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Lakeland Village Homeowners Association v. Great American Insurance Group

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA


September 9, 2010

LAKELAND VILLAGE HOMEOWNERS ASSOCIATION, PLAINTIFF,
v.
GREAT AMERICAN INSURANCE GROUP, TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, AND DOES 1 THROUGH 50, DEFENDANTS.

The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge

ORDER GRANTING DEFENDANT'S MOTION FOR CERTIFICATION OF ORDER FOR APPEAL, STAYING PROCEEDINGS PENDING INTERLOCUTORY APPEAL AND VACATING HEARING ON PLAINTIFF'S MOTION FOR ENFORCEMENT OF ORDER*fn1

Pending are Plaintiff's motion to enforce a partial summary judgment order and Defendant Travelers Property Casualty Company of America ("Travelers")'s motion for certification of the order for appeal under 28 U.S.C. § 1292(b) ("section 1292(b)"), which Plaintiff seeks to have enforced. Travelers also requests a stay of the district court proceedings pending the outcome of the requested appeal. The motions concern the Court's July 22, 2010 order that granted Plaintiff's motion for partial summary judgment on its declaratory relief claim and held that Travelers has a duty to defend a cross-complaint filed against Plaintiff in a pending state court action. (Order Granting Pl.'s Mot. for Partial Summ. J., ECF No. 58.)

I. BACKGROUND

Plaintiff's earlier motion for partial summary judgment sought a declaration that its insurer, Travelers, has a duty to defend a state court cross-complaint filed against it. Plaintiff's motion was granted because the cross-complaint alleges a nuisance claim covered by the following provision in its insurance policy: injury arising out of "invasion of the right of private occupancy of a room, dwelling or premises that a person occupies by or on behalf of its owner, landlord or lessor...." (Pl.'s P.&A. in Supp. of Mot. for Partial Summ. J. against Travelers 8:9-19, ECF No. 11.)

Plaintiff's partial summary judgment motion was granted in part because the clause "'by or on behalf of its owner, landlord or lessor'... is reasonably susceptible to more than one interpretation." (ECF No. 58. 11:18-22). Therefore, this clause was construed in Plaintiff's favor. Id. The order states, in relevant part:

The parties also dispute the effect of the clause "by or on behalf of its owner, landlord or lessor," in the policy's definition of "personal injury" for "invasion of the right of private occupancy."...

....

The parties have not provided any binding authority, which is dispositive of this issue....

Further, the out-of-state authority cited by the parties is conflicting....

....

Since the clause "by or on behalf of its owner, landlord or lessor," is reasonably susceptible to more than one interpretation, it is ambiguous and must be construed in Plaintiff's favor.

Id. 9:14-16, 10:6-7, 10:12-13, 11:18-20.

II. DISCUSSION

Travelers requests the Court amend its July 22, 2010 Order, which granted Plaintiff partial summary judgment (the "Order") to certify the following issue for interlocutory appeal under 28 U.S.C. § 1292(b):

[W]hether the cross-complaint by Francis Hollow against Lakeland in the underlying El Dorado County Superior Court action ("the Hollow Cross-Complaint") potentially seeks damages because of injury arising out of the "invasion of the right of private occupancy of a room, dwelling or premises that a person occupies by or on behalf of its owner, landlord or lessor," thereby creating a duty to defend. (Mem. of Law in Supp. of Def.'s Mot. for Certification of Order for Appeal ("Mot.") 1:11-18.)

Travelers argues this "issue is proper for interlocutory review under 28 U.S.C. § 1292(b) because (1) it presents a controlling question of law, (2) as to which there are substantial grounds for differences of opinion, and (3) from which an immediate appeal of the Court's ruling would materially advance the ultimate termination of this lawsuit." (Mot. 1:19-22.) Specifically, Travelers contends:

The first and third prongs are met because a reversal of the Court's ruling... would effectively eliminate all of [Plaintiff's] claims and obviate the need for a trial[, and] [t]he second prong is met because there is no controlling California case law concerning the interpretation of the coverage provision at issue, and courts outside of California have disagreed on the proper interpretation of the policy language. (Mot. 1:22-27.)

Plaintiff opposes Travelers' motion, arguing, inter alia, "Travelers cannot demonstrate that 'there is a substantial ground for difference of opinion' regarding the issues it seeks to certify[,]" "the question at issue does not involve any exceptional circumstances," and "reversal of this issue on appeal would not terminate the entire action as asserted by Travelers." (Pl.'s Opp'n to Def.'s Mot. for Certification of Order on Appeal ("Opp'n") 2:17-18, 3:10, 3:15-18.)

A. Request for Certification of Appeal under Section 1292(b)

"Section 1292(b) provides a mechanism by which litigants can bring an immediate appeal of a non-final order upon the consent of both the district court and the court of appeals." In re Cement Antitrust Litigation, 673 F.2d 1020, 1025-26 (9th Cir. 1982). "The party seeking review [has] the burden of showing that 'exceptional circumstances justify a departure of the basic policy of postponing appellate review until after the entry of a final judgment.'" Assoc. of Irritated Residents v. Fred Schakel Dairy, 634 F.Supp.2d 1081, 1087 (E.D. Cal. 2008)(quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 475 (1978)).

Section 1292 identifies three factors that must be present to certify an appeal. In re Cement Antitrust Litigation, 673 F.2d at 1026. First, the issue to be certified must involve a "controlling question of law." "[T]he issue 'need not be dispositive of the lawsuit... to be regarded as controlling.'" Sierra Foothills Public Utility Dist. v. Clarendon America Ins. Co., No. CV F 05-0736 AWI SMS, 2006 WL 2085244, at *2 (E.D. Cal. July 25, 2006)(quoting United States v. Woodbury, 263 F.2d 784, 787-88 (9th Cir. 1959)). Rather, "all that must be shown... is that resolution of the issue on appeal could materially affect the outcome of litigation in the district court." In re Cement Antitrust Litigation, 673 F.2d at 1026.

Second, there must be a "substantial ground for difference of opinion" on the issue. A party's disagreement with the district court's ruling is insufficient to demonstrate a "substantial ground for difference of opinion." Central Valley Chrysler-Jeep v. Witherspoon, No. CVF046663RECLJO, 2005 WL 3470653, at *2 (E.D. Cal. 2005). The moving party must make "some greater showing." Napa Community Redevelopment Agency v. Continental Ins. Co., No. C-94-3284 DLJ, 1995 WL 714363, at *3 (N.D. Cal. 1995). For example, courts have held this factor is satisfied when there is a lack of binding authority on an issue, which is subject to differing interpretations. See, e.g., Maestri v. Westlake Excavating Co., Inc., 894 F.Supp. 573, 578 (N.D.N.Y. 1995); see also, Wells Fargo Bank v. Bourns, Inc., 860 F.Supp. 709, 717 (N.D. Cal. 1994)(holding the "available precedent [left] 'substantial ground for difference of opinion'" when "the issues... have not been squarely addressed by the Ninth Circuit").

Third, an immediate appeal from the order must "materially advance the ultimate termination of the litigation." This factor is closely related to the question of whether an issue of law is "controlling" "in that the [district court] should consider the effect of a reversal... on the management of the case." Napa Community Redevelopment Agency v. Continental Ins. Co., 1995 WL 714363, at *4. The district court should consider "the effect of immediate [appellate] review and reversal, not just review.... The likelihood of success on the merits, and the typical lifespan of an appeal, do not answer the relevant question." Environmental Protection Information Center v. Pacific Lumber Co., No. C 01-2821, 2004 WL 838160, at *3 n.7.

Travelers has shown that certification of the Order is appropriate here. Resolving the legal issue of whether or not Travelers owes Plaintiff a defense on appeal would "materially affect the outcome" of these proceedings since three of the four claims Plaintiff alleges against Travelers are based upon a duty to defend; specifically, breach of contract, breach of the implied covenant of good faith and fair dealing and declaratory relief. (Pl.'s Compl. ¶¶ 26, 33, 34, 39-40.) Therefore, the Order "involves a controlling issue of law," and an immediate appeal from the order will "materially advance the ultimate termination of the litigation." A reversal of the Order could "eliminate trial time of trying [these three claims] and accordingly conserve judicial resources." Assoc. of Irritated Residents v. Fred Schakel Dairy, 634 F.Supp.2d at 1092-93. Further, "there is substantial ground for difference of opinion" as to whether or not Travelers has a duty to defend Plaintiff because no binding California decision has interpreted the clause "by or on behalf of its owner, landlord or lessor," and out-of-state courts have construed the clause differently. For the stated reasons, Travelers' certification motion under section 1292 will be granted.

B. Stay of Proceedings Pending Interlocutory Appeal

Travelers also requests a stay of the proceedings in this action pending the outcome of the appeal "so the parties may avoid the need for unnecessary discovery and motion practice." (Mot. 6:22-24.) Plaintiff opposes the request, arguing a stay would create substantial hardship to Plaintiff, "a self-funded non-profit homeowners association," because it would have to continue paying for its defense in the underlying state litigation. (Opp'n 10:18-24.)

This court has authority to stay this case pending an interlocutory appeal since section 1292(b) states: "[A]pplication for an appeal hereunder shall not stay proceedings in the district court unless the district judge or the Court of Appeals or a judge thereof shall so order." Here, resolution of the issue of whether or not Travelers owes Plaintiff a defense of a cross-complaint filed in a pending state court action "would alter the direction of the current proceedings...." Assoc. of Irritated Residents v. Fred Schakel Dairy, 634 F.Supp.2d at 1092-93 (staying proceedings pending interlocutory appeal of order denying motion to dismiss Clean Air Act claim). Since three of Plaintiff's four claims against Travelers are based upon the duty to defend, "[i]t would be a waste of judicial and party resources to proceed with [these] claims while the appeal is pending." Id.; see also Watson v. Yolo Co. Flood Control and Water Conservation District, No. 2:06-cv-1549 FCD DAD, 2007 WL 4107539, at *4 (E.D. Cal. Nov. 16, 2007) (holding stay of proceedings pending interlocutory appeal promotes economy of time and effort both for the court and the parties). Plaintiff counters that "a stay will cause [it] irreparable damage," but has not supported this argument with evidence. (Opp'n 10:18-19.) Therefore, Travelers' request to stay this case pending resolution of the interlocutory appeal will also be granted.

III. CONCLUSION

For the stated reasons, Travelers' Motion for Certification of the Order for appeal is granted, and this case is stayed pending the Ninth Circuit's decision on whether it will allow the appeal, or if the interlocutory appeal is permitted, its decision on the appeal. Further, the hearing on Plaintiff's motion to enforce the Order is vacated. The parties shall file a Joint Status Report within five court days of receipt of a Ninth Circuit Order that authorizes this case to proceed in the district court.


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