Red Shield Administration Inc v. Kreidler

District Court, W.D. Washington·Decided August 17, 2021·No. 3:21-cv-05551·Unknown

Opinion

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON

RED SHIELD ADMINISTRATION, INC., Case No. C21-5551-RSM

Plaintiff, ORDER DENYING CONVERSION OF TEMPORARY RESTRAINING ORDER v. INTO PRELIMINARY INJUNCTION MIKE KREIDLER, Defendant. I. INTRODUCTION This matter comes before the Court following the Court’s Order Granting Motion for Temporary Restraining Order. Dkt. #10. On August 4, 2021, this Court granted Plaintiff Red Shield Administration, Inc. (“Red Auto”)’s Motion for Ex Parte Temporary Restraining Order seeking relief from the Commissioner’s entry of a Consent Order that would have become final and public on August 5, 2021. Dkt. #10. The Court directed Defendant to show cause why the order should not be converted to a preliminary injunction. Having reviewed Defendant’s brief and Plaintiff’s response, the Court ORDERS that Plaintiff’s temporary restraining order shall not be converted to a preliminary injunction upon its expiration on August 18, 2021. // II. BACKGROUND A full background of this case is not necessary given this Court’s previous order in this matter. See Dkt. #10. Red Auto is an auto service contract provider incorporated under the laws of Kansas. Dkt. #3 at ¶ 3. Red Auto is licensed to sell auto service contracts in all states except for Washington, California, and Florida, but does not solicit or advertise its business in Washington, or have a place of business, property or employees in Washington. Id. at ¶¶ 4-6. On March 9, 2019, a resident of Washington (“Purchaser”) purchased a used automobile from an automobile dealership in Portland, Oregon, along with a RED Shield Guard Service Contract (“Red Shield Contract”) from Red Auto. Id. Red Auto later denied a claim for vehicle repair made by the Purchaser under the Red Shield Contract. Id. at ¶ 7. The Purchaser filed a complaint with the Washington Office of the Insurance Commissioner (“OIC”) alleging that Red Auto issued a service contract to a Washington resident without being registered as a service contract provider in the state of Washington. Id. On June 25, 2021, the OIC issued a revised Consent Order to Red Auto asserting violations of RCW Title 48, based on the fact that Red Auto entered into an insurance contract with a Washington resident despite not having a valid registration as a service contract provider. Id. Pursuant to RCW 48.15.023(5)(a), the Commissioner assessed a $2,000.00 fine against Red Auto and required that Red Auto consent to the laws of Washington and waive all procedural rights or judicial challenges to the Consent Order. See Dkt. #3 at 34 (“The Company consents to the entry of this Order, waives any and all hearing or other procedural rights, and further administrative or judicial challenges to this Order.”). The OIC further informed Red Auto that if it refused to agree to the Consent Order, the Commissioner could request a hearing and seek sanctions “in the full amount warranted for your particular situation.” Id.; see also RCW 48.15.023(5)(ii). The Consent Order and RCW 48.15.023 provide that the Commissioner may assess a civil penalty of “not more than twenty-five thousand dollars for each violation” against Red Auto. Id. On August 3, 2021, Red Auto sought emergency relief from this Court on the basis that it is not subject to RCW Title 48 such that the Commissioner may levy fines or take disciplinary action against it. Dkt. #2 at 5. The Court determined that “while [it] cannot conclude at this point whether Red Auto has demonstrated a likelihood of success on the merits, the Court finds that Red Auto’s arguments and the case law cited in support thereof raise a serious question of law warranting temporary injunctive relief under Cottrell.” Dkt. #10 at 5-6 (citing All. for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1134-35 (9th Cir. 2011)). The Court further concluded that Red Auto had demonstrated a likelihood of irreparable harm, that the balance of equities tipped in Red Auto’s favor, and that an injunction was in the public interest. Id. On August 4, 2021, the Court entered a temporary restraining order barring Defendants from entering the Consent Order, levying a fine or taking other disciplinary action, or otherwise enforcing RCW Title 48 against Plaintiff until August 18, 2021. Id. at 9. The Court also stayed the deadline for Plaintiff to demand a hearing before a Washington administrative hearings officer. Id. at 10. Parties have submitted briefing on whether the temporary restraining order should be converted to a preliminary injunction, which the Court will consider herein. III. DISCUSSION A. Legal Standard Granting a preliminary injunction is “an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 22 (2008). “The proper legal standard for preliminary injunctive relief requires a party to demonstrate (1) ‘that he is likely to succeed on the merits, (2) that he is likely to suffer irreparable harm in the absence of preliminary relief, (3) that the balance of equities tips in his favor, and (4) that an injunction is in the public interest.’” Stormans, Inc. v. Selecky, 586 F.3d 1109, 1127 (9th Cir. 2009) (citing Winter, 555 U.S. at 20, 129 S.Ct. 365). As an alternative to this test, a preliminary injunction is appropriate if “serious questions going to the merits were raised and the balance of the hardships tips sharply” in the moving party’s favor, thereby allowing preservation of the status quo when complex legal questions require further inspection or deliberation. All. for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1134–35 (9th Cir. 2011). However, the “serious questions” approach supports a preliminary injunction only so long as the moving party also shows that there is a likelihood of irreparable injury and that the injunction is in the public interest. Id. at 1135. The moving party bears the burden of persuasion and must make a clear showing that he is entitled to such relief. Winter, 555 U.S. at 22. B. Service of Summons and Complaint As an initial matter, parties dispute whether Red Auto has properly served the Commissioner pursuant to Fed. R. Civ. P. 4(e), which provides that state law governing service must be followed to effectuate service of process. While the Commissioner argues that Red Auto has yet to properly serve the Attorney General’s Office with the complaint, motion, or TRO, as required under RCW § 4.92.020, Red Auto contends that all Assistant Attorney Generals are working remotely such that it is unaware “how it is suppose[] to accomplish service in accordance with the statute under these circumstances.” Dkt. #13 at 9. An email dated August 13, 2021, indicates that counsel for Red Auto alerted the Attorney General’s Office of this issue, to which the Attorney General’s Office responded that it would “look into it and respond, likely early next week.” Dkt. #15 at 7. The Court is not persuaded that as of the date of this Order, the state of Washington has been properly served pursuant to Fed. R. Civ. P. 4(e). However, given that Red Auto has failed to meet the substantive requirements for a

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