Continental Casualty Company v. Platinum Training LLC

• Court: District Court, D. Arizona
• Decided: August 9, 2021
• Docket: 2:19-cv-05163
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Continental Casualty Company, et al., No. CV-19-05163-PHX-DJH

10 Plaintiffs, ORDER

11 v.

12 Platinum Training LLC, et al.,

13 Defendants. 14 15 This matter is before the Court on Cross-Motions for Summary Judgment.1 The 16 Claimant Defendants filed a Motion for Summary Judgment (Doc. 82), to which Plaintiff 17 Continental Casualty Company and Valley Forge Insurance Company (“Continental”) 18 filed a Response (Doc. 85) and Claimants filed a Reply (Doc. 86). Continental filed a 19 Motion for Summary Judgment (Doc. 106), to which Claimants filed a Response (Doc. 20 112) and Continental filed a Reply (Doc. 116). Filed with the briefing is nearly 5,000 pages 21 of exhibits, evincing the lengthy history and difficult nature of this case.2 22 Continental filed this action seeking a declaratory judgment that it is not responsible 23 for any portion of the judgment awarded to the Claimants after a jury trial in Arizona 24 Superior Court, and that it has no duty to continue to defend Stephen Gore on appeal in the

25 1 Both parties requested oral argument in this matter. The Court finds that the issues have been fully briefed and oral argument will not aid the Court’s decision. See Fed. R. Civ. P. 26 78(b) (court may decide motions without oral hearings); LRCiv 7.2(f) (same).

27 2 The Court notes that both parties flout the Court’s Scheduling Order by attaching full copies of exhibits, rather than pin citing to specific notations. The summary judgment 28 briefing, together with the Complaint, includes nearly 5,000 pages of briefing and exhibits, including hundreds of pages of documents that are not relevant to the issues at hand. 1 state court matter. 2 I. Background3 3 This case arises out of the horrific actions taken by Stephen Gore, which resulted 4 in his felony criminal conviction and a multi-million-dollar civil judgment against him. 5 Gore and his wife owned and operated Biological Resource Center, Inc. (“BRC”), an 6 anatomical donation organization that encouraged individuals to donate their bodies for 7 what was advertised as medical and scientific research. (Doc. 1). On behalf of BRC, Gore 8 solicited donors and obtained consent for body donations; this consent was limited to 9 scientific and medical use of the bodies. Once receiving consent, Gore coordinated the 10 transfer of donor bodies to BRC’s Phoenix facility, performed serology tests for infectious 11 diseases, disarticulated and stored body parts, shipped body parts to other companies, and 12 cremated bodies that were not used. (Docs. 106-27 and 106-30). BRC carried no liability 13 insurance. (Doc. 106-7). 14 Charles and Amy Oddo own Platinum Training, LLC, and Platinum Medical, Inc., 15 (collectively “Platinum”), a company that conducts hands-on medical training programs. 16 Starting in 2012, Platinum procured various anatomical specimens from BRC. On March 17 1, 2013, Platinum signed an agreement with BRC whereby BRC would provide 18 anatomical specimens and Platinum would reimburse BRC for the costs associated with 19 the procurement. On May 23, 2013, Gore signed an employment agreement with Platinum 20 to become its Director of Anatomical Operations. Continental Casualty Company issued 21 various commercial package insurance policies to Platinum. These policies included 22 liability insurance, and covered employees and agents of Platinum. Continental was the 23 insurer of Platinum at all relevant time periods. 24 At some point in 2014, family members of individuals who had donated their 25 bodies to BRC discovered that Gore’s company was misrepresenting how the bodies were 26 being used. Rather than being used solely for medical research, it was discovered that 27

28 3 The general facts are not in dispute and were established during the state court proceedings. 1 Gore was selling various body parts for a profit to third parties for non-medical purposes.4 2 This type of use exceeded the consent given. 3 In 2014, federal and state law enforcement officers, headed by an FBI task force, 4 conducted a raid on BRC’s Phoenix facility, discovering a horrific scene of dismembered 5 bodies and unsanitary conditions. Gore was subsequently charged by the State of Arizona 6 with a number of felonies. On October 7, 2015, Gore was convicted of a felony illegal 7 control of an enterprise charge, admitting that he obtained proceeds through a scheme to 8 defraud and engaged in racketeering by exceeding donor consents. (Doc. 106-34). The 9 Claimants, who are all relatives of individuals whose bodies Gore mishandled and profited 10 from, filed a civil suit in Maricopa County Superior Court against Gore, BRC, Platinum 11 Training and Platinum Medical, Inc., (collectively “Platinum”), Platinum’s owners 12 Charles and Amy Oddo, and others, alleging severe emotional trauma sustained as a result 13 of Gore’s actions and seeking compensatory and punitive damages. 14 A. Trial Court Summary Judgment Order 15 The Claimants, who totaled over 20 individuals, argued that Platinum could be held 16 vicariously liable for the acts of Gore, reasoning that Gore was acting as an agent of 17 Platinum. Prior to the state court trial, Platinum filed a motion for summary judgment 18 arguing that it was not liable for any negligent or criminal conduct of Gore related to 19 claimants whose loved one’s bodies were donated prior to the time that he became an 20 employee of Platinum. Platinum argued that, at the earliest, Gore became an agent of 21 Platinum on May 24, 2013, when the parties executed an employment agreement, and 22 therefore, Platinum could not be liable for Gore’s conduct prior to that date. The Claimants 23 below argued that Platinum “is responsible for all of the wrongdoing of Stephen Gore and 24 BRC.” (Doc. 106-23 at 4). 25 On June 14, 2019, after oral argument on the motion, Judge Timothy Thomason 26 issued his order in Platinum’s favor. The order found as follows: 27 4 BRC also provided hundreds of bodies to Arthur Rathburn, who allegedly dismembered 28 the bodies and sold them to numerous third parties for sums totaling in the millions of dollars. Rathburn is not a party to this proceeding. 1 Platinum Training does not dispute that Stephen Gore could be liable for 2 plaintiffs’ claims. The salient question, therefore, is whether Gore can be 3 characterized as an agent of Platinum Training, whose acts are attributed to that entity. Plaintiffs claim that “Gore was an employee and owner of 4 Platinum when he committed the acts” in question. (Response at 10:11). Of course, if Gore was acting as an employee or agent of Platinum when he 5 committed the acts in question that allegedly gave rise to liability, then 6 Platinum Training can be liable under the doctrine of respondeat superior. Higginbotham v. AN Motors of Scottsdale, 228 Ariz. 550, 552 (Ariz. Ct. App. 7 2012). 8 Plaintiffs have presented some evidence that Gore became an employee 9 of Platinum Training at some point in time. They specifically point to an 10 Employment Agreement dated May 24, 2013. As such, if Gore engaged in actionable conduct with respect to any of the plaintiffs, Platinum Training 11 could have vicarious liability, if Gore was in fact acting on behalf of Platinum 12 Training.

13 …

14 Defendants point out that only eleven plaintiffs have consent forms and death 15 dates that are after the date of [Gore’s] Employment Agreement [May 24, 2013]. It seems evident that Platinum Training cannot be vicariously liable 16 for Gore’s actions before he became its agent. 17 (Doc. 106-23 at 8)5. 18 The court noted that the Claimants did not make a factual showing that Platinum 19 had direct liability for Gore’s actions. (Id. at 10). In holding that Gore was not an 20 employee until May 24, 2013, the trial court concluded that Platinum had no liability for 21 Gore’s conduct prior to that date. Id. Therefore, Judge Thomason found as a matter of 22 law that Platinum had no liability for Gore’s conduct against the Claimants whose claims 23 arose prior to May 24, 2013, and that those Claimants would proceed to trial against Gore 24 5 The Claimants also argued that Platinum was liable under an alter ego theory, whereby 25 Platinum asserted control over Gore’s company, BRC. The trial court noted that the alter ego theory is utilized to impose liability on a parent company for the acts of subsidiary. 26 This “piercing the corporate veil” theory is not used to hold one corporation liable for the acts of a completely separate corporation. The court held that “Plaintiffs are trying to hoist 27 liability on a completely separate corporation, Platinum Training, based on the allegation that that corporation asserted control over BRC. Plaintiffs have cited no case law that has 28 imposed alter ego liability in a situation such as this.” (Doc. 106-23 at 8-9). The court dismissed Platinum on this ground as well. 1 alone. In reaching his decision, Judge Thomason noted that the Claimants’ “Response is 2 full of generalized, unsupported statements. Very little effort is made by plaintiffs to 3 actually tie facts to the causes of action. . . . Rather, they seem to feel as if all they need 4 to do is establish that Mr. Gore, the principal of BRC, did some bad things and then allege 5 that Platinum is responsible for that wrongdoing. That is obviously not how it works.” 6 (Doc. 106-23 at 5). 7 After the court’s finding that Gore was an employee of Platinum after May 24, 8 2013, Platinum and Gore settled with the eleven claimants who had signed consent forms 9 with Platinum after that date. Those claimants then released their claims and the trial 10 court dismissed Platinum. The remaining Claimants—those who had signed consent 11 forms and death dates before Gore became an employee of Platinum—proceeded to trial 12 against Gore. 13 B. Jury Verdict 14 The remaining Claimants proceeded to trial against Gore on three counts: common 15 law fraud; intentional infliction of emotional distress; and mishandling of bodily remains. 16 Beecher v. Biological Resource Center, Inc, 2015 CV-013391 (Maricopa Cty. Sup. Ct. 17 2015). At trial, the evidence established that Gore intentionally misrepresented how his 18 business used donated human remains, leaving individuals to believe that their loved ones 19 were being used for scientific and medical research, rather than selling their body parts to 20 other entities. Gore admitted that his misconduct constituted criminal fraud and 21 racketeering. Evidence presented at trial establish that the claimants suffered long term 22 emotional and mental illnesses, including depression, post-traumatic stress 23 disease/disorder (“PTSD”), panic attacks, suicidal thoughts, and numerous other symptoms 24 as a result of Gore’s tortious misconduct. 25 On November 19, 2019, after a four-week civil jury trial, the jury awarded the 26 Claimants $8,500,000 in compensatory damages for emotional distress and $50,000,000 27 in punitive damages. Following trial, and pursuant to state statute, the trial court reduced 28 the punitive damages award to $8,500,000, and entered judgment against Gore in the 1 amount of $17,000,000.6 As Platinum was dismissed before trial, no portion of the 2 judgment is against Platinum. 3 C. Arizona Court of Appeals 4 Following the jury verdict, the Claimants appealed Judge Thomason’s order 5 granting summary judgment and dismissing Platinum, arguing that the trial court erred in 6 holding that Gore was not acting as an agent of Platinum prior to the date of his 7 employment agreement on May 24, 2013. On appeal, the Claimants argued that Gore was 8 an employee, owner, and member of Platinum and that his wrongful acts should be imputed 9 to Platinum. Aloia v. Platinum Med. LLC, 2021 WL 1696122 (Ariz. Ct. App. Apr. 29, 10 2021). 11 In affirming the trial court’s order on summary judgment, the Arizona Court of 12 Appeals held that it was undisputed that Gore’s employment contract with Platinum was 13 executed on May 24, 2013, and also undisputed that all of the trial claimants’ consent forms 14 for donations were signed prior to that date. Id. at *2. The Aloia Court further noted that 15 the Claimants “did not provide admissible and non-conclusory evidence in support of their 16 argument that Platinum had the right to control Gore’s conduct before Gore was employed 17 by Platinum. Thus, as to these Appellants, all of whom had signed consent forms that 18 predated Gore’s employment with Platinum, the superior court noted that Platinum could 19 not be vicariously liable to these Appellants for Gore’s actions. Given these circumstances, 20 the court did not err in determining that Appellants could not recover via respondeat 21 superior.” Id. Furthermore, the appeals court held that even assuming the Claimants had 22 established that Gore was an agent of Platinum, they had not established Gore was acting 23 within the scope and course of his agency with Platinum in furthering its business. Id. 24 Likewise, the appellate court affirmed the trial courts grant of summary judgment on 25 Claimants’ alter ego theory. Ultimately, the Court of Appeals entirely affirmed the trial 26 court’s dismissal of Platinum. Id.

27 6 The claimants appealed the Superior Court’s decision to reduce the punitive damages award. The appeal is presently pending before the Arizona Court of Appeals, with oral 28 argument scheduled for August 18, 2021. The amount of the punitive damages award has no bearing on this Court’s ruling. 1 D. Federal Court Coverage Action 2 On September 13, 2019, shortly before the civil trial began in the state court against 3 Gore, Continental filed this declaratory judgment action, seeking a declaration from this 4 Court that Continental is not liable to indemnify the judgment against Stephen Gore. (Doc. 5 1). Continental argues that because the state trial and appellate court has found that Gore 6 was not an agent of Platinum during the relevant time period, it has no duty to indemnify 7 the judgment. Continental also seeks a declaration that it has no duty to defend its insureds 8 in the state court action, but does not seek summary judgment on that count. (Doc. 106). 9 Although recognizing that it has no liability based on the rulings of the state court, 10 Continental seeks to prevent future litigation filed by the Claimants. 11 II. Legal Standards 12 A. Declaratory Judgment 13 Under the federal Declaratory Judgment Act (the “DJA”), a court “may declare the 14 rights and other legal relations of any interested party seeking such declaration[.]” 28 15 U.S.C. § 2201(a). Hence, this Act “does not grant litigants an absolute right to a legal 16 determination.” United States v. Washington, 759 F.2d 1353, 1356 (9th Cir. 1985) (en 17 banc) (citing Zemel v. Rusk, 381 U.S. 1, 19 (1965); Public Service Commission v. Wycoff 18 Co., 344 U.S. 237, 241 (1952)). “The decision to grant declaratory relief is a matter of 19 discretion even when the court is presented with a justiciable controversy.” A.L. Mechling 20 Barge Lines, Inc. v. United States, 368 U.S. 324, 331 (1961); U.S Cheesebrough-Ponds, 21 Inc. v. Faberge, Inc., 666 F.2d 393, 396 (9th Cir. 1982) (internal citations omitted). “The 22 ‘actual controversy’ requirement of the Act is the same as the ‘case or controversy’ 23 requirement of Article III of the United States Constitution. The party seeking the 24 declaration bears the burden of establishing justiciability.” Nat’l Union Fire Ins. Co. of 25 Pittsburg, PA v. ESI Ergonomic Sols., LLC, 342 F. Supp. 2d 853, 862 (D. Ariz. 2004) 26 (internal citations and quotations omitted). To satisfy Article III requirements, the dispute 27 must be “definite and concrete, touching the legal relations of parties having adverse legal 28 interests;” and be “real and substantial” and request “specific relief through a decree of a 1 conclusive character, as distinguished from an opinion advising what the law would be 2 upon a hypothetical state of facts.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 3 127 (2007) (internal citations omitted). 4 To maintain a claim under the DJA, “a plaintiff must establish . . . sufficient 5 immediacy and reality to warrant issuance of a declaratory judgment.” Scott v. Pasadena 6 Unified School District, 306 F.3d 646, 658 (9th Cir. 2002). Moreover, “[a] declaratory 7 judgment offers a means by which rights and obligations may be adjudicated in . . . actual 8 controvers[ies] that ha[ve] not reached a stage at which [an interested] party may seek a 9 coercive remedy and in cases where [such] a party . . . could sue for coercive relief [but] 10 has not yet done so.” Seattle Audubon Soc. v. Moseley, 80 F.3d 1401, 1405 (1996). Thus, 11 declaratory judgments are “intended to allow earlier access to federal courts in order to 12 spare potential defendants from the threat of impending litigation.” Id. (emphasis added). 13 It is equally well settled that “[d]eclaratory relief should be denied when it will 14 neither serve a useful purpose in clarifying and settling the legal relations in issue nor 15 terminate the proceedings and afford relief from the uncertainty and controversy faced by 16 the parties.” Washington, 759 F.2d at 1357 (citing Winpisinger v. Watson, 628 F.2d 133, 17 141 (D.C. Cir. 1980) (per curiam); McGraw-Edison Co. v. Preformed Line Products Co., 18 362 F.2d 339, 342–43 (9th Cir. 1966) (citation omitted). “It follows that when neither of 19 these results can be accomplished, the court should decline to render the declaration 20 prayed.” McGraw-Edison Co., 362 F.2d at 342. 21 B. Duty to Indemnify 22 The duty of an insurer to indemnify requires proof by the claimant defendants of 23 actual coverage. “An insurer’s duty to indemnify hinges not on the facts the claimant 24 alleges and hopes to prove but instead on the facts (proven, stipulated or otherwise 25 established) that actually create the insured’s liability.” Colorado Casualty Ins. Co. v. 26 Safety Control Co. Inc., 288 P.3d 764, 772 (Ariz. Ct. App. 2012). The duty to indemnify 27 only concerns facts “determined in the action . . . on the merits ‘[a]fter actual litigation.’” 28 Quihuis v. State Farm Mut. Auto. Ins. Co., 334 P.3d 719, 725 (2014). Thus, parties to a 1 subsequent coverage action are “precluded from challenging the existence and extent” of 2 the liability decided in the underlying action. Id. 3 III. Analysis 4 The Claimants argue that Continental is bound to pay the judgment against Gore, 5 reasoning that Gore was an agent of Platinum, and Continental is Platinum’s insurer. (Doc. 6 112). Their arguments center on the interpretation of insurance policy, specifically arguing 7 that the emotional injuries they sustained as a result of Gore’s tortious conduct are “bodily 8 injuries” under the policy. (Doc. 82). Alternatively, they argue that the policy definition 9 of “bodily injury” is ambiguous, and when read in their favor, that the policy covers them. 10 (Docs. 82 and 86). Continental argues that Gore does not qualify as an insured under 11 Platinum’s policies as he was not an employee, agent, owner, or volunteer of Platinum 12 prior to May 24, 2013, the date the trial court designated for liability of these Claimants. 13 This determination, Platinum argues, was conclusively decided by the trial court, and 14 affirmed by the Arizona Court of Appeals. (Docs. 106 and 116). Therefore, Continental 15 seeks a declaratory judgment that it is not obligated to pay any judgment against Gore, as 16 the state courts have already determined that Gore was not an employee of Platinum during 17 the relevant time period. Continental argues that the Claimants should be collaterally 18 estopped from renewing these arguments here. 19 Before reaching the merits of Claimants’ arguments as to the language of the 20 insurance policy, the Court must examine whether it is precluded from reaching those 21 issues based on the state courts’ decisions. Both the state trial court and appellate court 22 orders point out that the Claimants failed to provide admissible evidence in support of their 23 argument that Gore was an agent of Platinum prior to May 24, 2013. The question for the 24 Court is whether the Claimants can attempt to establish this connection here or whether 25 they are estopped from doing so. 26 A. Collateral Estoppel 27 Collateral estoppel, like the related doctrine of res judicata promotes “judicial 28 economy by preventing needless litigation.” Parklane Hosiery Co. v. Shore, 439 U.S. 322, 1 326 (1979). “[A] federal court considering whether to apply issue preclusion based on a 2 prior state court judgment must look to state preclusion law.” McInnes v. California, 943 3 F.2d 1088, 1092–93 (9th Cir. 1991). “Collateral estoppel, or issue preclusion, binds a party 4 to a decision on an issue litigated in a previous lawsuit if the following factors are satisfied: 5 (1) the issue was actually litigated in the previous proceeding, (2) the parties had a full and 6 fair opportunity and motive to litigate the issue, (3) a valid and final decision on the merits 7 was entered, (4) resolution of the issue was essential to the decision, and (5) there is 8 common identity of the parties.” Campbell v. SZL Properties, Ltd., 62 P.3d 966, 968 (Ariz. 9 Ct. App. 2003) (quoting Garcia v. Gen. Motors Corp., 990 P.2d 1069, 1073 (Ariz. Ct. App. 10 1999)). Depending on whether collateral estoppel is being invoked “offensively” or 11 “defensively,” the last element regarding common identity of the parties may not be 12 required. Id. “Offensive use of collateral estoppel occurs when a plaintiff seeks to prevent 13 the defendant from relitigating an issue the defendant previously litigated unsuccessfully 14 in an action with another party; defensive use occurs when a defendant seeks to prevent a 15 plaintiff from asserting a claim the plaintiff previously litigated unsuccessfully against 16 another party.” Parklane Hosiery Co., 439 U.S. at 326 n. 4. If the first four elements of 17 collateral estoppel are present, Arizona permits defensive, but not offensive use of the 18 doctrine. Standage Ventures, Inc. v. State, 562 P.2d 360, 364 (Ariz. 1977). 19 1. Issue Litigated in State Court 20 Claimants argue that the issue that Continental seeks to estop—whether it must 21 indemnify Gore—was never litigated in the state court. (Doc. 112 at 7). They argue that 22 the issue of whether Gore is insured under the Continental Policy is an issue for this Court 23 to decide. Continental argues that the issue decided in state court is broader than Claimants 24 present. Continental argues that it has already been established in the state court that Gore 25 was not an agent of Platinum and that Platinum was not liable for his tortious conduct prior 26 to May 24, 2013. Thus, Continental argues the Claimants cannot now take a second bite 27 at the apple of establishing that Gore was an agent of Platinum and therefore covered by 28 the Continental policies simply because Continental was not a defendant in the state court 1 action. (Doc. 106). 2 Claimants argue that this action presents the novel issue of whether Gore is insured 3 under Continental’s policy. What Claimants have not explained is how Gore could be 4 insured by Continental if he is not an agent of Platinum. While it is true that the precise 5 issue the state court decided was not whether Gore met the definition of an insured under 6 Continental’s policy, for the Court to consider that issue would necessarily entail 7 relitigating the issue of whether Gore was an agent, and thus an insured, of Platinum. 8 Moreover, while Claimants argue that the issue here is only related to insurance 9 coverage, a number of their exhibits and a significant portion of their briefing involves 10 arguments related to Gore’s status as either a member, employee, or volunteer of Platinum 11 prior to May 24, 2013. For instance, in their Response, Claimants argue the following:

12 Gore was also a defined “Insured” during the time period before he became 13 a formal, salaried Platinum Employee in May 2013 when he was acting as Platinum’s Director of Anatomical Operations. The evidence in the record 14 shows that from late 2011 forward, Gore was “performing duties related to 15 the conduct of Platinum’s business” and therefore qualified as a “volunteer worker” for coverage purposes under the policy. It was during this critical 16 period that Gore was acting as Platinum’s Director of Anatomical Operations 17 with the specific duties of handling the distribution of the bodies and body parts of Platinum (including those of the JCDs). It is the mishandling of the 18 JCDs bodies and body parts owned and controlled by Platinum during this 19 time period, under Gore’s direction, which is the trigger for coverage under the Policy. 20 (Doc. 112 at 4) (emphasis in original). In this paragraph alone, the Claimants cited to 16 21 attached exhibits, spanning hundreds of pages, attempting to establish that Gore was an 22 agent of Platinum prior to May 24, 2013.7 (Id.) This is the precise issue that was litigated 23 in the state court. The appellate court noted that the Claimants “did not provide admissible 24 and non-conclusory evidence in support of their argument that Platinum had the right to 25 control Gore’s conduct before Gore was employed by Platinum.” Aloia v. Platinum Med. 26 7 Claimants also argue that they suffered their emotional injuries during the timeframe that 27 Gore was an employee of Platinum, and therefore coverage should apply. This does not appear to be an argument that was previously made or a fact that was established at trial. 28 Nor do Claimants provide legal support for this theory other than mentioning it in a single sentence in their Response. (Doc. 112 at 4). Therefore, the Court will not consider it. 1 LLC, 2021 WL 1696122 (Ariz. Ct. App. Apr. 29, 2021). And while it appears that 2 Claimants are providing additional evidence here and making additional arguments as to 3 the theory of Gore’s alleged association with Platinum, those arguments needed to be made 4 in the state court during the summary judgment process. The Court finds that the Claimants 5 have already litigated this issue in the state court. Therefore, the first element of collateral 6 estoppel is established. 7 2. Full and Fair Oppourtunity to Litigate 8 The parties below fully litigated the nature of Gore’s relationship with Platinum in 9 a motion for summary judgment prior to trial. The parties briefed and argued the issues 10 and the state court issued a well-reasoned written order finding that Gore was not an agent 11 of Platinum during the relevant time period, that Platinum could not be liable for Gore’s 12 actions, and dismissed Platinum from the case. This decision was affirmed on appeal after 13 a de novo review of all of the evidence that Claimants had presented in an attempt to 14 establish the connection between Gore and Platinum. Aloia v. Platinum Med. LLC, 2021 15 WL 1696122 (Ariz. Ct. App. Apr. 29, 2021). The Court finds that this element is 16 established. 17 3. Final Decision 18 “[A] final judgment is any prior adjudication of an issue in another action that is 19 determined to be sufficiently firm to be accorded conclusive effect.” Medley v. State, 2014 20 WL 5494921, at *5 (Ariz. Ct. App. Oct. 30, 2014). “[T]o be given preclusive effect, a 21 judgment must be a firm and stable one, the ‘last word’ of the rendering court—a ‘final’ 22 judgment as opposed to one that is considered merely tentative in the very action in which 23 it was rendered.” Elia v. Pifer, 977 P.2d 796, 803 (Ariz. Ct. App. 1998) (internal citations 24 omitted). 25 Here, there is no dispute that the state court’s order granting summary judgment for 26 Platinum and dismissing it from the case was a final decision on the merits. Regardless of 27 the fact that Continental was not a part of the state court action, it is impossible for this 28 Court to make the link between Gore and Continental when the state court has already 1 severed the link between Gore and Platinum. The Claimants have had their day in court 2 on these issues, and the judgment of the trial court, as affirmed by the appellate court, is 3 final. Moreover, that the Claimants appealed that order further indicates that the decision 4 was final. See Maria v. Najera, 214 P.3d 394, 395 (Ariz. Ct. App. 2009) (“Pursuant to 5 statute, the general rule in Arizona is that jurisdiction of appeals is limited to final 6 judgments[.]”). Therefore, this element is established. 7 4. Issue Was Essential to the Decision 8 “Whether a ruling is essential must be determined on a case-by-case basis.” Garcia 9 v. Gen. Motors Corp., 990 P.2d 1069, 1073 (Ariz. Ct. App. 1999). Here, there is no dispute 10 that the issue of whether Gore was an agent of Platinum was essential to the decision that 11 Platinum was not liable for the conduct of Gore. This issue was the basis for the trial court 12 dismissing Platinum and entering judgment in its favor. Therefore, this element is 13 established. 14 5. Common Identity of Parties 15 As Continental was not a party to the state court action, this element is not 16 established. However, Arizona law permits defensive use of collateral estoppel if, as is the 17 case here, the first four elements are established. See Standage Ventures, 562 P.2d at 364. 18 The issue then is whether Continental is attempting to use collateral estoppel defensively, 19 which is allowed under Arizona law, or offensively, which is not. 20 Claimants assert, without citing to any authority, that Continental is barred from 21 asserting collateral estoppel because it is doing so “offensively.” (Doc. 112). They reason 22 that as Continental is the Plaintiff in this matter, it is an offensive attempt to use collateral 23 estoppel, rather than using it as an affirmative defense as permitted. Claimants also argue 24 that a finding of collateral estoppel would lead to an “absurd result” where “motions 25 practice” would prevent Gore from seeking coverage. (Doc. 112 at 11). Continental argues 26 that while it is technically the Plaintiff in this action, it is actually defending against future 27 litigation that may arise with the Claimants, and therefore this is an instance of defensive 28 collateral estoppel. (Doc. 106 at 13). Moreover, Continental argues that this Court must 1 accept the holding of the state court. 2 The Court agrees with both parties that the situation presented here does not fit 3 squarely within the framework provided by the case law on the defensive use of collateral 4 estoppel. However, declaratory judgment actions are by their nature “defensive” actions. 5 See Pub. Serv. Comm'n of Utah v. Wycoff Co., 344 U.S. 237, 248 (1952) (observing that, 6 “a complaint in an action for declaratory judgment seeks in essence to assert a defense to 7 an impending or threatened state court action”). And while the parties here do not fit 8 precisely within the framework the courts use to define “offensive” and “defensive” 9 collateral estoppel, the Supreme Court and other courts have accounted for this reality by 10 describing the roles of the parties in a declaratory action as being flipped. Id. (“In this case, 11 as in many actions for declaratory judgment, the realistic position of the parties is 12 reversed”); GEICO Gen. Ins. Co. v. Tucker, 2014 WL 1713766, *5 (D. Ariz. Apr. 30, 2014) 13 (“traditional roles of plaintiff and defendant are somewhat less differentiated in a 14 declaratory judgment action.”). 15 Moreover, a key consideration is whether the use of estoppel in this way would be 16 “unfair to a defendant.” Parklane Hosiery Co., 439 U.S. at 323. Courts are primarily 17 concerned about collateral estoppel being used to bar claims from completely unrelated 18 parties. Here, while Continental was not a party to the prior proceeding, it was in privity 19 with Platinum as its insurer. It necessarily follows from the final judgment of the state 20 court that if Platinum was not liable for Gore’s conduct, Continental cannot be liable for 21 that conduct either. And, at its core, defensive use of collateral estoppel is based on the 22 principal that it would be “unjust to permit one who has had his day in court to reopen 23 identical issues by merely switching adversaries.” Bernhard v. Bank of Am. Nat. Tr. & 24 Sav. Ass’n, 122 P.2d 892, 895 (Cal. 1942). This is precisely what Continental seeks here, 25 to prevent Claimants from arguing identical issues against a different, albeit related 26 adversary. 27 Therefore, the Court finds that Continental’s use of collateral estoppel here, as a 28 defense to coverage, is permissible, based on the state court’s final decision on the merits 1 that Continental’s insured had no liability for the conduct of Gore. This element is 2 established as well and the Claimants are estopped from relitigating the trial court’s 3 decision that Gore was not acting on Platinum’s behalf and that Platinum, and thus 4 Continental, has no liability to these Claimants. 5 B. Abstention 6 Although not raised by the parties, the Court finds that in addition to collateral 7 estoppel, general principles of federal court abstention and comity preclude re-litigation of 8 the coverage issue presented here. 9 “Cases brought by state-court losers complaining of injuries caused by state-court 10 judgments rendered before the district court proceedings commenced and inviting district 11 court review and rejection of those judgments,” are not allowed and shall be dismissed. 12 Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284–85 (2005). “A United 13 States District Court has no authority to review final judgments of a state court in judicial 14 proceedings.” D.C. Ct. of Appeals v. Feldman, 460 U.S. 462, 482 (1983). Federal district 15 courts lack the requisite appellate authority to exercise appellate authority over the ruling 16 of a state court, for a federal district court’s jurisdiction is “strictly original.” Rooker v. 17 Fidelity Trust Co., 263 U.S. 413, 416 (1923). Of federal courts, only the Supreme Court 18 of the United States has authority “to reverse or modify a state-court judgment.” Id. 19 This Court must recognize these principles, and may not alter a decision of the state 20 court. While it appears that Claimants now attempt to present additional evidence and 21 argument, and wish the Court to find that Gore was acting as a “volunteer” of Platinum, 22 the Court cannot do so. The state court’s holding that Gore was not an agent of Platinum 23 prior to May 24, 2013 necessarily encompassed Claimants’ new arguments here. See 24 Scottsdale Jaycees v. Superior Ct. of Maricopa Cty., 499 P.2d 185, 188 (1972) (“One who 25 volunteers services without an agreement for or expectation of reward, may be a[n agent] 26 of the one accepting such services.”). But again, the time to make arguments and present 27 evidence of Gore’s alleged agency with Platinum was before the trial court. 28 As stated, the trial court, as affirmed by the appeals court, determined that Gore was 1 not an agent of Platinum and therefore that Platinum was not liable for Gore’s conduct 2 prior to the relevant date. It logically follows that if Platinum is not liable for his conduct, 3 Platinum’s insurer cannot be liable to pay a judgment entered against him. The only 4 possible link between the Claimants and Continental necessarily must run through 5 Platinum. Because that link has been severed, there is no option for this Court to find 6 Continental liable to indemnify the judgment without reversing the decision of the state 7 court, which this Court may not do. 8 The Court recognizes that Claimants did not file this action. However, their briefing 9 and exhibits overwhelmingly relate to their underlying argument that the state court got it 10 wrong in finding that Gore was not an agent of Platinum during the relevant time period. 11 The Court cannot proceed any further. The Court must conclude, based on the state court 12 decisions, that Continental does not have a duty to indemnify Gore for conduct prior to 13 May 24, 2013. For this Court to hold otherwise would be to disturb rulings of the Arizona 14 Superior Court and the Arizona Court of Appeals. This Court does not have the authority 15 to do so. 16 In so holding, the Court finds that Continental has sought declaratory judgment for 17 the purpose of “early access to federal courts” in order to spare future litigation, and to 18 prevent suits brought by various Claimants against Continental seeking indemnification on 19 the judgment against Gore. See Seattle Audubon Soc., 80 F.3d at 1405. Moreover, 20 Continental has established that the dispute is “definite and concrete, touching the legal 21 relations of parties having adverse legal interests;” and “real and substantial” and the Court 22 finds that it requests “specific relief through a decree of a conclusive character, as 23 distinguished from an opinion advising what the law would be upon a hypothetical state of 24 facts.” See MedImmune, Inc., 549 U.S. at 127. This ruling also serves to clarify the legal 25 relations at issue and afford relief from the uncertainty and controversy faced by the parties. 26 See Washington, 759 F.2d at 1357. Therefore, the Court finds that a declaratory judgment 27 is appropriate in this matter. 28 IV. Conclusion 1 The Court cannot comprehend the horrendous ordeal the Claimants and their 2 families have been through, which will undoubtedly be felt the rest of their lives. The 3 Court is bound however to follow the law, and the findings by the state court that Platinum, 4 and thus Continental, was not responsible for Gore’s conduct prior to May 24, 2013. The 5 proper course to contest that determination is through the state court appellate process, 6 which Claimants have taken advantage of. However, this Court, as a court of original and 7 specific jurisdiction, does not have the ability to modify these prior rulings. Therefore, the 8 Court must enter declaratory judgment in favor of Continental as to the duty to indemnify 9 the judgments against Gore. 10 The Court notes that Continental apparently did not move for summary judgment as 11 to the other count in its Complaint related to the duty to continue defending Gore in the 12 state court action. While it appears that many of these issues may be moot, as the majority 13 of the state court proceedings appear to be concluded, the Court does not have sufficient 14 information at this time to issue such a declaration. Within fourteen days of this Order, 15 Continental shall file a status report on whether it is proceeding with that claim or whether 16 it is dismissing it, thereby terminating this matter. Alternatively, the parties shall file their 17 Notice of Readiness for Final Pretrial Conference in accordance with the Scheduling Order. 18 19 Accordingly, 20 IT IS HEREBY ORDERED that Continental’s Motion for Partial Summary 21 Judgment (Doc. 106) is granted. Continental has no duty to indemnify the judgment at 22 issue. 23 IT IS FURTHER ORDERED that within fourteen (14) days of this Order, 24 Continental shall file a Status Report as to whether it is proceeding with the duty to defend 25 claim, or whether it is voluntarily dismissing that claim. Alternatively, the parties shall file 26 their Notice of Readiness for Final Pretrial Conference on the remaining claim. 27 … 28 … 1 IT IS FINALLY ORDERED that the Claimant’s Motion for Summary Judgment 2|| (Doc. 82) is denied. 3 Dated this 9th day of August, 2021. 4 5 ' So — □□ 6 Ke Diangé. 7 United States District Fudge 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

-18-