SEMPRA ENERGY; and SOUTHERN CALIFORNIA GAS COMPANY, Plaintiffs, v. ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LIMITED et al., Defendants.
Case No. 2:19-cv-03340-ODW (JPRx)
United States District Court Central District of California
February 11, 2020
OTIS D. WRIGHT, II
AND RELATED COUNTERCLAIMS AND CROSS ACTIONS.
I. INTRODUCTION
Before the Court is a motion to stay part (“Motion“) of this breach of insurance contract case filed by Plaintiffs, Sempra Energy (“Sempra“) and Southern California Gas Company (“SoCal Gas“) (collectively “Plaintiffs“). (Mot. to Stay In Part
II. FACTUAL BACKGROUND
Plaintiffs Sempra and SoCal Gas face litigation against over 36,000 plaintiffs (“Underlying Action“) for bodily injury and property damages arising from natural gas leaks at the Aliso Canyon storage facility discovered on October 23, 2015, and other leaks dating back to 1972. (Mot. 10–11.)
On September 21, 2018, once Plaintiffs discovered that certain claims in the Underlying Action date back to 1972, Plaintiffs notified Associated Electric & Gas Insurance Services Limited (“AEGIS“) and The Continental Insurance Company (“Continental“) (collectively “Defendants“), and demanded that they defend or pay for the defense of the Underlying Action. (Mot. 11.) On October 9, 2018, AEGIS declined to pay as, among other things, it had entered into a settlement agreement with Plaintiffs in September 2016 regarding the Underlying Action that allegedly released it from all liability. (Mot. 11; AEGIS Opp‘n to Mot. (“Opp‘n“) 4, ECF No. 80.) Continental initially failed to respond to the demands but eventually agreed to defend against all the individual claims. (Mot. 11.)
On March 26, 2019, Plaintiffs filed the instant lawsuit seeking damages for Defendants’ breach of their duties to defend the Underlying Action. (See Compl., ECF No. 1-1; Mot. 12.) On April 24, 2019, AEGIS filed its answer alleging a number of affirmative defenses. (AEGIS Answer, ECF No. 1-2.) On May 2, 2019, Continental similarly filed its answer and asserted affirmative defenses. (Continental Answer, ECF No. 10.)
After a discovery dispute ensued between the parties, Plaintiffs filed the instant motion to stay the case, only as to certain affirmative defenses raised by Defendants. (See Mot.) AEGIS opposes Plaintiffs’ Motion. (See Opp‘n.) Continental has not
III. LEGAL STANDARD
“[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. N. Am. Co., 299 U.S. 248, 254 (1936); Dependable Highway Express, Inc. v. Navigators Ins. Co., 498 F.3d 1059, 1066 (9th Cir. 2007). Courts must weigh competing interests when determining whether to grant a stay. CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962).
“Among these competing interests are [1] the possible damage which may result from the granting of a stay, [2] the hardship or inequity which a party may suffer in being required to go forward, and [3] the orderly course of justice measured in terms of the simplifying or complicating of issues, proof, and questions of law which could be expected to result from a stay.”
Id. The burden is on the moving party to show a stay is appropriate. AmTrust Int‘l Underwriters Ltd. v. Silver Star Constr. Eng‘g, Inc., No. CV-18-4776-MWF-JEMX, 2018 WL 5819454, at *4 (C.D. Cal. Oct. 30, 2018) (citing Landis, 299 U.S. at 255).
Courts “must be mindful that, ‘if there is even a fair possibility that the stay for which [the movant] prays will work damage to someone else,’ then the movant ‘must make out a clear case of hardship or inequity in being required to go forward.‘” Id. (alteration in original) (quoting Landis, 299 U.S. at 255).
IV. DISCUSSION
The Court finds neither the potential overlapping of the factual and legal issues in the Underlying Actions and this action, nor the balance of hardships between the parties, justifies a stay.
First, the Court addresses the possible damage which may result from granting the partial stay. See CMAX, 300 F.2d at 268. AEGIS claims that granting this partial stay would force it to litigate Plaintiffs’ claims without raising defenses. (Opp‘n 2.) Plaintiffs argue that the applicable standard in assessing whether Defendants are bound to defend the Underlying Action per the contractual terms does not require the Court to consider the factual and legal issues raised in certain affirmative defenses they seek to stay. (Mot. 18–21; Reply to Opp‘n (“Reply“) 1, ECF No. 83.) However, AEGIS asserts that a different standard is applicable to analyze the terms of the contract under which its defenses are relevant. (Opp‘n 12–14.) The Court declines at this time to address the merits of the claims in the lawsuit at issue or determine which standard is applicable to the terms of the insurance contract.
Regardless, the Court recognizes that AEGIS may be severely disadvantaged if forced to litigate the claims without being permitted to raise eight of twenty-five defenses pleaded in its Answer.2 (Opp‘n 14.) Plaintiffs assert that “being required to defend a suit does not constitute ‘hardship or inequity.‘” (Mot. 21 (citing Nat‘l Union Fire Ins. Co. of Pittsburgh, PA v. Elec. Arts, Inc., No. C 11-04897 JW, 2012 WL 219428, at *2 (N.D. Cal. Jan. 24, 2012)).) However, the potential hardship Defendants face is not the cost of defending Plaintiffs in the Underlying Action, as it was in Nat‘l Union, but rather answering Plaintiffs claims in the instant matter without the opportunity to raise defenses. Accordingly, given the potential damage to Defendants, the Court finds this factor weighs against granting a partial stay.
B. Hardship to Plaintiffs
Second, as the Court finds that there is a greater than fair possibility that the stay will damage Defendants, Plaintiffs must make out a clear case of hardship or inequity in being required to go forward. AmTrust, 2018 WL 5819454, at *4 (quoting
Furthermore, AEGIS contends, and the Court concurs, that Plaintiffs may have to rely on the allegedly prejudicial information to prove their prima facie case in this action. (Opp‘n 1, 8–10.) For example, Plaintiffs will have to prove “potential for coverage” under the standard they laid out, which would necessarily require information related to what occurrence is covered under Defendants’ policies—the subject of AEGIS‘s twelfth and fourteenth defenses that Plaintiffs seek to stay. (Opp‘n 8.) Thus, Plaintiffs’ primary argument is not persuasive. Accordingly, the Court finds that this factor weighs in favor of declining a partial stay.
C. Judicial Administration
Finally, the Court considers whether the partial stay would simplify or complicate issues, proof, and questions of law. See CMAX, 300 F.2d at 268. Plaintiffs cite to cases in which courts stayed actions to prevent inconsistent factual determinations potentially causing prejudice to the insured in the Underlying Action; however, none of the cited district court cases granted a partial stay of only the defendants’ affirmative defenses. (See Mot. 15–16.)
Plaintiffs further assert that granting the partial stay in this matter is akin to bifurcation of issues. (Mot. 17.) Plaintiffs’ cited authority in which the court severed
Considering the potential damage to Defendants, the failure of Plaintiffs to articulate clear hardship or inequity, and conservation of judicial resources, the Court DENIES Plaintiffs’ motion to stay.
V. CONCLUSION
For the foregoing reasons, the Court DENIES Plaintiffs’ motion to stay. (ECF No. 73.)
IT IS SO ORDERED.
February 11, 2020
OTIS D. WRIGHT, II
UNITED STATES DISTRICT JUDGE