United States Liability Insurance Company v. Mabry Management Co., Inc.

• Court: District Court, C.D. California
• Decided: November 9, 2023
• Docket: 2:23-cv-06417
• Status: Unknown

Opinion

1 2 O 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 UNITED STATES LIABILITY ) Case No. CV 23-06417 DDP (RAOx) INSURANCE COMPANY, ) 12 ) Plaintiff, ) ORDER DENYING DEFENDANT’S MOTION 13 ) TO DISMISS OR STAY CASE v. ) 14 ) MABRY MANAGEMENT CO., INC., ) [Dkt 16] 15 ) Defendants. ) 16 ___________________________ 17 Presently before the court is Defendant Mabry Management Co., 18 Inc.’s Motion to Stay Case. Having considered the submissions of 19 the parties, the court denies the motion and adopts the following 20 Order. 21 I. Background 22 Jordan Grossman (“the Tenant”) leased residential property 23 owned by Altai Burguin (“the Landlord”). (First Amended Complaint 24 (“FAC”) ¶¶ 7-8; Ex. A at 2.) Defendant Mabry Management Co., Inc. 25 (“the Manager”) managed the residential property on the Landlord’s 26 behalf. (FAC ¶ 8; Ex. A. at 2.) 27 Plaintiff United States Liability Insurance Company (“USLI”) 28 issued a professional liability coverage police to the Manager. 1 (FAC ¶ 17.) The policy excluded coverage for loss or defense costs 2 arising from “bodily injury, mental anguish, . . . pain, suffering, 3 . . . emotional distress, or damage to or destruction of any 4 tangible property.” (Id. ¶ 20.) 5 In November 2020, an explosion and fire destroyed the 6 residential property, allegedly causing the Tenant and his daughter 7 psychological trauma. (FAC ¶¶ 9-11; Ex. A at 4-5.) In May 2021, 8 the Tenant filed suit (“the Underlying Action”) against the 9 Landlord and the Manager in Los Angeles County Superior Court, 10 alleging various contract and tort claims. (FAC ¶ 7; Ex. A.). The 11 Manager tendered the suit to USLI, which agreed in August 2022 to 12 defend the Manager, subject to a reservation of rights, and 13 selected counsel to represent the Manager in the Underlying Action. 14 (Declaration of David Pierce, Ex. A.) 15 In November 2022, USLI received a settlement demand from the 16 Tenant for the full policy limit. (Pierce Decl., Ex. B.) USLI 17 declined to accept the demand, and informed the Manager as such. 18 (Id.) In July 2023, the Manager complained that USLI was not 19 engaging in meaningful, good-faith settlement discussions with the 20 Tenant, and indicated that the Landlord had also threatened to sue 21 the Manager. (Pierce Decl., Ex. C.) USLI then filed the instant 22 action on August 8, 2023, seeking a declaratory judgment that the 23 USLI policy does not cover the Tenant’s claims. 24 Soon after, the Landlord sought leave in the Underlying Action 25 to file a cross-complaint against the Manager, and made a 26 settlement demand of the Manager.1 The Manager’s USLI-selected 27 1 Several of the Manager’s representations about proceedings 28 (continued...) 1 counsel informed the Manager that counsel would not represent the 2 Manager as to the Landlord’s proposed cross-complaint. 3 (Declaration of Howard Weinberg ¶ 3.) The Manager then retained 4 counsel of his own choosing. (Pierce Decl., Ex. F.) 5 According to the Manager, the Underlying Action is set for 6 trial in state court on December 4, 2023. The Manager now moves to 7 dismiss or stay the instant USLI action, pending the outcome of the 8 Underlying Action. 9 II. Discussion 10 District courts may, in their discretion, stay or dismiss any 11 action seeking a declaratory judgment. Wilton v. Seven Falls Co., 12 515 U.S. 277, 288 (1995). That discretion is not, however, 13 “unfettered.” Gov’t Emps. Ins. Co. v. Dizol, 133 F.3d 1220, 1223 14 (9th Cir. 1998). Rather, the nonexclusive “philosophic touchstone” 15 for a court’s decision should be the factors set forth in 16 Brillhart v. Excess Ins. Co. of America, 316 U.S. 491 (1942): (1) 17 avoidance of unnecessary determinations of state law; (2) 18 discouragement of forum shopping; and (3) avoidance of duplicative 19 litigation. Dizol, 133 F.3d at 1225. Further relevant 20 considerations include, but are not limited to, whether the action 21 will “serve a useful purpose in clarifying the legal relations at 22 issue” and whether a declaratory action “will result in 23 entanglement between the federal and state court systems.” Id. 24 (quoting American States Ins. Co. v. Kearns, 15 F.3d 142, 145 (9th 25 Cir. 1994)). 26 1(...continued) 27 in the Underlying Case are not supported by accurate citations to the record. Nevertheless, there appears to be no dispute about the 28 proceedings in the Underlying Case. 1 The Manager’s discussion of the Brillhart factors is brief, 2 and unpersuasive. The Manager suggests that resolution of this 3 matter will require an “unnecessary declaration of state law” 4 because USLI’s claim requires “application of California insurance 5 law.” (Mot. at 9.) An application of state law, however, is not 6 rendered “unnecessary” simply because it arises in the context of a 7 freestanding claim for declaratory relief. Continental Casualty 8 Co. v. Robsac Industries, 947 F.2d 1367 (9th Cir. 1991) (overruled 9 on other grounds by Dizol, 133 F.3d at 1227), is not to the 10 contrary. There, a declination of federal jurisdiction “could have 11 avoided a needless determination of state law” because the insured 12 had already sued the insurer in state court. Robsac, 947 F.2d at 13 1368, 1371 (9th Cir. 1991). Indeed “the concern [as to the 14 ‘unnecessary declaration’] factor is with unsettled issues of state 15 law, not fact-finding in the specific case. When state law is 16 unclear, absent a strong countervailing federal interest, the 17 federal court should not elbow its way ... to render what may be an 18 uncertain and ephemeral interpretation of state law.” Allstate 19 Ins. Co. v. Davis, 430 F. Supp. 2d 1112, 1120 (D. Haw. 2006) 20 (internal quotation marks, alteration, and citations omitted) 21 (emphasis added). As the Ninth Circuit explained in Dizol, “there 22 is no presumption in favor of abstention in declaratory actions 23 generally, nor in insurance coverage cases specifically. We know of 24 no authority for the proposition that an insurer is barred from 25 invoking diversity jurisdiction to bring a declaratory judgment 26 action against an insured on an issue of coverage.” Dizol, 133 27 F.3d at 1225 (quotation marks omitted). 28 1 The Manager also argues, briefly, that the issues in this 2 action and the Underlying Action overlap because (1) there are 3 allegations in the Underlying Action that the Manager acted 4 willfully and (2) the USLI policy excludes willful conduct. USLI’s 5 FAC, however, makes no mention of or allegation regarding willful 6 conduct, or any related exclusion. Rather, USLI’s claim for 7 declaratory relief is premised on exclusions of claims related to 8 (1) mental anguish, emotional distress, and destruction of tangible 9 property, and (2) failure to maintain adequate insurance. The only 10 overlap of legal issues is of the Manager’s own creation. 11 The bulk of the Manager’s discussion, and the apparent crux of 12 the argument, centers on the Manager’s assertion that it will be 13 prejudiced by having to defend against USLI’s claim in this suit 14 while simultaneously preparing for trial in the Underlying Action. 15 (Mot. at 10-13.) Although not framed as such, the Manager appears 16 to be seeking a discretionary stay under the court’s inherent 17 powers and pursuant to Landis v. North American Co., 299 U.S. 248 18 (1936). An applicant for such a stay “must make out a clear case 19 of hardship or inequity in being required to go forward, if there 20 is even a fair possibility that the stay for which he prays will 21 work damage to some one else.” Landis, 299 U.S. at 255. The 22 Manager has made no such showing here. Although the Manager’s 23 attention may be somewhat split between the Underlying Action and 24 this matter, the Manager continues to be represented by USLI-funded 25 counsel in the Underlying Action, at least with respect to the 26 Tenant’s claims. The Manager has not, therefore, established the 27 requisite level of prejudice to warrant a discretionary stay. See, 28 e.g., AmTrust Int’l Underwriters Ltd. v. Silver Star Constr. Eng’g, 1 Inc., No. CV184776MWFJEMX, 2018 WL 5819454, at *6 (C.D. Cal. Oct. 2 30, 2018).2 3 IV. Conclusion 4 For the reasons stated above, Defendant’s Motion to Dismiss or 5 Stay or to Enlarge the Time to Respond is DENIED. 6 7 8 9 10 11 12 IT IS SO ORDERED. 13 14 15 Dated: November 9, 2023 DEAN D. PREGERSON 16 United States District Judge 17 18 19 20 21 22 23 24 25 26 27 2 For these same reasons, the Manager’s request for additional 28 time to respond to the FAC is also denied.