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James Luard Wallis, et al v. Centennial Ins. Co.

February 11, 2013


The opinion of the court was delivered by: Allison Claire United States Magistrate Judge


On February 6, 2013, the court held a hearing on plaintiffs' motion to compel admissions. Joanna Mendoza appeared for plaintiffs. David A. Evans appeared for defendants Centennial Insurance Company and Atlantic Mutual Insurance Company. On review of the Joint Statement re Discovery Disagreement ("JSDD") and on hearing the arguments of counsel, THE COURT FINDS AND ORDERS AS FOLLOWS:


A. Introduction

Defendants issued a general liability insurance policy to plaintiff Dr. Dale M. Wallis effective from January to December 1989.*fn1 Beginning in 1983, Dr. Wallis was involved in litigation over intellectual property rights to a bovine vaccine she had developed while working for Poultry Health Laboratories ("PHL"). Several lawsuits followed, one of which involved Dr. Wallis and PHL in a dispute over rights to sell or market the vaccine. Part of that lawsuit involved a cross-claim by PHL against Dr. Wallis ("the PHL cross-action"). Dr. Wallis tendered the cross-action to defendants for defense and indemnity. Defendants accepted the tender of the claim subject to a full reservation of rights to deny coverage should additional facts so warrant. This reservation of rights triggered Dr. Wallis's right to Cumis*fn2 counsel that defendants were required to pay. Joanna Mendoza*fn3 was chosen by plaintiffs as their Cumis counsel. The defense of the PHL cross-action proceeded for years until a dispute developed over the payment of Ms. Mendoza's bills.

In response to the defendants' allegedly improper actions related to the PHL cross-action, plaintiffs filed suit in this court on October 27, 2008 for declaratory relief, breach of contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, and injunctive relief. Defendants filed a counter-claim seeking declaratory relief, ECF No. 9, and moved to arbitrate the fee claim as required under California Civil Code § 2860.*fn4 This motion was granted by the Honorable William B. Shubb on April 16, 2009. ECF No. 41.

B. Defendants' Placement in Liquidation Proceedings On September 14, 2010, defendant insurance companies were deemed insolvent by a New York state court and placed in rehabilitation proceedings. ECF No. 122. In light of this placement, Judge Shubb temporarily stayed this action. See ECF Nos. 124-25.

On April 27, 2011, the New York state court issued an Order of Liquidation for both of the defendant insurance companies. ECF No. 126, Exs. 1-1. On December 19, 2011, defendants moved for a permanent stay of this action based on the New York state court's Orders of Liquidation that enjoined all legal actions against defendants. ECF No. 130. Judge Shubb denied this request on January 31, 2012. ECF No. 136.

On May 1, 2012, Judge Shubb lifted the temporary stay over the objection of the defendants and issued a scheduling order. ECF No. 141.

C. The Settlement Agreement and Motion to Enforce Settlement Agreement As noted supra, Judge Shubb ordered the issue of the amount of attorneys' fees allegedly owed to Cumis counsel to be arbitrated. On July 20, 2009, the parties participated in a mediation in the underlying PHL cross-action during which they purportedly entered into a handwritten agreement to settle the remaining claims in this action, including cross claims and counterclaims. See ECF No. 75.

On December 22, 2009, plaintiffs filed a motion to enforce settlement agreement, which Judge Shubb denied on January 10, 2010 after representations from defense counsel that the papers to dismiss all of the claims in this action except for the claim regarding attorneys' fees were being finalized. These papers were in fact never finalized and it appears settlement discussions broke down.

On April 22, 2010, defendants filed a motion to enforce the handwritten settlement agreement, which, per defendants, constituted a dismissal of the entire federal action, leaving only the arbitration to proceed. See ECF No. 93. Plaintiffs opposed this motion on the ground that the settlement agreement did not dismiss the federal action, but only those claims not previously ordered to arbitration.

On June 25, 2010, Judge Shubb denied defendants' motion for the reason that it was impossible to determine whether the handwritten agreement was intended to be a completed agreement instead of an "agreement to agree" and because it was obvious that the parties no ...

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