Murcia et al v. Spirit Commercial Auto Risk Retention Group, Inc, et al

Filing 23

ORDER AND REASONS GRANTING 18 Motion to Stay; 22 Motion to Withdraw as Attorney. This case is hereby STAYED for the duration of the receivershipproceedings. Attorneys Michael Joseph Gautier, Jr and Jeffrey Scott Loeb terminated. Signed by Judge Sarah S. Vance on 5/24/2019. (jeg)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
WALTER ALEXANDER MURCIA, ET
AL.
VERSUS

CIVIL ACTION
NO. 18-4938

SPIRIT COMMERCIAL AUTO RISK
RETENTION GROUP INC., ET AL.

SECTION “R” (1)

ORDER AND REASONS
Before the Court are: (1) defendants’ motion to stay and (2) defendants’
counsel’s ex parte motion to withdraw as counsel.1 Because defendant Spirit
Commercial Auto Risk Retention Group, Inc. (Spirit) has been put into a
receivership in Nevada state court, the Court grants the motions.

I.

BACKGROUND
This case arises from a car accident.2 Plaintiffs—Walter Alexander

Murcia, Harley Curtis, and Walter Murcia on behalf of himself and his minor
child—allege that they were traveling on Interstate 12 on March 21, 2018,
when defendant Kent Orr allegedly rear-ended their car.3 Plaintiffs filed a

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2
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R. Doc. 18; R. Doc. 22.
R. Doc. 1-1.
Id. at 2 ¶ 3.

petition for damages in Tangipahoa Parish on April 4, 2018, claiming
negligence against Orr, his employer WJ Express, Inc., and his employer’s
insurance company, Spirit.4 Defendants removed the case to this court on
the basis of diversity jurisdiction on May 15, 2018.5
On February 27, 2019, defendants filed a notice of temporary
receivership and a motion to stay the proceedings.6 Defendants explained
that a Nevada state court had appointed a temporary receiver for Spirit, an
initial step in a rehabilitation or liquidation process for troubled insurance
companies, pursuant to state law.7

As is typical, the Nevada court

temporarily enjoined all claims against Spirit seeking the company’s assets.8
The order appointing the temporary receiver states, “all persons are
immediately enjoined from the commencement or prosecution of any actions
by or on behalf of the Insurer, or against the Insurer, and the receivership
court will have exclusive jurisdiction over any actions involving the Receiver
or Insurer.”9 In light of the injunction, defendants sought a temporary 60-

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5
6
7
8
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Id. ¶¶ 5-6.
R. Doc. 1.
R. Doc. 18.
R. Doc. 18-2 at 1-2.
Id. at 2.
R. Doc. 18-1 at 2.
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day stay until the temporary receivership proceedings progressed.10
Plaintiffs did not respond to the motion.
On May 15, 2019, defendants’ counsel, the Loeb Law Firm, notified the
Court that Spirit had been placed in a permanent receivership and sought to
withdraw as counsel due to unpaid fees.11 Like the Nevada court’s earlier
order, the order appointing the permanent receiver provides, “all claims
against the Property must be submitted to the Receiver as specified herein to
the exclusion of any other method of submitting or adjudicating such claims
in any forum, court, arbitration proceeding, or tribunal subject to the further
Order of this Court.”12 The order also permanently enjoins “persons or
entities of any nature including . . . claimants [and] plaintiffs” from
“[c]ommencing, bringing, maintaining, or further prosecuting any action at
law, suit in equity, arbitration, or special proceeding against [Spirit] or its
estate.”13

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R. Doc. 18-2 at 2.
R. Doc. 22.
R. Doc. 22-1 at 7 ¶ 10.
Id. at 8 ¶ 13.
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II.

DISCUSSION
When a state court puts a troubled insurance company into

receivership proceedings, that court has “the task of providing for an orderly
liquidation of an insolvent company and the preservation of its remaining
assets.” Janak v. Allstate Ins. Co., 318 F. Supp. 215, 218 (W.D. Wis. 1970).
To avoid interfering with these proceedings, in which many claimants may
be seeking to recover funds from a limited pool of assets, the Fifth Circuit has
held that, “federal policy . . . directs that the control over the insurance
business remain in the hands of the states,” and “[a]n orderly liquidation
requires that [federal courts] not interfere with the order” of the receivership
court. Anshutz v. J. Ray McDermott Co., Inc., 642 F.2d 94, 95 (5th Cir.
1981). In these instances, a stay pending the conclusion of state receivership
proceedings and dissolution of the state court injunction is “the proper
course.” Id.; see also Indep. Petrochemical Corp. v. Aetna Cas. and Sur. Co.,
672 F. Supp. 1, 6 (D.D.C. 1986) (staying federal case for the duration of
rehabilitation and liquidation proceedings); Integrity Ins. Co. v. Martin, 105
Nev. 16, 18 (Nev. 1989) (“Nevada has adopted the UILA . . . [which]
authorizes the court in which a delinquency proceeding was instituted to
enjoin all claims against the insurer, including claims existing prior to an
order of liquidation.”). Thus, in order to ensure an orderly receivership
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process and to avoid interference with the state court’s custody over Spirit’s
assets, the Court orders this case stayed pending the conclusion of
receivership proceedings and reversal of the injunction by the Nevada state
court.
This stay shall apply to all litigation in this case. Plaintiffs have not
requested that the Court sever their claims against Orr and WJ Express, Inc.,
and the Court finds that, in the interest of the judicial economy, their claims
should not be severed given how closely connected the claims are. See Nester
v. Textron, Inc., 888 F.3d 151, 162 (5th Cir. 2018) (whether to sever certain
claims in a matter “is a matter within the sole discretion of the trial court”).
A finding of liability against Orr and WJ Express, Inc. may affect the orderly
distribution of assets in the state proceeding if WJ Express makes a claim in
that proceeding against Spirit as a policy-holder to cover that liability. Thus,
the claims against the other defendants are too closely related to a claim
against Spirit’s assets for the Court to proceed on those claims while the
receivership proceedings are ongoing. See Blevins v. Sheshadri, No. 02-43,
2003 WL 21145689, at *2 (W.D. Va. May 16, 2003) (staying case against all
defendants when insurer was in receivership proceedings “because of the
close interrelation of the claims that are the subject of this case”); Guar.
Residential Lending, Inc. v. Homestead Mortg. Co., No. 04-74842, 2009 WL
5

5214877, at *3-*4 (E.D. Mich. Dec. 28, 2009) (staying all litigation due to
FDIC bank receivership because the claims were “inextricably intertwined,”
and a stay against all defendants was necessary “for the purposes of judicial
economy”). The Court therefore finds that the case must be stayed against
all defendants pending the conclusion of receivership proceedings and
reversal of the injunction by the Nevada state court.
Finally, the Court also finds that the Loeb Law Firm has met the
requirements to withdraw under Local Rule 83.2.11. Accordingly, J. Scott
Loeb, Esq., Michael J. Gautier, Jr., and the Loeb Law Firm may withdraw as
counsel for defendants.

III. CONCLUSION
In light of the permanent injunction and order appointing a permanent
receiver of defendant Spirit Commercial Auto Risk Retention Group, Inc. in
the Eighth Judicial District Court of Nevada, defendants’ motion to stay and
defendants’ counsel’s ex parte motion to withdraw as counsel are
GRANTED. This case is hereby STAYED for the duration of the receivership
proceedings.

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New Orleans, Louisiana, this _____ day of May, 2019.
24th
_____________________
SARAH S. VANCE
UNITED STATES DISTRICT JUDGE

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