Illinois National Insurance Company v. National Union Fire Insurance Company of Pittsburgh, PA. et al

Filing 145

ORDER DENYING DEFENDANT'S MOTION TO CERTIFY QUESTION TO HAWAII SUPREME COURT denying 104 ; 110 - Signed by CHIEF JUDGE SUSAN OKI MOLLWAY on 1/14/13. (emt, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
ILLINOIS NATIONAL INSURANCE
COMPANY, ET AL.,

)
)
)
Plaintiffs,
)
)
vs.
)
)
NORDIC PLC CONSTRUCTION,
)
INC.,
)
)
Defendant.
)
_____________________________ )

CIVIL. NO. 11-00515 SOM/KSC
ORDER DENYING DEFENDANT’S
MOTION TO CERTIFY QUESTION TO
HAWAII SUPREME COURT

ORDER DENYING DEFENDANT’S MOTION TO CERTIFY QUESTION
TO HAWAII SUPREME COURT
I.

INTRODUCTION.
This case involves an insurance dispute arising out of

alleged construction defects.

Before the court is a motion by

Defendant/Counterclaim Plaintiff Nordic PCL Construction Inc.
(“Nordic”) to certify a proposed question to the Hawaii Supreme
Court (the “Motion”).
II.

The court denies Nordic’s Motion.

BACKGROUND.
Plaintiffs/Counterclaim Defendants Illinois National

Insurance Company and National Union Fire Insurance Company of
Pittsburgh, PA (collectively, the “Insurers”), commenced this
declaratory action seeking rulings concerning two insurance
policies (the “Policies”).

Nordic, the insured, was seeking

coverage with respect to (1) work done to address alleged defects

in Nordic’s construction of the Moanalua Shopping Center; and (2)
a construction defect lawsuit arising out of Nordic’s
construction of a Safeway grocery store.1
counterclaimed against the Insurers.

ECF No. 1.

Nordic

ECF No. 10.

This court’s first substantive ruling addressed, among
other issues, whether the Moanalua claim and the Safeway
litigation involved covered “occurrences.”

ECF No. 69.

The

court determined that the alleged construction defects were not
“occurrences” as defined by either the Intermediate Court of
Appeals in Group Builders, Inc. v. Admiral Insurance Co., 123
Haw. 142, 231 P.3d 67 (Ct. App. 2010) (“Group Builders”), or the
Ninth Circuit in Burlington Insurance Co. v. Oceanic Design &
Construction, Inc., 383 F.3d 940, 944 (9th Cir. 2004)
(“Burlington”).

Id. at 15-16.

This court concluded: “Bound by

the Ninth Circuit’s decision in Burlington, this court agrees
with the Insurers that the underlying damage was not caused by
any “occurrence” as defined in the main coverage provisions of
the Policies.”

Id. at 16.

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The court has previously addressed the factual and procedural
background of this case at length. See Order Granting
Counterclaim Defendants’ Motion to Dismiss Counterclaim
Plaintiff’s First Amended Counterclaim, ECF No. 119; Prior
Dismissal Order, ECF No. 69. The court incorporates the facts
and procedural history set forth in its prior orders by reference
and repeats only the most salient details here.
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The court further explained in that earlier order:
“While Nordic and Marsh say the Ninth Circuit misconstrued Hawaii
law, it is futile for them to seek this court’s departure from
the Ninth Circuit’s analysis.”

Id. at 23. Finally, the court

rejected Nordic’s argument that House Bill No. 924, passed by the
legislature as Act 83 in 2011, nullified Group Builders.
25-27.

Id. at

Although the legislature noted that Act 83 was intended

to restore insureds to their reasonable coverage expectations
before Group Builders was decided in 2010, this court explained
that the Ninth Circuit had decided Burlington in 2004, so it
could not be said to have created new confusion or to have
suddenly upset insureds’ settled expectations when the Policies
in issue in the present case were purchased in 2007.

Id. at 27.

Nordic and Third-Party Defendant Marsh USA, Inc.
(“Marsh”), moved separately for reconsideration by this court.
ECF Nos. 70 and 74.

This court denied both motions, reiterating

that this court “continues to read Burlington as controlling.”
ECF No. 83 at 3.
On May 27, 2012, Nordic filed an amended counterclaim
asserting, among other things, that contract-based construction
defect claims triggered coverage pursuant to the “productscompleted operations hazard” (“PCOH”) provisions of the Policies

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even without an occurrence.

ECF No. 84.

dismiss the amended counterclaim.

The Insurers moved to

On October 31, 2012, this

court issued an order that included a dismissal of the contract
claim in Nordic’s amended counterclaim on the grounds that PCOH
coverage is subject to the same “occurrence” requirement as nonPCOH coverage.

ECF No. 119.

While the insurers’ motion to dismiss the amended
counterclaim was pending, Nordic filed the present Motion,
seeking certification to the Hawaii Supreme Court of the
following question (the “Question”):
In light of Group Builders, Inc. v. Admiral
Insurance Co., 123 Hawai`i 142, 231 P.3d 67
(2010), and Act of 2011, No. 83, 26th Leg.,
Reg. Sess. (2011), enacted as Haw. Rev. Stat.
§ 431:1-217, does a standard form ISO
Commercial General Liability insurance policy
that includes “Products/Completed Operations”
coverage, in the absence of an applicable
policy exclusion, provide coverage for claims
of property damage to the completed work of
an insured if such damage arises out of the
deficient performance of a construction
contract by the insured or its subcontractor?

ECF No. 104 at 5.

Nordic urges this court to certify its

Question because Hawaii judicial decisions allegedly do not
provide controlling precedent and the Hawaii Supreme Court’s
answer would determine the claims in this case.

Id. at 17-22.

Nordic also claims that certification would conserve judicial

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resources and promote cooperative federalism.

Id. at 22-28.

The

court disagrees.
III.

STANDARD OF REVIEW.
Whether a question should be certified to a state

supreme court is a matter of judicial discretion.

See Riordan v.

State Farm Mut. Auto Ins. Co., 589 F.3d 999, 1009 (9th Cir.
2009).

This court may certify a question to the Hawaii Supreme

Court when: (a) there is a question concerning Hawaii law; (b)
the question is determinative of the cause; and (c) there is no
clear controlling precedent in Hawaii judicial decisions.
R. App. P. 13(a).

Haw.

Certification is inappropriate when the law is

“reasonably clear such that the court can readily predict how the
Hawaii Supreme Court would decide the issue.”

Saiki v. LaSalle

Bank Nat’l Ass’n, 2011 WL 601139, at *6 (D. Haw. Feb. 10, 2011).
Moreover, “[t]here is a presumption against certifying a question
to a state supreme court after the federal district court has
issued a decision.”
(9th Cir. 2008).

Thompson v. Paul, 547 F.3d 1055, 1064-65

This is because “[a] party should not be

allowed ‘a second chance at victory’ through certification by the
appeals court after an adverse district court ruling.”

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Id.

IV.

ANALYSIS.
Nordic filed this Motion after the court had dismissed

its original counterclaim and denied its reconsideration motion.
See ECF Nos. 69 and 83.

In issuing these prior rulings, this

court had to have found the applicable law reasonably clear.
Saiki, 2011 WL 601139, at *6.

See

Having filed this motion only

after this court had already ruled against it on the “occurrence”
issue, Nordic must overcome the presumption against certification
of a question addressed by an adverse ruling.
F.3d at 1064-65.

See Thompson, 547

Nordic does not succeed at overcoming the

presumption.
Nordic begins its Motion by assuring the court that the
Hawaii Supreme Court’s response to its Question would satisfy
Rule 13(a)’s requirement of being “determinative of the cause.”
Motion at 16.

While it is true that this necessary prerequisite

for certification would be met with respect to the issue of
whether the Policies do or do not provide coverage, that issue is
not all there is to this lawsuit; Nordic’s amended counterclaim
included other claims that Nordic is now seeking to reassert via
a pending motion for leave to file a second amended counterclaim.
It is not at all clear from the briefs filed in this
lawsuit that Nordic satisfies the “determination of the cause”

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requirement just because the response to the Question would
determine the contract cause of action.

“Cause” might refer to

the entire case, as opposed to one of the claims.

Thus, it has

been said that “no man shall be a judge in his own cause,”
meaning that no man shall act as the judge in his own case.
Treating “cause” as referring to a single cause of action would
mean that the requirement would be satisfied even if other claims
not affected by the Question might yield the same recovery.
Nordic might, for example, prevail on a misrepresentation claim,
and the damage award on such a claim might include amounts that
could be recovered on a contract claim.

If that were to occur,

the Hawaii Supreme Court might think it unnecessary or unwise for
it to determine the contract issue.
Even if the Question would determine the “cause,”
certification also requires that there be no clear controlling
precedent in Hawaii judicial decisions.

Nordic says, “At most, a

federal court might consider itself bound to follow Burlington in
the absence of a Hawai`i Supreme Court decision adopting a
contrary rule.”

Id. at 18.

Nordic follows this assertion with a

lengthy footnote that asserts, “The vitality of Burlington is not
settled even in this district.”

Id. at n.6.

In support of this

assertion, Nordic points to National Union Fire Insurance. Co. of

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Pittsburgh, PA v. Simpson Manufacturing Co., 829 F. Supp. 2d 914,
924 (D. Haw. 2011) (“National Union”), decided by Judge Alan C.
Kay, and Evanston Insurance Co. v. Nagano, 2012 WL 3800320 (D.
Haw. Aug. 31, 2012), decided by Judge Leslie E. Kobayashi.

But

neither National Union nor Nagano even begins to question the
vitality of Burlington.

Rather, National Union says that “the

state of Hawaii insurance law is very much in flux given Group
Builders and H.B. 924 [Act 83],” but says nothing about
application of Burlington to policies issued before Group
Builders was decided or Act 83 passed.

The Nagano decision,

quoting this court’s prior order in this case, rejected the idea
that any confusion concerning Burlington was warranted.

Nagano

involved policies issued in 2002, before Group Builders was
decided or Act 83 passed.

See Nagano, 2012 WL 3800320, at *14.

Nor is this court persuaded to certify the Question
based on Nordic’s assertion that a state trial judge has recently
ruled in Nordic’s favor on the “occurrence” issue.

This court

has only what has been submitted to it by the parties in that
regard.

Those submissions include transcript pages but no

written order.

The transcript pages do not appear to this court

to reflect a definitive legal ruling on the “occurrence” issue.
Instead, it appears to this court that the state trial judge was

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saying that he could not determine whether there had been an
occurrence because the factual record needed further development.
At most, the state trial judge indicated that Group
Builders was not binding in the wake of Act 83.
of Proceedings, 104-14 at 76.

See Transcript

As Nordic puts it, “Intermediate

Court of Appeals decisions are of course binding on all lower
courts in Hawai`i” but the trial court nevertheless “did not
follow Group Builders because it perceived that Act 83 abrogated
the analytical approach of Group Builders.”

Motion at 19.

This

court remains “puzzled by Nordic’s argument that a state trial
court’s decision, while admittedly not controlling, should stop
this or any other trial court in its tracks.”
Motion for Reconsideration at 10.

Order Denying

That is, while urging this

court not to follow the Hawaii ICA (or the Ninth Circuit), Nordic
urges this court to follow a trial court.

Interestingly, that

state trial court declined to allow the parties to present the
“occurrence” issue to the Hawaii Supreme Court before the
conclusion of the case.

See Motion at 13 (“Judge Chang declined

to immediately reserve the ‘Group Builders’ question of law to
the Hawai`i Supreme Court, however, commenting that there is a
potential for multiple appeals in the case.”).

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Nordic now asks

this court to do, in essence, what the state trial judge would
not do.
Notably, the very state case that Nordic points to does
provide a vehicle for ultimate presentation of the “occurrence”
issue to the Hawaii Supreme Court in the normal course.

The

pendency of that action makes it unnecessary for Nordic to have
the Question certified.

This court has, at present, no reason to

think that trial, much less final judgment, in the present case
will precede trial or final judgment in the ongoing state case.
Finally, Nordic argues that this court should certify
the Question to conserve judicial resources and promote
cooperative federalism.

In making this argument, Nordic relies

on Arizonans for Official English v. Arizona, 520 U.S. 43 (1997),
which this court views as inapposite.
In Arizonans, a state employee filed a federal action
against the state of Arizona and various state officials
challenging Article XXVIII of the Arizona’s constitution as
violative of the First Amendment.

Article XXVIII was a new

provision that declared English the official language of Arizona.
The employee said she feared that the provision would subject her
to disciplinary action if she spoke Spanish at work.
50.

Id. at 49-

The federal district court, finding Article XXVIII’s

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language “plain,” denied the Arizona Attorney General’s request
to certify to the Arizona Supreme Court the question of how to
construe Article XXVIII.

Id. at 56.

The district court then

ruled that Article XXVIII was unconstitutional.
Circuit affirmed.

The Ninth

The matter was then heard en banc by the Ninth

Circuit, which again affirmed, holding that the provision was
facially overbroad.

The Supreme Court dismissed the case for

mootness, but not without criticizing both lower federal courts
for having “refused to invite the aid of the Arizona Supreme
Court because they found the language of [the Article] ‘plain.’”
Id. at 77.
order.

The Court explained: “A more cautious approach was in

Through certification of novel or unsettled questions of

state law for authoritative answers by a State’s highest court, a
federal court may save time, energy, and resources and help build
a cooperative judicial federalism.”

Id. (internal quotations and

alterations omitted).
Unlike the Arizonans case, this case does not require
exploration of uncharted territory.

The issue raised by the

Policies has been reviewed by the Ninth Circuit.

While Act 83 is

new, it clearly provides that the law applicable before Group
Builders remains in effect.

Burlington was not only decided

before Group Builders, it discussed Hawaii law then in effect.

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Nor would certification of the Question necessarily
save time, money, or resources.

It may be that Nordic prevails

on other claims that make Nordic whole, possibly more quickly and
economically than if the present case were stayed while awaiting
a response from the Hawaii Supreme Court to the Question and then
unstayed for continued proceedings following that response.
Nordic’s federalism argument is equally unavailing.
All of the cases that Nordic cites in this regard address a
district court’s inability to predict how the state supreme court
would rule.

This district court has such a prediction from the

Ninth Circuit and from the ICA!
V.

CONCLUSION.
For the foregoing reasons, the court declines to

certify the Question to the Hawaii Supreme Court.

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IT IS SO ORDERED.
DATED: Honolulu, Hawaii, January 14, 2013

/s/ Susan Oki Mollway
Susan Oki Mollway
Chief United States District Judge

Illinois National Insurance Company, et al. v. Nordic PLC Construction, Inc., 11-CV0515 SOM-KSC, ORDER DENYING DEFENDANT’S MOTION TO CERTIFY QUESTION TO HAWAII SUPREME
COURT

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