Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-02385/USCOURTS-cand-3_05-cv-02385-6/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:2201 Declaratory Judgement

---

United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

ALLSTATE INSURANCE COMPANY,

Plaintiff,

 v.

RONALD GILLETTE, an individual, TRI-STAR

MOTIONS, LLC, a limited liability company,

GOLDEN WEST MOTORS, a general partnership,

PETER LIEBOWITZ, an individual, and LOURDY

HERRERA, an individual,

Defendants. ______________________________________

STATE NATIONAL INSURANCE AGENCY, INC.

Cross-Claimant,

v.

TRI-STAR MOTIONS, LLC; PETER LIEBOWITZ

Cross-Defendants. /

No. C 05-02385 WHA

ORDER DENYING 

MOTION TO STAY AND

VACATING HEARING

INTRODUCTION

In this action for declaratory judgment, defendant Peter Liebowitz moves to stay this

action pending resolution of a related action in state court. After consideration of the

Brillhart/Dizol factors, this order finds that no stay of this action is warranted. Liebowitz’s

motion, therefore, is DENIED.

Case 3:05-cv-02385-WHA Document 66 Filed 04/17/06 Page 1 of 8
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

STATEMENT

Defendants Peter Liebowitz and Ronald Gillette had a business relationship through

which they formed defendant companies Tri-Star Motions, LLC and Golden West Motors. 

Gillette and Liebowitz purchased used vehicles at automobile auctions and then resold the

vehicles using Tri-Star’s dealer license. 

On October 1, 2004, defendant Lourdy Herrera was walking in the parking lot of a

supermarket in Hayward, California when she was struck by a 2003 Mitsubishi Gallant. The

Mitsubishi was being driven by Gillette. The ownership of the Mitsubishi is a point of dispute

in this litigation.

Prior to the accident, plaintiff Allstate Insurance Company had issued Gillette a

“personal lines” automobile policy. Several provisions of the policy are important for

resolution of the instant motion. The policy included in the definition of “insured persons”

“[a]ny other person or organization liable for the use of an insured auto if the auto is not owned

or hired by the person or organization, provide the use is by an insured person” (First Amd.

Compl. Exh. A) (emphasis in original). 

Under the definition of “insured auto,” the policy included (ibid.):

An additional four wheel passenger auto or utility auto you

become the owner of during the policy period will be covered for

30 days immediately after you acquire it. However, we will

provide this coverage only if Allstate or one of its affiliates

insured all other private passenger autos or utility autos you

own, and you pay the additional premium.

Furthermore, the policy further defined “insured auto” as “[a] non-owned auto used by you or a

resident relative with the owner’s permission. This auto must not be owned by or furnished for

the regular use of you or a resident relative” (ibid.).

Finally, the policy provided several exclusions, two of which are relevant here. The

policy excluded “bodily injury or property damage arising out of auto business operations such

as repairing, servicing, testing, washing, parking, storing, or selling autos” (ibid.). 

Additionally, the policy excluded “bodily injury or property damage arising out of the use of a

non-owned auto in any business or occupation of an insured person” (ibid.).

Case 3:05-cv-02385-WHA Document 66 Filed 04/17/06 Page 2 of 8
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

Allstate seeks judicial notice of two documents, the complaint from the state-court action and a

request for extension filed in this action. Both of these court documents are proper subjects for judicial notice,

but are not relied on for the truth of their contents herein. See Fed. R. Evid. 201; Lee v. City of L.A., 250 F.3d

668, 690 (9th Cir. 2001).

3

Separately, Tri-Star took out a policy with cross-claimant State National Insurance

Agency, Inc. The provisions of that policy are not relevant to the instant motion.

* * *

On June 13, 2005, Allstate filed the instant action seeking a declaration of its rights and

responsibilities under Gillette’s policy in connection with the Mitsubishi accident. Allstate

provided three grounds why the policy does not cover the accident. First, Allstate contended

that if Gillette owned the Mitsubishi, it was not an “insured auto” because he failed to notify

Allstate of his acquisition of the car within thirty days. Second, if Gillette did not own the car,

Allstate contended that the car was still not an “insured auto” because it was then a non-owned

auto furnished for Gillette’s regular use. Third, Allstate maintained that the Mitsubishi was

excluded from coverage because it was used in “auto business operations,” a term which

includes “selling autos” under the policy (id. ¶ 23). By extension, Allstate alleged that

Liebowitz, Golden West, Tri-Star are not “insured persons” because Herrera’s injuries did not

arise out of the use of an “insured auto.”

Thereafter, State National filed a cross-complaint in this action against Tri-Star and

Liebowitz. The cross-complaint alleged that Tri-Star misrepresented material information about

its business when it applied for its policy with State National.

More than six months after Allstate’s complaint was filed, on December 16, 2005,

Herrera filed a complaint in California Superior Court for Alameda County against Gillette,

Liebowitz and Tri-Star seeking to recover under a theory of negligence for injuries she

allegedly sustained during the accident (RJN Exh. A).1

 Based on Gillette and Liebowitz’s

purported coverage under the Allstate policy, Allstate has been defending these two individuals

in the state-court action. 

Defendant Liebowitz now moves to stay this action so as to allow for resolution of

Herrera’s state claim. No other parties have joined Liebowitz’s motion. The main thrust of

Case 3:05-cv-02385-WHA Document 66 Filed 04/17/06 Page 3 of 8
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

Liebowitz’s instant motion is that he will be unfairly burdened by having to argue inconsistent

positions in the parallel proceedings, with the potential of being bound by collateral estoppel. 

In the state-court action, Liebowitz has asserted that he was not vicariously liable for the

allegedly negligent conduct of Gillette. In this action, Liebowitz has maintained that he is

covered by Allstate as an insured person due to his business relationship with Gillette.

Additionally, Liebowitz contends a stay of this action is necessary because it is unfair to

make him wage a two-front war. Finally, Liebowitz suggests that Allstate has not been

providing an adequate defense in the state-court action due to its collusion with Herrera’s statecourt counsel. His primary example of such collusion is that Allstate consolidated Liebowitz’s

deposition with Herrera’s state-court counsel. 

Allstate argues that the issues in the parallel actions are simply different. According to

Allstate, Liebowitz’s vicarious liability is not relevant to whether he is covered under the

Allstate policy. Coverage, according to Allstate, hinges on whether the Mitsubishi is a

“covered auto.” This will require an analysis of Gillette’s reporting of the car and whether the

car was furnished for his use. Being a covered auto also will depend on whether the Mitsubishi

was involved in business operations. None of these questions, it is argued, turn on Liebowitz’s

relationship to Gillette, Golden West and Tri-Star. 

Finally, as to collusion, Allstate counters that Liebowitz was evasive on proposed

deposition times for this action, thus it was reasonable to coordinate with Herrera’s state-court

counsel.

State National has also submitted a “limited” opposition to Liebowitz’s motion,

separately from Allstate’s opposition. State National argues that it has no objection to staying

this action as to Allstate’s claims. State National maintains, however, that its claims against

Tri-Star and Liebowitz have nothing to do with the underlying Mitsubishi accident and

therefore should not be impeded.

ANALYSIS

Determination whether to stay an action for declaratory relief over which a federal court,

as here, has statutory jurisdiction is a discretionary question for the district court:

Case 3:05-cv-02385-WHA Document 66 Filed 04/17/06 Page 4 of 8
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

Consistent with the nonobligatory nature of the remedy, a district

court is authorized, in the sound exercise of its discretion, to stay

or to dismiss an action seeking a declaratory judgment before trial

or after all arguments have drawn to a close.

Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995). “[T]here is no presumption in favor of

abstention in declaratory actions generally, nor in insurance coverage cases specifically.” Gov’t

Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir. 1998) (en banc).

In Dizol, the Ninth Circuit articulated the relevant factors for a court to consider in

making this discretionary determination whether to retain jurisdiction over an action for

declaratory relief. As a touchstone, a court should look to the so-called Brillhart factors:

avoiding needless determination of state-law issues, discouraging forum shopping, and avoiding

duplicative litigation. Additionally, a court may consider:

. . . whether the declaratory action will settle all aspects of the

controversy; whether the declaratory action will serve a useful

purpose in clarifying the legal relations at issue; whether the

declaratory action is being sought merely for the purposes of

procedural fencing or to obtain a ‘res judicata’ advantage; or

whether the use of a declaratory action will result in entanglement

between the federal and state court systems. In addition, the

district court might also consider the convenience of the parties,

and the availability and relative convenience of other remedies.

Id. at 1225 n. 5 (internal citation omitted).

* * *

Here, as to the touchstone Brillhart factors, the scales do not tip toward staying the

federal action. 

This action certainly presents state-law issues involving insurance coverage. Yet these

issues are not particularly complex or novel. This case also does not seem to particularly invite

forum shopping.

The real question, as far as the Brillhart factors, is to what degree Allstate’s action

invites unnecessary, duplicative litigation. This order agrees with Allstate that the issues are

not truly duplicative. As Allstate points out, the issues of coverage in this action focus on the

covered status of the Mitsubishi. Liebowitz will only be covered if the Mitsubishi covered. On

the contrary, Liebowitz’s potential liability in the state action depends on the legal status of

Liebowitz’s business relationship with Gillette and the nature of Tri-Star and Golden West. It is

Case 3:05-cv-02385-WHA Document 66 Filed 04/17/06 Page 5 of 8
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

true that Allstate is relying on an exclusion that would bar coverage of the Mitsubishi if the car

was involved in business operations. But the legal status of those business operations will not

need to be determined to analyze whether the car was part of some business operations—it does

not really matter here whether Tri-Star and Golden West are partnerships, corporations or any

other type of entity.

 This order does not find that the additional Dizol factors weigh in favor of a stay either. 

This declaratory relief action will not necessarily settle all aspects of the controversy. Of

course, Gillette’s negligence with respect to Herrera and the other parties’ vicarious liability to

Herrera will not be decided in this federal action. But the coverage issues will be conclusively

determined.

This leads to the second additional consideration: “whether the declaratory action will

serve a useful purpose in clarifying the legal relations at issue.” Dizol, 133 F.3d at 1225 n. 5. 

This factor weighs strongly in favor of Allstate. Allstate is currently encumbered with the

responsibility of defending the state-court action. If it turns out that the Mitsubishi is not

covered under the Allstate policy, this burden would be lifted. Determining what Allstate’s

burden is vis a vis Liebowitz and Gillette is an important and pressing question.

Liebowitz argues that the collateral-estoppel question militates in favor of a stay. 

Liebowitz points to several authorities, from both inside and outside this jurisdiction,

supposedly emphasizing the importance of considerations of collateral estoppel. See Montrose

Chem. Corp. v. Super. Ct., 25 Cal. App. 4th 902, 910 (1994) (“If the declaratory relief action is

tried before the underlying litigation is concluded, the insured may be collaterally estopped

from relitigating any adverse factual findings in the third party action”); The Home Indem. Co.

v. Stimson Lumber Co., 229 F. Supp. 1070, 1090 (D. Or. 2001); National Chiropractic Mut. Ins.

Co. v. Doe, 23 F. Supp. 2d 1109, 1123 (D. Alaska 1998); Sass Investors Servs. v. Reliance Ins.

Co. of Ill., 810 F. Supp. 1082, 1090 (N.D. Cal. 1992). Contrary to the implications of

Liebowitz’s motion, this order will not weigh the potential for collateral estoppel more heavily

than any other factor, nor do any of these authorities invite such a reading. Indeed, in denying a

motion to stay, the Sass opinion held that “the mere possibility of collateral estoppel does not

Case 3:05-cv-02385-WHA Document 66 Filed 04/17/06 Page 6 of 8
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

It is also worth at least noting again in passing that Allstate filed first, by over six months. “The order

of filing is a factor that may be considered but the discretion of the federal court cannot turn on so mechanical a

rule.” Wright and Miller, Federal Practice and Procedure, § 2758 (3d ed. 1998). 

7

justify a stay of the declaratory proceeding.” Sass, 810 F. Supp. at 1090. Moreover, as noted,

this order does not find that the issues at stake in the parallel proceedings are equivalent. This

action focuses on the Mitsubishi. The state-court action, at least with respect to Liebowitz,

focuses on the businesses.

For the same reason, this order does not find that the parallel proceedings invite undue

entanglement between the state and federal courts. The issues are sufficiently distinct in the

two actions so that the courts will not be stepping on each other’s toes.

Nor does consideration of convenience to the parties overwhelmingly favor Liebowitz. 

Certainly, fighting a “two-front war” is less than desirable for Liebowitz. Courts, as

Liebowitz’s authorities demonstrate, have not been blind to this concern. See, e.g., Wells Dairy,

Inc. Travelers Indem. Co. of Ill., 241 F. Supp. 2d 945, 976 (N.D. Iowa 2003); Montrose, 25 Cal.

App. 4th at 910. Nevertheless, it is also inconvenient for Allstate to face uncertainty over

whether it has a burden to defend Liebowitz or Gillette throughout the duration of the statecourt action. If Allstate can secure a favorable determination here, it would alleviate that

burden.

Finally, although not one of the explicitly enunciated factors in Dizol, Liebowitz

contends that this order must take into account the potential for collusion. This order is not

persuaded that the purported collusion requires a stay. It appears, although not entirely clear,

that Liebowitz himself is partly responsible for the need for consolidation of his deposition in

the two actions. More importantly, however, Allstate has every incentive to litigate the statecourt action to its fullest extent. If Allstate can show that Gillette was not negligent when the

Mitsubishi struck Herrera, Allstate’s potential liability for Herrera’s injuries will disappear,

regardless of whether the Mitsubishi was covered under the Allstate policy. A stay of this

action is not warranted.2

Case 3:05-cv-02385-WHA Document 66 Filed 04/17/06 Page 7 of 8
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

8

Given this conclusion, this order need not consider State National’s separate opposition. 

There is no reason to stay State National’s cross-complaint for Tri-Star’s misrepresentations

given that Allstate will be allowed to go forward with its declaratory relief action in this Court.

CONCLUSION

For the foregoing reasons, defendant Liebowitz’s motion to stay is DENIED. Finding no

further argument necessary, the hearing on this motion is hereby VACATED.

IT IS SO ORDERED.

Dated: April 17, 2006. WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

Case 3:05-cv-02385-WHA Document 66 Filed 04/17/06 Page 8 of 8