Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-00296/USCOURTS-caed-2_04-cv-00296-1/pdf.json

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

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1 All further references to the “Rules” are to the

Federal Rules of Civil Procedure unless otherwise noted. 

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

VESTA FIRE INSURANCE CORP., 

Plaintiff,

NO. CIV. S-04-0296 FCD PAN

v.

INSURANCE VENTURES, INC., 

McNEE ROESSER, RONALD CLARK MEMORANDUM AND ORDER

COLTON, STEPHANIE FRANCIS 

SMITH, CARL FRANK, LAW 

OFFICES OF COLTON & ROESSER,

and DOES 1 through 20, 

Defendants.

____________________________/

----oo0oo----

On May 6, 2005 plaintiff, Vesta Fire Insurance Corp.

(“Vesta”), filed a motion for partial summary judgment pursuant

to Fed. R. Civ. P. 56.1 Defendants Insurance Ventures, Inc.

(“IV”), Stephanie Francis Smith (“Smith”), and Carl Frank

(“Frank”), filed a motion pursuant to Rule 56(f) for a

continuance of the summary judgment motion to afford them

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2 The court refers to the moving defendants and the

defendants joining in the motion collectively as “defendants”. 

3 Because oral argument will not be of material 

assistance, the court orders this matter submitted on the briefs. 

See E.D. Cal. L.R. 78-230(h).

2

additional time to conduct discovery necessary to oppose the

motion. Defendants Paul McNeese Roesser (“Roesser”), Roland

Colton (“Colton”) and the Law Offices of Colton & Roesser (“C&R”)

joined in the motion.2 Vesta opposes the motion, contending that

defendants have been dilatory in conducting discovery, and that

the discovery identified by defendants is either irrelevant to

deciding the motion or not sufficiently specific to justify

continuing the motion.3 For the reasons stated herein,

defendants’ motion is GRANTED.

BACKGROUND

The underlying dispute in this matter arises out of a soured

business relationship between Vesta and IV, in which IV acted as

a non-exclusive general agent for Vesta for the purpose of

procuring homeowners insurance business in California. In the

complaint, filed February 9, 2004, Vesta alleges that defendants

issued policies and collected policyholder premiums on Vesta’s

behalf, but failed to remit the premium payments to Vesta as

required by the agreement. (Pl.’s Compl. ¶¶ 18-20.) The

complaint asserts claims for declaratory relief, fraud, breach of

contract, breach of implied covenant of good faith and fair

dealing, mishandling of fiduciary funds, conversion and account

stated. (Pl.’s Compl. ¶¶ 5-13.) 

STANDARD

When a party opposing a motion for summary judgment cannot

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3

present “facts essential to justify his opposition” to the

motion, Rule 56(f) permits the party to submit an affidavit

stating such reasons, and the court may continue or deny the

motion if the opposing party needs to discover essential facts. 

Garrett v. City and County of San Francisco, 818 F.2d 1515, 1518

(9th Cir. 1987) (citing Hancock v. Montgomery Ward Long Term

Disability Trust, 787 F.2d 1302, 1306 (9th Cir. 1986)). The

burden is on the party seeking additional discovery to

demonstrate that the information sought exists, and that it would

prevent summary judgment. Nidds v. Schindler Elevator Corp., 113

F.3d 912, 921 (9th Cir. 1996), cert. denied, 118 S. Ct. 369

(1997). The moving party must also demonstrate that it

diligently pursued previous discovery opportunities. Qualls v.

Blue Cross of California, 22 F.3d 839, 844 (9th Cir. 1994).

ANALYSIS

Vesta’s motion seeks partial summary judgment of the

following issues:

(1) IV, Colton and Roeser are fiduciaries of Vesta with

regard to their treatment of Vesta’s premium payments.

(2) IV, Colton and Roeser violated their fiduciary duties

to Vesta by, 

(a) Utilizing Vesta’s funds to pay another carrier;

(b) Utilizing Vesta’s funds to secure an increased

letter of credit securing obligations IV owed to

another carrier;

(c) Failing to account for premium amounts held in

trust for Vesta;

(d) Failing to inform Vesta regarding how it was

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misusing its premium funds;

(e) Failing to provide access to its accounts;

(f) Failing to establish a separate trust account; and

(g) Selling policies in contravention of Vesta’s

underwriting instructions.

(3) IV breached the contract between IV and Vesta by

(a) Failing to segregate Vesta’s premium funds

pursuant to terms of agreement;

(b) Failing to secure a surety bond pursuant to the

terms of the agreement;

(c) Failing to give Vesta adequate access to its trust

fund account pursuant to the agreement;

(d) Paying excessive commissions to IV;

(e) Misappropriating Vesta’s premium funds to pay

another carrier; and

(f) Selling policies in contravention of Vesta’s

underwriting instructions.

(4) IV, Colton and Roeser violated Insurance Code §§ 1733

and 1734 by not holding Vesta’s funds in trust. (See

Pl.’s Mot. Summ. J. at 1-2.)

In its application for Rule 56(f) continuance, defendants

assert that they need additional time to conduct discovery in

order to formulate a response to Vesta’s motion for summary

judgment. Specifically, defendants identify four issue on which

they need additional discovery.

First, defendants request additional discovery to

demonstrate that they did not conceal information from Vesta

regarding how they were using premium funds, (Issue (2)(d)

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above). Defendants identify specific witnesses whose testimony

will bear on whether defendants kept Vesta informed regarding use

of premium funds. (Defs.’ Mem. Supp. Mot. Suspent at 4.) The

depositions of many of these witnesses are scheduled for this

month. 

Second, defendants seek further discovery to rebut the

charge that they failed to provide Vesta with access to its

accounts. Defendants contend that they can refute Vesta’s claim

that it had a right to be a signatory on the accounts. The

contract is silent in this regard, and defendants assert that any

such right would derive from the intent of the parties. 

Defendants seek to depose Vesta President Stephen Korducki, who

signed the contract on behalf of Vesta, and James Watje, who was

the primary contact for the Vesta/IV agreement. 

Third, defendants seek discovery to rebut Vesta’s charge

that IV breached the contract by selling policies in

contravention of Vesta’s underwriting instructions. While

defendants appear to concede that some policies were sold in

contravention of the underwriting instructions, they contend that

the scope of this alleged problem bears on whether there was a

material breach of the contract. It is defendants’ position that

only a fraction (30%) of the policies identified by Vesta

violated the underwriting guidelines. 

Finally, defendants request additional discovery to refute

the allegation that excessive commissions were paid to IV. 

Defendants appear to concede that IV used a different method to

calculate its commissions than was specified in the contract. 

However, they contend that the different method resulted in early

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4 Vesta argues that the amount of overcharge is

irrelevant. The court disagrees. Vesta specifically seeks a

judgment that IV received excessive commissions, not that it used

the incorrect formula to calculate its commissions. IV is

entitled to discovery to rebut the charge that excessive

commissions were in fact paid. 

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payment, but not overpayment, of commissions. Defendants seek

additional discovery regarding premiums paid to Vesta to

demonstrate that IV’s total commissions were not greater than

specified by the contract.4

The court finds that defendants have identified specific

evidence that would prevent summary judgment of the above

referenced issues. Nidds v. Schindler Elevator Corp., 113 F.3d

at 921. Contrary to Vesta’s contention, defendants identify with

sufficient specificity the evidence they seek and its relevance

to the issues raised by Vesta’s motion. While admittedly

defendants do not identify additional discovery necessary to

rebut each issue Vesta seeks to adjudicate, Vesta does not

request that the court rule on its motion piecemeal, and the

court finds that judicial economy is best served by continuing

hearing on the motion as a whole. 

The court further finds that defendants have not been

dilatory in pursuing discovery. Vesta is correct that defendants

sought and obtained extensions of the deadlines in this case, in

part due to the substitution of new counsel for defendants IV,

Smith and Frank. However, the court found good cause to grant

the extensions and will not penalize defendants for seeking them. 

By this motion to continue, defendants do not seek further

extension of the deadlines. They merely ask to be able to

utilize the remaining time to formulate an adequate response. 

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That said, however, the court finds that defendants do not

need an additional five months, as they request, to respond to

the motion. It appears that most, if not all, of the depositions

defendants seek are scheduled in June, and responses to

defendants’ document requests were due in late May. As a result,

the court orders the hearing on Vesta’s motion vacated and reset

for September 23, 2005 at 10:00 a.m. This date provides

defendants ample time to evaluate additional discovery they

obtain and prepare a response to the motion. 

IT IS SO ORDERED. 

DATED: June 16, 2005.

/s/ Frank C. Damrell Jr. 

FRANK C. DAMRELL, JR.

United States District Judge

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