the California Superior Court had already held that Zurich had such
a duty. Although not depriving me of jurisdiction under
Rooker/ Feldman, the Superior Court’s decision may still be entitled
to res judicata. As Zurich informs me that the Superior Court’s
decision on the duty to defend in Armenta is currently on appeal,
however, and in California, a decision is not entitled to
preclusive effect while an appeal is pending, Franklin & Franklin
v. 7-Eleven Owners for Fair Franchising, 102 Cal. Rptr. 2d 770, 774
(Cal. Ct. App. 2000) (citing Producers Dairy Delivery Co. v. Sentry
Insurance Co., 718 P.2d 920 (Cal. 1986)),! that decision is not
binding on me here. Consequently, I find that for the same reason
the duty to defend in Rothschild was subject to arbitration under
the deductible agreements, the duty to defend in Armenta is
likewise subject to arbitration under the deductible agreements.
My opinion of September 9, 2002, previously withdrawn pending
receipt of the Seventh Circuit’s ruling on the preliminary
injunction, is hereby reinstated, amended only to reflect the fact
that the duty to defend in Armenta is arbitrable to the same extent
I previously found the duty to defend in Rothschild arbitrable
under the deductible agreement. I emphasize again that my opinion

is limited to holding that the dispute raised by the September 6,

1 “It is now settled that a federal court must give to a
state-court judgment the same preclusive effect as would be given
that judgment under the law of the State in which the judgment was
rendered.” Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S.
75, 81. (1984).



to alter or amend, requesting that I compel arbitration of all
issues in the California coverage dispute (whether they arise under
the policies or the deductible agreements), including the issue of
Zurich’s duty to defend in Armenta and all issues relating to James
Jones. It is this motion that is before me now.

I note first that Zurich’s attempt to have me broaden the
scope of my order compelling arbitration to compel the arbitration
of issues arising under the policies, as opposed to the deductible
agreements, is unwarranted. As noted numerous times before, only
the deductible agreements contain arbitration clauses, not the
policies. The only issue ever before me was whether the dispute
created by the September 6, 2001 and September 21, 2001 letters was
arbitrable under the deductible agreements. I held that, except as
relates to James Jones and the duty to defend in Armenta (and
whether Zurich had waived arbitrability), the dispute created by
those letters was arbitrable under the deductible agreement. The
Seventh Circuit’s decision on the preliminary injunction order
gives no reason to reconsider my holding as to James Jones, nor
does Zurich’s citation to the deposition of Elaine Prokop. The
only issue in the order compelling arbitration that needs
reexamination in light of the Seventh Circuit’s opinion is my
refusal to decide the issue of Zurich’s duty to defend in Armenta.

The Seventh Circuit held that Rooker/Feldman does not bar my

consideration of the duty to defend in Armenta issue, even though


2001 and September 21, 2001 is arbitrable under the deductible
agreement (except as to James Jones), and remind the parties that,
as discussed by the Seventh Circuit, the California state courts

are perfectly competent to determine other issues of arbitrability.

lone 2 Bash

Elaine E. Bucklo
United States District Judge

Dated: September 2g 7 2003


a a
"Minute rds Form (96997)

nited States District Court, Northern District of Illinois

()

rameottwack dee | Blaine B. Bucklo | Steanir ne
CASE NUMBER 01 C 7673 DATE 9/25/2003

CASE Zurich American Insurance Co. vs. Watts Industries, Inc., et al.

TITLE

[In the following box (a) indicate the party filing the motion, ¢.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.)
DOCKET ENTRY:
(00) Oo Filed motion of [ use listing in “Motion” box above.]
(2) Qa Brief in support of motion due
@) oO Answer brief to motion due . Reply to answer brief due___-
(4) o Ruling/Hearingon_____ssetfor_—_—at
(5) Oo Status hearing[held/continued to] [set for/re-set for]on__—setfor__—_at
(6) Oo Pretrial conference[held/continued to] [set for/re-set forlon__—ssetfor sat.
(yn o Trial{set for/re-set for]on___— at
(8) o [Bench/Jury trial] [Hearing] held/continuedto at
(9) o This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OOFRCP4(m) OLocal Rule 41.1 COFRCP41(a\(1) COFRCP41(a)(2).

do [Other docket entry]  Plaintiff’s motion to alter or amend and for injunctive relief (149-1,2,3) is

granted in part and denied in part. The court’s opinion of 9/9/02 , previously withdrawn, is hereby
reinstated and amended to reflect the fact that the duty to defend in Armenta is arbitrable to the same
extent the court previously found the duty to defend in Rothschild arbitrable under the deductible
agreement. Enter Memorandum Opinion and Order. Any pending motion in this case is terminated as

moot.

{For further detail see order attached to the original minute order.]

No notices required, advised in open court.

No notices required.

Notices mailed by judge’s staff

Notified counsel by telephone.

Docketing to mail notices,

Mail AO 450 form, 4UN09 LolYLsia ‘sn’
Wwa79

Copy to judge/magistrate judge. yb TL

cmon IS:9 Hd $2 d3S¢0
deputy’s
initials Se Sots

Date/time receiv
cata Clerk Otte rin ety ia



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

ZURICH AMERICAN INSURANCE COMPANY,
Petitioner,
No. 01 C 7673

WATTS INDUSTRIES, INC. and JAMES
JONES COMPANY,

DOCKETED

)
)
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v. )
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) SEP 2 6 2003

Respondents.

MEMORANDUM OPINION AND ORDER

The procedural history of this case is long and tortured, and
a thumbnail sketch should be sufficient here. Petitioner Zurich
American Insurance Company (“Zurich”) provided liability insurance
for respondents Watts Industries Inc. (“Watts”) and James Jones
Company (“James Jones”). Watts and James Jones were both sued in
California state court in two cases (“Armenta” and “Rothschild”).
When Zurich refused to provide defense coverage, Watts and James
Jones sued Zurich in California state court. Zurich then filed in
this court a petition to compel arbitration of the coverage dispute
based on arbitration clauses in certain deductible agreements.
Zurich also sought a preliminary injunction, asking that I enjoin
the California court from proceeding with litigation of the
coverage dispute. Prior to my ‘issuing an opinion on preliminary
relief, the California court issued an order holding that Zurich
had a duty to defend Watts in Armenta. I then issued a preliminary

injunction enjoining the California state court from proceeding

a2


with litigation of the coverage dispute as to Watts, except with
respect to Zurich’s duty to defend in Armenta. I did not enjoin
litigation with respect to James Jones because I found no
reasonable likelihood of success on the petition to compel
arbitration against it as James Jones was not a signatory to the
deductible agreements containing the arbitration clauses. I did
not enjoin litigation with respect to Zurich’s duty to defend in
Armenta because I found that under the Rooker/Feldman doctrine, I
had no jurisdiction to decide that issue because the California
court had already decided it. The parties cross-appealed the
preliminary injunction order.

While the preliminary injunction order was on appeal, I issued
my decision on the merits of the petition to compel arbitration.
I granted the petition in part, compelling arbitration as to Watts,
but not James Jones, and again noting that I lacked jurisdiction
over the issue of Zurich’s duty to defend in Armenta because it had
been determined by the California state court. Zurich then filed
a motion to alter or amend my order. After Zurich filed its motion
to alter or amend, the Seventh Circuit issued its opinion on the
preliminary injunction order, holding that it violated the Anti-
Injunction Act. Also in the opinion, however, the court indicated
that I was not barred by Rooker/Feldman from deciding a motion to
compel the issue of Zurich’s duty to defend in Armenta. Following

the Seventh Circuit’s opinion, Zurich filed a supplemental motion