Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_15-cv-01039/USCOURTS-cand-4_15-cv-01039-7/pdf.json

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

---

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

United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

UNITED SPECIALTY INSURANCE 

COMPANY,

Plaintiff,

v.

MERIDIAN MANAGEMENT GROUP, 

INC., et al.,

Defendants.

Case No. 15-cv-01039-HSG 

ORDER GRANTING MOTION TO 

STAY

Re: Dkt. No. 65

This is an insurance coverage action arising from a bedbug infestation at a residential 

building managed by Meridian Management Group, Inc. (“Meridian”). The residents of the 

building filed a lawsuit in state court on December 27, 2012, alleging several state law claims and 

seeking damages for bodily injury and property damage. Dkt. No. 65-1, Ex. A. Meridian insured 

its property management activities through a commercial general liability policy with United 

Specialty Insurance Company (“USIC”). USIC agreed to defend Meridian in the state court action 

under a disputed reservation of rights. 

On March 5, 2015, USIC filed a complaint in federal court, seeking a declaratory judgment 

that it does not owe a duty to defend or indemnify, as well as reimbursement of defense expenses. 

Dkt No. 1 (“Coverage Action”). Currently pending before the Court is Meridian’s motion to stay 

the Coverage Action during the pendency of the state court case. Dkt. No. 65. Having reviewed 

the parties’ arguments, and for the reasons set forth below, the Court GRANTS the motion to stay. 

I. LEGAL STANDARD

The parties dispute the legal standard the Court should use in evaluating the merits of 

Meridian’s motion. The Court considers and rejects Meridian’s contention that Brillhart v. Excess 

Ins. Co. of Am., 316 U.S. 491 (1942), sets the appropriate standard. Brillhart recognized “the 

unique and substantial discretion” afforded to district courts under the Declaratory Judgment Act, 

Case 4:15-cv-01039-HSG Document 77 Filed 04/15/16 Page 1 of 4
2

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

United States District Court

Northern District of California

Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995), and identified factors for consideration when 

deciding whether to hear a declaratory judgment action when there is a related case pending in 

state court, see R.R. St. & Co. v. Transp. Ins. Co., 656 F.3d 966, 975 (9th Cir. 2011); Scotts Co. 

LLC v. Seeds, Inc., 688 F.3d 1154, 1158 (9th Cir. 2012). The Brillhart analysis, however, is

limited to actions that seek only declaratory relief. Scotts, 688 F.3d at 1158. Where additional 

claims “exist independent of the request for a declaration,” the discretionary jurisdictional rule 

under Brillhart does not apply. Id. 

Here, the Coverage Action also includes a request for reimbursement. Because the

reimbursement claim would be viable without the declaratory relief claim, the reimbursement 

claim is “independent,” and thus invokes this Court’s mandatory jurisdiction. See United Nat. Ins. 

Co. v. R&D Latex Corp., 242 F.3d 1102, 1114 (9th Cir. 2001) (holding that insurer’s “request for 

reimbursement is independent of the request for declaratory relief”). Accordingly, Brillhart does 

not apply. 

That the reimbursement claim invokes the Court’s mandatory jurisdiction, however, does 

not negate the Court’s power to stay this action under Landis v. N. Am. Co., 299 U.S. 248, 254 

(1936) (“[T]he 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 sets out competing interests courts must weigh in deciding 

whether to grant a stay: (1) “possible damage which may result from granting a stay, (2) the 

hardship or inequity which a party may suffer in being required to go forward, and (3) 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.” CMAX, Inc. v. Hall, 300 F.2d 

265, 268 (9th Cir. 1962) (citing Landis, 299 U.S. at 254-55); see also Lockyer v. Mirant Corp., 

398 F.3d 1098, 1112 (9th Cir. 2005) (holding that the balance of hardships between the parties, or 

the prospect of narrowing the factual and legal issues in the other proceeding may justify a stay). 

A stay may be the most efficient and fairest course when there are “independent proceedings 

which bear upon the case.” Leyva v. Certified Grocers of Cal., Ltd., 593 F.2d 857, 863 (9th Cir. 

1979). A district court’s decision to grant or deny a Landis stay is a matter of discretion. 

Case 4:15-cv-01039-HSG Document 77 Filed 04/15/16 Page 2 of 4
3

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

United States District Court

Northern District of California

Dependable Highway Express, Inc. v. Navigators Ins. Co., 498 F.3d 1059, 1066 (9th Cir. 2007). 

II. DISCUSSION

Having balanced the competing interests in this case, the Court finds that a stay is 

warranted. Under the first Landis factor, USIC argues a possibility of damage, and contends that 

it would be “unjust” to require it “to pay defense costs throughout the underlying case even where 

it might be clear coverage did not exist.” Dkt. No. 70 at 14. The Ninth Circuit has found similar 

arguments unpersuasive reasons to deny a stay. See CMAX, Inc., 300 F.2d at 269 (holding that 

where the party opposing the stay seeks money damages, a delay in recovery of damages “is not 

the kind of prejudice which should move a court to deny a requested postponement”). USIC is 

currently defending Meridian under a reservation of rights, and if a stay is imposed, USIC 

presumably will continue defending Meridian under that reservation of rights. If the Coverage 

Action ultimately is determined in USIC’s favor, USIC will be able to recover the costs and fees 

of defending Meridian after the underlying action is resolved. 

Under the second Landis factor, Meridian contends that “a stay should be granted due to 

the prejudice to Meridian of fighting a two-front war with its defending carrier.” Dkt. No. 65 at 

16. The Ninth Circuit has rejected this argument as well: “defending a suit without more does not 

constitute a clear case of hardship or inequity within the meaning of Landis.” Lockyer, 398 F.3d 

at 1112. 

Under the third Landis factor, the Court concludes that the orderly administration of justice 

warrants a stay. Although USIC argues there is no overlap between the factual and legal issues in 

the underlying proceeding and the Coverage Action, exact factual and legal similarity is not 

required. See Leyva, 593 F.2d at 863-64 (holding the court’s ability to enter a stay “does not 

require that the issues in such proceedings are necessarily controlling of the action before the 

court”). Meridian has identified several policy coverage disagreements, including the applicability 

of coverage limitations, which rely on disputed underlying facts. For example, infested properties 

must be identified, and a determination must be made as to whether those properties are covered 

under the policy. It seems inevitable that both the underlying action and the Coverage Action will 

require overlapping fact discovery and the examination and interpretation of policy provisions 

Case 4:15-cv-01039-HSG Document 77 Filed 04/15/16 Page 3 of 4
4

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

United States District Court

Northern District of California

under state contract law and insurance law. Should the cases proceed simultaneously, there is a 

risk of inconsistent results on these disputed questions. See Leyva, 593 F.2d at 863 (“A trial court 

may. . . find it is efficient for its own docket and the fairest course for the parties to enter a stay of 

an action before it, pending resolution of independent proceedings which bear upon the case.”). 

Although “a stay should not be granted unless it appears likely the other proceedings will be 

concluded within a reasonable time,” Dependable Highway, 498 F.3d at 1066, the Court finds that 

the overlapping factual and legal issues, coupled with the risk of inconsistent results, create a 

“pressing need” necessitating a stay, see Landis, 299 U.S. at 255. 

Additionally, the Court is further persuaded that judicial economy favors a stay, given that 

determination of motions in the underlying action could result in a global settlement of the entire 

case. See Dkt. No. 72 at 1 (stating a “likelihood that if, as predicted, the class claims are not 

certified, the cost of litigating this case will quickly eclipse the value of the underlying case”). 

III. CONCLUSION

The Court GRANTS the motion to stay, and vacates the pretrial conference and trial dates 

scheduled for May 31, 2016 and June 13, 2016, respectively.

1

 The Court directs the parties to file 

a joint status report a year from the date of this order, briefing the Court on whether a continued 

stay is warranted. 

IT IS SO ORDERED.

Dated:

HAYWOOD S. GILLIAM, JR.

United States District Judge

 

1

The Court DENIES without prejudice Meridian’s request to strike the Keaster Declaration, 

attached Exhibit A (a copy of the initial reservation of rights letter issued by USIC in connection 

with the underlying action), and attached Exhibit B (a copy of the most recent reservation of rights 

letter). See Dkt. No. 70. Plaintiff contends that USIC’s filing of such documents violates the 

Northern District’s Local Rules 7-5 and 1-4, as well as Federal Rule of Civil Procedure 56(e). See 

Dkt. No. 72. at 9. Although there may be viable bases for striking the declaration and attached 

exhibits, these cited provisions do not provide them. The Court grants Meridian leave to file a 

motion to strike based on disclosure of privileged communications. Meridian should file such 

motion by April 22, 2016, and the motion should identify the specific bases for the privilege 

argument and supporting authority. 

4/15/2016

Case 4:15-cv-01039-HSG Document 77 Filed 04/15/16 Page 4 of 4