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Janopaul Block Companies, LLC v. St. Paul Fire and Marine Insurance Company; and Does 1 Through 500

November 16, 2011

JANOPAUL BLOCK COMPANIES, LLC;
JANOPAUL BLOCK S.D. NO. 1, LLC,
PLAINTIFFS,
v.
ST. PAUL FIRE AND MARINE INSURANCE COMPANY; AND DOES 1 THROUGH 500, INCLUSIVE, DEFENDANT.



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

ORDER: GRANTING MOTION TO STAY (ECF No. 7)

Presently before the Court is Defendant St. Paul Fire and Marine Insurance Company, et al.'s ("St. Paul") motion for partial summary judgment or, in the alternative, to stay this action. (ECF No. 7.) Also before the Court are Plaintiffs Janopaul Block Cos., LLC, and Janopaul Block S.D. No. 1, LLC's ("Janopaul") opposition (ECF No. 13) and St. Paul's reply (ECF No. 17). The motion hearing set for November 17, 2011, is HEREBY VACATED, and the matter is taken under submission without oral argument pursuant to Civil Local Rule 7.1(d)(1). Having considered the parties' arguments and the law, the Court GRANTS Defendant's motion to stay this action pending final judgments in two related pending state actions, and DECLINES TO RULE on Defendant's motion for partial summary judgment pursuant to this stay.

BACKGROUND*fn1

A web of prior suits arising out of defective construction work on the El Cortez building in San Diego, CA, underlies the instant motion. A timeline of relevant events involving many different parties and actions in San Diego Superior Court is discernable from the parties' moving papers, although it is far from clearly explained. Because understanding the factual and procedural history of these prior suits is integral to the resolution of the present motion, the Court attempts to set forth this history in some depth here.

Plaintiff Janopaul is a California corporation that purchases, renovates and develops property for residential uses, among other things. Defendant St. Paul is a Minnesota corporation that provides insurance policies to various entities, including construction contractors.

In 1998, Janopaul purchased the El Cortez building for development into apartments or condominiums. In May of 1998, Janopaul entered into a contract with Ninteman Construction Company, Inc., which later became known as Sundt Construction, Inc. ("Sundt"), to undertake the planned renovations. Sundt performed construction work and hired and supervised sub-contractors' work on the building. Sundt was covered under a series of general liability policies by St. Paul, effective between October, 1997, and October, 2004. Under Sundt's contract with Janopaul, Sundt provided Janopaul some form of insurance coverage through St. Paul, the nature of which the parties contest.

Several lawsuits in San Diego Superior Court arose out of deficiencies in the construction performed and supervised by Sundt on the El Cortez building. In 2005, Janopaul sued Sundt, alleging a breach of contract as a result of the construction defects. In 2006, the El Cortez Owners' Association ("Association") sued Janopaul and Sundt, alleging various causes of action arising out of the same construction defects, and Janopaul filed a cross-complaint for indemnity against Sundt. In 2007, the Association filed several other related actions against Janopaul regarding a lot adjacent to the El Cortez building. These various actions were all eventually consolidated into one case in San Diego County Superior Court ("the consolidated case").

For claims against them arising out of the construction defects in the consolidated case, Sundt and Janopaul both tendered defense and indemnity claims to St. Paul. St. Paul provided a defense to Sundt, but failed, at least initially, to defend Janopaul. Janopaul was represented throughout the consolidated case by the law firm Golub & Morales. As to the extent of St. Paul's duty to defend or indemnify Janopaul in the consolidated case, and the extent to which St. Paul eventually provided such defense or indemnification, the parties disagree.

At various points throughout 2010, the parties entered into settlement agreements regarding some of the claims in the consolidated case. As part of the terms of their settlement, Janopaul agreed to pay the Association proceeds that Janopaul recovered from Sundt, up to $600,000, exclusive of attorney's fees and costs. In connection with these settlement negotiations, Sundt agreed to pay a sum of $300,000, but the parties now disagree as to the nature of this sum. Janopaul believes Sundt agreed to pay the sum to Janopaul, while St. Paul contends Sundt agreed to pay the sum to the Association, and that Janopaul retained a right to pursue Sundt for attorney's fees and costs.

Janopaul continued to assert in the consolidated case that Sundt owed fees and costs through an indemnity provision or a prevailing party provision in the construction contract between them. On December 17, 2010, Janopaul filed a motion against Sundt in the consolidated case seeking recoupment of its outstanding attorney's fees and costs in that case. Janopaul alleged that it had incurred $3,172,079*fn2 in attorney's fees and costs in the consolidated case, of which $2,349,068 had previously been paid by insurance carriers other than St. Paul. Janopaul also claimed it was entitled to interest in the amount of $459,939. Janopaul acknowledged that St. Paul had already paid $385,000 for Janopaul's attorney's fees and costs, but did not subtract that amount from its requested award because St. Paul was in the process of contesting that fee award.

In a separate action ("fee arbitration case") in San Diego Superior Court, St. Paul petitioned to compel arbitration between Janopaul and St. Paul regarding the fee dispute. Assuming the parties' arguments in that action were similar to those advanced in the present motion before this Court, Janopaul asserted that it was an additional insured under one or more of the Sundt policies. St. Paul claims it agreed to defend Janopaul in the consolidated case under a reservation of rights and agreed to provide independent counsel pursuant to Civil Code section 2860. Janopaul disagrees, stating that "St. Paul's purported reservation was not unqualified as implied."

In the fee arbitration case, Judge Steven R. Denton granted St. Paul's petition and ordered the parties into arbitration pursuant to Civil Code section 2860 on January 25, 2011. Janopaul appealed this decision, and the appeal is currently pending.

In the consolidated case, Judge Luis R. Vargas found Janopaul was the prevailing party as against Sundt, and awarded Janopaul attorney's fees in the amount of $901,085.27. Without explaining the calculations underlying this award, Judge Vargas stated: "The Trial Court has broad authority to determine the amount of a reasonable fee. . . . The Court finds these fees are reasonable and were necessarily incurred." (May 9, 2011 Minute Order, Janopaul Block Cos., LLC v. Sundt Constr. Inc. Southern California (consolidated case), SDSC Case No. GIC854799; see Pl.'s Motion, Ex. F.) Sundt appealed this decision, which is also still pending.

The present action, filed on December 28, 2010 by Janopaul in San Diego Superior Court, asserts four different causes of action for breaches by St. Paul: (1) breach of written contract for failure to defend; (2) breach of written contract for failure to indemnify; (3) breach of the implied covenant of good faith and fair dealing for failure to defend; and (4) breach of the implied covenant of good faith and fair dealing for failure to indemnify. Janopaul seeks damages, attorney's fees and costs, and a declaratory judgment preventing St. Paul from seeking arbitration of defense fees and costs. St. Paul removed the action to this Court based on diversity jurisdiction on April 25, 2011. (ECF No. 1.) On July 15, 2011, St. Paul filed the instant motion for partial summary judgment of Janopaul's first and second causes of action, or, in the alternative, to stay this action until after the resolution of the pending appeals in the consolidated case and the fee arbitration case.

LEGAL STANDARD

In general, a federal court's obligation to exercise the jurisdiction given them is "virtually unflagging." Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976). Further, the existence of a case in one court does not defeat the court's jurisdiction over the same case in another court. See, e.g., Stanton v. Embrey, 93 U.S. 548, 554 (1877) ("the pendency of a prior suit in another jurisdiction is not a bar . . . even though the two suits are for the same cause of action.")

An exception to this general rule has been unquestionably established for actions concerning real property. In these instances, the court which first gains custody of property has the exclusive jurisdiction to proceed, and comity requires that the second-filed action must be ...


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