350 West Ash Urban Home, Inc. et al v. Everst Indemnity Insurance Company et al, No. 3:2013cv00018 - Document 38 (S.D. Cal. 2014)
Court Description: ORDER denying Defendant Everest Indemnity Insurance Company's 29 Motion to Dismiss The Insurance Company of the State of Pennsylvania's Cross-Claim for Failure to Join Indispensable Parties Under Rule 19. Signed by Judge Thomas J. Whelan on 4/24/2014. (jah)
Download PDF
<![CDATA[
350 West Ash Urban Home, Inc. et al v. Everst Indemnity Insurance Company et al Doc. 38 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 13 14 15 350 WEST ASH URBAN HOME, INC., et al., vs. Case No. 13-cv-18-W(BGS) Plaintiffs, 16 EVEREST INDEMNITY INSURANCE COMPANY., et al., 17 ORDER DENYING EVEREST’S MOTION TO DISMISS ISOP’S CROSS-CLAIM [DOC. 29] Defendants. 18 19 20 21 AND RELATED CROSS ACTIONS. On November 16, 2012, Plaintiffs 350 West Ash Urban Home, Inc. (“Urban 22 Homes”), 350 W.A. LLC (“350 W.A.”), B&H Property Systems, Inc. (“B&H”), and 23 David A. Blackburn commenced this action against Defendants Everest Indemnity 24 Insurance Company (“Everest”) and the Insurance Company of the State of 25 Pennsylvania (“ISOP”) in the San Diego Superior Court. Thereafter, ISOP removed 26 this action to this Court, and ISOP and Everest filed cross-claims against each other. 27 Everest now moves to dismiss ISOP’s First Amended Cross-Claim (“FACC”) under 28 Federal Rule of Civil Procedure 12(b)(7). ISOP opposes. -1- 13cv18 Dockets.Justia.com 1 The Court decides the matter on the papers submitted and without oral 2 argument. See Civ. L. R. 7.1(d.1). For the reasons discussed below, the Court DENIES 3 Everest’s motion to dismiss. 4 5 I. BACKGROUND 6 Everest issued a commercial general liability policy to its named insured, 350 7 West Ash, LLC, effective from December 3, 2003 to December 21, 2005 (“Everest 8 Policy”). (FACC ¶ 7.) Highland Home Builders, Inc. (“Highland”) was also an insured 9 under the Everest Policy. (Id.) The policy is “a project-specific policy, and only insures 10 ‘bodily injury’, ‘property damage’, or ‘personal injury and advertising injury’ that occurs 11 during the policy period.” (Id.) It also provided limits in the amount of $2 million each 12 occurrence, $2 million general aggregate, and $2 million products completed operations 13 hazard (“PCOH”) aggregate, and required satisfaction of a $50,000 per-occurrence SIR 14 by the named insured for each and every “occurrence” plus an additional SIR amount 15 as set forth in the SIR endorsement. (Id.) 16 ISOP also issued a Follow Form Excess Liability Policy, effective from April 14, 17 2004 to December 31, 2005 (“ISOP Policy”). (FACC ¶ 8.) According to ISOP, 18 “[e]xcept where inconsistent, the ISOP Policy follows the terms, exclusions, conditions 19 and endorsements of the Everest Policy,” and “provides limits of liability in the amount 20 of $3 million for each occurrence and $3 million for the products completed operations 21 aggregate.” (Id.) 22 ISOP emphasizes endorsements entitled “Defense Expenses Within Limits” and 23 “Self Insured Retention Endorsement” included in the Everest Policy. (FACC ¶¶ 24 42–43.) The former “provide[d], in pertinent part, that Everest’s ‘defense expenses’ 25 reduce the Limits of Insurance ‘allocated to a specific claim or suit’ and are subject to 26 the SIR(s) on the Everest Policy.” (Id. ¶ 42.) ISOP identifies six provisions in the 27 latter, which provided, for example, that ISOP’s “obligation to pay damages applies only 28 to damages in excess of the Self Insured Retention” and “duty to defend the insured -2- 13cv18 1 arises only after the Self Insured Retention is exhausted.” (Id. ¶ 43.) The six provisions 2 also covered ISOP’s obligation to pay “defense expenses,” and right to participate and 3 exercise control of any defense, as well as Everest’s right to obtain any insurance 4 applying the Self Insured Retention. (Id.) 5 According to ISOP, “Everest assumed control of the defense in the Highland 6 Lawsuit and the HOA Lawsuit prior to the proper satisfaction of the per occurrence 7 SIR(s), and . . . has been and continues to improperly erode its Limits with ‘defense 8 expenses in the HOA Lawsuit.” (FACC ¶ 45.) ISOP further alleges that “Everest’s 9 improper erosion of its Limits prematurely exposes the ISOP Policy with respect to 10 covered claims,” and under the terms of the Everest Policy, Everest’s “duty to defend 11 ends when [Everest] have [sic] used up the applicable limit of Insurance in the payment 12 of judgments or settlements ‘defense expenses[.]’” (Id. ¶¶ 45–46 (internal quotation 13 marks omitted).) 14 In July 2012, Everest informed Plaintiffs and Highland—all of whom were insured 15 under the two policies—that the Everest Policy was “nearing exhaustion” and that 16 Everest “would cease defending Plaintiffs and the Highland entities upon exhaustion 17 of the policy.” (Pls.’ Am. Compl. ¶ 29.) In light of this, Plaintiffs tendered their 18 continuing defense to ISOP. (Id.) In response, ISOP informed Plaintiffs that ISOP 19 disputed: (1) whether the Everest Policy was actually exhausted; and (2) whether the 20 Everest policy was “properly” exhausted. (Id. ¶ 30.) On these two bases, ISOP has 21 refused to defend or indemnify Plaintiffs. (Id.) 22 On January 3, 2013, Plaintiffs removed this action to this Court. On February 23 4, 2013, ISOP filed a cross-claim against Everest, and shortly thereafter, Everest 24 countered, filing a cross-claim of its own against ISOP. On December 2, 2013, ISOP 25 filed an answer to Plaintiffs’ amended complaint that includes an amended cross-claim. 26 In its cross-claim, ISOP three claims: (1) declaratory judgment; (2) equitable 27 subrogation; and (3) equitable contribution. Everest now moves to dismiss ISOP’s 28 cross-claim under Rule 12(b)(7). ISOP opposes. -3- 13cv18 1 II. LEGAL STANDARD 2 A party may move to dismiss a case for “failure to join a party under Rule 19.” 3 Fed. R. Civ. P. 12(b)(7); see also Camacho v. Major League Baseball, — F.R.D. —, 4 2013 WL 6730173, at *3 (S.D. Cal. 2013) (Lorenz, J.). Rule 19 imposes a three-step 5 inquiry: (1) Is the absent party necessary (i.e., required to be joined if feasible) under 6 Rule 19(a)?; (2) If so, is it feasible to order that absent party to be joined?; and (3) If 7 joinder is not feasible, can the case proceed without the absent party, or is the absent 8 party indispensable such that the action must be dismissed? Salt River Project Agric. 9 Improvement & Power Dist. v. Lee, 672 F.3d 1176, 1179 (9th Cir. 2012). The terms 10 “necessary” and “feasible” are “terms of art in Rule 19 jurisprudence”: “Necessary” refers 11 to a party who should be joined if feasible; and “indispensable” refers to “a party whose 12 participation is so important to the resolution of the case that, if the joinder of the party 13 is not feasible, the suit must be dismissed.” Disabled Rights Action Comm. v. Las Vegas 14 Events, Inc., 375 F.3d 861, 867 n.5 (9th Cir. 2004). The failure to join a party under 15 Rule 19 can only lead to dismissal of a suit where the court cannot obtain jurisdiction 16 over the necessary party and that party is determined to be indispensable to the action. 17 See Fed. R .Civ. P. 19(a). 18 “The Ninth Circuit has held that a court should grant a 12(b)(7) motion to 19 dismiss only if the court determines that joinder would destroy jurisdiction and the 20 nonjoined party is necessary and indispensable.” Biagro W. Sales Inc. v. Helena Chem. 21 Co., 160 F. Supp. 2d 1136, 1141 (E.D. Cal. 2001). “A motion to dismiss for failure to 22 join an indispensable party requires the moving party to bear the burden in producing 23 evidence in support of the motion.” Id. “A Rule 12(b)(7) motion for failure to join an 24 indispensable party demands a fact specific and practical inquiry.” Id.; see Makah 25 Indian Tribe v. Verity, 910 F.2d 555, 558 (9th Cir. 1990). “To determine whether Rule 26 19 requires the joinder of additional parties, the court may consider evidence outside 27 the pleadings.” McShan v. Sherrill, 283 F.2d 462, 464 (9th Cir. 1960). 28 // -4- 13cv18 1 III. DISCUSSION 2 A party is necessary if: (1) complete relief cannot be granted in the party’s 3 absence; or (2) the district court determines that “the absent party’s participation is 4 necessary to protect its legally cognizable interests or to protect other parties from a 5 substantial risk of incurring multiple or inconsistent obligations because of those 6 interests.” Disabled Rights Action Comm., 375 F.3d at 878 (quoting Fed. R. Civ. P. 7 19(a)). Such a legally cognizable interest must be more than a financial stake in the 8 outcome of the litigation. Makah Indian Tribe, 910 F.2d at 558. Defendants 9 demonstrate that the Red Devils and the Mexican League are necessary parties under 10 the latter of the two aforementioned definitions. See Disabled Rights Action Comm., 11 375 F.3d at 878. 12 Under Rule 19(a)(1)(B)(i), an absent party is necessary if it “has a legally protected 13 interest in the suit” and “that interest will be impaired or impeded by the suit.” Makah 14 Indian Tribe, 910 F.2d at 558 (emphasis in original). “Impairment may be minimized 15 if the absent party is adequately represented in the suit.” Id. It is also a “fundamental 16 principle” that “a party to a contract is necessary, and if not susceptible to joinder, 17 indispensable to litigation seeking to decimate that contract.” Dawavendewa v. Salt 18 River Project Agric. Improvement & Power Dist., 276 F.3d 1150, 1157 (9th Cir. 2002). 19 Alternatively, under Rule 19(a)(1)(B)(ii), an absent party is also necessary if 20 there is a potential risk that adjudicating an action without the absent party could leave 21 an existing party open to “incurring double, multiple, or otherwise inconsistent 22 obligations.” Fed. R. Civ. P. 19(a)(1)(B)(ii). The Ninth Circuit has stated that 23 24 25 26 27 “[i]nconsistent obligations” are not . . . the same as inconsistent adjudications or results. Inconsistent obligations occur when a party is unable to comply with one court’s order without breaching another court’s order concerning the same incident. Inconsistent adjudications or results, by contrast, occur when a defendant successfully defends a claim in one forum, yet loses on another claim arising from the same incident in another forum. 28 -5- 13cv18 1 Cahill Dehe Band of Wintun Indians of the Colusa Indian Cmty. v. California, 547 F.3d 2 962, 976 (9th Cir. 2008) (quoting Delgado v. Plaza Las Americas, Inc., 139 F.3d 1, 3 3 (1st Cir. 1998)). 4 “If an absentee is a necessary party under Rule 19(a), the second stage is for the 5 court to determine whether it is feasible to order that the absentee be joined.” Equal 6 Emp’t Opportunity Comm’n v. Peabody W. Coal Co., 400 F.3d 774, 779 (9th Cir. 7 2005). Rule 19(a) sets forth three circumstances in which joinder is not feasible: (1) 8 when venue is improper; (2) when the absentee is not subject to personal jurisdiction; 9 and (3) when joinder would destroy subject matter jurisdiction. See id. (citing Fed. R. 10 Civ. P. 19(a); Tick v. Cohen, 787 F.2d 1490, 1493 (11th Cir. 1986)). 11 Everest argues that dismissal of ISOP’s cross-claim is appropriate under Rule 12 12(b)(7) and Rule 19 because Plaintiffs and Highland are necessary and indispensable 13 parties absent from the cross-claim, “whose rights could be severely prejudiced 14 depending on this Court’s interpretation of the [sic] their policies.” (Everest’s Mot. 15 6:17–20, 9:5–13:19.) However, the important matter here is what Everest fails to 16 argue. 17 Assuming, for the sake of argument, that Everest adequately demonstrated that 18 Plaintiffs and Highland are necessary parties to ISOP’s cross-claim, the next step in 19 Rule 19’s three-step inquiry is whether it is feasible for the court to order the absent 20 parties to be joined. See Salt River Project, 672 F.3d at 1179. But Everest wholly fails 21 to address in its motion the feasibility of joining Plaintiffs and Highland to ISOP’s cross22 claim. And feasibility of joinder must be determined before the court may proceed to 23 determine whether the absent parties are indispensable. See Kescoli v. Babbitt, 101 24 F.3d 1304, 1309 (9th Cir. 1996). This omission is particularly perplexing given 25 Everest’s recognition of this integral step in the Rule 19 analysis: Everest states in its 26 motion that “it must first be determined whether the absent party is necessary to 27 adjudicate the action and whether joinder is feasible.” (Everest’s Mot. 8:8–10 (emphasis 28 added).) It is also worth noting that Everest’s reply brief is devoid of any reference to -6- 13cv18 1 feasibility of joinder. In fact, the words “feasible” or “feasibility” do not appear even 2 once throughout the entire reply brief. Consequently, even if Everest adequately 3 demonstrated that Plaintiffs and Highland are necessary parties, it fails to carry its 4 burden under Rule 12(b)(7) and Rule 19 to demonstrate that it is not feasible for the 5 Court to order the absent parties joined in ISOP’s cross-claim. 6 7 IV. CONCLUSION & ORDER 8 In light of the foregoing, the Court DENIES Everest’s motion to dismiss ISOP’s 9 cross-claim. (Doc. 29.) 10 IT IS SO ORDERED. 11 12 DATE: April 24, 2014 13 HON. THOMAS J. WHELAN United States District Court Southern District of California 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -7- 13cv18
]]>
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You
should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
