Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_07-cv-00515/USCOURTS-azd-2_07-cv-00515-7/pdf.json

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

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 The Court finds that Defendant’s motion may be decided without oral argument, and

therefore the parties’ requests for oral argument are denied as moot.

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Henry J. Wojtunik,

Plaintiff, 

v.

Carolina Casualty Insurance Company,

Defendant. 

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No. CV-07-515-PHX-SMM

ORDER 

Defendant Carolina Casualty Insurance Company (“Defendant”) filed a Motion to

Stay this proceeding (Dkt. 42) until resolution of the appeals to the Ninth Circuit in Kealy,

et al. v. Carolina Casualty Insurance Company (the “Coverage Action”). Defendant also

filed a Request for Judicial Notice in support of the Motion to Stay, seeking judicial notice

of an Order and Final Judgment in the Coverage Action, and the parties’ briefs on appeal to

the Ninth Circuit. (Dkt. 43.) The Coverage Action addresses the issue of coverage under an

insurance policy issued by Defendant; the above-captioned matter addresses Plaintiff’s rights

as an assignee of the insureds. Having considered the parties’ arguments and briefs, the

Court issues this order.1

 

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2

 A full factual background is set forth in the Memorandum of Decision and Order

denying Defendant’s Motion to Dismiss, Dkt. 37.

3

 See Damron v. Sledge, 460 P.2d 997 (Ariz. 1969).

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 The Court takes judicial notice of the summary judgment order as requested by

Defendant (Dkt. 43). See Fed. R. Evid. 201(b); see also Duckett v. Godinez, 67 F.3d 734,

741 (9th Cir. 1995).

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BACKGROUND2

Plaintiff's claims against Defendant for declaratory relief, breach of contract, and bad

faith arise out of a failed merger transaction and a directors and officers insurance policy.

In a related case (the “Wojtunik Lawsuit”), Plaintiff sued former officers of the acquiring

company because of the failed merger. Defendant declined to advance defense costs in the

Wojtunik Lawsuit to the former officers (“Insureds”), and the Insureds sued Defendant for

breach of contract and bad faith. The second action is the “Coverage Action.”

The Wojtunik Lawsuit ended with a Damron3

 agreement, settling Plaintiff's claims

against the Insureds for a stipulated judgment of $8 million plus interest and an assignment

of the Insureds’ claims against Defendant and the excess carriers in exchange for a covenant

not to execute. (Compl., Ex. E.) The Coverage Action ended in a grant of summary

judgment which held that the insurance policy obligates Defendant to provide coverage for

the Wojtunik Lawsuit. (CV-05-0911, Order dated January 16, 2007, attached at Dkt. 34, Ex.

1.)4

 Plaintiff’s motion to join or substitute as plaintiff in the Coverage Action was denied.

Both of those decisions—the coverage determination and the join or substitute denial—have

been appealed to the Ninth Circuit.

Plaintiff then filed the instant action, seeking a declaration that the judgment in the

Wojtunik Lawsuit is covered by the insurance policy. Plaintiff also brings claims for bad

faith and breach of contract, which he argues accrued by Defendant’s failure to pay the

judgment and refusal to give adequate consideration to an earlier settlement demand.

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Defendant now seeks to stay these proceedings during the pendency of the Ninth Circuit

appeal in the Coverage Action.

STANDARD OF REVIEW

The United States Supreme Court recognized long ago that “the power to stay

proceedings is incidental to the power inherent in every court to control the disposition of the

causes on its docket with economy of time and effort for itself, for counsel, and for litigants.”

Landis v. North American Co., 299 U.S. 248, 254-55 (1936). The power to stay proceedings

calls for “an exercise of a sound discretion.” CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th

Cir. 1962). In determining whether to issue a stay, the Ninth Circuit instructs a district court

to weigh competing interests. These competing interests include the possible damage which

may result from the granting of the stay, the hardship or inequity which a party may suffer

in being required to go forward, and the orderly course of justice measured in terms of the

simplifying or complicating of issues, proof, and questions of law which could be expected

to result from a stay. Id. (citing Landis, 299 U.S. at 254-55). If there is even a “fair

possibility” that the stay will harm another party, the party seeking a stay must make out a

“clear case of hardship or inequity in being required to go forward.” Id.

DISCUSSION

The thrust of Defendant’s argument is that this proceeding should be stayed 

pending a determination of the coverage issue on appeal because Plaintiff stands in the

shoes of the Insureds and thus his position could be altered by the Ninth Circuit’s

decision in the Coverage Action. As an assignee of the Insureds, Plaintiff’s rights in this

action could be altered by the decision on appeal. Plaintiff responds that a stay is

inappropriate because it would harm him, Defendant has not shown hardship or inequity

would result if this case moves forward, and a stay would be inefficient. 

The balance of the competing interests weigh against issuing a stay in this matter. 

Although the outcome of the Coverage Action appeal could affect some of Plaintiff’s

claims, other claims operate independent of the Coverage Action and would not be

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affected by the appeal. For example, Plaintiff’s bad faith claim does not require a finding

that coverage existed under Defendant’s policy. Deese v. State Farm Mut. Auto. Ins. Co.,

838 P.2d 1265, 1270 (Ariz. 1992). Additionally, the Court finds that the orderly course of

justice is best promoted by moving this action forward. Accordingly,

IT IS HEREBY ORDERED denying Defendant’s Motion to Stay (Dkt. 42). This

matter will proceed as scheduled.

DATED this 9th day of January, 2008.

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