United States District Court, N.D. California, San Jose Division
ORDER STAYING CASE (Re: Docket Nos. 21, 40 and 43)
PAUL S. GREWAL, Magistrate Judge.
Two years ago, the parties in this case struck a deal to stay a New York state court case challenging an interim arbitration award until thirty days after a final award issued. The final arbitration award issued late last year. Less than one week after the final award issued, but before the deadline for lifting the stay in the state court case had passed, Yahoo! filed a petition in this California federal court to confirm the final arbitration award. While Colorado River and its Ninth Circuit progeny are pertinent to this court's evaluation of jurisdiction, the predicate question is whether Yahoo! should be bound by a stipulation in the New York case into which it freely entered.
As explained below, under both the plain language of the stipulation and Colorado River, the appropriate course is to stay this case in deference to the case in New York.
This case concerns Yahoo!'s claim for reimbursement of defense fees from four class action cases filed against it in 2005 and 2006 involving its Sponsored Search Pay-Per-Click ("PPC") advertising program. The class actions were based on the same causes of action, were brought by the same plaintiff classes and involved the same contracts to provide PPC advertising services. They were filed in several jurisdictions across the country but were subsequently consolidated in the United States District Court for the Central District of California. On April 17, 2009, Yahoo initiated arbitration in New York City against American International Specialty Lines Insurance Company ("AISLIC"), National Union Fire Insurance Co. ("NUFIC"), Illinois Union Insurance Company and Columbia Casualty Company seeking insurance coverage for the defense and settlement of the consolidated case. On January 13, 2010, Yahoo and the four insurance companies entered into an arbitration agreement designating a panel of arbitrators. The agreement provided arbitration "shall be conducted at a site to be determined in New York, New York."
"The Panel issued an Interim Award on November 3, 2011." On February 2, 2012, in order to preserve their right to vacate the interim award, AISLIC and NUFIC filed a petition in New York state court. On February 7, 2012, Respondents, Yahoo! and the remaining insurers entered a stipulation, granted by the New York state court, providing that the New York state case be "be stayed until thirty (30) days after the Panel issues a Final Award, by which time" the Respondents in this case "shall advise the undersigned parties in writing whether they intend to withdraw, modify, amend, or supplement" their original motion.
On December 13, 2013, the panel issued its final award, which ordered AISLIC to pay $4, 271, 762.04 to Yahoo. Five days later, on December 18, 2013, Yahoo filed a petition in this court to confirm the final award. On January 9, 2014, less than thirty days after the final award, AISLIC and NUFIC gave notice of their intent to amend their original motion. On January 23, 2014, Respondents filed an amended petition to vacate the arbitration award in the New York state proceeding.
Respondents urge that the language of the stipulation requires this case be stayed or dismissed. According to Respondents, all parties, along with the New York state court, understood that the court would later permit the case to proceed once the final award issued. The stipulation provided that in light of future proceedings in the arbitration, the state court action would be stayed. The stipulation further provided that "this action be stayed until thirty (30) days after the Panel issues a Final Award, by which time Petitioners shall advise the undersigned parties in writing whether they intend to withdraw, modify, amend, or supplement" their original motion. The petition to vacate could proceed following the issuance of the final award.
The court agrees with Respondents that, in this posture, the California case should not proceed. In the New York case, the parties reached an agreement granting Respondents the option to "withdraw, modify, amend, or supplement" their original motion once the final award issued from the panel. The parties thus linked the dispute over the initial award to a dispute over the final award. One door that did not remain open was for Yahoo! to initiate another proceeding in another court. Perhaps the agreement could have been more artfully drafted to make explicit the dispute under all circumstances would remain in the New York state court. But by staying, and not withdrawing, the initial petition and giving all options in proceeding exclusively to Respondents, the only fair read of that agreement compels this court to respect the sovereignty of the New York state court.
Even if reference to Colorado River was necessary, the court would arrive at the same conclusion. These facts fall squarely within the limited purview of the Colorado River line of cases. The petition filed in this court comes two years after a petition filed in the New York state court over the disputed arbitration award. The parties concede the New York state case remains live and is subject to active, duplicative motion practice. This court remains wary of the tension any issued order may generate and is eager to avoid conflicting court decisions. "Here, there is no question that the state court has authority to address the rights and remedies at issue" and the parties "concede that the state court can adequately resolve the parties' claims." Even if the state is California, state "law provides the rules of decision" for the parties' claims in this case. Finally, the Ninth Circuit has "affirmed a Colorado River stay or dismissal when it was readily apparent that the federal plaintiff was engaged in forum shopping." On balance, a stay is favored.
This case shall be stayed subject to complete resolution of the New York action. The parties shall lodge one page status reports with the court every ninety days to keep this court appraised of the New York state proceeding. With that action resolved, the court ...