Provide Commerce, Inc. v. Hartford Fire Insurance Company ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 PROVIDE COMMERCE, INC., Case No. 12-cv-00516-BAS-WVG 11 Plaintiff, ORDER LIFTING STAY 12 13 v. 14 HARTFORD FIRE INSURANCE COMPANY, et al., 15 Defendants. 16 17 This case, which has been pending for over eight years, has been stayed for the 18 past five years. (See ECF No. 124.) The Court recently ordered the parties to file a 19 joint status report addressing the status of this case, including when the parties 20 anticipate the stay can be lifted. (ECF No. 153.) The parties responded and provided 21 a summary of procedural issues and arguments concerning the stay. (ECF No. 154.) 22 For the following reasons, the Court determines a stay is no longer appropriate, lifts 23 the stay, and orders the parties to contact the Magistrate Judge’s chambers to schedule 24 a case management conference. 25 “[T]he power to stay proceedings is incidental to the power inherent in every 26 court to control disposition of the cases on its docket with economy of time and effort 27 for itself, for counsel, and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 1 is dependent upon the circumstances of the particular case.’ The party requesting a 2 stay bears the burden of showing that the circumstances justify an exercise of that 3 discretion.” Nken v. Holder, 556 U.S. 418, 433–34 (2009) (alteration in original) 4 (citations omitted) (quoting Virginian Ry. Co. v. United States, 272 U.S. 658, 672– 5 73 (1926)). 6 The parties are familiar with the facts of this case. In brief, this is an insurance 7 coverage dispute under California state law. Plaintiff Provide Commerce seeks 8 damages under an insurance policy issued by Defendant Sentry Insurance for costs 9 Provide incurred while defending In re Easysaver Rewards Litigation, 09-cv-2094- 10 BAS-WVG (S.D. Cal. Filed Sept. 24, 2009) (“Underlying Action”).1 In the 11 Underlying Action, the plaintiff consumers allege, among other things, that Provide 12 defrauded them through operation of its online rewards program. 13 Sentry filed a Counterclaim against Provide. Then, a few years into this 14 litigation, Provide moved to stay the action under the California Supreme Court’s 15 decision in Montrose Chemical Corp. v. Superior Court, 6 Cal. 4th 287 (1993). (ECF 16 No. 108.) In Montrose, the California Supreme Court determined a stay is 17 “appropriate” where factual issues in the coverage action overlap with issues being 18 resolved in the underlying litigation. See 6 Cal. 4th at 301–02. The court explained: 19 For example, when the third party seeks damages on account of the 20 insured’s negligence, and the insurer seeks to avoid providing a defense by arguing that its insured harmed the third party by intentional conduct, 21 the potential that the insurer’s proof will prejudice its insured in the 22 underlying litigation is obvious. This is the classic situation in which the [coverage] action should be stayed. By contrast, when the coverage 23 question is logically unrelated to the issues of consequence in the 24 underlying case, the [coverage] action may properly proceed to judgment. 25 26 27 1 Provide also sued its two other insurers, Hartford Insurance Company and Certain 1 See id. at 302. Sentry contests its liability in this case by arguing that Provide 2 intentionally defrauded its customers, leading to the Underlying Action. Hence, 3 Provide argued a stay was warranted under Montrose because this case presents “the 4 classic situation in which the [coverage] action should be stayed.” See id. at 302. 5 (See ECF No. 108.) 6 When the Court considered Provide’s stay motion in 2014, the Underlying 7 Action had resulted in a class action settlement, but the settlement was on appeal. 8 The Court reasoned that there was thus “the potential that the settlement may be 9 negated on appeal and the litigation reopened.” (ECF No. 116.) Consequently, the 10 Court granted Provide’s motion to stay and required Provide to file a status report 11 after the Ninth Circuit ruled on the appeal. (Id.) 12 Ultimately, the Ninth Circuit affirmed the settlement in the Underlying Action 13 but remanded the matter for the Court to recalculate the appropriate fee award for the 14 plaintiffs’ class counsel. As the Court emphasized in its most recent order in the 15 Underlying Action, “[t]he fairness or validity of the settlement” is no longer before 16 the Court. Underlying Action, ECF No. 367. “[T]he Court already determined that 17 the settlement was fair and entered judgment,” and the Court of Appeals “affirmed 18 the fairness determination.” Id. Therefore, although ancillary proceedings continue 19 regarding the appropriate amount of attorney’s fees for class counsel and now 20 potentially the counsel for the objector to the settlement, Provide’s liability is not 21 being adjudicated. Further, given the procedural posture of the Underlying Action, 22 the Court finds the rationale for a Montrose stay is inapposite, and the “circumstances 23 of [this] particular case” no longer justify a stay. See Nken, 556 U.S. at 433. 24 That said, although the Court originally stayed this case in light of Montrose’s 25 rationale, the stay became justified on an alternative ground when Provide filed for 26 bankruptcy. (See ECF No. 151.) By then, Provide was known as Provide Commerce, 27 1 LLC, and the entity was a subsidiary of FTD Companies, Inc.2 FTD Companies and 2 its subsidiaries filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy 3 Court for the District of Delaware. The bankruptcy court is jointly administrating the 4 cases—including Provide’s bankruptcy—under the caption In re FTD Companies, 5 Inc., No. 19-11240 (LSS) (Bankr. Del. 2019) (“Bankruptcy Action”). Further, 6 Provide’s bankruptcy filing automatically stayed Sentry’s Counterclaim against the 7 entity. See 11 U.S.C. § 362. 8 The bankruptcy court has since issued an order confirming the debtor 9 companies’ liquidation plan under Chapter 11. Bankruptcy Action, ECF No. 1037. 10 The confirmation order provides: 11 40. The automatic stay imposed by section 362(a) of the Bankruptcy Code and the injunctions set forth in the Plan, if and to the extent 12 applicable, shall be deemed lifted with respect to Provide Commerce v. 13 Sentry Insurance, et al., and Sentry Insurance’s Counterclaim therein, Case No. 12-cv-00516 (the “Sentry Litigation”) without further order of 14 this Bankruptcy Court. Further, following the occurrence of the 15 Effective Date, neither the automatic stay nor the injunctions set forth in the Plan or any other terms in the Plan or this Confirmation Order 16 shall prevent Sentry Insurance from proceeding with investigation, 17 discovery, and litigation regarding the Sentry Litigation in the United States District Court for the Southern District of California (the 18 “California District Court”). Sentry Insurance may move the California 19 District Court to lift the stay imposed of the Sentry Litigation by the California District Court at any time after March 1, 2020, and proceed 20 with investigation, discovery and litigation of the Sentry Litigation in 21 the California District Court. 22 (Id.) Regardless of whether Sentry should have since filed a motion to lift the stay, 23 the bankruptcy court’s order plainly provides that the automatic stay “shall be 24 deemed lifted . . . without further order of this Bankruptcy Court.” (Id.) Thus, the 25 Bankruptcy Code’s automatic stay no longer applies here. 26 27 1 In sum, the Court finds a stay under Montrose, 6 Cal. 4th 287, is no longer 2 |lappropriate. Nor is a stay justified in light of Provide’s bankruptcy filing. 3 || Accordingly, the Court LIFTS the stay in this matter. The Court ORDERS the 4 || parties to contact the Magistrate Judge’s chambers no later than Friday, June 12, 5 ||2020, to schedule a case management conference. 6 IT IS SO ORDERED. 7 f 8 DATED: June 2, 2020 (yi iA A (Ayphan 6 9 United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28