Amtrust International Underwriters v. Findlay

• Court: District Court, D. Nevada
• Decided: February 20, 2020
• Docket: 2:18-cv-00652
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 * * *

7 AMTRUST INTERNATIONAL Case No. 2:18-CV-652 JCM (VCF) UNDERWRITERS, LIMITED, 8 ORDER Plaintiff(s), 9 v. 10 CLIFFORD J. FINDLAY, et al., 11 Defendant(s). 12

13 Presently before the court is Amtrust International Underwriters’s (“Amtrust”) motion for 14 summary judgment. (ECF No. 65). Clifford J. Findlay and Donna Sue Findlay, individually and 15 as Trustees, Cliff Findlay and Donna S. Findlay Family Trust, Dated February 20, 1986; Findlay 16 Management Group; Findlay-Nolte Automotive, LLC; Cliff Findlay Automotive, LLC; Findlay 17 Auto Holdings, LLC; Cliff Findlay Auto Center; and Tyler Corder (collectively, “the Findlay 18 defendants”) filed a response (ECF No. 69), to which Amtrust replied (ECF No. 77). Defendant 19 Windmill Farms, Inc. (“Windmill”) also filed a response (ECF No. 71), to which Amtrust replied 20 (ECF No. 78). 21 Also before the court is the Findlay defendants’ motion for summary judgment. (ECF 22 No. 67). Amtrust filed a response (ECF No. 74), to which the Findlay defendants replied (ECF 23 No. 79). Windmill also filed a response (ECF No. 75), to which the Findlay defendants replied 24 (ECF No. 80). 25 I. Background 26 The instant action arises from a dispute regarding insurance coverage as the result of 27 underlying state-court litigation. (ECF No. 4). AmTrust issued a “Euclid Exec policy” to 28 1 Findlay Management Group, Inc. for the policy period June 1, 2015, to June 1, 2016. Id. at 9. 2 The policy insures against “loss,” which includes defense costs. Id. at 9–10. 3 Windmill filed a lawsuit against the Findlay defendants in the Eighth Judicial District 4 Court in Clark County, Nevada. Id. at 4. Windmill’s state-court complaint alleged, amongst 5 other things, that it did not receive its share of sale proceeds after the sale of two car 6 dealerships—which Windmill owned and managed with the Findlay defendants—and that the 7 Findlay defendants wrongfully denied Windmill an accounting. Id. at 5. 8 After a complete trial on the merits, the state court case was resolved in the Findlay 9 defendants’ favor. (ECF No. 28 at 15). The state court judgment included an award of 10 $713,880.86 in attorney fees because the Findlay defendants had made a $1.2 million offer of 11 judgment before trial. (ECF No. 67 at 5). 12 On the eve of trial in the underlying state court case, Amtrust filed the instant action in 13 this court and filed an amended complaint nine days later. (ECF Nos. 1; 4). Amtrust seeks 14 various declarations of its obligations under its policy with the Findlay defendants. (ECF No. 4). 15 For instance, Amtrust alleges that it is not obligated to extend coverage to Findlay Auto Holdings 16 or Cliff Findlay Auto Center “as each does not qualify as an insured under the policy.” Id. at 15. 17 No party to this action filed a motion to dismiss the amended complaint. Instead, the 18 parties filed cross-motions for summary judgment, which the court now considers. (ECF Nos. 19 65; 67). 20 II. Legal Standard 21 A. Dismissal for lack of jurisdiction 22 Federal courts are courts of limited jurisdiction. Owen Equip. & Erection Co. v. Kroger, 23 437 U.S. 365, 374 (1978). “A federal court is presumed to lack jurisdiction in a particular case 24 unless the contrary affirmatively appears.” Stock West, Inc. v. Confederated Tribes of Colville 25 Reservation, 873 F.2d 1221, 1225 (9th Cir. 1989). Thus, federal subject matter jurisdiction must 26 exist at the time an action is commenced. Mallard Auto. Grp., Ltd. v. United States, 343 F. 27 Supp. 2d 949, 952 (D. Nev. 2004). 28 1 Federal Rule of Civil Procedure 12(b)(1) allows defendants to seek dismissal of a claim 2 or action for a lack of subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). Dismissal under Rule 3 12(b)(1) is appropriate if the complaint, considered in its entirety, fails to allege facts on its face 4 sufficient to establish subject matter jurisdiction. In re Dynamic Random Access Memory 5 (DRAM) Antitrust Litig., 546 F.3d 981, 984–85 (9th Cir. 2008). 6 Although the defendant is the moving party in a 12(b)(1) motion to dismiss, the plaintiff 7 is the party invoking the court’s jurisdiction. As a result, the plaintiff bears the burden of 8 proving that the case is properly in federal court to survive the motion. McCauley v. Ford Motor 9 Co., 264 F.3d 952, 957 (9th Cir. 2001) (citing McNutt v. Gen. Motors Acceptance Corp., 298 10 U.S. 178, 189 (1936)). More specifically, the plaintiff’s pleadings must show “the existence of 11 whatever is essential to federal jurisdiction, and, if [plaintiff] does not do so, the court, on having 12 the defect called to its attention or on discovering the same, must dismiss the case, unless the 13 defect be corrected by amendment.” Smith v. McCullough, 270 U.S. 456, 459 (1926). 14 Because subject matter jurisdiction goes to the power of the court to hear a case, it is a threshold issue and may be raised at any time 15 and by any party. Fed. R. Civ. P. 12(b)(1). Additionally, the court may sua sponte raise the issue of lack of subject matter jurisdiction 16 and must dismiss a case if no subject matter jurisdiction exists. Fed. R. Civ. P. 12(h). Thus, even if the question of subject matter 17 jurisdiction is not fully adjudicated or addressed by the parties, “it is axiomatic that this court has a special obligation to satisfy itself 18 of its own jurisdiction ...” United States v. Touby, 909 F.2d 759, 763 (3d Cir.1990) (internal citations and quotations omitted). 19 20 Mallard Auto. Grp., Ltd. v. United States, 343 F. Supp. 2d 949, 952–53 (D. Nev. 2004) 21 B. Mootness 22 Article III of the U.S. Constitution limits the jurisdiction of federal courts to “cases and 23 controversies.” The “core component of standing is an essential and unchanging part of the case- 24 or-controversy requirement of Article III.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 25 (1992); see also City of Los Angeles v. Lyons, 461 U.S. 95, 101 (1983) (“[T]hose who seek to 26 invoke the jurisdiction of the federal courts must satisfy the threshold requirement imposed by 27 Art. III of the Constitution by alleging an actual case or controversy”). 28 1 “Mootness is a threshold jurisdictional issue.” S. Pac. Transp. Co. v. Pub. Util. Comm'n 2 of State of Or., 9 F.3d 807, 810 (9th Cir. 1993) (citing Sea–Land Serv., Inc. v. ILWU, 939 F.2d 3 866, 870 (9th Cir. 1991)). The Supreme Court has described the doctrine of mootness “as 4 the doctrine of standing set in a time frame: The requisite personal interest that must exist at the 5 commencement of the litigation (standing) must continue throughout its existence (mootness).” 6 Arizonans for Official English, 520 U.S. 43, 68 n.22 (1997) (quoting United States Parole 7 Comm’n v. Geraghty, 445 U.S. 388, 397 (1980)) (internal quotation marks omitted). Thus, a 8 case becomes moot when “the issues presented are no longer ‘live’ or the parties lack a legally 9 cognizable interest in the outcome.” Powell v. McCormack, 395 U.S. 486, 496 (1969). 10 In other words, if events subsequent to the filing of the case resolve the parties’ dispute, we must dismiss the case as 11 moot, see Stratman v. Leisnoi, Inc., 545 F.3d 1161, 1167 (9th Cir. 2008); DHX, Inc. v. Allianz AGF MAT, Ltd., 425 F.3d 1169, 1174 12 (9th Cir. 2005), because “[the court] do[es] not have the constitutional authority to decide moot cases,” Foster v. 13 Carson, 347 F.3d 742, 747 (9th Cir. 2003) (citation and internal quotation marks omitted). 14 15 Pitts v. Terrible Herbst, Inc., 653 F.3d 1081, 1087 (9th Cir. 2011). 16 C. Motion for summary judgment 17 The Federal Rules of Civil Procedure allow summary judgment when the pleadings, 18 depositions, answers to interrogatories, and admissions on file, together with the affidavits, if 19 any, show that “there is no genuine dispute as to any material fact and the movant is entitled to a 20 judgment as a matter of law.” Fed. R. Civ. P. 56(a). A principal purpose of summary judgment 21 is “to isolate and dispose of factually unsupported claims.” Celotex Corp. v. Catrett, 477 U.S. 22 317, 323–24 (1986). 23 For purposes of summary judgment, disputed factual issues should be construed in favor 24 of the nonmoving party. Lujan v. Nat’l Wildlife Fed., 497 U.S. 871, 888 (1990). However, to 25 withstand summary judgment, the nonmoving party must “set forth specific facts showing that 26 there is a genuine issue for trial.” Id. 27 In determining summary judgment, a court applies a burden-shifting analysis. “When the 28 party moving for summary judgment would bear the burden of proof at trial, it must come 1 forward with evidence which would entitle it to a directed verdict if the evidence went 2 uncontroverted at trial. In such a case, the moving party has the initial burden of establishing the 3 absence of a genuine issue of fact on each issue material to its case.” C.A.R. Transp. Brokerage 4 Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000) (citations omitted). 5 By contrast, when the nonmoving party bears the burden of proving the claim or defense, 6 the moving party can meet its burden in two ways: (1) by presenting evidence to negate an 7 essential element of the nonmoving party’s case; or (2) by demonstrating that the nonmoving 8 party failed to make a showing sufficient to establish an element essential to that party’s case on 9 which that party will bear the burden of proof at trial. See Celotex Corp., 477 U.S. at 323–24. If 10 the moving party fails to meet its initial burden, summary judgment must be denied and the court 11 need not consider the nonmoving party’s evidence. See Adickes v. S.H. Kress & Co., 398 U.S. 12 144, 159–60 (1970). 13 If the moving party satisfies its initial burden, the burden then shifts to the opposing party 14 to establish that a genuine issue of material fact exists. See Matsushita Elec. Indus. Co. v. Zenith 15 Radio Corp., 475 U.S. 574, 586 (1986). The opposing party need not establish a dispute of 16 material fact conclusively in its favor. See T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n, 17 809 F.2d 626, 631 (9th Cir. 1987). It is sufficient that “the claimed factual dispute be shown to 18 require a jury or judge to resolve the parties’ differing versions of the truth at trial.” Id. 19 In other words, the nonmoving party cannot avoid summary judgment by relying solely 20 on conclusory allegations that are unsupported by factual data. See Taylor v. List, 880 F.2d 21 1040, 1045 (9th Cir. 1989). Instead, the opposition must go beyond the assertions and 22 allegations of the pleadings and set forth specific facts by producing competent evidence that 23 shows a genuine issue for trial. See Celotex, 477 U.S. at 324. 24 At summary judgment, a court’s function is not to weigh the evidence and determine the 25 truth, but to determine whether a genuine dispute exists for trial. See Anderson v. Liberty Lobby, 26 Inc., 477 U.S. 242, 249 (1986). The evidence of the nonmovant is “to be believed, and all 27 justifiable inferences are to be drawn in his favor.” Id. at 255. But if the evidence of the 28 1 nonmoving party is merely colorable or is not significantly probative, summary judgment may be 2 granted. See id. at 249–50. 3 The Ninth Circuit has held that information contained in an inadmissible form may still 4 be considered for summary judgment if the information itself would be admissible at trial. 5 Fraser v. Goodale, 342 F.3d 1032, 1036 (9th Cir. 2003) (citing Block v. City of Los Angeles, 253 6 F.3d 410, 418–19 (9th Cir. 2001) (“To survive summary judgment, a party does not necessarily 7 have to produce evidence in a form that would be admissible at trial, as long as the party satisfies 8 the requirements of Federal Rules of Civil Procedure 56.”)). 9 III. Discussion 10 As an initial matter, Windmill’s responses to both motions amount to little more than an 11 attempt to relitigate the issues that were before the state court in the underlying action. (See ECF 12 Nos. 71; 75). Windmill argues that it did not approve of any insurance contract with Amtrust 13 and, on that basis, there is a genuine issue of material fact regarding all claims in this case. Id. 14 Windmill’s argument is unavailing, as it includes no evidence with either response and largely 15 sidesteps the material issues in this case. The court now turns to the substance of this case. 16 A. Amtrust’s declaratory judgment claims 17 The Declaratory Judgment Act “gave the federal courts competence to make a declaration 18 of rights; it did not impose a duty to do so.” Public Affairs Associates v. Rickover, 369 U.S. 111, 19 112, (1962). The Declaratory Judgment Act provides, in relevant part, as follows: 20 In a case of actual controversy within its jurisdiction, . . . any court of the United States, upon the filing of an appropriate pleading, 21 may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or 22 could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as 23 such. 24 28 U.S.C. § 2201(a). Thus, by the plain terms of the act, the court “must first inquire whether 25 there is an actual case or controversy within its jurisdiction.” Principal Life Ins. Co. v. Robinson, 26 394 F.3d 665, 669 (9th Cir. 2005) (citing American States Ins. Co. v. Kearns, 15 F.3d 142, 143 27 (9th Cir. 1994)). 28 1 “If the suit passes constitutional and statutory muster, the district court must also be 2 satisfied that entertaining the action is appropriate.” Gov’t Employees Ins. Co. v. Dizol, 133 F.3d 3 1220, 1223 (9th Cir. 1998). “This determination is discretionary, for the Declaratory Judgment 4 Act is ‘deliberately cast in terms of permissive, rather than mandatory, authority.’” Id. (quoting 5 Public Serv. Comm'n of Utah v. Wycoff Co., 344 U.S. 237, 250 (1952) (J. Reed, concurring)). 6 The court “must decide whether to exercise its jurisdiction by analyzing the factors set 7 out in Brillhart v. Excess Ins. Co., 316 U.S. 491 (1942), and its progeny.” Principal Life Ins. 8 Co., 394 F.3d at 669. These factors include: (1) avoiding needless determination of state laws; 9 (2) discouraging litigants from filing declaratory actions as a means of forum shopping; and (3) 10 avoiding duplicative litigation. See, e.g., Principal Life Ins. Co., 394 F.3d at 672; Gov’t 11 Employees Ins. Co., 133 F.3d at 1225; Continental Casualty Co. v. Robsac Indus., 947 F.2d 12 1367, 1371–73 (9th Cir. 1991). 13 “When a party requests declaratory relief in federal court and a suit is pending in state 14 court presenting the same state law issues, there exists a presumption that the entire suit should 15 be heard in state court.” Chamberlain v. Allstate Ins. Co., 931 F.2d 1361, 1366–67 (9th Cir. 16 1991) (citing Brillhart, 316 U.S. at 495). This is particularly true when the only claim that the 17 plaintiff brings is under the Declaratory Judgment Act. See Snodgrass v. Provident Life & Acc. 18 Ins. Co., 147 F.3d 1163, 1167-68 (9th Cir. 1998) (per curiam). In such cases, the court has a 19 compelling reason to let state courts resolve issues of state law. See, e.g., Continental Casualty 20 Co., 947 F.2d at 1371 (“Moreover, this case involves insurance law, an area that Congress has 21 expressly left to the states through the McCarran-Ferguson Act. 15 U.S.C. §§ 1011–12 22 (1988).”). 23 Here, Amtrust has invoked diversity jurisdiction when filing the instant case. (ECF No. 24 4). But diversity jurisdiction simply satisfies the first prong of this court’s analysis. The court 25 must determine whether it would be appropriate in light of the Brillhart factors to entertain the 26 instant action in light of the the underlying state-court case. This inquiry is particularly 27 necessary because “[w]here, as in the case before us, the sole basis of jurisdiction is diversity of 28 citizenship, the federal interest is at its nadir.” Continental Casualty Co., 947 F.2d at 1371 1 First, the court notes that this case—like the case in Continental Casualty Co.—involves 2 insurance law, “an area that Congress has expressly left to the states through the McCarran- 3 Ferguson Act. 15 U.S.C. §§ 1011–12 (1988).” 947 F.2d at 1371. There is a parallel proceeding 4 in state court: the underlying state-court action that gave rise to the instant insurance-coverage 5 dispute. Amtrust’s obligations under the policy must be determined only because it is potentially 6 liable to the Findlay defendants for attorney fees incurred in the underlying case. Once again, 7 Continental Casualty Co. is instructive. The Ninth Circuit in Continental Casualty Co. held as 8 follows: 9 Often an insurer has brought a declaratory judgment action in federal court against its insured in order to obtain a ruling as to its 10 obligations in relation to a state court action by a third party against the insured. Although the insurer would have been unable 11 to remove the state court action to federal court in most cases due to lack of complete diversity under 28 U.S.C. § 1441(b), there was 12 diversity jurisdiction in the suit for declaratory relief because the insurer and insured were citizens of different states. the ripeness 13 requirement of Article III's “case or controversy” clause precludes the insurer’s obtaining a declaratory judgment with respect to 14 its liability to the insured in such cases because “the federal relief sought may hinge upon the outcome of state court actions.” 15 16 Id. at 1371–72 (quoting Ticor Title Ins. Co. of Cal. v. American Resources, Ltd., 859 F.2d 772, 17 777 n.7 (9th Cir. 1988)). Thus, the Ninth Circuit concluded that “[a] declaratory judgment action 18 by an insurance company against its insured during the pendency of a non-removable state court 19 action presenting the same issues of state law is an archetype of what we have termed ‘reactive’ 20 litigation.” Id. at 1372. 21 As in Continental Casualty Co, Amtrust filed this action seeking declaratory judgment on 22 the basis of diversity—without asserting any other claims—when the underlying case could not 23 have been removed. Although Amtrust is not a party to the underlying case, a declaration of its 24 obligations under the policy are best addressed by the state court action that determined liability 25 for the underlying case. Indeed, as the Findlay defendants note, Judge Allf has already granted 26 the Findlay defendants’ motion for attorneys’ fees and made detailed findings regarding the 27 necessity and reasonableness of the fees incurred in the underlying action, which is an issue at 28 the heart of the instant case. (ECF No. 67 at 9–10). 1 Amtrust’s tactical decision to litigate in a federal forum by filing the instant suit is 2 necessarily “reactive” litigation. Accordingly, dismissal is warranted because there is a 3 presumption in favor of the state court resolving issues of state law. 4 In light of the foregoing, the court dismisses Amtrust’s complaint seeking declaratory 5 relief sua sponte. The pending motions for summary judgment are denied in part as moot insofar 6 as they relate to Amtrust’s claims. 7 B. The Findlay defendants’ breach of contract claim 8 Although Amtrust’s complaint is dismissed, the court has non-discretional jurisdiction 9 over the Findlay defendants’ counterclaims. The court turns first to the breach of contract claim. 10 The Findlay defendants argue that because they “won the underlying case brought by Windmill, 11 most of AmTrust’s coverage arguments are likewise defeated or moot.” (ECF No. 67 at 7). 12 While that may be the case, the Findlay defendants’ victory in state court also moots their breach 13 of contract claim. 14 “A breach of contract may be said to be a material failure of performance of a duty 15 arising under or imposed by agreement.” Bernard v. Rockhill Dev. Co., 734 P.2d 1238, 1240 16 (Nev. 1987). Nevada law also requires the plaintiff to show damage as a result of the breach. 17 Saini v. Int’l Game Tech., 434 F. Supp. 2d 913, 919–20 (D. Nev. 2006) (citing Richardson v. 18 Jones, 1 Nev. 405, 405 (Nev. 1865)). 19 Here, the Findlay defendants were represented by the counsel of their choice—Mr. 20 Carroll of Rice, Reuther, Sullivan & Carroll LLP—throughout the underlying litigation. (ECF 21 No. 67-2). The Findlay defendants made an offer of judgment, which Windmill rejected, and 22 was successful in the underlying case. As the Findlay defendants note, Judge Allf made specific 23 findings that counsel’s rates and time spent were reasonable. (ECF No. 67 at 9). As a result, 24 “Judge Allf found that counsel’s work would have justified higher rates” and “awarded the full 25 amount of fees sought by the Findlay [defendants].” Id. at 9–10. Accordingly, the Findlay 26 defendants will be fully reimbursed for Mr. Carroll’s representation. 27 Because the Findlay defendants were awarded their entire defense fees, “events 28 subsequent to the filing of the case [have] resolve[d] the parties’ dispute.” Pitts, 653 F.3d at 1 1087. The Findlay defendants will recover their attorney fees from Windmill and, as a result, 2 will not have incurred damages as the result of Amtrust’s alleged breach of contract. Thus, the 3 breach of contract claim is moot. The court dismisses it accordingly. 4 C. The Findlay defendants’ breach of the covenant of good faith and fair dealing claim 5 “‘Where one of the several issues presented becomes moot, the remaining live issues 6 supply the constitutional requirements of a case or controversy’ regardless of whether the 7 remaining claims are ‘secondary.’” S. Pac. Transp. Co., 9 F.3d at 810 (quoting Powell, 295 8 U.S. at 497); see also Shell Offshore Inc. v. Greenpeace, Inc., 815 F.3d 623, 631 (9th Cir. 2016) 9 (“Even where one issue in a case has been rendered moot, others may remain.”). 10 The breach of contract claim has been mooted by the Findlay defendants’ success and 11 award of attorney fees in the underlying action. The breach of the implied covenant of good 12 faith and fair dealing claim has not. 13 “An implied covenant of good faith and fair dealing exists in every Nevada contract and 14 essentially forbids arbitrary, unfair acts by one party that disadvantage the other.” Frantz v. 15 Johnson, 999 P.2d 351, 358 n.4 (Nev. 2000) 16 With respect to the covenant of good faith and fair dealing, [the Nevada Supreme Court] ha[s] stated that “when one party 17 performs a contract in a manner that is unfaithful to the purpose of the contract and the justified expectations of the other party are 18 thus denied, damages may be awarded against the party who does not act in good faith.” 19 20 Perry v. Jordan, 900 P.2d 335, 338 (Nev. 1995) (quoting Hilton Hotels v. Butch Lewis Prods., 21 808 P.2d 919, 923 (Nev. 1991)) (alteration omitted). 22 Within the insurance context, Nevada law provides that “[b]ad faith is established where 23 the insurer acts unreasonably and with knowledge that there is no reasonable basis for its 24 conduct.” Guar. Nat. Ins. Co. v. Potter, 112 Nev. 199, 206, 912 P.2d 267, 272 (1996) (citing 25 American Excess Ins. Co. v. MGM Grand Hotels, Inc., 729 P.2d 1352, 1354–55 (Nev. 1986)). 26 Because bad faith is found when there is no reasonable basis for the insurer’s conduct, an insurer 27 is not liable for bad faith so long as it had a reasonable basis to deny coverage. Pioneer Chlor 28 Alkali Co. v. Nat’l Union Fire Ins. Co., 863 F.Supp. 1237, 1249 (D. Nev. 1994). 1 Here, there is a genuine and reasonable dispute regarding whether to Findlay Auto 2 Holdings and Cliff Findlay Auto Center are “insureds” for the purposes of the Amtrust policy. 3 The policy obligates Amtrust to “pay [l]oss of a [c]ompany,” and defines “company” to mean the 4 named insured and any subsidiary. (ECF No. 65 at 5). The named insured is Findlay 5 Management Group. (ECF No. 65-2 at 3). The subsidiaries expressly include a variety of 6 Findlay-related entities. Id. at 62–63. But neither Findlay Auto Holdings nor Cliff Findlay Auto 7 Center are expressly included in the list of subsidiaries. See id. 8 Instead, Findlay Auto Holdings and Cliff Findlay Auto Center are subsidiaries—and, 9 consequently, insured—only if Findlay Management Group had “management control” over 10 them “on or before the inception date of the policy.” Id. at 16. Clifford J. Findlay and Tyler 11 Corder are managers of Findlay Auto Holdings, not Findlay Management Group. (ECF No. 65 12 at 10). “CDF Holdings, LLC” is the sole owner of Findlay Auto Holdings, not Findlay 13 Management Group. Id. Findlay Auto Holdings is the sole stockholder of Cliff Findlay Auto 14 Center. Id. at 11. 15 Based on the corporate structure and governance of both Findlay Auto Holdings and Cliff 16 Findlay Auto Center, Amtrust reasonably concluded that Findlay Management Group did not 17 have “management control” over either entity. Id. However, Amtrust specifically notified the 18 Findlay defendants that they could “provide information that they believed could demonstrate” 19 that Findlay Auto Holdings and Cliff Findlay Auto Center were, in fact, insured under the policy. 20 (ECF No. 65 at 18). 21 The Findlay defendants in this case argue that Findlay Management Group exerts 22 “indirect management control” over Findlay Auto Holdings and Cliff Findlay Auto Center 23 because there is common management—namely Clifford J. Findlay—amongst the entities. (ECF 24 No. 69 at 11–13). The Findlay defendants contend that this “indirect management control” 25 makes both entities subsidiaries of Findlay Management Group. Id. 26 Thus, this case turns on the complex corporate structure of the Findlay defendants and the 27 reasonable dispute regarding whether Clifford J. Findlay’s status as manager of several Findlay 28 entities means that Findlay Management Group has “indirect management control” over Findlay Auto Holdings and Cliff Findlay Auto Center. Amtrust reasonably concluded that it did not. The Findlay defendants concluded that it did. 3 These disparate conclusions leave no genuine issue of material fact regarding the bad 4| faith claim. Amtrust had a reasonable basis to deny coverage. Accordingly, the Findlay 5 | defendants’ breach of the implied covenant of good faith and fair dealing claim fails. The court 6 | grants Amtrust’s motion for summary judgment as to that claim. 7| IV. Conclusion 8 Accordingly, 9 The court dismisses Amtrust’s complaint for lack of jurisdiction. The court dismisses the Findlay defendants’ breach of contract claim as moot. The court grants Amtrust’s motion for 11 | summary judgment as to the Findlay defendants’ breach of the implied covenant of good faith and fair dealing claim. 13 IT IS HEREBY ORDERED, ADJUDGED, and DECREED that Amtrust’s motion for summary judgment (ECF No. 65) be, and the same hereby is, GRANTED in part and DENIED 15 | in part, consistent with the foregoing. 16 IT IS FURTHER ORDERED that the Findlay defendants’ motion for summary judgment 17 | (ECF No. 67) be, and the same hereby is, DENIED. 18 The clerk is instructed to enter judgment and close the case accordingly. 19 DATED February 20, 2020. 20 btw ©. Atala UNITED STATES DISTRICT JUDGE 22 23 24 25 26 27 28

es C. Mahan District Judge -12-