Accident Insurance Company v. Classic Building Design, LLC et al

Filing 185

ORDER STAYING CASE pending final resolution of Martha Pace's crossclaims against Classic. The stay will be lifted in the event Martha Pace fails to appeal the Court's Judgment 183 within the applicable period of time for filing an appeal, or if an appeal from the Judgment results in the affirmance of the Court's dismissal of Pace's crossclaims. Signed by District Judge Keith Starrett on October 15, 2012 (dsl)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
HATTIESBURG DIVISION

ACCIDENT INSURANCE COMPANY
VERSUS

PLAINTIFF
CIVIL ACTION NO. 2:11cv33KS-MTP

CLASSIC BUILDING DESIGN, LLC, et al.

DEFENDANTS

OPINION AND ORDER
This matter is before the Court sua sponte for case management purposes. For
the reasons stated below, the Court finds that proceedings on Accident Insurance
Company’s (“AIC”) insurance coverage claims should be stayed pending final resolution
of Martha Pace’s crossclaims against Classic Building Design, LLC and Robert D.
Brewer (collectively referred to as “Classic”).
On September 7, 2011, the Court bifurcated the insurance coverage issues,
including Classic’s third-party claims against Danny Wilks and Danny Wilks Insurance
Agency, LLC (collectively referred to as “Wilks”), from Martha Pace’s crossclaims
against Classic for purposes of trial. (See Order [77].) The Court further held that
Pace=s crossclaims were to be tried prior to the coverage action.
On September 7, 2012, the Court granted summary judgment in favor of Classic
and dismissed Martha Pace’s crossclaims with prejudice. (See Memorandum Opinion
and Order [175].) Pace and Classic subsequently requested that the Court enter final
judgment on the dismissal of the crossclaims pursuant to Federal Rule of Civil
Procedure 54(b). On October 9, 2012, the Court granted Classic and Pace’s Rule 54(b)
request and entered final judgment. (See Judgment [183].)

In conjunction with granting summary judgment in favor of Classic, the Court
requested that the parties advise it of their respective positions as to whether new case
management deadlines and a trial date are necessary for the resolution of the insurance
coverage claims. AIC and Classic have taken different positions as to whether the
insurance claims should proceed at this time.1 AIC requests a case management
conference so that the insurance coverage matter may be placed on an active trial
docket. Classic asks that the insurance claims be stayed until Martha Pace’s underlying
liability claims are finally resolved through her expected appeal or otherwise. Wilks has
joined in Classic’s request. (See Wilks’ Joinder [181].)
“A district court has the inherent power to stay its proceedings.” Hood ex rel.
Miss. v. Microsoft Corp., 428 F. Supp. 2d 537, 541 (S.D. Miss. 2006). The “authority to
issue a stay ‘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 itself, for counsel, and for
litigants’”. Ambraco, Inc. v. Bossclip B.V., 570 F.3d 233, 243 (5th Cir. 2009) (quoting
Landis v. N. Am. Co., 299 U.S. 248, 254-55, 57 S. Ct. 163, 81 L. Ed. 153 (1936)). In
considering a stay of proceedings, the district court should weigh the potential benefits
of a stay against any burdens that may arise from delayed adjudication. See Landis,
299 U.S. at 259.
The Court finds noteworthy two potential benefits identified by Classic relating to
the proposed stay of the insurance coverage portion of this action pending resolution of
Martha Pace’s expected appeal. First, litigation expenses and judicial resources will be

1

It does not appear that Pace has taken a position on the issue.
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saved if the United States Court of Appeals for the Fifth Circuit affirms the dismissal of
the underlying liability claims. There will be no need to litigate whether AIC owes
Classic a duty of indemnification with respect to Pace’s crossclaims in the event of such
a ruling. Further, Classic has advised that it will likely dismiss its claims against Wilks if
the Fifth Circuit upholds the Court’s grant of summary judgment.
The second potential benefit to entering a stay arises if the Fifth Circuit reverses
this Court’s grant of summary judgment in favor of Classic. Counsel for AIC previously
advised Judge Parker “that there are factual issues material to both the coverage
litigation and the underlying litigation that, if explored for the first time as part of the
coverage litigation, may adversely affect Classic, AIC’s insured . . . .” (See August 22,
2011 Letter [76-2].) AIC’s initial concerns could come to pass if a stay is not entered
and the Fifth Circuit reverses the dismissal of the underlying liability claims. In that
instance, the coverage action would almost certainly be tried first since discovery has
proceeded on the insurance issues in conjunction with discovery on the liability issues.
Entering a stay on the insurance claims at this time would ensure that the liability claims
are resolved first and negate AIC’s initial concerns regarding prejudice to its insured.
This result would also be consistent with the Court’s prior ruling that the trial on liability
is to occur before the trial on insurance coverage. (See Order [77].)
AIC has not identified any burdens associated with a stay of proceedings on the
insurance claims. Instead, AIC contends that Classic will not suffer any prejudice if the
insurance dispute is allowed to go forward. (See AIC’s Reply [180] at ¶¶ 4-8.) AIC’s
present position ignores the possibility of the Fifth Circuit reversing this Court’s grant of
summary judgment and remanding Martha Pace’s crossclaims for trial. As noted
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above, the insurance coverage claims would likely be tried first in that event. AIC, in
conjunction with Classic, previously requested that Martha Pace’s crossclaims be tried
before the insurance coverage issues. (See Classic’s Motion to Stay Discovery and
Claims of AIC for Declaratory Relief [63]; AIC’s Joinder [64].) AIC’s change of position
is not well taken. The Court finds that the benefits of a stay of the insurance claims
outweigh any potential prejudice to AIC. Thus, a stay of proceedings should be entered
pursuant to the Court’s inherent power to control and manage the course of litigation on
its docket.
Although not yet applicable, a stay of proceedings is also warranted under the
four-factor test for granting a stay of an order pending appeal referenced in In re First
South Savings Ass’n, 820 F.2d 700 (5th Cir. 1987).2 The four factors are as follows:
(1) whether the movant has made a showing of likelihood of success on the
merits; (2) whether the movant has made a showing of irreparable injury if
the stay is not granted; (3) whether the granting of the stay would
substantially harm the other parties; and (4) whether the granting of the stay
would serve the public interest.
In re First S. Savings Ass’n, 820 F.2d at 709 (citing Ruiz v. Estelle, 666 F.2d 854, 856
(5th Cir. 1982)). Classic, the party requesting a stay, is likely to succeed on the merits
of Pace’s expected appeal for the same reasons the Court granted Classic summary
judgment. (See Memorandum Opinion and Order [175] at pp. 34-43.) Although the
Court does not perceive any “irreparable injury” to Classic if its stay request is denied,
2

Martha Pace’s expected appeal has yet to be filed. Further, some courts have
found that the four-factor test generally applies to determine whether a stay of a
judgment or order is appropriate, as opposed to a stay of proceedings. See Cardenas
v. Americredit Fin. Servs. Inc., No. C 09-04978, 2011 WL 846070, at *2 (N.D. Cal. Mar.
8, 2011) (citing cases). Classic has not requested that the Court’s Judgment [183]
dismissing Martha Pace’s crossclaims be stayed.
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no party has alleged that it will be substantially harmed or prejudiced by a stay.
Therefore, the second and third factors basically cancel each other out and are thus
neutral. Finally, the public interest favors a stay of proceedings in light of the possibility
that appellate resolution of the underlying liability claims will moot the necessity of
litigating some or all of the insurance coverage issues. “[C]onsiderations of judicial
economy counsel, as a general matter, against investment of court resources in
proceedings that may prove to have been unnecessary.” Sutherland v. Ernst & Young
LLP, 856 F. Supp. 2d 638, 644 (S.D.N.Y. 2012) (finding the public interest served by a
partial stay where an appeal could dispose of the remaining issues in the district court).
The balance of the above-listed factors weighs in favor of a stay of proceedings.
IT IS THEREFORE ORDERED AND ADJUDGED that proceedings on the
insurance coverage claims at issue in this action, including Classic’s third-party claims
against Wilks, are stayed pending final resolution of Martha Pace’s crossclaims against
Classic. The stay will be lifted in the event Martha Pace fails to appeal the Court’s
Judgment [183] within the applicable period of time for filing an appeal, or if an appeal
from the Judgment results in the affirmance of the Court’s dismissal of Pace’s
crossclaims.
SO ORDERED AND ADJUDGED this the 15th day of October, 2012.
s/Keith Starrett
UNITED STATES DISTRICT JUDGE

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