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American Newland Communities, L.P., et al v. Axis Specialty Insurance Company

November 7, 2011

AMERICAN NEWLAND COMMUNITIES, L.P., ET AL.,
PLAINTIFFS,
v.
AXIS SPECIALTY INSURANCE COMPANY,
DEFENDANT.



The opinion of the court was delivered by: Honorable Janis L. Sammartino United States District Judge

ORDER (1) DENYING MOTION TO DISMISS OR TRANSFER; (2) GRANTING, IN THE ALTERNATIVE, MOTION TO STAY; (3) DENYING, IN THE ALTERNATIVE, MOTION TO TRANSFER PURSUANT TO 28 U.S.C. § 1404(a); AND (4) DENYING AS MOOT MOTIONS TO STRIKE AND REQUEST FOR JUDICIAL NOTICE (ECF Nos. 6, 17, 18, 19)

Presently before the Court is Defendant Axis Specialty Insurance Company's ("Defendant" or "Axis") motion to dismiss, stay or transfer for improper venue or in the alternative to transfer for convenience pursuant to 28 U.S.C. § 1404(a). (Mot. to Dismiss, ECF No. 6) Also before the Court is American Newland Communities, LP; Newland IHP Ventures, LLC; Newland Real Estate Group, LLC; Terrabrook Vista Lakes, L.P.; Terrabrook Vista Lakes GP, LLC; and Westerra Management, L.L.C.'s (collectively, "Insureds") response in opposition (Resp. in Opp'n, ECF No. 12), and Defendant's reply in support, (Reply in Supp., ECF No. 17). Having considered the parties' arguments and the law, the Court GRANTS Defendant's motion to stay.

BACKGROUND

The instant case involves a declaratory judgment action regarding an insurance dispute, namely, whether Defendant has a duty to defend the Insureds in several underlying actions alleging damages arising from the purchase of homes that were allegedly built on or immediately adjacent to a former military bombing range. (Compl. ¶ 1, ECF No. 1-1)

On April 8, 2011 Defendant filed a declaratory judgment action in the Southern District of California; that action was voluntarily dismissed by Defendant on April 27, 2011. (Resp. in Opp'n 3, ECF No. 12)

Subsequently, on May 6, 2011, Defendant filed a second declaratory judgment action, this time in the Middle District of Florida ("Florida Action"). (Id.); (Mot. to Dismiss 2, ECF No. 6) That complaint "seeks a declaration that [Defendant] is not required to provide liability coverage and a defense to plaintiffs in the Underlying Florida Actions under the terms and conditions of the Policy . . . and is entitled to recoupment of the costs incurred in the defense of the non-covered claims in the underlying lawsuits." (Mot. to Dismiss 2, ECF No. 6) In addition to all but one of the Insureds named as plaintiffs in the instant complaint, the Florida Action names several of the representative plaintiffs in the underlying actions. (Id. at 2--3)

Three days-but just one business day-after the Florida Action was filed, on May 9, 2011, the Insureds filed a complaint for declaratory relief in the Superior Court of the State of California for the County of San Diego ("California Action"), seeking a declaration that Defendant was required to defend the Insureds in the underlying actions. (Compl., ECF No. 1-1) The complaint did not name any of the plaintiffs in the underlying actions as defendants. (See id.) Defendant removed the complaint to this Court on June 3, 2011. (Not. Removal, ECF No. 1)

LEGAL STANDARD

"[T]he well-established 'first to file rule[]' . . . allows a district court to transfer, stay, or dismiss an action when a similar complaint has already been filed in another federal court." Alltrade, Inc. v. Uniweld Prods., Inc., 946 F.2d 622, 623 (9th Cir. 1991). "In applying this rule, a court looks at three threshold factors: (1) the chronology of the two actions; (2) the similarity of the parties; and (3) the similarity of the issues." Z-Line Designs, Inc. v. Bell'O Int'l LLC, 218 F.R.D. 663, 665 (N.D. Cal. 2003).

Although the first to file rule "should not be disregarded lightly," Church of Scientology v. U.S. Dep't of the Army, 611 F.2d 738, 750 (9th Cir. 1979), the district court has discretion to disregard the first to file rule in the interest of equity when there are circumstances of bad faith, anticipatory suit, or forum shopping, Alltrade, 946 F.2d at 628 (citations omitted). "A court may also refuse to apply the first to file rule if the balance of convenience weighs in favor of the later-filed action." Z-Line Designs, 281 F.R.D. at 665. However, "the respective convenience of the two courts[] 'normally . . . should be addressed to the court in the first-filed action.'" Alltrade, 946 F.2d at 628 (quoting Pacesetter Sys., Inc. v. Medtronic, Inc., 678 F.2d 93, 96 (9th Cir. 1982)).

ANALYSIS

1. First to File Rule

A. Chronology of the Two Actions

Defendant's action pending in the Middle District of Florida was indisputably filed prior to the Insureds' complaint in the California Action. The fact that Defendant's action was filed just three days, or one business day, prior to the Insureds' action does not defeat the Court's finding that chronologically, Defendant's action was filed first. See Z-Line Designs, 218 F.R.D. at 665 ...


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