Gladd et al v. Landmark Logistics Inc et al

Filing 14

ORDER denying 5 Motion to Stay Action During Conservation Proceedings. Signed by Honorable Timothy D. DeGiusti on 10/28/2016. (mb)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
CAMERON DAVID GLADD and
SHELBY GLADD, husband and wife,
Plaintiffs,
v.
LANDMARK LOGISTICS, INC.,
a foreign corporation, and
SATNAM SINGH, an individual,
Defendants.

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Case No. CIV-16-894-D

ORDER
Before the Court is Defendant Satnam Singh’s Motion to Stay Action During
Conservation Proceedings [Doc. No. 5]. Defendant Singh asks the Court to exercise its
inherent discretion to grant a stay of this case pending the resolution of a California
conservatorship proceeding regarding CastlePoint National Insurance Company
(“CastlePoint”). This insurer, although not a party, is allegedly obligated by an insurance
policy issued to Defendant Landmark Logistics, Inc. (“Landmark”) to provide a defense of
this action. See Jones v. CastlePoint Nat’l Ins. Co., Case No. CPF-16-515183 (Cal. Super.
Ct.).1 Defendant Singh also relies on Grimes v. Crown Life Ins. Co., 857 F.2d 699, 704 (10th
Cir. 1988), which addressed appropriate circumstances for applying the federal abstention

1

Plaintiffs’ case was filed in state court and removed by Defendant Singh, who stated that Landmark
had not been served. When the Motion was filed, Landmark had not appeared or responded to Plaintiffs’
pleading, and no proof of service had been made. On October 11, 2016, Landmark answered the petition but
remained silent regarding a stay. Landmark has not moved for a stay or joined the Motion.

doctrine recognized in Burford v. Sun Oil Co., 319 U.S. 315 (1943), to prevent interference
with a state insurance receivership matter.
Plaintiffs have timely opposed the Motion on the grounds that CastlePoint is not a
party to this action, an injunction issued by the California court does not impact this case, and
neither a discretionary stay of their negligence action against Defendants nor abstention is
warranted. Plaintiffs argue, and the Court agrees, that appropriate circumstances warranting
Burford abstention are not present in this case. See Grimes, 857 F.2d at 703-04 (abstention
avoids disruption of a complex state regulatory scheme for liquidating insolvent insurers).2
Notably, Burford abstention would require remand or dismissal of the action, and not merely
a stay. See id. at 707 & n.11 (abstention results in remand of removed case); Burford, 319
U.S. at 334 (affirming dismissal due to abstention).

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In Grimes, the Tenth Circuit determined Burford abstention was appropriate in a dispute regarding
a reinsurance contract, which arose in a state insurance liquidation proceeding, based on four factors:
(1) whether the suit is based on a cause of action which is exclusively federal; (2) whether
the suit requires the court to determine issues which are directly relevant to the liquidation
proceeding or state policy in the regulation of the insurance industry; (3) whether state
procedures indicate a desire to create special state forums to regulate and adjudicate these
issues; and, (4) whether difficult or unusual state laws are at issue . . . .
Id. at 704-05 (citations omitted). The issues in Grimes involved the interpretation of state statutes, including
one “inseparably related” to the liquidation proceeding, and the effect of a prior decision of the insurance
commissioner, involving a “fundamental and important question of state law and policy.” Id. at 705-06.
Consistent with Grimes, the Supreme Court later narrowed Burford abstention to protect a complex state
regulatory scheme from federal interference “(1) when there are difficult questions of state law bearing on
policy problems of substantial public import whose importance transcends the result in the case then at bar;
or (2) where the exercise of federal review of the question in a case and in similar cases would be disruptive
of state efforts to establish a coherent policy with respect to a matter of substantial public concern.” See New
Orleans Pub. Serv., Inc. v. Council of City of New Orleans, 491 U.S. 350, 361 (1989).

2

Defendant Singh has filed a reply brief that provides additional information regarding
developments in the CastlePoint conservatorship case in California.3 Defendant Singh also
argues that permitting this case to proceed 1) will affect the assets of CastlePoint, which
owes him a defense and may lack sufficient funds to pay for it, 2) will disrupt the orderly and
efficient payment of claims against CastlePoint in the conservatorship proceeding, and
3) would be an inefficient use of judicial and litigants’ resources. He contends the Oklahoma
Property and Casualty Insurance Guaranty Association may become involved with his and
Landmark’s claims against CastlePoint, and a stay of litigation under Okla. Stat. tit. 36,
§ 2020 may occur.
The parties agree that a federal district court has discretionary authority to stay a
proceeding pending before it. “[T]he power to stay proceedings 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.” Landis v. North Am. Co., 299
U.S. 248, 254 (1936); see Pet Milk Co. v. Ritter, 323 F.2d 586, 588 (10th Cir. 1963)
(describing principle as “well settled”). The utilization of this power “calls for the exercise

3

On September 13, 2016, the presiding judge approved a conservation plan and related agreements,
and authorized California’s insurance commissioner, as conservator, to cancel CastlePoint’s existing stock
and reissue new stock, to create a trust to hold the new stock and other assets of CastlePoint, to administer
the trust and distribute assets according to the priorities of California law, and to use CastlePoint’s assets to
satisfy liabilities. See Def.’s Reply Br., Ex. 1 [Doc. No. 8-1], ¶ 11. Persons with claims against CastlePoint
have recourse only against CastlePoint’s assets according to statutory priorities, under which claims of
policyholders and the California Insurance Guarantee Association (or similar associations in other states)
are second only to expenses of administration. See id. ¶ 22; see also Cal. Ins. Code, § 1033. No order of
liquidation has been issued, but the conservator may apply for one if deemed advisable. See Def.’s Reply
Br., Ex. 1 [Doc. No. 8-1], ¶ 19.

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of judgment, which must weigh competing interests and maintain an even balance.” Landis,
299 U.S. at 254-55. A party seeking to stay litigation until a separate controversy is
concluded “must make out a clear case of hardship or inequity in being required to go
forward, if there is even a fair possibility that the stay for which he prays will work damage
to some one [sic] else.” Landis, 299 U.S. at 255; see Commodity Futures Trading Comm’n
v. Chilcott Portfolio Mgmt., Inc., 713 F.2d 1477, 1484 (10th Cir. 1983) (“where a movant
seeks relief that would delay court proceedings by other litigants he must make a strong
showing of necessity because the relief would severely affect the rights of others”). The
court of appeals has provided guidance regarding appropriate factors for consideration where
a stay is sought due to the pendency of another judicial proceeding:
In assessing the propriety of a stay, a district court should consider: whether
the defendants are likely to prevail in the related proceeding; whether, absent
a stay, the defendants will suffer irreparable harm; whether the issuance of a
stay will cause substantial harm to the other parties to the proceeding; and the
public interests at stake.
United Steelworkers of Am. v. Oregon Steel Mills, Inc., 322 F.3d 1222, 1227 (10th Cir.
2003).
Considering these factors here, the Court finds no basis to determine whether
Defendants’ insurance claims against CastlePoint are likely to be satisfied in the California
convervatorship or any ancillary proceeding. Defendant Singh does not assert or attempt to
show any irreparable harm that he will suffer if Plaintiffs’ negligence case is allowed to
proceed. Defendant Singh’s reasons for staying the case relate solely to who is responsible
for paying the cost to defend the case and, if Plaintiffs prevail, for satisfying an award of
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damages. However, CastlePoint has already retained counsel to represent Defendants in this
action (see Def. Landmark’s Mot. to Answer Out of Time [Doc. No. 9], ¶ 4), and counsel
must continue to do so unless authorized by the Court to withdraw from the representation.
See LCvR83.5. Thus, Defendant has not shown any specific injury to his defense of the case.
On the other hand, a stay would cause substantial harm to Plaintiffs, whose personal
injury claims against Defendants would go unanswered while CastlePoint’s conservator
receives and processes insureds’ claims. Plaintiffs are entitled to “the just, speedy, and
inexpensive determination” of their action. See Fed. R. Civ. P. 1. To the extent a public
interest is implicated, the Court finds that the public interest is best served by permitting
Plaintiffs’ action to proceed in an orderly fashion. Landmark, Defendant Singh’s employer,
was the one who selected the insurer for its business, and it is not Plaintiffs’ fault that
Defendants’ insurer has become financially unstable or insolvent. It would be fundamentally
unfair to allow Defendants’ choice of insurers to prevent Plaintiffs’ timely pursuit of their
claims, for reasons having nothing to do with the merit of the claims.
For these reasons, the Court finds that Defendant Singh has failed to justify a stay of
the case at this juncture. Should it later appear, as argued in his Reply Brief, that a stay of
litigation by operation of the Oklahoma Insurance Code (or some other basis) should come
into play,4 then Defendant Singh may renew his request, as appropriate, based on a change
of circumstances.

4

The stay mandated by Okla. Stat. tit. 36, § 2020, applies only “when insolvency [of an insurer] is
determined or an ancillary proceeding is instituted in this state.”

5

IT IS THEREFORE ORDERED that Defendant Satnam Singh’s Motion to Stay
Action During Conservation Proceedings [Doc. No. 5] is DENIED, without prejudice to a
subsequent motion if appropriate.
IT IS SO ORDERED this 28th day of October, 2016.

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