Philadelphia Indemnity Insurance Company v. City Of Fresno ( 2019 )

1 2 3 4 5 6 7 8 9 UNITED STATES DISTRICT COURT 10 EASTERN DISTRICT OF CALIFORNIA 11 12 PHILADELPHIA INDEMNITY INSURANCE No. 2:16-cv-00495-JAM-KJN COMPANY, a Pennsylvania 13 corporation, 14 Petitioner, ORDER GRANTING RESPONDENT’S MOTION TO VACATE ORDER FILED 15 v. ON JULY 13, 2016 (ECF No. 21) 16 THE CITY OF FRESNO, a municipal 17 corporation, 18 Respondent. 19 20 The City of Fresno (“Fresno”) moves this Court to vacate its 21 July 13, 2016 Order (ECF No. 21) compelling arbitration of an 22 insurance coverage dispute between Fresno and Philadelphia 23 Indemnity Insurance Company (“Philadelphia”). ECF No. 36. 24 For the reasons set forth below, this Court GRANTS Fresno’s 25 motion.1 26 27 1 This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled 28 for August 13, 2019. 1 I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND 2 Fresno, through SMG Holdings, Inc. (“SMG”), entered into a 3 licensing agreement with the California Association of Future 4 Farmers of America (“Future Farmers”) for Future Farmers to use a 5 portion of the Fresno Convention and Entertainment Center. 6 Petition to Compel Arbitration (“Petition”), ECF No. 1, ¶ 5. The 7 licensing agreement required Future Farmers to obtain liability 8 insurance. Id. In accordance with this requirement, Future 9 Farmers entered into a liability insurance agreement with 10 Philadelphia (the “Future Farmers Policy”). Id. ¶ 8. The Future 11 Farmers Policy states that either party may demand arbitration if 12 a dispute arises over “whether coverage is provided under this 13 [policy] for a claim made against the insured.” Id. ¶ 10. 14 In April 2013, Timothy Sailors (“Sailors”) allegedly 15 sustained injuries after stepping into a large pot hole in the 16 parking lot of the Fresno Convention Center on his way to a 17 Future Farmers event. Petition ¶ 7. Both Sailors and his 18 employer, Reef Sunset Unified School District (“Reef”), sued 19 Fresno and SMG to recover for his injuries and for the employment 20 benefits Reef paid to Sailors after he was injured. Id. ¶¶ 6-7. 21 The cases, filed in Fresno County Superior Court and later 22 consolidated, are captioned Timothy Sailors vs. City of Fresno, 23 et al., Case No. 14CECG00069 (the “Sailors Action”) and Reef 24 Sunset vs. City of Fresno, et al., Case No. 14CECG00807 (the 25 “Reef Action”). Id ¶ 6. 26 Facing the Sailors and Reef Actions, Fresno demanded that 27 Philadelphia defend and indemnify Fresno as an additional insured 28 under the Future Farmers Policy. See Petition. Philadelphia 1 refused on the grounds, among others, that Fresno was not named 2 as an insured in the Future Farmers Policy. Id. Philadelphia 3 then sought an order from this Court requiring Fresno to submit 4 the coverage dispute to arbitration pursuant the policy’s 5 arbitration clause. Id. Fresno did not oppose the petition and, 6 on July 13, 2016, this Court issued an order compelling 7 arbitration on “whether Philadelphia must indemnify and defend 8 Fresno in the underlying Sailors litigation.” Order Compelling 9 Arbitration (the “Arbitration Order”), ECF No. 21, at 6. 10 Fresno now moves to vacate the Arbitration Order. Mot., 11 ECF No. 37. Philadelphia opposes the motion. Opp’n, ECF No. 43. 12 13 II. OPINION 14 A. Judicial Notice 15 Fresno asks this Court to take judicial notice of five 16 California state court documents: (1) Opinion of the California 17 Court of Appeal in Timothy Sailors v. City of Fresno, et al., 18 Case No. F074944; (2) online case docket for the Sailors Action; 19 (3) Amended Cross-Complaint by SMG and Fresno in the Sailors 20 Action; (4) online case docket for the Reef Action; and (5) 21 online docket for California Court of Appeal case Philadelphia 22 Indemn. Ins. Co. vs. SMG Holdings, Inc., Case No. C082841. RJN, 23 ECF No. 40. Philadelphia does not oppose this request. And 24 since requests for judicial notice of court records are routinely 25 accepted, Fresno’s request is granted as to the existence of the 26 documents but not as to the truth of their contents. 27 B. Relief from Final Judgment 28 Federal Rule of Civil Procedure 60(b)(5) authorizes a court 1 to relieve a party from a final judgment, order, or proceeding if 2 “applying it prospectively is no longer equitable.” Fed. R. Civ. 3 P. 60(b)(5). The party seeking relief bears the burden of 4 establishing that a “significant change in facts or law warrants 5 [the] revision.” Rufo v. Inmates of Suffolk Cty. Jail, 502 U.S. 6 367, 384, 393 (1992). Once the moving party carries this burden, 7 a court abuses its discretion “when it refuses to modify [the 8 judgment or order] in light of such changes.” Agostini v. 9 Felton, 521 U.S. 203, 215 (1997). 10 This Court is not persuaded by Philadelphia’s arguments that 11 the motion is untimely. Opp’n at 3-4. On March 20, 2019, the 12 California Court of Appeal affirmed the trial court’s grant of 13 summary judgment in favor of Fresno and SMG in the consolidated 14 Sailors Action. ECF No. 40-1. That order became final in April 15 2019. Fresno would have had no basis in July or August 2016 to 16 appeal the Arbitration Order, nor any basis to have this Court 17 reconsider the Arbitration Order before April 2019. This Court 18 therefore finds the motion was filed within a reasonable time. 19 See United States v. Holtzman, 762 F.2d 720, 725 (9th Cir. 1985). 20 The Arbitration Order is subject to review under Rule 60(b)(5). 21 C. Mootness of Subject Arbitration 22 Fresno argues this Court should vacate the Arbitration Order 23 because a California court found Fresno not liable in the 24 underlying Sailors and Reef Actions, and therefore the compelled 25 arbitration regarding insurance coverage for any such liability 26 is moot. Philadelphia opposes on several grounds. 27 Philadelphia argues any question regarding mootness must be 28 decided in arbitration, not by this Court. Opp’n at 4-7. This 1 Court disagrees. A “question of arbitrability,” including 2 whether “an arbitration clause in a concededly binding contract 3 applies to a particular type of controversy,” is a matter “for 4 judicial determination unless the parties clearly and 5 unmistakably provide otherwise.” Howsam v. Dean Witter Reynolds, 6 Inc., 537 U.S. 79, 84 (2002) (quoting in part AT & T Techs., Inc. 7 v. Commc’ns Workers of Am., 475 U.S. 643, 651–52 (1986)). 8 Indeed, in deciding a petition to compel arbitration, the court’s 9 role is to determine “[1] whether a valid arbitration agreement 10 exists and, if so, [2] whether the agreement encompasses the 11 dispute at issue.” Lifescan, Inc. v. Premier Diabetic Sevs., 12 Inc., 363 F.3d 1010, 1012 (9th Cir. 2004). This Court previously 13 answered both prongs in the affirmative. See Arbitration Order 14 at 6 (“Given that Philadelphia and Fresno dispute whether 15 coverage under the Future Farmers Policy extends to the area in 16 which Sailors was injured, the arbitration clause clearly 17 encompasses the dispute in this case.”). The instant motion now 18 raises questions as to whether the agreement still encompasses 19 the dispute at issue, and that question of arbitrability is 20 squarely within the purview of this Court. See Howsam, 537 U.S. 21 at 84. 22 The California Court of Appeal affirmed the trial court’s 23 grant of summary judgment in favor of Fresno and SMG in the 24 consolidated Sailors Action, and that judgment is now final. 25 ECF No. 40-1. Given that Fresno has no liability to the 26 underlying plaintiff, “Fresno readily agrees it has no damage 27 claims to arbitrate” and “has nothing to seek indemnity for from 28 Philadelphia.” Mot. at 1; Reply at 1. Despite the final 1 judgment on underlying liability and Fresno’s statements to this 2 Court, Philadelphia asserts it may face liability in a 3 subrogation action for Fresno’s litigation costs from the Sailors 4 Action. Opp’n at 6. Federal Insurance Company (“Federal”) paid 5 Fresno’s defense expenses in that case. Mot. at 1; Reply at 1-2. 6 Fresno thus asserts that only Federal owns the right to bring a 7 claim against Philadelphia for those litigation costs. Id. 8 It is this Court’s duty to determine questions of 9 arbitrability, here the presence of a disagreement about “whether 10 coverage is provided . . . for a claim made against the insured.” 11 Petition ¶ 10. This Court finds there is no live controversy 12 between Philadelphia and Fresno regarding potential insurance 13 coverage. The arbitration previously compelled by this Court is 14 therefore moot. Am. Rivers v. Nat’l Marine Fisheries Serv., 126 15 F.3d 1118, 1123 (9th Cir. 1997), as amended (Sept. 16, 1997) (“A 16 claim is moot if it has lost its character as a present, live 17 controversy.”). 18 D. Conclusion 19 This Court previously compelled arbitration between Fresno 20 and Philadelphia on coverage for the Sailors incident, including 21 as to “whether Philadelphia must indemnify and defend Fresno in the 22 underlying Sailors litigation.” Arbitration Order at 6. The 23 Sailors Action has since been resolved in favor of Fresno, and 24 the arbitration compelled by this Court is now moot. This Court 25 finds this to be a “significant change in facts” warranting 26 relief from the Arbitration Order, the application of which is no 27 longer equitable. Fed. R. Civ. P. 60(b)(5); see Rufo, 502 U.S. 28 367, at 384. Given this disposition, it is unnecessary for this 1 Court to reach Fresno’s other arguments for vacating the 2} Arbitration Order. 3 4 Til. ORDER 5 For the reasons set forth above, this Court GRANTS 6 respondent Fresno’s Motion to Vacate. ECF No. 36. This Court’s 7 July 13, 2016 Order (ECF No. 21) is hereby VACATED. The Petition 8 (ECF No. 1) is hereby DENIED AS MOOT. This case remains CLOSED. 9 10 11 IT IS SO ORDERED. 12 Dated: October 3, 2019 13 he Me 14 teiren staves odermacr 7008 15 16 17 18 19 20 21 22 23 24 25 26 27 28