Huynh v. Allstate Northbrook Indemnity Company ( 2024 )

1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 EASTERN DISTRICT OF CALIFORNIA 9 10 TRUCMAI HUYNH, et al., Case No. 1:24-cv-00157-KES-EPG 11 Plaintiffs, 12 v. ORDER GRANTING DEFENDANT’S MOTION TO STAY DISCOVERY 13 ALLSTATE NORTHBROOK INDEMNITY COMPANY, (ECF No. 18) 14 Defendant. 15 16 This matter is before the Court on the motion of Defendant Allstate Northbrook Indemnity 17 Company to stay discovery in this case until its motion to compel arbitration is decided.1 (ECF 18 No. 18). Upon review of the parties’ briefing and the applicable law, the Court will stay discovery 19 in this matter until Defendant’s motion to compel arbitration is decided. 20 I. BACKGROUND 21 Defendant removed this action from the Fresno Superior Court on February 2, 2024. (ECF 22 No. 1). In the underlying complaint, Plaintiffs Trucmai and Trucphuong Huynh allege that, after 23 they were injured in a motor vehicle accident involving a driver who was not insured, Defendant 24 wrongly denied them uninsured motorist benefits under their insurance policy. Specifically, 25 1 Defendant’s motion also requests clarification of the Court’s February 8, 2024 minute order (ECF No. 9); 26 generally, it asks whether it has been excused from responding to Plaintiffs’ motion for summary adjudication. The Court addressed this issue in its April 17, 2024 order, advising that nothing in the order 27 relieved Defendant of the obligation to respond to the motion and granting Defendant an extension to respond, which response Defendant has since filed. (ECF Nos. 20, 22). Accordingly, this issue has already 28 been addressed. 1 Plaintiffs allege two causes of action: (1) breach of written contract, stemming from Defendant’s 2 failure to provide them the coverage owed under their insurance policy; and (2) breach of the 3 implied covenant of good faith and fair dealing, stemming from Defendant’s actions in dealing 4 with Plaintiffs’ coverage claims, e.g., Defendant purportedly failed to promptly and reasonably handle their insurance claim. 5 About one month after this case was removed, Defendant filed a motion to compel 6 arbitration. (ECF No. 13). Generally, Defendant argues that a California statute—California 7 Insurance Code § 11580.2(f)—and the policy at issue require the parties to arbitrate their dispute 8 regarding the uninsured motorist claim. In response, “Plaintiffs do not dispute that the policy and 9 the insurance code provided for arbitration of Plaintiffs’ claim for [uninsured motorist benefits].” 10 (ECF No. 16, p. 29). However, they argue that Defendant’s conduct in dealing with their claim 11 for benefits—such as denying their requests to provide coverage in discussions before this action 12 was filed—means that Defendant “has waived or should be estopped from having any right to 13 arbitrate Plaintiffs’ claims for uninsured motorists benefits.” (Id. at 8). Defendant’s motion to 14 compel arbitration is currently pending before the assigned District Judge. 15 On April 13, 2024, Defendant filed this motion to stay discovery, arguing as follows: 16 In this case, the Court should stay discovery pending a ruling on Allstate’s pending motion to compel arbitration because: (1) the outcome of the motion could moot 17 the currently pending discovery; (2) Plaintiffs will not face any prejudice if a stay 18 is granted; (3) Allstate will suffer an undue hardship if a stay is not granted; and (4) this request preserves the parties’ and the Court’s resources. 19 (ECF No. 18-1, p. 7). 20 Plaintiffs argue that discovery should not be stayed because Defendant’s motion to 21 compel arbitration will fail as Defendant has waived, or should be estopped from seeking, 22 arbitration of their claims for uninsured motorist benefits. (ECF No. 19, p. 15). Additionally, they 23 argue that they should first be able to pursue discovery on the arbitration issue before the motion 24 to compel arbitration is decided. Lastly, they argue that staying discovery will cause them 25 extreme prejudice, as the longer discovery is delayed, the more difficult it may be to obtain 26 relevant discovery. 27 On April 17, 2024, the Court issued an order (1) giving Defendant the opportunity to file a 28 reply in support of its motion and noting that no oral argument would be held; (2) staying 1 discovery until it ruled on Defendant’s motion; and (3) vacating the initial scheduling conference. 2 (ECF No. 20). Defendant has since filed a reply, reiterating its arguments for a stay. (ECF No. 3 21). Accordingly, this matter is now ripe. 4 II. STANDARDS With limited exception, “[a] party may not seek discovery from any source before the 5 parties have conferred as required by Rule 26(f).” Fed. R. Civ. P. 26(d)(1). After the parties’ Rule 6 26(f) conference, a party is required to make initial disclosures within 14 days “unless a different 7 time is set by stipulation or court order, or unless a party objects during the conference that initial 8 disclosures are not appropriate in this action and states the objection in the proposed discovery 9 plan.” Fed. R. Civ. P. 26(a)(1)(C). And generally, a court is required to issue a scheduling order 10 addressing the completion of discovery after receiving the parties’ Rule 26(f) report. Fed. R. Civ. 11 P. 16(b)(2)-(3). 12 While “[t]he Federal Rules of Civil Procedure do not provide for automatic or blanket 13 stays of discovery in the face of potentially dispositive motions . . . district courts may 14 nonetheless exercise wide discretion in controlling discovery.” Marsh v. AFSCME Loc. 3299, No. 15 2:19-CV-02382-JAM-DB, 2020 WL 1475442, at *2 (E.D. Cal. Mar. 26, 2020) (internal quotation 16 marks and internal citations omitted). “While the Ninth Circuit has not provided a clear standard 17 for evaluating a motion to stay discovery pending resolution of a potentially dispositive motion, it 18 has affirmed that district courts may grant such a motion for good cause.” Ahern Rentals, Inc. v. 19 EquipmentShare.com, Inc., No. 2:19-CV-01788-MCE-KJN, 2020 WL 2216944, at *2 (E.D. Cal. 20 May 7, 2020) (citing Little v. City of Seattle, 863 F.2d 681, 685 (9th Cir. 1988)). 21 “District courts in the Ninth Circuit often apply a two-pronged test to decide whether to 22 stay discovery.” Apothio, LLC v. Kern Cnty., No. 1:20-CV-00522-JLT-CDB, 2023 WL 2655847, 23 at *5 (E.D. Cal. Mar. 27, 2023). Under the first prong, the Court considers whether the pending motion is “potentially dispositive of the entire case, or at least dispositive on the issue at which 24 discovery is aimed” and “even if the motions are not completely dispositive, courts will stay 25 discovery where resolution of the motions will impact the number of defendants and legal 26 theories at issue which will in turn impact the scope of discovery.” Id. (internal quotation marks 27 and citation omitted). Under the second prong, the Court evaluates “whether the pending, 28 1 potentially dispositive motion can be decided absent additional discovery.” Id. (citation omitted). 2 Further, “[a]side from the two-prong analysis discussed above, the Court is mindful that it should 3 inevitably balance the harm of staying discovery with the benefit of allowing discovery to 4 continue.” Id. at 7 (internal quotation marks and citation omitted). III. ANALYSIS 5 Upon review, the Court concludes that the pending motion to dismiss is “sufficiently 6 meritorious for a finding that the motion[] [is] potentially dispositive of the case.” 7 Stavrianoudakis v. U.S. Dep’t of Fish & Wildlife, No. 1:18-CV-01505-LJO-BAM, 2019 WL 8 9667685, at *3 (E.D. Cal. Dec. 20, 2019). Notably, the motion to compel arbitration relies on 9 policy and statutory language that Plaintiffs concede in their opposition to the motion “provide[s] 10 for arbitration of Plaintiffs’ claim for [uninsured motorist benefits].” (ECF No. 16, p. 29). While 11 the Court notes that Plaintiffs argue that Defendant has waived (or should be estopped from 12 pursuing) arbitration by its conduct in addressing Plaintiffs’ claim, the Court’s role at this stage is 13 to take only a “preliminary peek” at the motion to compel arbitration, which “is not intended to 14 prejudge the outcome of the motion.” Apothio, LLC, 2023 WL 2655847, at *6. With this standard 15 in mind, Defendant’s motion to compel arbitration—although opposed—is at least potentially 16 dispositive of the case. 17 Regarding the second prong— whether the pending, potentially dispositive motion can be 18 decided absent additional discovery—Plaintiffs state that information concerning Defendant’s 19 investigation of its uninsured motorist benefits is needed, including “(1) obtaining a complete 20 copy of the related claims file materials and (2) taking the depositions of the persons involved in 21 the handling of their claims.” (ECF No. 19, p. 21). Defendant counters that “Plaintiffs have 22 already filed their opposition to Allstate’s Motion, and it is fully briefed and under submission to 23 the Court” so “[n]o discovery was or is needed for the Court to decide Allstate’s Motion.” (ECF No. 21, p. 7). Further, Defendants rely on the following case in support of their argument: 24 Second, EDC’s motion to compel arbitration can be decided absent additional 25 discovery. Indeed, the pending motion will be fully briefed in two days and is set 26 for hearing on January 19, 2024. Ferrell argues further discovery is required on the ground that EDC’s evidence in support of its motion to compel arbitration is 27 inadmissible and insufficient. See Opp’n at 14-15. But those questions go to the merits of the underlying motion, not whether additional discovery is required to 28 1 decide it. Moreover, Ferrell has already filed her opposition to the underlying > motion, so it is not clear what purpose limited discovery would serve. Ferrell v. AppFolio, Inc., No. SA CV 23-01353-JWH (DFMx), 2024 WL 132223, at *2 (C.D. ° Cal. Jan. 8, 2024). ‘ Ultimately, the Court finds good cause for a stay of discovery. Notably, in its opposition ° to the motion to compel arbitration, Plaintiffs assert that the “undisputed facts, along with the case 6 law cited above, leads to the inescapable conclusion that ALLSTATE lost any right to insist on 7 Plaintiffs’ claims for UMB to be decided by arbitration.” (ECF No. 16, p. 26). While Plaintiff 8 alternatively argues that “[t]o the extent the Court finds issues of fact remain, ALLSTATE’s 9 | motion is premature and must be denied,” it is not evident that there will be disputed facts here. 10 | Moreover, if the assigned District Judge determines that further discovery is needed, the District 11 || Judge may permit limited discovery at that time. 12 Lastly, the Court has balanced the interests of Plaintiffs in proceeding with the case 13 | against the interests in Defendants of not being unduly burdened by unnecessary discovery. 14 | While the Court is sympathetic to Plaintiffs’ desire to move forward as soon as possible, the 15 | Court finds that this temporary stay will not unreasonably delay the litigation. 16 | 1¥. CONCLUSION AND ORDER Having concluded that a stay is warranted, IT IS ORDERED as follows: 18 1. Defendant’s motion to stay discovery (ECF No. 18) is granted. 19 2. The Court declines to enter a scheduling order at this time and all discovery is stayed 50 until after the District Judge rules on the pending motion to compel arbitration.” 21 | Tr Is SO ORDERED. 22 Dated: _May 23, 2024 [Je hey UNITED STATES MAGISTRATE JUDGE 24 25 26 27 || ———— *If the District Judge denies the motion to compel arbitration, the Court will issue an order resetting the 28 scheduling conference so that discovery may commence.