Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_08-cv-02558/USCOURTS-caed-2_08-cv-02558-11/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

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

DALE M. WALLIS, D.V.M., JAMES

L. WALLIS, and HYGIEIA

BIOLOGICAL LABORATORIES, INC.,

a California Corporation,

Plaintiffs,

 v.

CENTENNIAL INSURANCE COMPANY,

INC., a New York corporation,

ATLANTIC MUTUAL INSURANCE CO.,

INC., a New York Corporation, 

Defendants. /

AND RELATED COUNTER-CLAIMS AND

THIRD-PARTY COMPLAINT.

NO. CIV. 08-2558 WBS GGH

ORDER RE: MOTION FOR

RECONSIDERATION

 /

----oo0oo----

Plaintiffs move for reconsideration of this court’s

order of April 16, 2009 compelling arbitration of the parties’

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Cumis1 fee dispute. A court should be loathe to revisit its own

decisions unless extraordinary circumstances show that its prior

decision was clearly erroneous or would work a manifest

injustice. Christianson v. Colt Indus. Operating Corp., 486 U.S.

800, 816 (1988). This principle is generally embodied in the law

of the case doctrine. That doctrine counsels against reopening

questions once resolved in ongoing litigation. Pyramid Lake

Paiute Tribe of Indians v. Hodel, 882 F.2d 364, 369 (9th Cir.

1989). Nonetheless, in certain limited circumstances, a court

has discretion to reconsider its prior decisions.

Rule 60(b) provides for relief from a final judgment or

order: (1) due to mistake, surprise, or excusable neglect; (2)

due to “newly discovered evidence that, with reasonable

diligence, could not have been discovered in time to move” for

Rule 59(e) relief; (3) due to fraud or misconduct by an opposing

party; (4) where the judgment is void; (5) where the judgment has

been satisfied, reversed, or where applying it prospectively is

no longer equitable; and (6) for any other reason that justifies

relief. 

Under Rule 60(c), motions for relief from final

judgment based on grounds (1) through (3) must be made within one

year after the order is entered. Because plaintiffs’ motion

comes more than one year after the court’s Order, their motion

for relief from judgment can only be based on grounds (4) through

(6). Nothing in plaintiffs’ motion implies that the court’s

Order is void, satisfied, or discharged, leaving only the sixth

1 San Diego Navy Fed. Credit Union v. Cumis Ins. Soc’y,

Inc., 162 Cal App. 3d 358 (1984). 

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ground as a possible avenue through which to seek relief from the

court’s April 16, 2009 Order. Courts grant relief under the

sixth ground only under “extraordinary circumstances.” Sch.

Dist. Number 1J, 4 F.3d at 1263. 

Plaintiffs argue that the March 24, 2010 decision of

the California Court of Appeals in Intergulf Development, LLC v.

Superior Court, 183 Cal. App. 4th 16 (2010) is an “intervening

change in controlling law” that warrants reconsideration of the

court’s prior Order. See School Dist. No. 1J, Multnomah County

v. Acands, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993). In

Intergulf, the insured filed a claim under the policy of

insurance for defense, and the insurer agreed to defend under a

reservation of rights through its preferred law firm. 183 Cal.

App. 4th at 18-19. Citing Cumis, the insured objected to the

insurer’s choice of counsel and sent the insurer letters spanning

the course of a year requesting confirmation that the insurer

would reimburse the insured’s defense costs. Id. at 19. After

more than a year of silence from the insurer and after incurring

defense costs that were not yet reimbursed, the insured sued for

bad faith and breach of contract. The insurer subsequently made

payments toward the insured’s defense costs, and moved to compel

arbitration under section 2860. Id. Intergulf emphasizes that

the insurer’s absolute silence with respect to the insured’s

right to independent counsel and delay in paying policy benefits

was alleged to be a total breach of the duty to defend. Id. at

20-21. When the court granted a motion to compel arbitration, it

had not yet decided if the insurer owed the insured a duty to

defend and whether the insurer had breached that duty by failing

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to defend the insured “immediately” and “entirely” on tender of

the defense. Id. at 21. Under those circumstances, it was

inappropriate for the court to order section 2860 arbitration

because it could prejudice the insured’s claim that the insurer

“failed to accept [its] selection of independent counsel and pay

its share of defense costs in a timely manner.” Id. at 22. 

Intergulf distinguishes itself from Compulink

Management Center, Inc. v. St. Paul Fire & Marine Ins. Co., 169

Cal. App. 4th 289 (2008), noting that in Compulink the insurer

allowed the insured to select independent counsel and the

insured’s complaint for breach of contract and bad faith alleged

the insurer underpaid attorney fees and costs. Intergulf, 183

Cal. App. 4th at 19-22. Intergulf further distinguishes

Compulink on the grounds that it did not involve the preliminary

questions of the duty to defend or whether the insurer recognized

the insured’s right to select independent counsel involved. Id.

at 21-22. This court’s April 16, 2009 Order compelling

arbitration of third-party defendant Mendoza’s Cumis counsel fees

agreed with the analysis in Compulink that stated that section

2860 “does not exempt from arbitration Cumis fee disputes that

are coupled with additional . . . claims.” 169 Cal. App. 4th at

296-97; (see Docket No. 41.) 

Unlike in Intergulf and like in Compulink, the

defendants in this action do not dispute that they owe plaintiffs

a duty to defend. Indeed, defendants have defended plaintiffs in

the underlying state court action for over a decade and paid

large sums for plaintiffs’ defense. (See Compl. ¶ 22 (“For a

long period of time the defendant insurers paid the fees and

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costs incurred by the plaintiffs . . . .”).) Nor do the

defendants in this case dispute plaintiffs’ right to select

independent Cumis counsel. Plaintiffs have selected and

defendants have paid for independent counsel for years. Rather,

plaintiffs allege that defendants have, after many years of

litigation, refused “to pay the full amount of fees and costs

incurred” in plaintiffs’ defense. (Id.) As a result of

defendants’ limitations on the fees and costs it now agrees to

pay to further plaintiffs’ defense, plaintiffs allege that they

have been unable to keep the counsel of their choice and are in

debt to their attorneys. (Id. ¶ 23.) Defendants’ new “billing

guidelines” and third-party audits of plaintiffs’ attorneys fees

and costs which have reduced the amounts that defendants have

been willing to pay for plaintiffs’ defense, along with general

claims that defendants desire to control plaintiffs’ defense,

form the basis of plaintiffs’ bad faith cause of action against

defendants. (Id. ¶ 36.) 

The facts of this case simply do not track the facts in

Intergulf such that it constitutes an intervening change in

controlling law. Rather, the facts in this case mirror those

which Intergulf found distinguishable in Compulink. The mere

fact that plaintiffs’ Complaint includes causes of action for bad

faith and breach of contract does not exempt the Cumis fee

dispute from section 2860 arbitration. 

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IT IS THEREFORE ORDERED that plaintiffs’ motion for

reconsideration be, and the same hereby is, DENIED.

DATED: June 24, 2010

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