Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_05-cv-03092/USCOURTS-cand-5_05-cv-03092-12/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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United States District Court

For the Northern District of California

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ORDER GRANTING DEFENDANTS' MOTION TO ADD COUNTERCLAIM FOR REIMBURSEMENT—No. C-05-03092 RMW

JAH

United States District Court

For the Northern District of California

E-FILED on 8/28/06

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

KLA-TENCOR CORPORATION, a Delaware

Corporation,

Plaintiff,

v.

NATIONAL UNION FIRE INSURANCE OF

PITTSBURGH, PA, a Pennsylvania

corporation; and AIU INSURANCE

COMPANY, a New York corporation,

Defendants.

No. C-05-03092 RMW

ORDER GRANTING DEFENDANTS'

MOTION TO ADD COUNTERCLAIM FOR

REIMBURSEMENT

[Re Docket Nos. 58, 103, 111]

Defendants National Union Fire Insurance of Pittsburgh, PA and AIU Insurance Company

move for leave to amend their answer to plaintiff KLA-Tencor Corporation's complaint to add a

claim for reimbursement. For the reasons set forth below, the court grants the motion.

I. BACKGROUND

KLA obtained litigation insurance from the defendants. In 2001, KLA sued Tokyo

Seimitsu Company, Ltd. for patent infringement. Tokyo Seimitsu counterclaimed for

disparagement and malicious prosecution. KLA, believing its insurance covered the

counterclaims, tendered them to the defendants and requested that defendants handle them

Case 5:05-cv-03092-RMW Document 168 Filed 08/28/06 Page 1 of 4
United States District Court

For the Northern District of California

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 The Ninth Circuit has noted that a claim for reimbursement under California law appears

independent of declaratory relief that an insurance company will not be liable for future costs. 

United Nat'l Ins. Co. v. R&D Latex Corp., 242 F.3d 1102, 1113-14 (9th Cir. 2001). In a prior case

in the Northern District of California, an insurer was allowed to bring a counterclaim for

reimbursement before paying anything on a litigation insurance policy, noting jurisdiction would

be proper under the Declaratory Judgment Act. See SecuriMetrics, Inc. v. Hartford Cas. Ins. Co., 2005 WL 2463749 at *2-3 (N.D. Cal. 2005). The resort to the Declaratory Judgment Act implies

that the claim for reimbursement does not arise until the money subject to the reimbursement

claim is actually paid or ordered paid. Under the law of another jurisdiction, contribution claims

similarly do not arise until after the initial claim is decided. See Hartford Accident & Indem. Co. v.

Levitt & Sons, Inc., 24 F.R.D. 230, 232 (E.D. Pa. 1959).

ORDER GRANTING DEFENDANTS' MOTION TO ADD COUNTERCLAIM FOR REIMBURSEMENT—No. C-05-03092 RMW

JAH 2

pursuant to the insurance policy. The defendants did not agree to defend KLA until November

2002. Defendants paid KLA approximately $100,000 in 2003 to reimburse it for its legal fees. 

In 2005, KLA initiated this action against the defendants, claiming that the defendants

should have agreed sooner to handle the defense of Tokyo Seimitsu's counterclaims and should

have paid defense costs as they were incurred. According to KLA, it spent over $7.5 million

defending those counterclaims, and defendants now owe it this sum. 

The close of discovery in this action was on May 15, 2006. On June 7, 2006, defendants

sent KLA a check for approximately $3.9 million, claiming that this was all they owed KLA under

California Civil Code § 2860. On June 30, 2006, the defendants moved for leave to amend their

answer to add a claim for reimbursement of any portion of the $3.9 million that was not for

expenses covered by the insurance policy.

II. ANALYSIS

The Ninth Circuit uses the plain meaning of the Federal Rules of Civil Procedure to

determine if supplemental pleadings should be allowed. See United States v. Springer, 491 F.2d

239, 241-42 (9th Cir. 1974). Rule 13(e) provides that "[a] claim which either matured or was

acquired by the pleader after serving a pleading may, with the permission of the court, be

presented as a counterclaim by supplemental pleading." Though KLA objects to the defendants

adding a counterclaim at this juncture, neither side has presented any caselaw directly on point.1

Here, the defendants did not pay the $3.9 million until well after they had answered KLA's

complaint. This counterclaim certainly would seem more mature and concrete now that the sum

has been paid. While KLA complains that making the payment after the close of discovery was

impermissible gamesmanship on the defendants' part in an attempt to avoid KLA directing

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ORDER GRANTING DEFENDANTS' MOTION TO ADD COUNTERCLAIM FOR REIMBURSEMENT—No. C-05-03092 RMW

JAH 3

discovery to their motives for doing so, it is not clear to the court what discovery KLA would be

entitled to that would not be protected by the attorney-client privilege. Furthermore, payment of

$7.5 million is one of the major remedies KLA seeks in this action; to deny the defendants here

leave to add their counterclaim for reimbursement would have the undesirable effect of

discouraging future insurers in the position of the defendants from paying sums allegedly owed to

future insureds in the position of KLA. The defendants should be allowed to add this

supplemental counterclaim under Rule 13(e).

Even if the proposed counterclaim was considered one omitted—and thus to be added, if at

all, under Rule 13(f)—rather than one maturing after the initial pleading, the court would still have

discretion to allow it. See Ralston-Purina Co. v. Bertie, 541 F.2d 1363, 1367 (9th Cir. 1976). The

court would find defendants had good cause to add the counterclaim for reimbursement now,

shortly after paying KLA the $3.9 million. That defendants asserted in their initial answer an

affirmative defense of offset of payments as to the first $100,000 they paid KLA should not be

taken as a waiver of their rights to seek reimbursement or offset as to amounts they had not at that

time yet paid.

III. ORDER

For the foregoing reasons, the court grants the defendants' motion for leave to amend their

answer to add a counterclaim for reimbursement.

DATED: 8/28/06

RONALD M. WHYTE

United States District Judge

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United States District Court

For the Northern District of California

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ORDER GRANTING DEFENDANTS' MOTION TO ADD COUNTERCLAIM FOR REIMBURSEMENT—No. C-05-03092 RMW

JAH 4

Notice of this document has been electronically sent to:

Counsel for Plaintiff:

Adam C. Trampe ATrampe@Oppenheimer.com 

Christine Lindblad Nessa cnessa@Oppenheimer.com 

David A. Prange 

Linda M. MacLeod lmacleod@mffmlaw.com 

Jeffrey John Bouslog JBouslog@Oppenheimer.com 

Katherine Mary Wilhoit Kwilhoit@oppenheimer.com 

Counsel for Defendants:

Stephen P. Ellingson sellingson@hayesdavis.com 

Counsel are responsible for distributing copies of this document to co-counsel that have not

registered for e-filing under the court's CM/ECF program.

Dated: 8/28/06

Chambers of Judge Whyte

Case 5:05-cv-03092-RMW Document 168 Filed 08/28/06 Page 4 of 4