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Northern California Collection Jam Dad Services Inc. of Sacramento v. Central Sierra Construction

August 19, 2008

NORTHERN CALIFORNIA COLLECTION JAM DAD SERVICES INC. OF SACRAMENTO, A CORPORATION, PLAINTIFF,
v.
CENTRAL SIERRA CONSTRUCTION, INC., A NEVADA CORPORATION, DEFENDANT.
CENTRAL SIERRA CONSTRUCTION, INC., A NEVADA CORPORATION, ON BEHALF OF ITSELF AND ALL OTHERS SIMILARLY SITUATED, CROSS-CLAIMANT/DEFENDANT,
v.
PRO GROUP MANAGEMENT, INC., A NEVADA CORPORATION; BUILDERS' ASSOCIATION OF WESTERN NEVADA; AND BUILDERS' ASSOCIATION OF WESTERN NEVADA SELF INSURED GROUP, CROSS-DEFENDANTS.



ORDER DENYING CENTRAL SIERRA'S MOTION FOR SUMMARY JUDGMENT AND GRANTING CROSS-DEFENDANTS' CROSS-MOTION FOR SUMMARY JUDGMENT

Defendant and third-party complainant Central Sierra Construction, Inc. ("Central Sierra") brings this motion for summary judgment against Cross-Defendants Pro Group Management Inc. ("Pro Group"), Builders' Association of Western Nevada ("BAWN"), and Builders' Association of Western Nevada Self Insured Group ("BAWNSIG") (collectively "Cross-Defendants") pursuant to Rule 56(c) of the Federal Rules of Civil Procedure. Cross-Defendants filed a cross-motion for summary judgment. For the reasons set forth below, Central Sierra's motion is DENIED and Cross-Defendants' cross-motion is GRANTED.

I. FACTUAL AND PROCEDURAL BACKGROUND

Central Sierra is a Nevada construction company that sometimes performs work in California. BAWN is a non-profit construction trade association composed of builder and associate members providing services for the building industry. BAWN sponsors a workers' compensation insurance plan called BAWNSIG. Third-party defendant Pro Group administers BAWNSIG.

On December 16, 2002, Central Sierra applied for workers' compensation insurance through BAWNSIG. It received a certificate of insurance from Pro Group for the period of December 31, 2002 through January 1, 2004. Central Sierra's BAWNSIG policy (the "policy") provided it with workers' compensation coverage for its Nevada operations. According to Cross-Defendants, the policy also provided coverage for Central Sierra's Nevada hired/based employees performing temporary work in California, so long as other applicable procedures for obtaining that coverage were satisfied, including having these employees complete and sign a form titled "Election for Nevada Workers' Compensation Coverage For Out-Of-State Injury."

During the insuring period, Central Sierra employees performed work in California. On January 1, 2003, Central Sierra decided to stop paying workers' compensation premiums to California.*fn1 Some of Central Sierra's Nevada hired/based employees, however, continued to perform work in California. On March 4, 2004, the California State Compensation Insurance Fund ("SCIF") wrote to Central Sierra questioning whether the company had maintained California worker's compensation coverage, as required by California law, in 2002 and 2003. The letter states that Central Sierra has failed to report payroll in California since January 1, 2003. The letter also states that SCIF had contacted Pro Group, which was unable to provide proof that Central Sierra's Nevada hired/based employees working in California are covered under a certificate of insurance issued by Pro Group. On March 5, 2004, Robert Vogel, Pro Group's vice president of operations, wrote a letter to SCIF stating that "Pro-Group Management, as the plan administrator for [BAWNSIG], has insured Central Sierra Construction Inc., [sic] for all temporary work in the State of California for their Nevada hired/based employees." Unconvinced that Central Sierra's coverage through BAWNSIG satisfied California law, however, SCIF audited Central Sierra for its operations from June 1, 2002 to June 1, 2003 and demanded that Central Sierra pay approximately $280,000 in unpaid insurance premiums, plus interest.

On August 9, 2006, SCIF's collection agency filed suit against Central Sierra in Sacramento Superior Court. On August 23, 2006, Central Sierra removed the case to this Court on the basis of diversity. On September 5, 2006, Central Sierra filed a third-party complaint against Cross-Defendants. On December 6, 2007, Central Sierra filed an amended complaint, alleging claims for breach of contract, misrepresentation and indemnification, seeking to recover from Cross-Defendants the amount claimed by SCIF. On April 4, 2008, Central Sierra filed a motion for summary judgment. On June 18, 2008, Cross-Defendants filed a cross-motion for summary judgment.

II. OPINION

A. Legal Standard

Summary judgment is appropriate if "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Where the nonmoving party will have the burden of proof on an issue at trial, the movant's burden may be discharged by pointing out to the district court that there is an absence of evidence to support the nonmoving party's case. Id. at 325. "Summary judgment for a defendant is appropriate when the plaintiff fails to make a showing sufficient to establish the existence of an element essential to [his] case, and on which [he] will bear the burden of proof at trial." Miller v. Glenn Miller Productions, Inc., 454 F.3d 975, 987 (9th Cir. 2006) (internal quotation marks omitted).

If the moving party sustains its burden, the burden then shifts to the nonmoving party to go beyond the pleadings and by his or her own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial. Celotex, 477 U.S. at 324. "If the nonmoving party fails to produce enough evidence to create a genuine issue of material fact, the moving party wins the motion for summary judgment." Nissan Fire & Marine Ins. Co. v. Fritz Companies, Inc., 210 F.3d 1099, 1103 (9th Cir. 2000). Summary judgment is appropriate if, viewing the evidence and the inferences therefrom in the light most favorable to the nonmoving party, there are no genuine issues of material fact in dispute and the moving party is entitled to judgment as a matter of law. Valandingham v. Bojorquez, 866 F.2d 1135, 1137 (9th Cir. 1989).

B. Choice of Law

Cross-Defendants maintain that Nevada law governs this insurance dispute. Therefore, before reaching the merits of the cross-motions for summary judgment, the Court must conduct a choice-of-law analysis to determine whether California or Nevada law governs the substantive issues raised in this case. In a diversity action, federal courts sitting in California must apply the choice-of-law rules of California. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941); Estate of Darulis v. Garate, 401 F.3d 1060, 1062 (9th Cir. 2005). In California, courts apply a three-part governmental interest test. Estate of Darulis, 401 F.3d at 1062. Under this test, a court must first consider whether the two states' laws actually differ; if so, the court then examines each state's interest in applying its own law to determine whether there is a "true conflict"; and if each state has a legitimate interest, the court must compare the extent to which each state's interests will be impaired if the other state's law is applied. Id. This choice of law analysis embodies the presumption that California law applies unless the proponent of foreign law can show otherwise. Browne v. McDonnell Douglas Corp., 504 F.Supp. 514, 517 (N.D. Cal. 1980) ("Under the government interest analysis, California will apply its own law unless it is shown that there is a compelling reason to displace forum law."); see also McGhee v. Arabian American Oil Co., 871 F.2d 1412, 1422 (9th Cir. 1989) (The burden is on the party seeking to invoke foreign law; California applies its own rule of decision unless a party litigant properly invokes the law of a foreign state.). "A party advocating application of foreign law 'must demonstrate that the [foreign] rule of decision will further the interest of that foreign state and therefore that it is an appropriate one for the forum to apply to the case before it.' " McGhee, 871 F.2d at 1422 (quoting Hurtado v. Superior Court, 11 Cal.3d 574, 581 (1974)). Here, because Cross-Defendants did not show that a conflict exists between the laws of California and Nevada or that the application of Nevada law would further Nevada's interests, the Court will apply the substantive law of California to resolve this insurance dispute.

C. Claim One: Breach of Contract

Cross-Defendants argue that summary judgment is appropriate with respect to Central Sierra's breach of contract claim because Central Sierra cannot demonstrate that the policy was breached, nor can it demonstrate ...


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