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Evanston Insurance Co. v. 70 Limited Partnership

United States District Court, District of Nevada

December 5, 2014

EVANSTON INSURANCE COMPANY, Plaintiffs,
v.
70 LIMITED PARTNERSHIP, et al., Defendants.

ORDER GRANTING MOTION TO STAY (Docket No. 30)

NANCY J. KOPPE, United States Magistrate Judge

Pending before the Court is Defendants John Peter Lee, LTD.’s and John Peter Lee’s (“JPLL Defendants”) motion to stay, which they filed on an emergency basis. Docket No. 30. Plaintiff filed a response in opposition. Docket No. 36. Third-Party Defendant Harley E. Harmon Insurance Agency, Inc. filed a notice of non-opposition. Docket No. 40. The JPLL Defendants filed a reply. Docket No. 41. The Court finds this motion properly resolved without oral argument. See Local Rule 78-2. For the reasons discussed more fully below, the motion to stay is hereby GRANTED.

I. FACTUAL BACKGROUND

The JPLL Defendants represented 70 Limited Partnership in an inverse condemnation proceeding. After that attorney-client relationship was terminated and after the inverse condemnation proceeding was resolved, 70 Limited Partnership filed a malpractice lawsuit against the JPLL Defendants in state court (“malpractice case”). See Compl. ¶ 8. Plaintiff initially defended the JPLL Defendants in the malpractice case pursuant to insurance policies issued to the JPLL Defendants. Docket No. 37 at ¶ 2. Plaintiff ultimately concluded that those policies were not implicated by the allegations of malpractice asserted, however, and ceased defending the JPLL Defendants in the malpractice case. See id.; Compl. ¶ 15. The malpractice case continues, and has a trial date set for August 2015. See Docket No. 30-1 at ¶ 4. As of November 18, 2014, the JPLL Defendants had incurred more than half a million dollars in legal fees and costs in defending the malpractice case. See Docket No. 30-1 at ¶ 7.[1]

Plaintiff then filed the instant case in this court, seeking declaratory relief that it is not required to defend or indemnify the JPLL Defendants in relation to the malpractice case. See Compl. at ¶¶ 18-28. Shortly after the parties submitted a proposed discovery plan, which the Court entered, the JPLL Defendants filed the pending emergency motion to stay this case pending resolution of the malpractice case.

II. STANDARDS AND ANALYSIS

Courts have inherent power to stay the cases before them as a matter of controlling their own docket and calendar. See Landis v. North American Co., 299 U.S. 248, 254-55 (1936).[2] This power to stay is “incidental to the power inherent in every court to control the disposition of the causes of action on its docket with economy of time and effort for itself, for counsel, and for litigants.” Id. at 254. The movant bears the burden of showing that a stay is warranted. See Clinton v. Jones, 520 U.S. 681, 708 (1997).

In exercising its discretion, the Ninth Circuit has outlined various factors to be considered:

Where it is proposed that a pending proceeding be stayed, the competing interests which will be affected by the granting or refusal to grant a stay must be weighed. Among those competing interests are the possible damage which may result from the granting of a stay, the hardship or inequity which a party may suffer in being required to go forward, and the orderly course of justice measured in terms of simplifying or complicating of issues, proof, and questions of law which could be expected to result from a stay.

Lockyer v. Mirant, 398 F.3d 1098, 1110 (9th Cir. 2005) (quoting CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962)).

In the context of a motion to stay a declaratory relief action brought by an insurer while an underlying action remains pending, courts have outlined several concerns that often inform the above analysis:

The first concern is that by bringing the action for declaratory judgment regarding coverage, the insurer effectively attacks its insured and thus gives aid and comfort to the claimant in the underlying suit. The second concern is that the suit addressing insurance coverage forces the insured to fight a two-front war, thereby expending its resources fighting both the insurer and the third-party action, which undercuts one of the primary reasons for purchasing liability insurance. The third concern is the real risk that, if the declaratory relief action proceeds to judgment before the underlying action is resolved, the insure[d] could be collaterally estopped to contest issues in the latter by the results in the former.

Federal Ins. Co. v. Holmes Weddle & Barcott P.C., 2014 U.S. Dist. Lexis 12456, *9-10 (W.D. Wash. Jan. 31, 2014) (quoting Allied Prop. & Cas. Ins. Co. v. Roberts, 2013 U.S. Dist. Lexis 132239, *9-10 (E.D. Cal. Sept. 12, 2013)). Against these concerns, the Court balances prejudice to the insurer that may come from a stay; namely, whether the insurer is prejudiced by having to pay defense costs that it may ultimately be found to have had no duty to pay. Se ...


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