Travelers Indemnity Company of Connecticut v. Newlin et al, No. 3:2020cv00765 - Document 73 (S.D. Cal. 2020)
Court Description: ORDER Granting Travelers' Motions to Dismiss the Counterclaims by the Newlins and Quade With Leave to Amend; and Denying CCL's Motions to Dismiss the Third Party Complaints by the Newlins, Quade and AIG ([Dkt. Nos. 32 , 33 , 50 , 51 , 52 ]). The Newlins and Quade may file amended counterclaims on or before November 20, 2020. The hearing set on November 6, 2020 shall be vacated. Signed by Judge Gonzalo P. Curiel on 11/2/20. (dlg)
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Travelers Indemnity Company of Connecticut v. Newlin et al Doc. 73 Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2807 Page 1 of 26 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 TRAVELERS INDEMNITY COMPANY OF CONNECTICUT, v. 18 ANTHONY and BLYTHE NEWLIN, as individuals; QUADE & ASSOCIATES, PLC, a California professional liability company; AIG PROPERTY CASUALTY COMPANY, a Pennsylvania corporation, and DOES 1 through 10, inclusive, 19 Defendants 20 and Related Counterclaims and ThirdParty Complaints. 15 16 17 21 ORDER Plaintiff, 13 14 Case No.: 20cv765-GPC(DEB) 1) GRANTING MOTIONS TO DISMISS THE COUNTERCLAIMS BY THE NEWLINS AND QUADE WITH LEAVE TO AMEND; AND 2) S TO DIMISS THE THIRD PARTY COMPLAINTS BY THE NEWLINS, QUADE AND AIG [Dkt. Nos. 32, 33, 50, 51, 52.] 22 23 Before the Court are Plaintiff and Counterdefendant Travelers Indemnity Company motions to dismiss counterclaims filed by Anthony and 24 25 26 27 28 Blythe Newlin , and Quade & Associates, PLC Federal Rule of Civil Procedure pursuant to 12(b)(6). (Dkt. Nos. 32, 33.) The Newlins and Quade jointly filed an opposition. (Dkt. No. 46.) Travelers filed a reply to the joint opposition. (Dkt. No. 49.) Before the Court are also Third-Party Defendant CCL 1 20cv765-GPC(DEB) Dockets.Justia.com Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2808 Page 2 of 26 1 2 motions to dismiss the third-party complaints pursuant to Rule 12(b)(6) filed by the Newlins, Quade and AIG Property Casualty Company, 3 AIG . (Dkt. Nos. 50, 51, 52.) AIG filed an opposition. (Dkt. No. 58.) The Newlins 4 and Quade filed a motion for joinder to 5 a joint reply. (Dkt. No. 70.) Based on the reasoning below, the Court GRANTS 6 7 . (Dkt. Nos. 61, 62.) CCL filed motion to dismiss with leave to amend and 8 third-party complaints. Procedural Background 9 On April 22, 2020, Plaintiff Travelers filed a complaint alleging counts for 10 declaratory relief against Defendants the Newlins, Quade and AIG, as well as a breach of 11 contract claim against the Newlins based on facts arising from an underlying state court 12 complaint in San Diego County Superior Court, Case No. 37-2017-00006963-CU-OR- 13 NC entitled Hamadeh et al. v. Newlins, et al., 14 Compl.) 15 indemnity obligations to the Newlins, Quade and AIG in the Hamadeh Litigation. (Id.) 16 Travelers then filed a first amended complaint on May 1, 2020. (Dkt. No. 5, FAC.) On 17 June 11, 2020, the Newlins and Quade filed a motion to dismiss pursuant to Rule 18 12(b)(1) and Rule 12(b)(6), (Dkt. No. 15), and AIG filed a motion to dismiss pursuant to 19 Federal Rule of Civil Procedure 12(b)(1). (Dkt. No. 13.) On September 14, 2020, the 20 Rule 21 12(b)(6) and granted the Defendants motion to dismiss pursuant to Rule 12(b)(1) with 22 leave to amend.1 (Dkt. No. 55.) On September 24, 2020, Travelers filed a second 23 ). (Dkt. No. 1, On October 13, 2020, the Newlins, Quade 24 25 26 27 28 1 In its order, the Court directed supplemental briefing on whether a stay should be issued in the case due to the pending cross-complaint filed by the Newlins against CCL arising from the same underlying facts as this case. (Dkt. No. 55 at 27.) On October 9, 2020, AIG and CCL filed their supplemental briefs. 64.) On October 16, 2020, Travelers filed a response. (Dkt. No. 69.) The Court will not consider these arguments until after the pleadings have been settled. 2 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2809 Page 3 of 26 1 and AIG filed motions to dismiss the SAC which is not yet fully briefed. (Dkt. Nos. 66, 2 67.) 3 On June 11, 2020, the Newlins, AIG and Quade each separately filed a 4 counterclaim against Travelers and each separately filed a third-party complaint against 5 CCL c 6 (Dkt. Nos. 14, 16, 17.) While Travelers filed , (Dkt. No. 31), it filed the instant fully briefed motions 7 counterclaims. (Dkt. Nos. 32, 33, 46, 49.) CCL also 8 filed the instant motions to dismiss the third-party complaints filed by the Newlins, AIG 9 and Quade which are fully briefed. (Dkt. Nos. 50, 51, 52, 58, 59, 60, 70.) 10 11 Factual Background According to the counterclaim/TPC, the Newlins were the owners of real 12 property located at 16350 Via Del Alba, Rancho Santa Fe, California 92067 from late 13 2012 until February 2015. (Dkt. No. 16, Newlins Counterclaim/TPC ¶¶ 1, 7.) During 14 that time, the Newlins remodeled, repaired and/or modified two residences on the 15 property as well as made repairs and improvements to the landscape, hardscape and 16 irrigation system. (Id. ¶ 8.) In addition, CCL was contracted by the Santa Fe Irrigation 17 District to perform certain work on the water infrastructure on the property and to 18 move/install a new fire hydrant and to perform certain related site work. (Id. ¶ 8.) 19 Around October 18, 2013, CCL submitted a bid to the Santa Fe Irrigation District 20 - 21 property while the Newlins were the owners. (Id. ¶¶ 16-18.) CCL was awarded the 22 contract and on December 2, 2013, CCL signed the Santa Fe Irrigation District Contract. 23 (Id. ¶ 18.) The Santa Fe Irrigation District Contract required CCL to procure certain 24 insurance. (Id. ¶¶ 19-21.) As such, CCL purchased Commercial General Liability 25 policies of insurance from Travelers for dates of coverage from April 1, 2014 26 April 1, Id. ¶ 29.) Per the Santa Fe Irrigation District Contract, CCL 27 named the Newlins as additional insureds on the CCL Policies. (Id. ¶¶ 21, 31.) The 28 Contract requ defend . . . indemnify and hold District, its officials, officers, 3 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2810 Page 4 of 26 1 agents, employees, owners of property upon which Contractor will perform Work . . .free 2 and harmless from any claims . . . arising out of or incident to any acts, omissions or 3 willful misco 4 project, t Id. ¶ 22.) Per the Santa Fe Irrigation District 5 with the Santa Fe Irrigation 6 District around October 8, 2013 concerning certain work on the water infrastructure 7 systems that was located on the property. (Id. ¶ 24.) The Property Owner Contract also 8 stated that CCL is to defend and hold harmless any claims arising out of the acts, 9 omission or willful misconduct of the contractor. (Id. ¶ 26.) Around April 2014, CCL 10 submitted a change order, approved by the Santa Fe Irrigation District, to relocate the fire 11 hydrant to the end of the cul-de-sac on Via Del Alba. (Id. ¶ 28.) 12 Around February 18, 2015, the Newlins sold the property to Bassim Hamadeh, 13 Seidy Hamadeh and the Ravello Trust (collectively 14 February 24, 2017, the Hamadeh plaintiffs filed a complaint in San Diego Superior Court 15 against the Newlins and others for negligent misrepresentation, negligence and breach of 16 contract. (Id. ¶ 10.) On October 12, 2017, the Hamadeh plaintiffs filed a first amended 17 complaint adding claims for fraud by concealment, intentional misrepresentation, 18 negligence per se under California Business & Professions Code section 7028 et seq., 19 fraudulent inducement and negligence per se under California Civil Code section 1102 et 20 seq. (Id.) The Hamadeh Litigation arose from the 21 misrepresentation and/or concealment relied upon by the Hamadeh plaintiffs when they 22 purchased the property concerning alleged defects with the modification and remodel 23 work performed by the Newlins and/or on behalf of the Newlins. (Id.) 24 p Id. ¶ 9.) On AIG issued a homeowner policy to the Newlins for the policy period, November 25 29, 2014 to November 29, 2015, which provided liability coverage, including defense, for 26 qualifying damages for property damage caused by an occurrence and subject to 27 limitations and exclusions. (Id. ¶ 7.) The Newlins tendered their defense in the 28 Hamadeh Litigation to AIG, its insurer, and it provided a full defense to the Newlins 4 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2811 Page 5 of 26 1 under a reservation of rights. (Id. ¶ 11.) After the tender, AIG assigned panel counsel, 2 Patrick J. Mendes, Esq. of Tyson & Mendes, LLP to defend the Newlins. (Id. ¶ 12.) In 3 of 4 Quade & Associates, a PLC as independent counsel under California Civil Code section 5 2860. (Id.) 6 Around May 23, 2017, after Quade transmitted to CCL a Notice of Tender of 7 Defense and Demand for Indemnification and Notice of Claim demanding that CCL 8 defend and indemnify the Newlins for claims made by the Hamadeh plaintiffs related to 9 , Id. ¶ 32.) On 10 avelers acknowledging 11 receipt of the tender to CCL. (Id. ¶ 33.) On July 14, 2017, Ms. Donna Moore of the firm 12 Diederich & Associates emailed Quade indicating she had been retained by Travelers to 13 represent CCL. (Id. ¶ 35.) 14 On August 3, 2017, Quade te 15 Id. ¶ 36.) On 16 October 6, 2017, Travelers sent a letter to Quade representing that Travelers would 17 defend the Newlins in the Hamadeh Litigation under a full reservation of rights and 18 defenses under the CCL policies. (Id. ¶ 37.) The rights reserved included the issue of 19 (1) whether the damages resulted from an occurrence, a term defined in the CCL 20 policies to mean, in pertinent part, an accident , and (2) the extent to which coverage is 21 afforded under the Blanket Additional Insured Endorsements in the CCL policies which 22 limit coverage to injury or damage . . . caused by acts or omissions of CCL. (Id.) 23 Further, the October 6, 2017 letter represented that coverage under the CCL policies to 24 the Newlins as additional insureds 25 Bohm Wildish LLP Id. ¶ 38.) Travelers also identified as its chosen defense counsel and indicated that 26 27 28 5 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2812 Page 6 of 26 1 defense fees and costs incurred by Mr. Bohm. Mr. Bohm will be contacting you shortly 2 to 3 Id. ¶ 39.) On October 19, 2017, Annie Won of Bohm Wildish sent Quade the first of three 4 Notice of Association of Counsel forms, each of which contained incorrect information. 5 (Id. ¶ 40.) On November 1, 2017, Won wrote that this was her third attempt to associate 6 into the matter and Quade had not responded to her numerous emails and calls and asked 7 that she be contacted as soon as possible to discuss the matter. (Id. 8 coverage counsel, Mr. Hilding, responded advising that having a third firm involved in - 9 10 11 association of couns 12 advised that AIG would be providing the defense through panel counsel and independent 13 counsel and asked Ms. Won to inquire with Travelers about sharing in the cost of the 14 defense. (Id.) On November 29, 2017, Ms. Won responded that she had not received an 15 update from Travelers about her assignment to the case and reasserted that her office 16 remains assigned counsel for the Newlins and requested that the files be sent to her so 17 that she could associate into the case. (Id. ¶ 42.) The next day, Mr. Hilding emailed Ms. 18 Won expressing his concern that Travelers had not yet responded to counsel it selected. 19 (Id. ¶ 43.) In response, Ms. Won referred Mr. Hilding to Sandy Ngo of Travelers and Mr. 20 Hilding contacted her on November 3, 2017 by email and voicemail but Ms. Ngo never 21 responded. (Id. ¶ 44.) 22 Id. ¶ 41.) Counsel further On December 7, 2017, the Newlins filed a cross-complaint against CCL, and 23 others, in the state court action for breach of contract, negligence, negligent 24 misrepresentation, indemnity, contribution, apportionment and declaratory relief. (Id. ¶¶ 25 13, 45.) On January 17, 2019, Quade sent a letter to Ms. Ngo informing her of the 26 January 24, 2019 mediation but no representatives of Travelers attended the mediation. 27 (Id. ¶ 49.) In January 2019, AIG funded a $900,000 settlement between the Newlins, the 28 Hamadeh plaintiffs and all the Hamadeh cross-defendants except CCL. (Id. ¶ 15.) The 6 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2813 Page 7 of 26 1 state court dismissed the Hamadeh complaint and the cross-complaints as to all cross- 2 defendants except CCL. (Id.) During the Hamadeh litigation, AIG paid over $1.5 3 million in attorney fees on behalf of the Newlins to Tyson Mendes and Quade. (Id. ¶ 14.) 4 CCL and Travelers did not contribute to the defense or indemnification of the Newlins in 5 the Hamadeh action. (Id. ¶ 50.) 6 third-party complaint against CCL alleges a claim for breach of 7 contract claim, (id. ¶¶ 57-62) and the counterclaim against Travelers asserts claims for 8 breach of insurance contract, (id. ¶¶ 63-70), and breach of implied covenant of good faith 9 and fair dealing, (id. ¶¶ 71-75). 10 The third-party complaint filed by Quade against CCL and counterclaim against 11 Travelers allege almost identical facts as the Newlins counterclaim/TPC. (Dkt. No. 17, 12 Quade additionally alleges that while AIG agreed to fund 13 of Quade as independent counsel, California Civil Code section 14 2860 limits the rate of attorneys fees to $250/hour and the rate of paralegals to $125/hour. 15 (Id. ¶ 15.) Therefore, according to the legal services agreement between Quade and the 16 Newlins, the Newlins are legally obligated to pay Quade the difference of its regular rates 17 of $695/hour for partners, $450/hour for associates and $190/hour for paralegals. (Id.) 18 On June 10, 2020, the Newlins assigned all their rights under the legal services agreement 19 with Quade to recover unpaid excess fees from CCL and/or Travelers while still retaining 20 their own personal rights to pursue claims for emotional distress, punitive damages and 21 attorney s fees incurred in recovering contractual benefits unreasonably withheld by 22 Travelers. (Id. ¶ 17.) Quade alleges that CCL and Travelers are obligated to pay it the 23 excess fees of about $1.7 million, plus interest. (Id. ¶ 18.) Quade asserts breach of 24 contract against CCL, (id. ¶¶ 65-72), breach of contract-duty to defend-independent 25 counsel against Travelers, (id. ¶¶ 73-76), and indemnity, equitable subrogation, 26 waiver/estoppel against Travelers, (id. ¶¶ 77-81). 27 28 In AIG hird-party complaint against CCL and counterclaim against Travelers, it additionally claims that because CCL owed a primary obligation to defend and indemnify 7 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2814 Page 8 of 26 1 the Newlins in the Hamadeh Litigation under the Santa Fe Irrigation District Contract and 2 the Property Owner Contract and refused to do so, 3 counterclaim/TPC ¶¶ 57, 61), AIG instead paid the defense and indemnification of the 4 Newlins. (Id.) Because AIG paid for a loss which would otherwise borne by the 5 6 (Id. ¶ 62.) Therefore, AIG alleges equitable subrogation 7 against CCL, (id. ¶¶ 56-64), equitable subrogation -contractual promise to procure 8 primary coverage against CCL, (id. ¶¶ 65-69), equitable subrogation 9 contractual indemnity against Travelers, (id. ¶¶ 70-75), equitable indemnity against 10 Travelers, (id. ¶¶ 76-78), equitable contribution 11 Contracting, (id. ¶¶ 79-81), and equitable contribution 12 Travelers, (id. ¶¶ 82-84). 13 14 express contractual indemnity express proportionate liability against CCL proportionate liability against Discussion A. Legal Standard as to Federal Rule of Civil Procedure 12(b)(6) 15 16 Civ. P. 12(b)(6). Dismissal 17 under Rule 12(b)(6) is appropriate where the complaint lacks a cognizable legal theory or 18 sufficient facts to support a cognizable legal theory. See Balistreri v. Pacifica Police 19 901 F.2d 696, 699 (9th Cir. 1990). Under Federal Rule of Civil Procedure 20 21 22 the . . . claim is and the groun 23 550 U.S. 544, 555 (2007). 24 Bell Atlantic Corp. v. Twombly, A complaint may survive a motion to dismiss only if, taking all well-pleaded 25 26 pl Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 27 28 content that allows the court to draw the reasonable inference that the defendant is liable 8 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2815 Page 9 of 26 1 Id. 2 Id. 3 complaint to survive a motion to dismiss, the non-conclusory factual content, and 4 reasonable inferences from that content, must be plausibly suggestive of a claim entitling 5 Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) 6 (quotations omitted). In reviewing a Rule 12(b)(6) motion, the Court accepts as true all 7 facts alleged in the complaint, and draws all reasonable inferences in favor of the 8 plaintiff. al-Kidd v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009). 9 10 the court determines that the allegation of other facts consistent with the challenged 11 DeSoto v. Yellow Freight Sys., Inc., 12 957 F.2d 655, 658 (9th Cir. 1992) (quoting Schreiber Distrib. Co. v. Serv-Well Furniture 13 Co., 806 F.2d 1393, 1401 (9th Cir. 1986)). In other words, where leave to amend would 14 be futile, the Court may deny leave to amend. See DeSoto, 957 F.2d at 658; Schreiber, 15 806 F.2d at 1401. 16 B. 17 Motions to Dismiss 1. Counterclaims Breach of Contract Claims 18 19 because they have failed to allege a breach. (Dkt. No. 32-1 at 11-23; Dkt. No. 33-1 at 12- 20 20.2) In addition, Travelers 21 failing to allege damages resulting from the breach. (Dkt. No. 32-1 at 11-12.) The 22 Newlins and Quade filed a joint response arguing that they have sufficiently alleged 23 breach of the contracts for failing to defend and indemnify the Newlins and as a result, 24 they suffered damages. (Dkt. No. 46 at 11-25.) 25 26 27 28 2 Page numbers are based on the CM/ECF pagination. 9 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2816 Page 10 of 26 1 2 Under California law, the elements required for a cause of action for breach of c (1) the existence of the contract, (2) plaintiff's performance or excuse for 3 4 Oasis W. Realty, LLC v. Goldman, 51 Cal. 4th 811, 821 (2011). 5 6 Newlins as additional insured under the CCL policies. In fact, the counterclaim avers 7 that Travelers agreed to defend the Newlins in the Hamadeh litigation and appointed 8 defense counsel. ¶¶ 36-39; Dkt. No. 17, 9 45-48.) However, the parties diverge on whether there 10 was a breach of the CCL contracts when 11 counsel due to a conflict of interest. ed to appoint independent Cumis 12 13 Gray v. Zurich Ins. Co., 65 Cal. 2d 263, 275 (1966) (emphasis 14 omitted). 15 an incentive to reserve a broad spectrum of coverage defenses in order to preserve its 16 right to limit its obligation to indemnify to covered claims. By giving notice to its 17 insured, an insurer may agree to defend a suit subject to a reservation of rights. In this 18 manner, an insurer meets its obligation to furnish a defense without waiving its right to 19 Swanson v. State Farm Gen. 20 Ins. Co., 219 Cal. App. 4th 1153, 1162 (2013) (internal citations and quotations omitted). 21 22 for liability under the policy, has the right to control defense and settlement of the third 23 party action against its insured, and is . . . 24 (citation and internal quotations omitted). 25 Id. However, California Civil Code section 2860 26 conflict of interest exists between the insurer and the insured. Section 2860 codified the 27 opinion in San Diego Federal Credit Union v. Cumis Ins. Society, Inc., 162 Cal. App. 3d 28 358, 364 (1985) which held if a conflict of interest exists between an insurer and its 10 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2817 Page 11 of 26 1 insured, based on possible noncoverage under the insurance policy, the insured is entitled 2 to retain its own independent counsel at the insurer's expense. Fed. Ins. Co. v. MBL, 3 Inc., 219 Cal. App. 4th 29, 41 (2013) (citing Cumis Ins. Society, Inc., 162 Cal. App. 3d at 4 364). Section 2860 5 insured as set forth in Cumis 6 1100 (2001). Section 2860 provides that, 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 James 3 Corp. v. Truck Ins. Exch., 91 Cal. App. 4th 1093, [i]f the provisions of a policy of insurance impose a duty to defend upon an insurer and a conflict of interest arises which creates a duty on the part of the insurer to provide independent counsel to the insured, the insurer shall provide independent counsel to represent the insured. Cal. Civ. Code § 2860(a). In addition, a conflict of interest does not exist as to allegations or facts in the litigation for which the insurer denies coverage; however, when an insurer reserves its rights on a given issue and the outcome of that coverage issue can be controlled by counsel first retained by the insurer for the defense of the claim, a conflict of interest may exist. No conflict of interest shall be deemed to exist as to allegations of punitive damages or be deemed to exist solely because an insured is sued for an amount in excess of the insurance policy limits. Cal. Civ. Code § 2860(b). The right to independent counsel does not exist in every case involving a conflict of interest nor does every reservation of rights entitle an insured to Cumis counsel. James 3 Corp., 91 Cal. App. 4th at 1101. The duty to provide Cumis insurance company. The attorney, who typically has a long-standing relationship with the insurer and none with the insured (including little prospect of future work), may be forced to make numerous and varied decisions that could help one of his clients concerning insurance coverage and harm the other. [T]here has been 25 26 27 position, whether or not it coincides with what is best for the insured. Consequently, in order to eliminate the ethical dilemmas and temptations 28 11 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2818 Page 12 of 26 1 2 that arise along with conflict in joint representations, the insurer is required to provide its insured with independent counsel of the insured's choosing[.] 3 Long v. Century Indem. Co., 163 Cal. App. 4th 1460, 1469-70 (2008) (citations and 4 quotations omitted). 5 An insured 6 Fed. Ins. Co., 219 Cal. 7 App. 4th at 42 (quoting Blanchard v. State Farm Fire & Casualty Co., 2 Cal. App. 4th 8 345, 350 (1991)). 9 have nothing to do with the issues being litigated in the underlying action, there is no 10 Id. (quoting Foremost Ins. Co. v. 11 Wilks, 206 Cal. App. 3d 251, 261 (1988). There is no such entitlement, for example, 12 where the coverage issue is independent of, or extrinsic to, the issues in the underlying 13 Id. 14 (quoting Dynamic Concepts, Inc. v. Truck Ins. Exch., 61 Cal. App. 4th 999, 1006 (1998)); 15 Gafcon, Inc. v. Ponsor & Assocs., 98 Cal. App. 4th 1388, 1421-22 (2002) 16 when the basis for the reservation of rights is such as to cause assertion of factual or legal 17 theories which undermine or are contrary to the positions to be asserted in the liability 18 case that a conflict of interest sufficient to require independent counsel, to be chosen by 19 20 It is established that a conflict does not arise when an insurer provides a general 21 reservation of rights. Gafcon, Inc., 98 Cal. App. 4th at 1422; Fed. Ins. Co., 219 Cal. App. 22 4th 29 at 47 (a general reservation of rights-where the insurer does not reserve its right to 23 deny coverage under a particular policy exclusion-does not give rise to a conflict of 24 interest). Some examples of a conflict of interest requiring the insurer to provide 25 independent counsel include: (1) where the insurer reserves its rights on a given issue 26 and the outcome of that coverage issue can be controlled by the insurer's retained 27 counsel; 28 the insurer has filed suit against the insured, whether or not the suit is related to the 12 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2819 Page 13 of 26 1 2 excess of policy limits without the insured's consent and leav[es] the insured exposed to 3 claims by third 4 the interests of both the insurer and the insured finds that his or her representation of the 5 James 6 3 Corp, 91 Cal. App. 4th at 1101 (emphasis in original) (internal quotation marks and 7 citations omitted). 8 Dynamic Concepts, Inc., 61 Cal. App. 4th at 1007. 9 10 additional insured under the CCL policies and appointed counsel to defend them in the 11 Hamadeh Litigation and as the insurer, it had the right to control their defense. (Dkt. No. 12 32-1 at 14-16; Dkt. No. 33-1 at 12-15.) Travelers further asserts that the Newlins and 13 Quade have failed to allege facts to show the Newlins were entitled to independent 14 counsel. (Dkt. No. 32-1 at 16-22; Dkt. No. 33-1 at 15-20.) In opposition, the Newlins 15 and Quade argue that they alleged that Travelers breached its defense obligations by 16 right to independent counsel. First, they argue that 17 Travelers failed to recognize their right to independent counsel based on the actual 18 19 issues. (Dkt. No. 46 at 11- 20 ).) Second, they have alleged there was an actual 21 conflict of interest because Travelers attempted to be on both sides of the dispute between 22 the Newlins and CCL. (Dkt. No. 46 at 13- 23 counterclaim/TPC ¶¶ 35-48; Dkt. No. 17 ¶ 44-55).) Third, 24 25 provision of ineffective defense counsel. (Dkt. No. 46 at 20-22 (citing Dkt. No. 16, 26 27 -46; Dkt - 55).) 28 13 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2820 Page 14 of 26 1 On the first argument, there is a conflict of interest requiring independent counsel 2 and the outcome of that coverage 3 issue can be controlled by the in 4 4th at 1101. Here, the Newlins and Quade allege that Travelers reservation of rights 5 included certain coverage issues. (See Dkt. No. 16, 6 James 4 Corp., 91 Cal. App. counterclaim/TPC ¶ 37; claim/TPC ¶ 46.) While Travelers argue that there was no 7 express reservation of rights, on a motion to dismiss, the Court must accept as true the 8 allegations in the complaint and draw all reasonable inference in favor of the Plaintiff. 9 See al-Kidd, 580 F.3d at 956. Here, the counterclaims sufficiently allege that Travelers 10 reserved its right on certain coverage issues. However, the counterclaims fail to claim 11 12 James 3 Corp, 91 Cal. App. 4th at 1101, or that the reservation of rights are 13 related to the issues in the underlying case, Fed. Ins. Co., 219 Cal. App. 4th at 42. 14 Instead, the counterclaims allege a conflict of interest based on concerns of 15 amongst all three law firms, giving the wrong impression to the jury, and, based on her 16 17 18 The counterclaims fail to allege that the reservation of rights asserted concerning 19 coverage were related to the underlying litigation.3 Therefore, Newlins and 20 argument concerning the right to independent counsel fails. 21 first Second, the Newlins and Quade claim that there was a conflict of interest because 22 Travelers attempted to be on both sides of the dispute between the Newlins and CCL. 23 They maintain that Travelers would have been on both sides of the litigation between the 24 Newlins and CCL because both are insureds under the same insurance policies and have 25 26 27 3 28 was not yet named as a cross-defendant in the Hamadeh Litigation. It was not until December 2017, when CCL was named as a cross-defendant when the Newlins filed their cross-complaint. 14 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2821 Page 15 of 26 1 adverse interests. (Dkt. No. 46 at 13-19.) Travelers respond that it was not on both sides 2 of the Hamadeh Litigation and that it had no duty to pay for the prosecution of the cross- 3 complaint against CCL. (Dkt. No. 49 at 5-6.) 4 The Newlins and Quade rely on the ruling in w v. Borad, 27 Cal. 2d 794, 5 798 (1946), the California Supreme Court held the insurer cannot control both sides of 6 the litigation even if different counsel are assigned. Id. In that case the insurer 7 represented both drivers in a car accident, and the 8 of the policy contracts, the insurers have undertaken to pay any judgment rendered in 9 favor of either the plaintiff or the cross-complainant; they, therefore, have a pecuniary 10 interest in effecting a balance between the litigants and so conducting the litigation that 11 neither party recovers against the other. Id. at 798. 12 nder the terms Travelers relies on the MBL, Inc. case where the federal government brought a 13 CERCLA action against the property owners and lessees of a dry-cleaning facility 14 suspected of causing soil and groundwater contamination to recover monitoring and 15 remediation costs. MBL, Inc., 219 Cal. App. 4th at 33. The owners and lessees 16 subsequently filed third-party actions against, among others, MBL, Inc., the supplier of 17 dry-cleaning products, seeking indemnity, contribution, and declaratory relief. Id. MBL, 18 Inc. then filed a cross-claim which named several additional cross-defendants. Id. at 35. 19 The court determined that MBL, Inc. was not entitled to independent counsel even 20 though the insurers simultaneously represented MBL, Inc. and some other third-party 21 defendants and cross-defendants because the parties were no 22 Id. at 46-47. Travelers also cite to Centex case where a group of homeowners 23 brought a construction defect action against a developer for work performed by various 24 subcontractors. Centex, 237 Cal. App. 4th at 25-26. The developer then sued the 25 subcontractors for indemnity, contribution, and repayment. Id. at 26. The court found 26 that the insurer defending the developer and the subcontractors did not create an ethical 27 conflict of interest requiring independent counsel. Id. at 31. 28 15 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2822 Page 16 of 26 1 While both sides present persuasive legal arguments, the allegations in the 2 counterclaims do not support a conflict based on an insurer being on both sides of the 3 litigation. Even though the Newlins and Quade cite to their counterclaims, (Dkt. No. 16, 4 Newlins counterclaim/TPC ¶¶ 35- 5 to support the conflict alleged that Travelers sought to be on both sides of the litigation, 6 (Dkt. No. 46 at 14), the allegations do not support such a conflict but describe the 7 communications 8 appointed counsel where the concern at the time involved the inconvenience of having a 9 third firm involved in the defense. ¶¶ 44-57), -coverage counsel and Travelers along with its -48; 10 -57.) -coverage counsel 11 12 counterclaim/TPC ¶ 41.) Therefore, the Court concludes that 13 counterclaims fail to allege that an actual conflict of interest existed sufficient to warrant 14 the appointment of Cumis counsel where the insurer represents both the plaintiff and 15 defendant. See James 3 Corp., 91 Cal. App. 4th at 1101. 16 Third, the Newlins and Quade argue that they have alleged a conflict of interest 17 based on 18 proposed counsel failed on three instances in preparing a notice of association of counsel. selection of ineffective defense counsel. 19 - 20 counterclaim/TPC ¶¶ 49-55.) They also allege that the proposed defense counsel did not 21 understand their ethical duties as insurer-appointed defense counsel. (Dkt. No. 16, 22 23 24 - -57.) Travelers opposes. The Newlins and Quade fail to provide any legal authority that typographical 25 errors in a notice of association of counsel 26 that there was a conflict of interest demonstrate incompetent counsel for purposes of a 27 28 duty to defend includes hiring competent counsel J.B. Aguerre, Inc. v. American Guarantee & Liab. 16 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2823 Page 17 of 26 1 Ins. Co., 59 Cal. App. 4th 6, 14 (1997); see also Gray Cary Ware & Freidenrich v. 2 Vigilant Ins. Co., 114 Cal. App. 4th 3 providing competent counsel and paying all reasonable and necessary costs. 4 Aguerre 5 litigation in order that it may act intelligently and in good faith on settlemen 6 Here the allegation that there was an actual conflict of interest to warrant the appointment 7 of independent counsel 8 failure to acknowledge a conflict are not persuasive or supported. this duty [to defend] includes J.B. keep[ing] abreast of the progress and status of the Id. and 9 10 breach of contract claim for failing to sufficiently allege a breach of the contracts. 11 2. 12 Travelers also argues that the Newlins have not alleged they have been damaged Damages 13 -1 at 11-12.) In fact, the counterclaim alleges 14 they have not suffered any damages by the purported breach because AIG fully defended 15 them in the Hamadeh Litigation by paying over $1.5 million in attorneys fees and 16 $900,000 to settle the Hamadeh Litigation. The Newlins respond that Travelers refused 17 18 defense as provided by that counsel. (Dkt. No. 46 at 23-24.) As a result of the breach 19 and failure to recognize the right to Cumis counsel, Travelers has forfeited its ability to 20 take advantage of the section 2860(c) rate cap and accordingly, the Newlins incurred 21 economic loss in the amount of the difference between the section 2860(c) rates paid by 22 AIG and the value of reasonable attorne 23 Quade. 24 Under California law, a breach of contract claim requires a showing of 25 appreciable and actual damage. Aguilera v. Pirelli Armstrong Tire Corp., 223 F.3d 26 1010, 1015 (9th Cir. 2000) (citing Patent Scaffolding Co. v. William Simpson Const. Co., 27 256 Cal. App. 2d 506, 511 28 ). A claim for nominal damages, speculative harm, or fear of future harm, 17 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2824 Page 18 of 26 1 without a showing of actual damages, does not suffice. Aguilera, 223 F.3d at 1015; Ruiz 2 v. Gap, Inc., 622 F. Supp. 2d 908, 917 (N.D. Cal. 2009). It is also the rule that an insured 3 is entitled to only a single full defense, Safeco Ins. Co. of America v. Parks, 170 Cal. 4 App. 4th 992, 1004 (2009), and an insurer that has borne the responsibility and cost of 5 that defense is itself entitled to a sharing or contribution by the other responsible insurers, 6 see Continental Cas. Co. v. Zurich Ins. Co., 57 Cal. 2d 27, 37 (1961); Fireman's Fund Ins 7 Co. v. Maryland Casualty Co., 65 Cal. App. 4th 1279, 1289, 1295 (1998). The measure 8 of damages for any breach of the duty 9 10 11 12 Emerald Bay Community Ass n v. Golden Eagle Ins. Corp., 130 Cal. App. 4th 1078, 1088-89 (2005). Here, the Newlins allege they incurred economic loss in the amount of the difference between the section 2860(c) rates paid by AIG and the value of reasonable 13 14 counterclaim/TPC ¶ 15 10, 2020, the Newlins assigned to Quade all their rights under the legal services 16 agreement between Newlins and Quade to recover unpaid excess fees from CCL and/or 17 Travelers. (Dkt. No. 1 18 cannot 19 Quade. Nonetheless, the Newlins further argue that they are still entitled to seek damages 20 for emotional distre 21 indemnity obligations. (Dkt. No. 46 at 25.) 22 on June ¶ 17.) Therefore, the Newlins However, the traditional rule is that emotional distress damages are not recoverable 23 on a breach of contract claim. See Wynn v. Monterey Club, 111 Cal. App. 3d 789, 799 24 (1980). Moreover, the cases the Newlins cite to support emotional distress damages 25 concern breach of the implied covenant of good faith and fair dealing, not a breach of 26 contract claim. (Dkt. No. 46 at 25.) Accordingly, because the Newlin have not alleged 27 damages to support an alleged breach by Travelers, the Court 28 for breach of contract. 18 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2825 Page 19 of 26 1 While Travelers did not move to dismiss contract claim based 2 on damages, Quade, in the joint opposition, argues that it suffered damages, by means of 3 assignment from the Newlins, in the amount of the difference between the section 4 2860(c) rates paid by AIG and the reasonable rates the Newlins became legally 5 responsible for to Quade. (Dkt. No. 46 at 25.) Travelers, in reply, argues that while an 6 insurer may not take advantage of the rate cap in section 2860 if it did not meet its duty to 7 in this case, because Travelers 8 9 10 , it did not forfeit the benefits of section 2860. Travelers raises an issue of fact that is not amenable to determination on a motion to dismiss. Therefore, the Court concludes that Quade has sufficiently alleged damages. 11 12 13 3. 14 Travelers also moves to dismiss the counterclaim for breach of the covenant of Breach of the Covenant of Good Faith and Fair Dealing 15 good faith and fair dealing filed by the Newlins. (Dkt. No. 32-1 at 23-24.) The Newlins 16 oppose. (Dkt. No. 46 at 28-29.) 17 every 18 insurance contract. Anguiano v. Allstate Ins. Co., 209 F.3d 1167, 1169 (9th Cir. 2000) 19 (per curiam) (citing PPG Indus., Inc. v. Transamerica Ins. Co., 20 Cal. 4th 310, 312 20 (1999)). Anguiano, 209 F.3d at 21 22 Egan v. Mutual of Omaha Ins. 23 Co., 24 Cal.3d 809, 818 (1979). A breach of covenant of good faith and fair dealing 24 cannot survive absent any coverage under an insurance policy. Waller v. Truck Ins. 25 Exchange, Inc., 11 Cal. 4th 1, 36 (1995); Cybernet Ventures, Inc. v. Hartford Ins. Co. of 26 the Midwest, 27 Co., 116 Cal. App. 4th 578, 594 (2004) 850, 853 (9th Cir. 2006) (quoting Brizuela v. Calfarm Ins. A claim for breach of the covenant of good 28 19 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2826 Page 20 of 26 1 faith and fair dealing cannot be maintained where a party is barred from bringing a claim 2 for breach of contract. 3 Here, the breach of the covenant of good faith and fair dealing stems from 4 due to a conflict of interest. Because 5 6 inability to plausibly allege a breach of the contract, the claim for breach of the covenant 7 of good faith and fair dealing also fails. See Park Townsend LLC v. Clarendon America 8 Ins. Co., 916 F. Supp. 2d 1045, 1057 (N.D. Cal. 2013) (dismissing breach of the implied 9 10 right to independent counsel due to a conflict of interest which the complaint failed to set 11 forth). Accordingly, the Court GRANT 12 counterclaim for breach of the implied covenant of good faith and fair dealing. 13 14 15 miss the 4. -Equitable Subrogation-Waiver- Estoppel Travelers moves to dismiss the third cause of action 16 initially arguing that because it relies on the same facts as the breach of contract claim, 17 this claim also fails. (Dkt. No. 33-1 at 20-22.) Additionally, Travelers argues that the 18 third cause of action is a hodgepodge of ambiguous claims that fails to state a claim and 19 contends that Quade has failed to allege facts to support the elements of equitable 20 subrogation and equitable indemnity. (Id.) In response, Quade merely recites arguments 21 concerning the breach of contract claim without explaining whether the counterclaim 22 alleges claims for indemnity, equitable subrogation, waiver and estoppel. (Dkt. No. 46 at 23 29-30.) 24 25 -Equitable Subrogation- ¶¶ 77-81.) The 26 27 counsel based on its reservation of rights and, as such, T 28 rate cap in section 2860. (Id. 20 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2827 Page 21 of 26 1 2 their rights under the legal services agreement with Quade. (Id.) 3 4 doctrines each pertain to the allocation of costs when there is more than one potentially 5 responsible insurance company. 6 Transcontinental Ins. Co. v. Ins. Co. of the State of Penn., 148 Cal. App. 4th 1296, 1303 7 (2007) (citation omitted). coverage or 8 n to pursue a full recovery from another 9 insurer who was primarily responsible for the loss. 10 Casualty Co., 65 Cal. App. 4th 1279, 1295 (1998). 11 hand, applies to apportion costs among insurers that share the same level of liability on 12 the same risk as to the same insured. Id. 13 the form of an insurer's right to be put in the position of the insured in order to pursue 14 recovery from third parties legally responsible to the insured for a loss which the insurer 15 has both insured and paid. Id. at 1305. By their description, a claim for equitable 16 subrogation and equitable contribution are brought by the insurers. Here, Quade is not an 17 insurer and has also not paid out any monies. Therefore, the Court concludes that the 18 third cause of action fails to state a claim. 19 20 C. 21 Quade, and AIG 22 Motions to Dismiss Third Party Complaints filed by the Newlins, CCL moves to dismiss the third party complaints filed by the Newlins, Quade and 23 AIG claiming that the complaints violate the rule against claim splitting because the same 24 exact claim is pending in state court. (Dkt. Nos. 50-52.) AIG filed an opposition. (Dkt. 25 26 (Dkt. Nos. 61, 62.) CCL filed a joint reply to the oppositions. (Dkt. No. 70.) 27 third party complaint against CCL alleges one cause of action for 28 breach of contract of the Santa Fe Irrigation District Contract and the Property Owners 21 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2828 Page 22 of 26 1 2 refusing to indemnify the NEWLINS Counterclaim/TPC ¶ 58.) 3 4 recover unpaid excess fees from CCL, 5 breach of contract. (Dkt. No. 6 paid for the defense of the Newlins in the Hamadeh Litigation, 7 complaint against CCL asserts equitable subrogation-express contractual indemnity; 8 equitable subrogation-contractual promise to procure primary coverage; and equitable 9 contribution-proportionate liability. (Dkt. No. 14 10 alleges ¶¶ 65-72.) Because AIG -64; 65-69; 79-81.) 11 In state court, the pending cross-complaint filed by the Newlins on December 7, 12 2017 against CCL alleges breach of contract and negligence. (Dkt. No. 51-2 13 RJN4, Cross-Complaint ¶¶ 58-76; 83-92). The breach of 14 15 and the Property Owners Contract by failing to timely accept the tender letter for defense 16 and indemnity. (Id. ¶¶ 70-73.) The cross-complaint also seeks damages for express 17 indemnity, equitable indemnity, total indemnity, comparative equitable indemnity, 18 contribution, apportionment, and declaratory relief. (Id. ¶¶ 127-156.) No party disputes 19 that the claims in the state and federal court cases are nearly identical. 20 CCL argues that the third party complaint filed by the Newlins should be dismissed under 21 the doctrine of claim splitting because there is already a pending cross-complaint in state 22 court with the same claim being alleged against CCL in this case. (Dkt. No. 50-1.) As to 23 24 25 26 27 28 4 Nos. 50-2, 51-2; 52-2.) Under Federal Rule of Evidence 201, the Court may take judicial notice of filings in other courts. Accordingly, the Court GRANTS requests for judicial notice. See Reyna Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n. 6 (9th Cir. 2006); United States ex rel. Robinson Rancheria Citizens Council v. Borneo, Inc. notice of proceedings in other courts, both within and without the federal judicial system, if those proceedin 22 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2829 Page 23 of 26 1 Quade and AIG, CCL argues that their third party complaints allege the same primary 2 rights for recovery as the pending state court action based on the alleged breach of the 3 same contracts related to the same property arising from the Hamadeh Litigation as the 4 third party complaint. (Dkt. Nos. 51-1; 52-1.) CCL contends that any 5 judgment in this case would necessarily impair a judgment in the pending state court 6 action as it would adjudicate the same rights and obligations under the same contracts. 7 (Dkt. No. 51-1 at 5; Dkt. No. 52-1 at 5.) Moreover, because Quade, as the assignee, and 8 AIG, as the subrogee, both stand in the shoes of the assignor and subrogor, they stand in 9 privity with CCL. (Dkt. No. 51-1 at 6-7; Dkt. No. 52-1 at 6-7.) In response, the Newlins, 10 Quade and AIG do not dispute that claim splitting bars the third party complaints as there 11 is a pending state law cross-complaint with the same claim; instead they argue that the 12 ising the 13 14 third party complaints against CCL Contracting in the event the Newlins dismiss their 15 pending state cross-complaint against CCL Contracting without prejudice. 16 at 16; see also Dkt. Nos. 61, 62.) 17 CCL moves to dismiss relying on the claim splitting analysis provided in Adams v. 18 California Dep't of Health Servs., 487 F.3d 684 (9th Cir. 2007) overruled on other 19 grounds by Taylor v. Sturgell, 553 U.S. 880, 904 (2008). Under the doctrine, 20 generally have no right to maintain two separate actions involving the same subject 21 matter at the same time in the same court and against the same 22 (quotation and citation omitted). Borrowing from the test for claim prelusion, the court 23 24 Id. at 688 [and] examine whether the causes of action and relief sought, as well as the parties or privies to the action, are 25 Id. After weighing the equities of the case, the district court may exercise its 26 discretion to dismiss a duplicative later-filed action, to stay that action pending resolution 27 of the previously filed action, to enjoin the parties from proceeding with it, or to 28 consolidate both actions. Id. 23 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2830 Page 24 of 26 1 However, Adams Claim splitting 2 applies only to duplicative cases involving concurrent jurisdiction within federal court,5 3 and does not apply in this case, involving concurrent jurisdiction between state and 4 federal court. See Colorado River Water Conservation Dist. v. United States, 424 U.S. 5 as between state and federal courts, the rule is that the pendency of an 6 action in the state court is no bar to proceedings concerning the same matter in the 7 Federal court having jurisdiction . . . As between federal district courts, . . . though no 8 prec 9 citations omitted); Noel v. Hall, 341 F.3d 1148, 1159 (9th Cir. 2003) 10 (internal even identical federal and state court litigation may proceed simultaneously, limited only 11 ; Chromologic LLC v. Yang, Case No. SACV 12 13-01575 JVS(CWx), 2013 WL 12125537, at *3 (C.D. Cal. May 9, 2013) (claim-splitting 13 did not apply to case involving similar claims in federal and state court as claim-splitting 14 is aimed at duplicative litigation within federal courts). 15 In Kanciper v. Suffolk County Soc. for the Prevention of Cruelty to Animals, Inc., 16 722 F.3d 88, 92-93 (2d Cir 2013), the district court dismissed the complaint under claim 17 splitting based on the fact that the plaintiff had a pending state court case involving the 18 same facts. Id. at 89. The Second Circuit recognized that under the Ninth Circuit case of 19 Adams 20 same subject matter at the same time in the same court and against the same defendant 21 id. at 92 (citation omitted); however, 22 the pendency of an action in the state court is no bar to proceedings concerning the same 23 matter in the Federal court having jurisdiction 24 U.S. at 817). The court noted that the appropriate analysis to determine whether a stay or maintain two separate actions involving the Id. (citing Colorado River Water, 424 25 26 27 5 28 cases cited by the opposition arguing that those cases all involved two federal cases, not a state and federal case. 24 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2831 Page 25 of 26 1 dismissal was warranted on an allegedly duplicative federal claim with a state court 2 parallel proceeding is under Colorado River. Id. at 93. 3 Similarly, in Wyles v. Sussman, 661 Fed. App x 548, 552 (10th Cir. 2016), during 4 the pendency of a state court complaint, the plaintiff filed a complaint in federal court 5 asserting nearly identical claims. Id. at 549. The district court dismissed the complaint 6 under the claim splitting doctrine. Id. The Tenth Circuit held that the district court erred 7 in dismissing based on claim-splitting because it applies only when both complaints are 8 in federal court. Id. at 552. 9 Therefore, because claim splitting under Adams does not apply to this case 10 s to 11 dismiss the third party complaints filed by the Newlins, Quade and AIG as legally 12 unsupported. 13 D. Leave to Amend 14 15 counterclaims, in the even the Court grants dismissal on their claims, they seek leave to 16 file an amended counterclaim. (Dkt. No. 46 at 13 n.2; 19 n.4; 31 n.5.) Because the 17 Newlins and Quade may cure the deficiencies noted in the order, and an amendment 18 would not be futile 19 an amended counterclaim. See DeSoto, 957 F.2d at 658; Schreiber, 806 F.2d at 1401. 20 est for leave to file Conclusion 21 Based on the above the Court GRANTS motions to dismiss the 22 counterclaims filed by the Newlins and Quade. In addition, the Cou 23 motions to dismiss the third party complaints filed by the Newlins, Quade and AIG. The 24 /// 25 /// 26 /// 27 /// 28 /// 25 20cv765-GPC(DEB) Case 3:20-cv-00765-GPC-DEB Document 73 Filed 11/02/20 PageID.2832 Page 26 of 26 1 Newlins and Quade may file amended counterclaims on or before November 20, 2020. 2 The hearing set on November 6, 2020 shall be vacated. 3 4 IT IS SO ORDERED. Dated: November 2, 2020 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 26 20cv765-GPC(DEB)
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