RLI Insurance Company v. ACE American Insurance Co. ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 SAN JOSE DIVISION 11 12 RLI INSURANCE COMPANY, Case No. 19-CV-04180-LHK 13 Plaintiff, ORDER GRANTING DEFENDANT RDC’S MOTION TO STAY AND 14 v. DENYING WITHOUT PREJUDICE PLAINTIFF RLI’S MOTION FOR 15 ACE AMERICAN INSURANCE CO., JUDGMENT ON THE PLEADINGS et al., 16 Re: Dkt. Nos. 38, 42 Defendants. 17 18 Plaintiff RLI Insurance Co. (“RLI”) brings this action against Defendants ACE American 19 Insurance Co. (“ACE”) and RossDrulisCusenbery Architecture, Inc. (“RDC”) (collectively, the 20 “Defendants”) seeking, among other things, declaratory relief that ACE, and not RLI, owes a duty 21 to defend and indemnify RDC in an underlying California state court lawsuit brought against RDC 22 in 2019 (the “2019 Underlying Action”). See ECF No. 1 (“Compl.”). Before the Court is Plaintiff 23 RLI’s motion for judgment on the pleadings, ECF No. 38, and Defendant RDC’s motion to stay 24 pending resolution of the 2019 Underlying Action. ECF No. 42. Having considered the 25 submissions of the parties, the relevant law, and the record in this case, the Court GRANTS 26 RDC’s motion to stay and DENIES RLI’s motion for judgment on the pleadings without 27 1 1 prejudice. 2 I. BACKGROUND 3 A. Factual Background 4 1. The Parties in the Instant Case 5 RLI is an insurance company incorporated in Illinois with its principal place of business in 6 Peoria, Illinois. Compl. ¶ 3. ACE is likewise an insurance company, incorporated in 7 Pennsylvania with its principal place of business in Philadelphia, Pennsylvania. Id. ¶ 4. RDC is 8 an architecture firm incorporated in California with its principal place of business in Sonoma, 9 California. Id. ¶ 5. 10 2. The ACE and RLI Policies 11 Both ACE and RLI provided liability insurance to RDC. Specifically, from October 30, 12 2006 to October 30, 2009, ACE provided liability insurance to RDC under ACE’s “Advantage 13 Professional Liability Policy For Design Professionals” (“ACE Policy”). Id. ¶ 17. For the ACE 14 Policy to cover a claim against RDC, the claim would have to be “made against RDC during the 15 policy period[] and reported to ACE during the policy period.” Id. However, the ACE Policy 16 allowed RDC to give ACE notice of a potential claim. Id. ¶ 21. Such notice could trigger 17 coverage under the ACE Policy for a later-filed claim, even outside the policy period, if the later- 18 filed claim arose out of the same “Interrelated Wrongful Acts” as those in the previous notice to 19 ACE. Id. ¶¶ 19-21. The ACE Policy defined “Interrelated Wrongful Acts” as “all Wrongful Acts 20 that have as a common nexus any fact, circumstance, situation, event, transaction, cause or series 21 of related facts, circumstances, situations, events, transactions or causes.” Id. ¶ 19. 22 Likewise, from October 30, 2018 to October 30, 2019, RLI provided liability insurance for 23 RDC under RLI’s “Professional Liability Policy (Design Professionals)” (“RLI Policy”). Id. ¶ 22. 24 The RLI Policy requires “that a claim be first made against RDC during the policy period” for 25 coverage. Id. Furthermore, the RLI Policy contained a provision for “Multiple/Related Claim(s),” 26 wherein the RLI Policy stated that “Related Claims will be treated as a single Claim, regardless of 27 2 1 when the earliest Claim was made against [RDC].” Id. ¶ 25. The RLI policy defined “Claim” as 2 “a demand received by [RDC] for money or services and which alleges a Wrongful Act,” Id. ¶ 24, 3 and defined “Related Claim” as “all Claims for Wrongful Acts that are logically or causally 4 connected by common facts, situations, events, transactions, decisions or advice.” Id. ¶ 25. 5 3. The Underlying 2011 Action 6 In 2001, RDC entered into a “Professional Service Agreement” (“PSA”) with the County 7 of Santa Clara (“County”). Id. ¶ 8. Under this agreement, “RDC agreed to provide architectural, 8 engineering, planning, design and construction administration services in connection with the 9 Morgan Hill Courthouse and Justice Agencies Building in Santa Clara County” (“Courthouse 10 Project”). Id. 11 In 2007, while ACE insured RDC, RDC alerted ACE to “a potential claim in connection 12 with [RDC’s] duties and work performed under the PSA.” Id. ¶ 9. Later, in 2011, RDC brought a 13 lawsuit in California state court against the County for “nonpayment of amounts due under the 14 PSA.” Id. In response, the County filed a cross-complaint against RDC alleging breach of the 15 PSA for “alleged design defects in the Project” (the “2011 Underlying Action”). Id. Specifically, 16 the “County allege[d] that RDC: ‘materially breached the [PSA] by failing to provide services 17 within the applicable standard of care’ and ‘breached its duties by providing deficient designs.’” 18 Id. ¶ 10 (citations omitted). 19 Although the County filed the 2011 Underlying Action after ACE ceased insuring RLI, the 20 basis of the County’s lawsuit arose out of the same potential claim that RLI filed with ACE in 21 2007. Id. ¶¶ 27-28. As such, ACE defended RDC against the County’s design defect lawsuit in 22 the 2011 Underlying Action. Id. ¶ 11. Ultimately, the 2011 Underlying Action settled with a 23 release of liability. Id. ¶ 12; see also Mot. at 4. 24 4. The Underlying 2019 Action 25 In 2008, the County and the Judicial Council of California (“JCC”) executed a transfer 26 agreement for the Courthouse Project, and the transfer agreement “assigned the County’s interest 27 3 1 in the completed [Courthouse] Project to the JCC, including the assignment of the County’s rights 2 under the PSA.” Compl. ¶ 13. In 2019, JCC, as the County’s successor in interest, filed the 2019 3 Underlying Action against RDC in California state court. Id. ¶ 14. JCC alleged that RDC 4 breached the PSA “on the basis that RDC [] provided defective designs for the [Courthouse] 5 Project.” Id. ¶ 15. 6 In response to JCC’s lawsuit, RDC tendered RDC’s defense to both RLI and ACE under 7 the RLI Policy and the ACE Policy, respectively. ACE declined to defend RDC because ACE 8 determined that the “wrongful acts” alleged in the 2019 Underlying Action were not “Interrelated 9 Wrongful Acts” under the ACE Policy with respect to the 2011 Underlying Action and RDC’s 10 2007 notice of potential claim. Id. ¶ 30. Therefore, ACE determined that the ACE Policy did not 11 cover the 2019 Underlying Action and that ACE did not owe a duty to defend RDC. Id. RLI 12 disagreed with ACE’s conclusion that the 2019 Underlying Action did not involve “Interrelated 13 Wrongful Acts” and disagreed that the ACE Policy excluded the 2019 Underlying Action. Id. ¶ 14 31. Further, RLI determined that the 2019 Underlying Action was a “Related Claim” to the 2011 15 Underlying Action under the RLI Policy, and thus, for the purposes of the RLI policy, the 2019 16 Underlying Action was filed before RLI insured RDC. Id. ¶ 29. As such, RLI determined that the 17 RLI Policy did not cover the 2019 Underlying Action. Id. Therefore, RLI concluded that ACE, 18 and not RLI, owed a duty to defend RDC. Id. ¶¶ 29-31. 19 Despite RLI’s conclusion that RLI did not owe a duty to defend RDC, “RLI agreed to 20 defend RDC under reservation of rights, including the right to seek reimbursement, . . . because 21 ACE refused to so defend.” Id. ¶ 32. The 2019 Underlying Action is currently “in its preliminary 22 stages,” and RLI has continued to defend RDC. Mot. at 4. Furthermore, RDC indicates that it is 23 “clear that a centerpiece of RDC’s defense to the 2019 Underlying Action will be that [JCC’s] 24 claims are barred by the release [of liability] contained in the settlement of the 2011 Underlying 25 Action.” Id. Indeed, RDC included this affirmative defense “in [RDC’s] Answer to the 26 Complaint in the 2019 Underlying Action.” Id. 27 4 B. Procedural History of the Instant Case 1 On July 19, 2019, RLI filed its complaint seeking declaratory relief that RLI does not have 2 a duty to defend RDC, as well as seeking indemnity, subrogation, and reimbursement. See Compl. 3 ¶¶ 33-61. On September 12, 2019, RDC answered RLI’s complaint. ECF No. 15. On the same 4 day, RDC filed a crossclaim against ACE seeking declaratory relief that ACE has a duty to defend 5 RDC in the 2019 Underlying Action “in the event that RLI prevails on [RLI’s] Complaint.” ECF 6 No. 17 at 3. On September 16, 2019, ACE answered RLI’s complaint, ECF No. 19, and on 7 October 22, 2019, answered RDC’s crossclaim. ECF No. 31. 8 On October 28, 2019, the Court filed a case management order. ECF No. 37. The Court 9 explained that “[i]f Defendants want their motion to stay to be considered at the same time as 10 Plaintiff’s Rule 12(c) motion, Defendants must file their motion to stay” the same week that RLI 11 filed its motion for judgment on the pleadings. Id. at 1. 12 On October 30, 2019, RLI filed a motion for judgment on the pleadings. ECF No. 38. On 13 December 12, 2019, ACE and RDC independently opposed RLI’s motion for judgment on the 14 pleadings, ECF Nos. 46, 48, and on December 18, 2019, RLI filed a reply. ECF No. 51. 15 On November 1, 2019, the same week that RLI filed its motion for judgment on the 16 pleadings, RDC filed a motion to stay pending resolution of the 2019 Underlying Action. ECF 17 No. 42 (“Mot.”). On December 12, 2019, ACE filed a limited joinder to RDC’s motion to stay. 18 ECF No. 49. On December 13, 2019, RLI opposed RDC’s motion to stay, ECF No. 50 (“Opp.”), 19 and on December 20, 2019 RDC replied. ECF No. 52 (“Reply”). 20 II. LEGAL STANDARD 21 A. Landis Applies to the Instant Motion 22 As an initial matter, the parties dispute which legal standard applies to RDC’s motion to 23 stay. See Mot. at 5; Opp. at 15-16. Specifically, RDC argues that federal procedural law should 24 apply such that Landis v. North American Co., 299 U.S. 248 (1936), governs. See Mot. at 5; see 25 also Reply at 2-3. Conversely, RLI argues that California state procedural law should apply and 26 that Montrose Chemical Co. of California v. Superior Court, 6 Cal. 4th 287 (1993), governs. See 27 5 1 Opp. at 5, 16 (“[RDC’s cited cases] are not on point because those cases relied on Landis rather 2 than the controlling authorit[y] of Montrose”). However, the Court has already extensively 3 addressed this question in Zurich American Ins. Co. v. Omnicell, Inc., No. 18-CV-05345-LHK, 4 2019 WL 570760, at *2-5 (N.D. Cal. Feb. 12, 2019). There, the Court held that “Landis 5 applies . . . because federal procedural law governs in diversity cases.” Id. at *4. As in Zurich, the 6 instant case proceeds under diversity jurisdiction, Compl. ¶ 6, and as such “federal procedural law, 7 and not Montrose, . . . governs the instant motion.” Zurich, 2019 WL 570760, at *4. RLI offers 8 no argument for why the Court should depart from the Court’s previous ruling in Zurich, and the 9 Court finds no reason to alter its conclusion here. See generally Opp. at 14-17. Accordingly, the 10 Court assesses RDC’s motion to stay under Landis. 11 B. Motion to Stay Under Landis 12 Under Landis, the Court has “discretionary power to stay proceedings in its own court.” 13 Lockyer v. Mirant Corp., 398 F.3d 1098, 1109 (9th Cir. 2005). “A trial court may, with propriety, 14 find it is efficient for its own docket and the fairest course for the parties to enter a stay of an 15 action before it, pending resolution of independent proceedings which bear upon the case.” Leyva 16 v. Certified Grocers of California, Ltd., 593 F.2d 857, 863 (9th Cir. 1979). “This rule applies 17 whether the separate proceedings are judicial, administrative, or arbitral in character, and does not 18 require that the issues in such proceedings are necessarily controlling of the action before the 19 court.” Id. “Where it is proposed that a pending proceeding be stayed, the competing interests 20 which will be affected by the granting or refusal to grant a stay must be weighed.” CMAX, Inc. v. 21 Hall, 300 F.2d 265, 268 (9th Cir. 1962) (citing Landis, 299 U.S. at 254-55). As such, when 22 determining whether to grant a stay, the Court weighs three factors: (1) the possible damage to the 23 non-moving party, (2) “the hardship or inequity which a party may suffer in being required to go 24 forward,” and (3) “the orderly course of justice.” CMAX, 300 F.2d at 268 (citing Landis, 299 U.S. 25 at 254-55); see also Lockyer, 398 F.3d at 1110 (applying Landis factors). 26 III. DISCUSSION 27 6 A. Weighing the Landis Factors 1 The Court now weighs the Landis factors and assesses (1) the possible damage to RLI 2 from granting a stay; (2) the possible harm or prejudice to RDC that could arise if the instant case 3 proceeds without a stay; and (3) whether a stay will serve the orderly administration of justice. 4 See CMAX, 300 F.2d at 268. 5 1. A Stay Will Cause Minimal Damage to RLI 6 The Court first assess the possible damage to RLI which may result from granting RDC’s 7 motion to stay the instant case. The Court concludes that granting a stay will cause minimal 8 damage to RLI, and therefore, the first factor weighs in favor of granting a stay. 9 Though RLI contends that it will suffer material harm because it will be required to 10 continue defending RDC in an action in which RLI has no duty to defend, Opp. at 6, the Ninth 11 Circuit has held that “being required to defend a suit, without more, does not constitute a ‘clear 12 case of hardship or inequity’ within the meaning of Landis.” Lockyer, 398 F.3d at 1112. Further, 13 the Court has already held that delaying a determination of whether an insurer owes an insured 14 party coverage does not substantially harm the insurer. See Zurich, 2019 WL 570760, at *5. 15 Specifically, the Court aligned with “[o]ther courts in this district” and found that “advancing 16 defense costs ‘is part of an insurer’s obligation and costs of doing business.’” Id. (quoting State 17 Nat’l Ins. Co., Inc. v. US-SINO Inv., Inc., No. 5-13-CV-05240-EJD, 2015 WL 5590842, at *5 18 (N.D. Cal. Sept. 23, 2015)); see also United Specialty Ins. Co. v. Meridian Mgmt. Grp., Inc., No. 19 15-CV-01039-HSG, 2016 WL 1534885, at *2 (N.D. Cal. Apr. 15, 2016) (rejecting an insurer’s 20 argument that a stay would cause the insurer harm). 21 Moreover, RLI is defending RDC “under reservation of rights, including the right to seek 22 reimbursement,” meaning that RLI can recover the costs of defending RDC. Compl. ¶ 32. The 23 Court and other courts in this district have held that the ability of an insurer to recover for 24 continued defense weighs against finding that a stay harms the insurer. See Zurich, 2019 WL 25 570760, at *5 (finding minimal harm to the insurer, in part, because “[the insurer] can recover the 26 costs of defending [the insured party] after the underlying action is resolved”); see also Meridian 27 7 1 Mgmt., 2016 WL 1534885, at *2 (same); United Specialty Ins. Co. v. Bani Auto Grp. Inc., No. 18- 2 CV-01649-BLF, 2018 WL 5291992, at *5 (N.D. Cal. Oct. 23, 2018) (same). Furthermore, and 3 most importantly, the Ninth Circuit has already held that a delay in recovery of damages “is not 4 the kind of prejudice which should move a court to deny a requested postponement.” CMAX, 300 5 F.2d at 269. 6 Therefore, because RLI can seek reimbursement from RDC and will thus suffer minimal 7 damage, the Court finds that the first Landis factor weighs in favor of granting a stay. 8 2. Allowing the Instant Case to Proceed Could Cause Hardship and Prejudice to RDC 9 The Court now turns to the possible harm or prejudice that RDC could suffer if the Court 10 allows the instant case to proceed. RDC argues that RDC will suffer without a stay because RDC 11 will have to fight a “two-front war,” “will be forced to engage in discovery and litigate issues that 12 are more properly addressed in the 2019 Underlying Action,” and will be forced to take 13 “inconsistent positions” between the instant case and the 2019 Underlying Action. See Mot. at 7- 14 9. RLI responds that the instant case and the 2019 Underlying Action lack any “overlapping 15 issues of consequence,” such that the two cases will adjudicate independent issues and will not 16 force RDC to make contradictory arguments. See Opp. at 17-18. Further, RLI argues that RDC’s 17 concerns about fighting a “two-front war” are nonexistent because there are no overlapping issues 18 of consequence. Id. at 18. 19 The Court concludes that allowing the instant case to proceed could result in harm or 20 prejudice to RDC. Specifically, the Court finds that denying a stay could harm RDC for two 21 reasons. First, denying RDC’s motion could force RDC to take contradictory positions in the 22 instant case and in the 2019 Underlying Action. Second, denying RDC’s motion would force 23 RDC to fight a “two-front war” and therefore cause hardship and prejudice to RDC. 24 a. Allowing the Instant Case to Proceed Could Force RDC to Take Contradictory 25 Positions Regarding the “Relatedness” of the 2011 and 2019 Underlying Actions 26 First, RDC argues that RDC will have to take contradictory positions to defend against the 27 8 1 instant suit and to defend against the 2019 Underlying Action. See Mot. at 8-9; Reply at 3-5. 2 Specifically, RDC argues that “RLI’s entire case [in the instant case] is based on [RLI’s] claim 3 that the [2011 and 2019 Underlying Actions] are ‘related claims’ and involve ‘interrelated 4 wrongful acts,’” such that ACE and not RLI has to defend RDC. Reply at 4-5. Therefore, RDC 5 argues that to defend against RLI in the instant case, RDC must argue that the 2011 and 2019 6 Underlying Actions are not “Related Claims” and do not involve “Interrelated Wrongful Acts.” 7 See id. In addition, RDC also contends that one of “RDC’s primary defenses to the 2019 8 Underlying Action is that all claims were released by the prior settlement agreement [from the 9 2011 Underlying Action].” Id. According to RLI’s briefing, the settlement agreement released 10 “any and all claims . . . which the [parties] now own or hold, or have at any time owned or held, or 11 which may hereinafter accrue on account of, or relating to or relating from, the [2011 Underlying 12 Action].” Opp. at 12 (emphasis added).1 As a result, RDC argues that the central defense to the 13 2019 Underlying Action requires RDC to argue that the 2011 and 2019 Underlying Actions are in 14 fact related claims. See Reply at 4-5. This argument is contrary to the argument RDC must make 15 in the instant case, and thus, allowing the two cases to proceed simultaneously could prejudice 16 RDC. See id.; Mot. at 8-9. 17 RLI asserts that RDC would not be prejudiced because the instant case and the 2019 18 Underlying Action will adjudicate different issues. See Opp. at 10-13, 17-18. Specifically, RLI 19 argues that “whether the claims in the two actions constitute ‘Interrelated Wrongful Acts’ is not 20 the same determination as to whether the 2019 Design Defect Action is barred by the scope of the 21 [settlement] Release [from the 2011 Underlying Action].” Id. at 15. RLI contends that the two 22 23 1 The Court notes that RDC objects to the propriety of RLI’s “attempt[] to put into the record the language of a confidential settlement agreement, to which [RLI] was not a party, the meaning and 24 scope of which is currently being disputed in the [2019] underlying litigation.” Reply at 4 (emphasis in original); see also id. (“RLI has no business quoting the settlement agreement in 25 public filings in this litigation. For this reason, RLI quotes this language without any source or citation. Thus, it lacks any foundation.”). Nonetheless, RDC argues that “the language RLI chose 26 to quote” supports RDC’s motion to stay. Id. As such, for the purposes of assessing RDC’s motion to stay, the Court assumes that RLI’s briefing correctly quotes the settlement agreement 27 from the 2011 Underlying Action. 9 1 determinations are entirely independent because “[t]he language upon which [the] determinations 2 [in the instant case and in the 2019 Underlying Action] will be made is different.” Id. 3 The Court agrees with RDC. Even if the language of the settlement release is different 4 from the language of the ACE and RDC Policies, the fundamental question still turns on the 5 “relatedness” of the 2019 and 2011 Underlying Actions. In the instant case, in order to rule on the 6 merits, the Court will have to determine whether the 2011 and 2019 Underlying Actions “are 7 logically or causally connected by common facts, situations, events transactions, decisions or 8 advice” when assessing whether the two actions are “Related Claims” under the RLI Policy. See 9 Compl. ¶ 25 (quoting the RLI Policy). Additionally, in the instant case, reaching the merits will 10 also compel the Court to determine whether the 2011 and 2019 Underlying Actions “have as a 11 common nexus any fact, circumstance, situation, event, transaction, cause or series of related facts, 12 circumstances, situations, events, transactions or causes” when assessing “Interrelated Wrongful 13 Acts” under the ACE Policy. See Compl. ¶ 19 (quoting the ACE Policy). Although this language 14 from the ACE and RLI Policies at issue here does differ from the language of the 2011 Underlying 15 Action’s settlement agreement, the settlement agreement nonetheless uses the language “related to 16 or relating from.” Opp. at 12 (quoting the settlement agreement). Therefore, in the 2019 17 Underlying Action, the parties will have to address whether the 2019 Underlying Action “relat[es] 18 to or relat[es] from” the 2011 Underlying Action. See Reply at 3-5. 19 Indeed, even though the contract language the Court and the California state court will 20 interpret are different—as the Court must interpret the language of the RLI Policy and ACE Policy 21 and the California state court must interpret the 2011 settlement agreement—the Court rejects 22 RLI’s argument that these linguistic differences mean that the two inquiries are entirely 23 independent and present no “overlapping” or “common issues.” See Opp. at 10-12. Although RLI 24 may be correct that the scope of the settlement agreement will not be adjudicated in both cases, 25 both the Court and the California state court will have to assess the degree to which the 2011 and 26 2019 Underlying Actions are “related” through underlying facts and circumstances. See id. at 12. 27 10 1 Therefore, to ensure that RLI continues defending RDC in the 2019 Underlying Action, RDC will 2 be forced to argue in the instant case that JCC’s claims are separate, independent and unrelated to 3 the 2011 Underlying Action. That argument is the exact opposite of the argument RDC would 4 raise in the 2019 Underlying Action. The Court will not hold RDC to such a Hobson’s choice. 5 As a result, the Court finds that forcing RDC to argue that the 2011 and 2019 Underlying 6 Actions are not “logically or casually connected” could prejudice RDC’s simultaneous defense 7 that the two are in fact related. Specifically, such an argument could trigger collateral estoppel, 8 which weighs strongly in favor of granting a stay. State Farm Fire & Casualty Co. v. B.T.B., Inc., 9 No. CV-F-10-1990-LJO-DLB, 2011 WL 284974 (E.D. Cal. Jan. 26, 2011) (“An insured may also 10 be prejudiced by collateral estoppel.”); Montrose Chemical Corp. v. Superior Court, 25 Cal. App. 11 4th 902, 910 (1994) (“If the declaratory relief action is tried before the underlying litigation is 12 concluded, the insured may be collaterally estopped from relitigating any adverse factual findings 13 in the third party action.”). Put another way, if the instant case is not stayed, RDC would have to 14 develop a factual record and make arguments that JCC could then use against RDC in the 2019 15 Underlying Action. The Court finds that forcing RDC into such a contradictory position could 16 prejudice RDC and therefore weighs strongly in favor of granting a stay. 17 b. Allowing the Instant Case to Proceed Will Force RDC to Fight a “Two-Front War” 18 Second, RDC argues that denying a stay would force RDC to “fight a ‘two-front war’” 19 because RDC will have to simultaneously litigate against its own insurer, RLI, and against JCC, 20 the plaintiff in the 2019 Underlying Action. Mot. at 2. RLI responds that “[t]he concern about 21 fighting a ‘two-front war’ is relevant only where there are overlapping issues of consequence” and 22 thus “inapplicable here because this [case] does not seek to adjudicate a policy provision or 23 exclusion which is the same as an issue to be decided in the 2019 [Underlying Action].” Opp. 18. 24 Further, RLI argues that “RDC will not be prejudiced by fighting two litigations simultaneously” 25 because even if RDC succeeds in the instant case, ACE will step in and defend RLI. Id. 26 RDC has the better argument. The Court has already recognized that forcing an insured 27 11 1 party to simultaneously litigate against its own insurer and against a claimant in an underlying 2 litigation weighs in favor of a stay. See Zurich, 2019 WL 570760, at *6 (“Courts have found that 3 any prejudice (if at all) to the insurer in having to pay defense costs while the underlying case is 4 pending is outweighed by prejudice to the insured in having to fight a ‘two-front war.’” (collecting 5 district court and state cases)); see also Atain Specialty Insurance Co. v. 20 Parkridge, LLC, No. 6 15-CV-00212-MEJ, 2015 WL 2226356, at *10 (N.D. Cal. May 11, 2015) (“Defendants should not 7 have to fight both in this action and the Underlying Action, expending significant resources. To 8 do so would undercut one of the primary reasons for purchasing liability insurance.” (quotation 9 marks omitted)). Further, in light of the previous discussion regarding the overlapping issue of 10 “relatedness” between the instant case and the 2019 Underlying Action, the Court rejects RLI’s 11 notion that the concerns of a “two-front war” are inapplicable here because there are “no 12 overlapping issues.” See Opp. at 18. 13 RLI additionally argues that RDC would suffer no prejudice from a “two-front war” 14 because “ACE will assume RDC’s defense” in the event RLI’s declaratory action is successful. 15 See id. To the contrary, ACE’s answer to RDC’s crossclaim asserts numerous defenses as to why 16 ACE does not owe a duty to defend RDC in the 2019 Underlying Action. See ECF No. 31 at 4-6 17 (asserting fifteen defenses). As a result, if RLI is successful in the instant action, ACE appears 18 poised to dispute any potential duty ACE owes to RDC. Thus, whether ACE will assume RDC’s 19 defense remains an open question if RLI prevails in the instant case. 20 In summary, allowing the present case to proceed would force RDC to take contradictory 21 positions and compel RDC to engage in a “two-front war” in both the instant case and the 2019 22 Underlying Action. Accordingly, the Court finds that the second Landis factor weighs strongly in 23 favor of granting a stay. 24 3. A Stay Would Promote the Orderly Course of Justice 25 Lastly, the Court considers whether a stay will serve the orderly course of justice, 26 “measured in terms of the simplifying or complicating of issues, proof, and questions of law which 27 12 1 could be expected to result from a stay.” CMAX, 300 F.2d at 268. The Court concludes that a stay 2 will promote the orderly administration of justice and could potentially simplify factual issues. As 3 an initial matter, under Landis, courts do not require that two proceedings adjudicate identical 4 issues to find that a stay would promote the orderly course of justice. Instead, courts look for 5 whether the underlying case would make determinations that would inform or “contribute to the 6 decision of[] the factual and legal issues before the district court.” Lockyer, 398 F.3d at 1113 7 (“We hold only that a Landis stay is improper in the circumstances of this case . . . where the 8 [other proceeding] . . . is unlikely to decide, or to contribute to the decision of, the factual and 9 legal issues before the district court”); see also, N. River Ins. Co. v. Leffingwell Ag Sales Co., No. 10 CV-F-10-2007-LJO-MJS, 2011 WL 304579, at *7 (E.D. Cal. Jan. 27, 2011) (“While the 11 Underlying Action is not identical to the current action, the Underlying Action will make factual 12 determinations upon which coverage may hinge.”); Fahmy v. Live Nation Entm’t, Inc., No. 2-15- 13 CV-01158-CAS, 2015 WL 3617040, at *13 (C.D. Cal. June 8, 2015) (“Although the outcome of 14 the [underlying case] will not necessarily be dispositive of this case, that outcome will certainly 15 inform this case.”); Nat’l Union Fire Ins. Co. v. Elec. Arts, No. C-11-04897-JW, 2012 WL 16 219428, at *3 (N.D. Cal. Jan. 24, 2012) (“The resolution of this question in the Underlying 17 Lawsuits bears upon this action, inasmuch as it has the potential to simplify the issues before the 18 Court in this action.”). Importantly, granting a stay under Landis “does not require that the issues 19 in [the separate] proceedings are necessarily controlling of the action before the court.” Leyva, 20 593 F.2d at 863-64. 21 Here, as discussed previously, the Court finds that both the instant case and the 2019 22 Underlying Action will address the “relatedness” of the 2011 and 2019 Underlying Actions. 23 Although the language of the settlement agreement from the 2011 Underlying Action (the issue to 24 be adjudicated in the 2019 Underlying Action) differs from the language in the ACE and RLI 25 Policies (the issue to be adjudicated in the instant case), the two inquiries will nonetheless assess 26 the degree to which the 2011 Underlying Action “relates” to the 2019 Underlying Action. See 27 13 1 Mot. at 8-10. As such, the state court findings as to “relatedness” could “inform” or “bear upon” 2 the Court’s determination of whether the 2019 and 2011 Actions involve “Interrelated Wrongful 3 Acts” or “Related Claims” under the ACE and RLI policies. Therefore, the Court concludes that 4 allowing the state court to proceed first would serve the orderly course of justice and would 5 promote judicial efficiency. 6 Accordingly, because the determinations in the 2019 Underlying Action could inform the 7 Court’s decision in the instant case, the Court finds that the third Landis factor weighs in favor of 8 granting RDC’s motion to stay. 9 4. Conclusion 10 All three Landis factors weigh in favor of granting a stay in the instant case pending 11 resolution of the 2019 Underlying Action. Therefore, the Court GRANTS RDC’s motion to stay. 12 B. The Court Declines to Decide RLI’s Motion for Judgment on the Pleading 13 Because the Court GRANTS RDC’s motion to stay, the Court declines to reach RLI’s 14 motion for judgment on the pleadings until the stay is lifted after resolution of the 2019 15 Underlying Action. Therefore, the Court DENIES RLI’s motion for judgment on the pleadings 16 without prejudice. 17 IV. CONCLUSION 18 For the foregoing reasons, the Court GRANTS RDC’s motion to stay the instant case 19 pending resolution of the 2019 Underlying Action and DENIES RLI’s motion for judgment on the 20 pleadings without prejudice. The Clerk shall administratively close the file during the pendency 21 of the stay. This is a purely administrative internal procedure that does not affect the rights of the 22 parties. 23 IT IS SO ORDERED. 24 Dated: March 20, 2020 25 ______________________________________ LUCY H. KOH 26 United States District Judge 27 14