Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_15-cv-00509/USCOURTS-cand-3_15-cv-00509-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Petition for Removal

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

RICHARD THOMAS,

Plaintiff,

 v.

STATE FARM MUTUAL AUTOMOBILE

INSURANCE COMPANY ET AL.,

Defendants. /

No. C15-00509 CRB

ORDER VACATING HEARING AND

GRANTING MOTION TO STAY

Now calendared for a hearing on April 10, 2015 is Defendant State Farm’s Motion to

Stay the Action Until Completion of Binding Contractual Arbitration (dkt. 9). The Court

finds this matter suitable for resolution without oral argument pursuant to Civil Local Rule 7-

1(b), VACATES the hearing, and GRANTS the Motion. 

This case arises out of Plaintiff Richard Thomas’s car accident with an uninsured

motorist. See generally Notice of Removal (dkt. 1) Ex. 1. Thomas brings suit against his

insurer, State Farm, alleging breach of contract, breach of the implied covenant of good faith

and fair dealing, declaratory relief and negligence in State Farm’s handling of Thomas’s

claims. Id. Specifically, Thomas alleges that State Farm failed to pay some of his medical

bills, to compensate him for the actual value of his vehicle, to provide a coverage position on

his vandalism claim, and to provide him with clear coverage information about his bodily

injury and loss of earning claims. Id. ¶ 13. He also alleges that State Farm needlessly forced 

Case 3:15-cv-00509-CRB Document 16 Filed 04/02/15 Page 1 of 3
United States District Court

For the Northern District of California

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 He also argues that the Court lacks jurisdiction over this case, claiming that there is no diversity

under 28 U.S.C. § 1332(c)(1)(A), and promising a motion to remand advancing this same argument.

Id. However, following State Farm’s Reply in this matter (dkt. 14), which argued that “the instant

lawsuit is not a ‘direct action’ precluding diversity jurisdiction under § 1332(c)(1)(A),” id. at 1, Thomas

withdrew his Motion to Remand, see Notice to Withdraw (dkt. 15), and, presumably, this argument.

In any case, State Farm is correct that this is not a “direct action” under § 1332(c)(1)(A). See Searles

v. Cincinnati Ins. Co., 998 F.2d 728, 728–29 (9th Cir. 1993) (bad faith action against a plaintiff’s own

insurer not a direct action). 

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him to retain legal counsel to obtain a default judgment against the uninsured motorist. 

Id. ¶ 14.

State Farm moves to stay this case, arguing that Thomas’s “claim has not yet been

arbitrated as required under the arbitration provision of the policy.” Mot. at 3. Thomas

concedes that “the uninsured motorist claim is already going to binding arbitration,” but

argues that he is not “ask[ing] this Court to decide the uninsured motorist claim.” Opp’n

(dkt. 13) at 2.1

 He maintains that the arbitration will decide only whether he is legally

entitled to collect damages from the uninsured motorist, and if so, the amount of damages,

and that “this bad faith case . . . does not involve” those questions. Id. at 2, 3.

But this case does involve those questions. Whether the uninsured motorist claim has

merit has some bearing on whether State Farm acted negligently, or in bad faith, or in breach

of its contract, in processing that claim the way it did. See, e.g., Morello v. Amco Ins. Co.,

No. 11-6623, 2012 WL 19493 87, at *2 (N.D. Cal. May 29, 2012) (“whether and to what

extent plaintiff is entitled to UIM benefits will affect, inter alia, plaintiff’s claims for breach

of the implied covenant of good faith and fair dealing, infliction of emotional distress, and

for unfair business practices.”). The uninsured motorist claim is certainly at issue in this

case. See, e.g., Notice of Removal Ex. 1 ¶ 4 (“As a result of the accident, Plaintiff sustained

property damage to his vehicle, bodily injuries, and lost earnings.”); ¶ 29 (“State Farm owes

a duty to Plaintiff to provide him with reimbursement for the damages that he suffered as a

result of his accident with an uninsured motorist. . . . Despite the clear duty, State Farm, and

DOES 1-5, to date have refused to do so.”); ¶ 33(h) (alleging bad faith in “[n]ot attempting in

good faith to effectuate prompt, fair, and equitable settlements of Plaintiff’s claims at the

time when liability became reasonably clear”); ¶ 33(i) (alleging bad faith in “[c]ompelling

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 The Court does not rely on State Farm’s argument that California Code of Civil Procedure

§ 1281.4 applies; that section explicitly relates to “an issue involved in an action or proceeding before

a court of [California].” See generally Mot.; Cal. Code Civ. Proc. § 1281.4. 

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Plaintiff to institute litigation to recover amounts due under the insurance policies by offering

less than the amounts Plaintiff expects to receive and in some cases by not offering anything

at all”). 

A stay pending completion of the arbitration is therefore appropriate, both under the

Federal Arbitration Act and in the interest of judicial efficiency. See Federal Arbitration Act,

9 U.S.C. § 3 (2012) (if an arbitration agreement covers an issue, a court must “stay the trial

of the action until such arbitration has been had in accordance with the terms of the

agreement.”); Landis v. N. Am. Co., 299 U.S. 248, 254 (1936) (power to stay 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.”).2

 

For the foregoing reasons, the Court GRANTS State Farm’s Motion to Stay the

Action Until Completion of Binding Contractual Arbitration and STAYS the case. The

parties shall promptly notify the Court when the arbitration is complete.

IT IS SO ORDERED.

Dated: April 2, 2015 

CHARLES R. BREYER

UNITED STATES DISTRICT

JUDGE

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