, this argument is unavailing. 21 excludes “disputes over fees for services.” 22 Scholz complaint alleges that the fee agreement, in the form of 23 the signed disbursement statement, violated state law. 24 disputes in the complaint, including the negligence claim, each 25 arose directly or indirectly out of the rights or duties under the 26 fee agreement, namely Fladseth’s right to withhold the amount that 27 was excessive under state law. 28 25 The exclusion clearly In addition, the The 1 Similarly, the claims in the Christiansen action arise directly or indirectly out of the rights or duties under 3 agreements, including disputes over fees. 4 specifically pointing to allegations or claims included in the 5 operative complaint in this action that are not subject to this 6 exclusion, Defendants primarily argue that claims might be added 7 to the complaint in the future which may not be based on fee 8 disputes. 9 named plaintiffs and the putative class members who stated that 10 United States District Court For the Northern District of California 2 they were unhappy with the legal services provided by Fladseth, 11 not just the fees and costs charged. 12 shows that the plaintiffs may later add claims, based on 13 Fladseth’s failure to provide proper legal services, that are 14 separate and apart from the failure to advise clients properly 15 about the limits on attorneys’ fees and misclassification of 16 costs. 17 Rather than Defendants point to the deposition testimony of the Defendants contend that this In support of their argument, Defendants improperly conflate 18 “two similar, but critically distinct ideas” within California 19 law. 20 F. Supp. 2d 803, 810 (N.D. Cal. 2007). 21 that California law allows, indeed requires, insurers to consider 22 evidence ‘extrinsic’ to the allegations set forth on the face of a 23 third-party complaint.” 24 Mann, 4 Cal. 4th at 1081; Gray, 65 Cal. 2d at 276). 25 insurance company “cannot construct a formal fortress of the third 26 party’s pleadings and retreat behind its walls” and the third 27 party is not “the arbiter of the policy’s coverage.” 28 Cal. 2d at 276. See Storek v. Fidelity & Guar. Ins. Underwriters, Inc., 504 First, “it is beyond cavil Id. at 810 (citing, among others, Horace Thus, the Gray, 65 Second, “it is also clear that, under California 26 1 law, an insurer’s duty to defend extends to all suits that raise 2 the ‘possibility’ or ‘potential’ for coverage.” 3 Supp. 2d at 810 (citing Gray, 65 Cal. 2d at 275; CNA Casualty, 176 4 Cal. App. 3d at 606). 5 unplead facts that may give rise to new claims not yet asserted in 6 the lawsuit, Plaintiff is required to provide a defense. 7 Storek, 504 F. Thus, Defendants reason, because there are However, under the first principle, “the cases make it clear 8 that extrinsic evidence is sufficient to compel an insurer to 9 defend only when the evidence pertains to claims actually asserted United States District Court For the Northern District of California 10 by the third party.” 11 among others, Horace Mann, 4 Cal. 4th at 1081 (extrinsic facts 12 “give rise to a duty to defend when they reveal a possibility that 13 the claim may be covered by the policy” (emphasis added in 14 Storek)); El-Com Hardware, Inc. v. Fireman’s Fund Ins. Co., 92 15 Cal. App. 4th 205, 217 (2001) (“extrinsic facts known to the 16 insurer can generate a duty to defend” when “they reveal a 17 possibility the policy may cover the claim”). 18 provided here do not reveal that any claim actually asserted in 19 the Christiansen action might fall under the coverage of the 20 policy. 21 Storek, 504 F. Supp. 2d. at 811 (citing, The extrinsic facts Under the second principle, for a potential amendment “to 22 give rise to a liability that would be covered under the policy,” 23 it “must be supported by the facts already pled in the complaint.” 24 Upper Deck Co. v. Fed. Ins. Co., 358 F.3d 608, 615 (9th Cir. 2004) 25 (citing Olympic Club v. Those Interested Underwriters at Lloyd’s 26 London, 991 F.2d 497, 503 (9th Cir. 1993) (“Only amendments that 27 would include new causes of action clearly supported by the facts 28 already pled in the complaint may support a finding of potential 27 liability.”) (emphasis in original)); Low v. Golden Eagle Ins. 2 Co., 99 Cal. App. 4th 109, 113-14 (2002) (holding that there is no 3 duty to defend a claim for uncovered economic losses even if it 4 might later be amended to allege bodily injury); 5 Fire Ins. Exch., 37 Cal. App. 4th 1106, 1114 (1995) (“An insured 6 may not trigger the duty to defend by speculating about extraneous 7 ‘facts’ regarding potential liability or ways in which the third 8 party claimant might amend its complaint at some future date.”); 9 Hurley Constr. Co. v. State Farm Fire & Cas. Co., 10 Cal. App. 4th 10 United States District Court For the Northern District of California 1 533, 538 (1992) (“The insured may not speculate about unpled third 11 party claims to manufacture coverage.”)); see also Hudson Ins. Co. 12 v. Colony Ins. Co., 624 F.3d 1264, 1267-68 (9th Cir. 2010) (“These 13 cases concluded that there was no potential for coverage, not 14 because the complaint did not list a particular legal cause of 15 action, but because the complaint did not allege any facts 16 supporting a covered cause of action.”). 17 alleged in the complaint that could support an unplead but covered 18 cause of action. 19 that arise out of the fee dispute. Gunderson v. Here, no facts have been Instead, the allegations all relate to claims 20 Thus, although the Court must consider extrinsic facts that 21 relate to plead claims, and must consider facts plead that could 22 support unplead claims, it need not consider unplead facts 23 supporting only unplead claims. 24 812 (“there is no evidence to impose a duty to defend when the 25 underlying lawsuit sets forth neither the facts nor the legal 26 claims necessary to bring the lawsuit within the terms of the 27 policy”). 28 undertake a defense as to claims that are factually and legally See Storek, 504 F. Supp. 2d at “The duty to defend does not require an insurer to 28 1 untethered from the third party’s complaint.” 2 Am. Zurich Ins. Co., 830 F. Supp. 2d 953, 961 (E.D. Cal. 2011); 3 see also Microtec Research, Inc. v. Nationwide Mut. Ins. Co., 40 4 F.3d 968, 971 (9th Cir. 1994) (explaining there was no potential 5 for coverage where the third party knew about facts that could 6 have given rise to a potentially covered claim but elected to omit 7 such allegations and claims from the underlying suit). 8 Defendants are “not entitled to justify an argument for coverage 9 based on speculation about claims that have not been alleged or Burgett, Inc. v. United States District Court For the Northern District of California 10 asserted,” 11 Because 4th 976, 988 (2007), their arguments are unavailing. 12 Golden Eagle Ins. Corp. v. Cen-Fed Ltd., 148 Cal. App. Further, to the extent that Defendants argue that they may 13 uncover facts in discovery that may reveal that a claim is 14 covered, this argument is also not persuasive. 15 of potential coverage is made at the time the lawsuit is tendered 16 to the insurance company.” 17 omitted). 18 a potential for coverage, Defendants may submit a new tender of 19 defense to Plaintiff. 20 “The determination Upper Deck, 358 F.3d at 612 (citations If new extrinsic evidence were developed that revealed Id. at 613. If the Christiansen plaintiffs amend their complaint to add 21 claims not subject to this exclusion, Defendants may re-tender the 22 actions to Plaintiff for a defense. 23 taking into account the extrinsic facts offered, there is no 24 material dispute that the actions fall into this exclusion. 25 26 However, as currently plead, B. Gaining of personal profit or advantage to which insured was not entitled In its motion, Plaintiff also seeks a determination that it 27 has no duty to defend or indemnify Defendants under a provision 28 29 1 that excludes from the policy claims that are “[b]ased on or 2 directly or indirectly arising out of or resulting from . . . 3 [t]he gaining by any insured of any personal profit, gain or 4 advantage to which an insured is not legally entitled.” 5 In their opposition, Defendants correctly point out that this 6 exclusion further states, “However, we shall defend such 7 allegations against any insured if it involves a ‘claim’ otherwise 8 covered under the Policy until final adjudication.” 9 exclusion cannot be the only basis for disclaiming coverage for Thus, this United States District Court For the Northern District of California 10 the duty to defend. 11 this exclusion may serve an additional basis to deny coverage as 12 to both the duty to defend and the duty to indemnify. 13 Because the claims are not otherwise covered, The allegations in the underlying complaint arise out of 14 Defendants’ unlawful gaining of a profit or advantage to which 15 they were not entitled, by categorizing overhead expenses as 16 costs, by charging clients rates higher than the statutory limit 17 and by telling their clients that this was proper. 18 underlying actions also fall into this exclusion. 19 III. Defendants’ request to renew motion to stay and to delay adjudication of the instant motion for summary judgment 20 Thus, the Defendants request that they be allowed to renew their motion 21 for a stay and that this motion be denied as premature until they 22 have had an opportunity to conduct discovery in this case and 23 further discovery in the underlying cases. 24 Plaintiff’s motion for summary judgment was filed prior to 25 the deadline previously set by the Court for dispositive motions. 26 Shortly after the motion was filed, the Court issued an order 27 stating that the motion could be heard as noticed “as long as 28 30 1 Defendants are prepared to oppose it and neither party intends to 2 file another case-dispositive motion to be heard at a later date.” 3 Docket No. 44. 4 about the schedule and file an administrative motion if they were 5 unable to agree. 6 stipulation to change the briefing dates based on Defendants’ 7 counsel’s travel schedule. 8 did not represent that they were not prepared to oppose the 9 motion. United States District Court For the Northern District of California 10 The Court directed the parties to meet and confer Id. The parties subsequently filed a Docket No. 45. Defendants, however, In addition, Defendants have not submitted a declaration as 11 required under Federal Rule of Civil Procedure 56(d) to show that 12 they cannot present facts essential to justify their opposition or 13 that facts they would seek in discovery would entitle them to 14 relief. 15 diligent in seeking discovery; although Defendants state that they 16 have “not had the opportunity to conduct discovery” in this case, 17 their opposition was filed more than three months after the 18 initial case management conference was held. 19 previously noted, if the complaints in the state court actions are 20 amended, they may re-tender the defense to Plaintiff. They have also not made any showing that they were 21 22 23 24 25 26 27 28 31 Further, as 1 2 3 4 5 6 CONCLUSION For the reasons set forth above, the Court GRANTS Plaintiff’s motion for summary judgment (Docket No. 42). The Clerk shall enter judgment and close the file. Plaintiff shall recover its costs from Defendants. IT IS SO ORDERED. 7 8 9 Dated: 4/3/2013 CLAUDIA WILKEN United States District Judge United States District Court For the Northern District of California 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 32

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