Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-02293/USCOURTS-caed-2_05-cv-02293-2/pdf.json

Parties Involved:
Amco Insurance Company
Defendant
Mosaic Law Congregation
Plaintiff

Document Text:

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1 Because oral argument will not be of material

assistance, the court orders these matters submitted on the

briefs. See E.D. Cal. L.R. 78-230(h).

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

MOSAIC LAW CONGREGATION, a

California non-profit

corporation,

NO. CIV. S-05-2293 FCD/KJM

Plaintiff,

v. MEMORANDUM AND ORDER

AMCO INSURANCE CO.,

Defendant.

----oo0oo----

This matter is before the court on the parties’ crossmotions for partial summary judgment on the issue of coverage

under plaintiff Mosaic Law Congregation’s (“plaintiff”) all-risk

commercial property insurance policy (the “Policy”) through

defendant Amco Insurance Company (“defendant” or “AMCO”).1

 In

its motion, plaintiff seeks summary judgment on its claim for

declaratory relief, arguing that the damage to its building

during a rainstorm is a covered loss under the Policy because the

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damage was caused by the roofing contractor’s negligence. 

Defendant argues, on the other hand, via its cross-motion, that

no coverage exists under the Policy because plaintiff’s negligent

acts and decisions caused the damage to the building and such

conduct by plaintiff is not a covered cause of loss. 

Plaintiff, alternatively, argues that during the rainstorm

the building suffered a “collapse” within the terms of the

Policy, thereby providing coverage for the damage; defendant

responds that plaintiff has failed to proffer sufficient evidence

of such a collapse.

Finally, relating to this incident, plaintiff also tendered

defense of a lawsuit to defendant in which plaintiff is sued by a

service company plaintiff hired to do clean-up and repairs at the

building. Plaintiff is sued for failure to pay the service

company, and plaintiff contends under the Policy defendant is

obligated to defend plaintiff in that action. Defendant asserts

that no such defense is required as no coverage exists under the

Policy.

For the reasons set forth below, the court DENIES

plaintiff’s motion in its entirety and GRANTS in part and DENIES

in part defendant’s motion. Triable issues of fact remain as to

the cause of the damage to plaintiff’s building which prevent

award of summary judgment to either party. The court also cannot

determine as a matter of law whether the building suffered a

“collapse” as that term is defined in the Policy; plaintiff’s

showing on that issue is insufficient to grant summary judgment

in its favor. Finally, the court grants defendant’s motion with

respect to its duty to defend plaintiff in the other litigation

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3

pursuant to the “General Liability Coverage Part” of the Policy

but denies defendant’s motion as to its duty to defend plaintiff

under the “Directors and Officers Liability Coverage Part” of the

Policy. 

BACKGROUND

Plaintiff was insured under a commercial property insurance

policy (the aforementioned “Policy”) issued by defendant for the

period February 22, 2004 through February 22, 2005. (Pl.’s Resp.

to Def.’s Stmt. of Undisputed Facts [Docket #25] [“PRUF”], ¶ 1.) 

Plaintiff entered a contract with Clark Roofing, Inc. (“Clark”)

to replace the roof on the classroom building at its facility. 

On September 8, 2004, Clark commenced demolition of the existing

roof and continued working on the roof replacement through

Wednesday, September 15, 2004. (PRUF ¶ 2.) On September 13,

2004, Carl Stein, a congregant of plaintiff who was assisting

with reconstruction of the building, directed Clark to cease all

work on the project as of sundown on September 15, 2004 in

observance of Rosh Hashanah, a Jewish holiday, which began at

sundown that day. Mr. Stein informed Clark that it would not be

able to resume work on the roof until Monday, September 20, 2004. 

(PRUF ¶ 3.)

Plaintiff disputes that Clark was first informed about the

work restrictions on September 13, 2004. Plaintiff asserts Mr.

Stein informed Clark before Clark began the project on September

8 that the work on the roof would have to stop in honor of Rosh

Hashanah and the Sabbath (which meant that work would have to

stop by sundown on September 15, 2004 in honor of Rosh Hashanah

and could not resume until September 20, 2004, the following

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2 Under Jewish Law, no work is permitted to be performed

from 18 minutes before sunset (or one hour after sundown) on

Fridays and on the eve of all Jewish holy days, through one hour

after sundown on the day the holy day concludes. Rosh Hashanah

is the Jewish New Year and involves two full days of religious

observance. Friday evening through Saturday evening is the

Sabbath. (PADF ¶s 15, 17, 18.)

4

Monday, due to the Sabbath). (Pl.’s Add’l Disputed Facts in

Opp’n to Def.’s MSJ [Docket #25] [“PADF”], ¶s 14, 20.)2 

Plaintiff contends that Mr. Stein reminded Clark again of these

work restrictions on September 13, 2004. (PADF ¶ 21.)

Before the weekend of September 17, 2004, John Clark, coowner of Clark, contacted Mr. Stein to advise him that there was

a chance of rain over the next couple of days. (PRUF ¶ 4.) Mr.

Clark advised Mr. Stein that the property was not completely

air/weather tight due to the required work stoppage. Defendant

maintains that had Clark been able to work from September 15,

2004 to Friday, September 17, 2004, it could have installed three

layers of roofing material on the roof, which would have made the

roof of the building completely air/weather tight (PRUF ¶ 5.) 

Mr. Clark attests that despite being warned of the possibility of

rain and the condition of the roof, plaintiff remained adamant

that no further roofing work could take place until Monday,

September 20, 2004. (Id.)

On Sunday, September 19, 2004, the rain came. (PRUF ¶ 6.) 

Plaintiff asserts that as a result of Clark’s failure to install

a temporary covering over the plywood sheeting where the roof had

been removed, water collected on and penetrated through the

exposed roofing areas, thereby saturating the plywood on the

roof, as well the ceiling titles below, causing them to collapse. 

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5

(Def.’s Resp. to Pl.’s Stmt. of Undisputed Facts [Docket #23]

[“DRUF”], ¶s 5-7.) Defendant does not dispute that there was no

temporary covering on the roof, but contends that its failure to

apply such a covering was the direct result of the explicit

directions of plaintiff to stop all work and leave the roof in an

unprotected condition. (DRUF ¶ 5.) Defendant also disputes that

the ceiling tiles collapsed. (DRUF ¶ 7.)

Plaintiff maintains that among other property, the collapsed

ceiling titles and water intrusion damaged carpets, gas and

electrical units, insulation, walls and beams, the security

system, and light fixtures in plaintiff’s administrative offices

and classrooms. (DRUF ¶ 9.) Plaintiff retained ServiceMaster,

Inc. (“ServiceMaster”) to perform clean-up and restoration work. 

Immediately after the damage occurred, plaintiff submitted a

claim for benefits to defendant. (DRUF ¶ 10.) Defendant

investigated the claim, which included visiting the premises,

obtaining recorded statements of relevant parties, including

plaintiff, Clark, and ServiceMaster, retaining engineers to

inspect the property, and retaining coverage counsel for advice

on the claim. (PRUF ¶ 8.) Ultimately, defendant denied

plaintiff’s claim. (PRUF ¶ 9.)

Subsequently, in May 2005, ServiceMaster filed a lawsuit

against plaintiff based on plaintiff’s alleged failure to pay

ServiceMaster for its services. (PRUF ¶ 11.) Plaintiff tendered

defense of the lawsuit to defendant on June 23, 2005. (PRUF 

///

///

///

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3 The reasons why defendant denied plaintiff’s claim for

benefits and demand for defense of the ServiceMaster suit are

irrelevant to this motion as the parties agree plaintiff’s “bad

faith” claims for breach of contract and breach of the implied

covenant of good faith and fair dealing are not at issue on the

instant motions. 

6

¶ 12.) Defendant did not accept the defense. (PRUF ¶ 13.)3

STANDARD

The Federal Rules of Civil Procedure provide for summary

judgment where "the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to any

material fact." Fed. R. Civ. P. 56(c); see California v.

Campbell, 138 F.3d 772, 780 (9th Cir. 1998). The evidence must

be viewed in the light most favorable to the nonmoving party. 

See Lopez v. Smith, 203 F.3d 1122, 1131 (9th Cir. 2000) (en

banc).

The moving party bears the initial burden of demonstrating

the absence of a genuine issue of fact. See Celotex Corp. v.

Catrett, 477 U.S. 317, 325 (1986). If the moving party fails to

meet this burden, "the nonmoving party has no obligation to

produce anything, even if the nonmoving party would have the

ultimate burden of persuasion at trial." Nissan Fire & Marine

Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102-03 (9th Cir. 2000). 

However, if the nonmoving party has the burden of proof at trial,

the moving party only needs to show "that there is an absence of

evidence to support the nonmoving party's case." Celotex Corp.,

477 U.S. at 325.

Once the moving party has met its burden of proof, the

nonmoving party must produce evidence on which a reasonable trier

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of fact could find in its favor viewing the record as a whole in

light of the evidentiary burden the law places on that party. 

See Triton Energy Corp. v. Square D Co., 68 F.3d 1216, 1221 (9th

Cir. 1995). The nonmoving party cannot simply rest on its

allegations without any significant probative evidence tending to

support the complaint. See Nissan Fire & Marine, 210 F.3d at

1107. Instead, through admissible evidence the nonmoving party

"must set forth specific facts showing that there is a genuine

issue for trial." Fed. R. Civ. P. 56(e). 

ANALYSIS

1. Covered Cause of Loss

The instant Policy excludes damage caused by rain unless the

building first sustains damage by a “covered cause of loss.” The

Policy provides, in pertinent part:

We [AMCO] will not pay for loss of or damage to 

property, as described and limited in this section.

In addition, we will not pay for any loss that is

a consequence of loss or damage and described and

limited in this section.

* * *

C. The interior of any building or structure, or

to personal property in the building or structure,

caused by or resulting from rain, snow, sleet,

ice, sand or dust, whether driven by wind or

not, unless:

(1) the building or structure first sustains

damage by a Covered Cause of Loss to its

roof or walls through which the rain, snow

sleet, ice, sand and dust enters.

(Ex. A to Young Decl. in Supp. of Def.’s MSJ [Docket #21] at

AL0000166.) Plaintiff contends that the cause of loss here is

Clark’s negligence in failing, despite prior notice of the

inability to work over the Rosh Hashanah holiday and Sabbath, to

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4 Said doctrine provides that where a loss is caused by a

combination of covered and excluded causes, coverage under a

policy of insurance applies where the covered loss is the

“efficient proximate cause” of the loss. Garvey v. State Farm

Fire & Casualty Insur. Co., 48 Cal.3d 395 (1989). The “efficient

proximate cause” of a loss is the predominant or most important

cause of a loss. Id.

8

install a temporary cover on the roof to protect the building

from rain during the work stoppage. Plaintiff maintains that

contractor negligence is a covered cause of loss under the

Policy. As support, plaintiff primarily relies on the Ninth

Circuit’s decision in Tento International, Inc. v. State Farm

Fire & Casualty Co., 222 F.3d 660, 662 (9th Cir. 2000) wherein

the court reversed the trial court’s determination that no

coverage existed under the policy’s rain exclusion (which was

similar to the Policy here), finding that under California’s

“efficient proximate cause” doctrine,4 the insurance loss was

actually caused by the contractor’s negligent handling of the

roof repair (the failure to install a temporary covering). The

Ninth Circuit found that under the policy at issue, the

contractor’s negligence was not an excluded cause of loss. Id.

at 663-64. See also Allstate Insur. Co. v. Smith, 929 F.2d 447

(9th Cir. 1991) (finding under similar facts to Tento, that the

contractor’s negligence in failing to install a temporary

covering on the roof, which resulted in damage to the premises

due to rain, was the “efficient proximate cause” of the insured’s

loss and the loss was not excluded by the policy’s “faulty

workmanship” exclusion which was ambiguous as a matter of law);

accord Century Theatres, Inc. v. Travelers Property Casualty

Company of America, 2006 WL 708667 (N.D. Cal. March 20, 2006).

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5 However, the court in Landmark did not decide whether

coverage was, in fact, excluded under this provision because

whether plaintiffs’ acts were the predominate cause of the

damages was not before the court; on the Landmark plaintiffs’

motion for partial summary judgment, the court was asked only to

decide whether the exclusion was unambiguous and enforceable. 

Id. at *7.

9

Defendant, on the other hand, contends that the cause of

loss in this case was not Clark’s negligence but plaintiff’s

decision to leave the roof unfinished despite being warned by

Clark of the possibility of rain and the fact that the roof was

not in a watertight condition on September 15, 2004. Plaintiff’s

decision, defendant asserts, is not a covered cause of loss under

the Policy. Defendant cites to the “Acts and Decisions”

exclusion in the Policy which provides that AMCO will not pay for

damage caused by or resulting from “acts or decisions [of the

insured], including the failure to act or decide of any person,

group, organization or governmental policy.” (Ex. A to Young

Decl., Exclusion 3.b. at AL0000165.) Defendant argues this

exclusion excuses it from providing coverage for damages caused

by plaintiff’s negligence. See e.g., Landmark Hospitality LLC v.

Continental Casualty Co., 2002 U.S. Dist. LEXIS 27794 (C.D. Cal.

July 2, 2002) (finding the policy’s “acts and decisions

exclusion” [which involved the same language as at issue here]

was unambiguous and enforceable and would excuse the insurance

company from providing coverage for damages caused by the

plaintiffs’ negligence).5

While the question of coverage under the Policy is a

question of law for the court to decide, here, the court cannot

resolve the question on summary judgment because the parties

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dispute what caused the loss. Plaintiff proffers evidence in

support of its position that Clark’s negligence caused the

damage, but defendant proffers evidence in rebuttal to argue that

plaintiff was responsible for the damage. Only where the facts

are undisputed can the court determine proximate causation as a

matter of law. See Allstate Insur. Co. v. Smith, 929 F.2d at

451. Otherwise, the issue of causation is a factual

determination for resolution by the trier of fact. Id. Unlike

Tento, Allstate, and Century Theaters, relied on by plaintiff,

the issue of whether Clark’s negligence caused the damage is

factually in dispute. In Tento, Allstate, and Century Theaters,

there was no dispute that the contractors’ negligence was at

least a cause of the loss (in addition to the rain), and thus,

the courts only had to determine whether the contractors’

negligence was the “predominant cause” for purposes of the

efficient proximate cause doctrine and then ascertain whether the

loss was excluded by the relevant policies. In this case,

triable issues of fact exist as to the cause of the damage to

plaintiff’s building. Those issues of fact must be resolved

before the court can decide the question of coverage, and thus,

the court denies both parties’ motions for summary judgment on

this issue.

2. Additional Coverage – Collapse

As an alternative argument for coverage, plaintiff argues

its building suffered a “collapse” of part of its internal

structure as a result of the rainwater on the roof and because of

faulty construction methods by Clark. The collapse, plaintiff

asserts, caused damage to the interior of the building and forced

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plaintiff to move its classroom and administrative offices to a

different location. Plaintiff contends such circumstances give

rise to a covered loss under the Policy.

The Policy provided additional coverage for a “collapse” as

follows:

D. Additional Coverage – Collapse

The term Covered Cause of Loss includes 

Additional Coverage–Collapse as described

and limited in D.1. through D.5. below.

1. With respect to buildings:

a. Collapse means an abrupt falling

down or caving in of a building

or any part of a building with the

result that the building or part of

the building cannot be occupied for

its intended purpose;

(Ex. A to Young Decl. at AL0000167-168.) Plaintiff contends 

coverage exists under this provision, relying solely on the case

of Panico v. Truck Insur. Exch., 90 Cal. App. 4th 1294 (2001). 

According to plaintiff, in Panico, “the court determined that the

falling of ceiling tiles under the weight of water could

constitute collapse within the ordinary meaning of the word under

an insurance policy.” (Pl.’s Opp’n to Def.’s MSJ [Docket #24] at

9:7-9.) 

This court disagrees. In Panico, the California court of

appeal reversed a trial court’s decision to grant a motion for

non-suit, which was based only on evidence discussed by counsel

in a mandatory settlement conference before trial. The opinion,

in large part, is a critique of the trial court’s improper

procedures to dispose of a case without trial. The court did not

evaluate coverage under the policy at issue there or make a

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finding that a claim that a few acoustical titles had fallen from

the ceiling constituted, as a matter of law, a collapse within

the meaning of an insurance policy. Indeed, the court did not

mention the policy language concerning “collapse” at issue. Id.

at 1298-1300. While the court did note, in dicta, that if enough

tiles fell down, such an event could be reasonably characterized

as a collapse under the ordinary meaning of that term, it also

remarked that “[o]ne tile of many, dislodged from a roof and

leaving a relatively small opening in it, does not a ‘collapse’

make.” Id. at 1300. Ultimately, the court found the trial court

erred in granting a non-suit when a “dispute [remained] over

whether the ‘falling in’ was big enough to rate the appellation

‘collapse.’” Id. 

Thus, this court cannot find as a matter of law, on the

basis of Panico, that a collapse occurred in this case. Indeed, 

similar to Panico, here, a dispute remains as to whether the

falling down of some acoustic ceiling tiles was “big enough” to

constitute a collapse under the Policy. As the moving party on

this issue, it is plaintiff’s burden to proffer evidence

sufficient for a finding in its favor. Plaintiff did not meet

its burden in several regards. First, plaintiff did not proffer

evidence as to the number of titles which purportedly fell as a

result of the water saturation. Second, it appears that certain

titles were removed by ServiceMaster during the clean-up of the

building; plaintiff did not proffer evidence of the number of

titles removed by ServiceMaster as opposed to the number of

titles that fell due to the rain. Third, plaintiff did not

proffer evidence that the building could not be occupied for its

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6 Plaintiff’s statements in its motion and opposition

papers that the synagogue’s administrative offices and school

operations had to be relocated to a different building are not

supported by any evidence submitted on the motions. Indeed, no

one on plaintiff’s behalf attests that indeed the offices were

moved, let alone that they were moved because of the fallen

ceiling tiles.

13

intended purpose due to the fallen ceiling tiles, a requisite for

coverage under the Policy.6 As such, plaintiff’s motion on this

issue must be denied.

3. Defense of the ServiceMaster Lawsuit

In its motion, defendant moves for summary judgment on the

issue of whether it was obligated to defend plaintiff in the

lawsuit filed by ServiceMaster. Defendant argues plaintiff is

not entitled to a defense of that action because no coverage

exists under the Policy, either pursuant to the “General

Liability Coverage Part” or the “Directors and Officers Liability

Coverage Part.” In opposition to defendant’s motion, plaintiff

asserts coverage only under the latter “Directors and Officers

Liability Part,” and as such, the court construes plaintiff’s

failure to respond to defendant’s motion as to the General

Liability Part as a non-opposition thereto (see E.D. Cal. L.R.

78-230(c)), and accordingly finds that no coverage exists under

that Part. 

As to the Directors and Officers Liability Part, the Policy

provides coverage for liability incurred by plaintiff as a result

of the “wrongful acts” of its directors and officers. 

Specifically, this coverage Part provides, in pertinent part, the

following:

///

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14

PART I – COVERAGE

A. AGREEMENT

We [AMCO] will pay those sums you become legally

obligated to pay as damages because of any 

‘wrongful act(s)’ to which this coverage part

applies . . . . We will have the right and duty

to defend any claim seeking damages . . . . 

B. WHO IS INSURED

1. You are an insured, but only with 

respect to an obligation to indemnify

your ‘directors and officers’ with 

respect to their duties as such.

2. Your ‘directors and officers’ are insured,

but only with respect to their duties as

such . . . .

PART II – DEFINITIONS

. . . 

B. ‘Loss(es)’ under this coverage part shall include:

Claims or proceedings occurred during the policy

period against the ‘directors or officers’ for

‘wrongful acts,’ as well as indemnities due the

‘directors or officers’ pursuant to the operation

of law or permitted by law to be paid as

indemnity, as set forth in the church’s by-laws,

and/or rules of its governing body which determine

and define such rights of indemnity.

E. ‘Wrongful acts’ means any negligent act, error,

omission, or breach of duty of your ‘directors or

officers’ while acting in their capacity as such.

(Ex. A to the Young Decl. at 000047-50.) Defendant asserts that

this coverage Part does not apply to the ServiceMaster lawsuit

because only plaintiff was sued in that action, not any directors

or officers of plaintiff. Defendant also argues that coverage is

not afforded by this Part because there is no “wrongful act” upon

which the lawsuit is based. The ServiceMaster complaint asserts

four causes of action against plaintiff: (1) breach of written

contract; (2) account stated; (3) reasonable value; and (4) to

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7 It is noteworthy that according to plaintiff, its

decisions with respect to ServiceMaster were made by plaintiff’s

Board of Directors and thus, liability could seemingly be

asserted against the directors in the SerivceMaster action. 

 

15

foreclose mechanic’s lien. Defendant contends that with respect

to each of the causes of action, plaintiff’s decision not to pay

ServiceMaster was a “deliberate, intentional act, not a negligent

one,” and thus, there is no covered, “wrongful act” at issue.

Defendant’s first argument is unavailing because an

insurer’s duty to defend its insured in a lawsuit is “not merely

determined by looking to the language of the complaint.” Mullen

v. Glens Falls Insur. Co., 73 Cal. App. 3d 163, 169 (1977). 

Rather, the duty to defend should be determined by the facts the

insurer learns from the complaint, the insured, and other

sources, not merely from how the complaint is written. Id.

Indeed, defendant cites no legal authority for its position that

directors or officers of plaintiff must be named as defendants

for coverage under the policy to apply. Moreover, the duty to

defend exists if there is any potential for coverage under a

policy. Montrose Chem. Co. v. Sup. Ct., 6 Cal. 4th 287, 299

(1993). Even the bare potential or possibility of coverage will

trigger the duty to defend. Id. at 295. As such, the court

cannot find in favor of defendant on this issue.7 To demonstrate

it had no duty to defend under this coverage Part, defendant must

do more than simply rely on the complaint itself.

As to defendant’s second argument, defendant asserts that

plaintiff’s decision not to pay ServiceMaster was a “deliberate,

intentional act” but proffers no evidence of this alleged fact.

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25

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28

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(Def.’s MSJ [Docket #21] at 16:5-10.) Not surprisingly,

plaintiff disputes defendant’s characterization of its conduct,

arguing that its decision not to pay ServiceMaster was the result

of plaintiff’s “negligent” belief that defendant would ultimately

pay benefits under the Policy for the damage to its building,

from which plaintiff could then pay ServiceMaster. However, like

defendant, plaintiff also does not proffer any evidence in

support of its position. Absent admissible evidence, the court

cannot resolve this issue. As such, it must deny defendant’s

motion as to coverage under this Part. 

CONCLUSION

For the forgoing reasons, plaintiff’s motion for partial

summary judgment is DENIED in its entirety and defendant’s motion

for partial summary judgment is GRANTED in part and DENIED in

part.

IT IS SO ORDERED.

 DATED: March 9, 2007

Case 2:05-cv-02293-FCD-KJM Document 31 Filed 03/09/07 Page 16 of 16