Opinion
Case No. CV 20-01652-AB (GJSx)
2020-07-21
IRONSHORE SPECIALTY INSURANCE COMPANY, individually and as an assignee of H&R Construction Surfacing Inc., Plaintiff, v. EVEREST INSURANCE COMPANY, Defendant.
Craig G. Kline, Vogrin and Frimet LLP, Beverly Hills, CA, George J. Vogrin, Vogrin and Frimet LLP, New York, NY, for Plaintiff. Robert W. Keaster, Chamberlin and Keaster LLP, Encino, CA, for Defendant.
Craig G. Kline, Vogrin and Frimet LLP, Beverly Hills, CA, George J. Vogrin, Vogrin and Frimet LLP, New York, NY, for Plaintiff.
Robert W. Keaster, Chamberlin and Keaster LLP, Encino, CA, for Defendant.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S REQUEST FOR JUDICIAL NOTICE AND GRANTING IN FULL DEFENDANT'S MOTION TO DISMISS PLAINTIFF'S FIRST AMENDED COMPLAINT (DKT. NO. 15)
ANDRÉ BIROTTE JR., UNITED STATES DISTRICT COURT JUDGE
I. INTRODUCTION
Before the Court is Defendant Everest Insurance Company's ("Defendant") Motion to Dismiss ("MTD," Dkt. No. 15) Plaintiff's First Amended Complaint ("FAC," Dkt. No. 14) and Request for Judicial Notice. ("RJN," Dkt. No. 16). Plaintiff Ironshore Specialty Insurance Company ("Plaintiff") opposes Defendant's Motion to Dismiss and Defendant's Request for Judicial Notice. ("Opp'n," Dkt. No. 22; "RJN Opp'n," Dkt. No. 23). Defendant filed replies to both of Plaintiff's oppositions. ("Reply," Dkt. No. 24; "RJN Reply," Dkt. No. 25). The Court held a hearing on July 10, 2020. For the reasons stated below, the Court GRANTS in part and DENIES in part Defendant's Request for Judicial Notice, and GRANTS in full Defendant's Motion to Dismiss Plaintiff's FAC.
II. BACKGROUND
This action regards a dispute between two insurance companies, Plaintiff and Defendant. Here, Plaintiff seeks to recover defense costs and indemnity that it paid in connection with an insurance claim for a construction project in Beverly Hills against mutual insureds of itself and Defendant. The following facts are taken from allegations in Plaintiff's FAC and exhibits filed in support of Defendant's RJN.
A. Factual Background
i. Defendant's Original Insurance Policy
Pacific Northstar Reeves, LLC ("PNR") was the developer of a luxury condominium community located at 261 Reeves Drive, Beverly Hills, California ("the Subject Project"). (FAC ¶ 9, Ex. A (Dkt. No. 14-1)). From October 31, 2003 to October 31, 2006, Defendant insured the Subject Project under a wrap insurance policy ("Defendant's Wrap Policy"), or a blanket insurance policy designed to cover developers, general contractors, and subcontractors in major construction projects. (FAC ¶ 10, Ex. D (Dkt. No. 14-4); FAC ¶ 59). Plaintiff alleges that Defendant's Wrap Policy covered PNR and all other contractors, subcontractors, or entities involved in the Subject Project's construction. (FAC ¶ 10, Ex. D (Dkt. No. 14-4)).
Defendant's Wrap Policy provided "completed operations" coverage. (Id. ). The policy's completed operations provision specified that Defendant would cover policyholders for bodily injury and property damage that occurred during the policy period or within the "contractors products-completed operations period." (Id. at 51 of 58). The policy defined "[c]ontractors products-completed operations period" as "during the period of time allowed by the applicable law for claims or ‘suits’ to be brought against the insured." (Id. at 26 of 58).
ii. Plaintiff Takes Over as the Subject Project's Insurer
On or about September 18, 2008, a Los Angeles Superior Court judge appointed Thomas Henry Coleman ("Coleman") as Receiver to oversee the Subject Project's completion. (FAC ¶ 11, Ex. E (Dkt. No. 14-5)).
Plaintiff alleges that, at an unspecified date and upon information and belief, Defendant repudiated its insurance coverage. (FAC ¶ 12). Defendant's repudiation motivated Coleman to seek out an additional insurance policy, or "wrap" coverage, for the Subject Project. (Id. ). Accordingly, on or about August 19, 2009, Plaintiff issued Coleman a wrap insurance policy ("Plaintiff's Wrap Policy"). (Id. , Ex. F (Dkt. No. 14-6)). Plaintiff's Wrap Policy named as insureds Coleman, PNR, and Avoca USA, Inc. ("Avoca"), the Subject Project's general contractor. (Id. ). Plaintiff's Wrap Policy covered the insureds from June 23, 2009 to June 23, 2010. (Id. ). On or about October 7, 2009, Coleman purchased an excess insurance policy from Plaintiff for the Subject Project ("Plaintiff's Excess Policy"). (FAC ¶ 13, Ex. G (Dkt. No. 14-7)). Plaintiff's Excess Policy covered Coleman from June 23, 2009 to June 23, 2010. (Id. ). iii. Plaintiff Intervenes in Litigation Between HOA and the Subject Project's Contractors
At an unspecified date in 2011, the Maison Reeves Homeowners Association ("HOA") filed a complaint in Los Angeles Superior Court, alleging several construction defect claims against Coleman. (FAC ¶ 14, Ex. H (Dkt. No. 14-8)). Thereafter, on or about September 29, 2011, Perry E. Rhoads ("Rhoads") of Robert Smylie & Associates, a law firm representing Coleman, sent a tender letter to Defendant regarding these defects. (Id. ). Rhoads requested that Defendant reimburse Coleman for losses Coleman incurred in his lawsuit against HOA in the amount of approximately $600,000. (Id. ). On or about September 19, 2013, HOA's counsel delivered a notice of claim to Attorney Peter Pritchard, Esq. ("Pritchard"), PNR's and Coleman's counsel. (FAC ¶ 15, Ex. I (Dkt. No. 14-9)). On April 8, 2014, Pritchard sent Defendant a notice of claim letter. (FAC ¶ 17, Ex. K (Dkt. No. 14-11)). On May 29, 2014, Pritchard sent Defendant correspondence concerning HOA's and Coleman's lawsuit, specifically its claim for defects in the construction of the Subject Property. (FAC ¶ 17, Ex. L (Dkt. No. 14-12)).
On or about September 26, 2014, HOA filed a complaint in Los Angeles Superior Court against Pacific Northstar Property Group, LLC ("Pacific Northstar"), PNR, Avoca, and Coleman ("the Named Defendants") seeking damages for alleged construction defects. (FAC ¶ 18, Ex. M (Dkt. No. 14-13)).
On January 20, 2015, Defendant replied to Pritchard's April and May 2014 letters, denying liability. (FAC ¶ 19, Ex. N (Dkt. No. 14-14)). Specifically, Defendant denied Coleman insurance coverage and stated that it had "no duty to defend or indemnify the insured in the Maison Reeve HOA litigation, as there is no products-completed operations coverage during the policy period." (Id. at 23). At an unspecified date following Defendant's reply, H&R Construction Surfacing, Inc. ("H&R"), a Subject Project subcontractor, sent Defendant a tender letter. (FAC ¶ 20). Plaintiff alleges that Defendant did not respond to H&R's letter. (Id. ).
On April 3, 2015, Plaintiff filed a complaint in intervention in HOA's construction defect action against the Named Defendants. (FAC ¶ 21, Ex. O (Dkt. No. 14-15)). Because PNR was a suspended corporation, Plaintiff sought to intervene on PNR's behalf. (FAC ¶ 21).
On February 18, 2016, HOA filed a separate lawsuit against Avoca, the Subject Project's general contractor, seeking damages for the same alleged construction defects as asserted against PNR, the Subject Project's developer. (FAC ¶ 24, Ex. Q (Dkt. No. 14-17)). HOA's lawsuits against the Named Defendants and Avoca were eventually consolidated into one action ("the Underlying Action"). (FAC ¶ 25). Plaintiff funded PNR's and Avoca's entire defense, despite Plaintiff's repeated requests that Defendant contribute to representation costs. (FAC ¶ 22).
iv. Plaintiff and Defendant Enter into a Standstill Agreement
In March 2016, Plaintiff filed a declaratory judgment action against Defendant in Los Angeles Superior Court which was eventually consolidated with the Underlying Action. (FAC ¶ 25, Ex. R (Dkt. No. 14-18)).
In October 2017, Plaintiff agreed to dismiss its declaratory judgment action against Defendant, without prejudice, in consideration for Defendant agreeing to a standstill agreement ("the Standstill Agreement"). (FAC ¶ 25, Ex. T (Dkt. No. 14-20)). On October 4, 2017, Plaintiff sent Defendant a draft Standstill Agreement. (FAC ¶ 25, Ex. R (Dkt. No. 14-18)). The draft agreement specified, in part, that Defendant:
agrees that with regard to any claims made against them by [Plaintiff] relating to or arising out of the claims filed by Maison Reeves [HOA], any defense relating to the Statute of Limitations is tolled from March 22, 2016 until 90 days after any dismissal or judgment becomes final, in that all appeals have been decided or the time for appeal has passed.
(Id. , Ex. R at ¶ 4). Defendant proposed October 6, 2019 as an alternative tolling expiration date. (FAC ¶ 25, Ex. S (Dkt. No. 14-19)). On October 10, 2017, Plaintiff and Defendant executed a final Standstill Agreement that incorporated Defendant's proposal of October 6, 2019. (FAC ¶ 25, Ex. T (Dkt. No. 14-20)).
v. Plaintiff Intervenes in Litigation Between HOA and Contractors
On April 15, 2016, Plaintiff stipulated to file a complaint-in-intervention on Avoca's behalf in the Underlying Action. (RJN, Ex. C (Dkt. No. 16-3)). On May 9, 2016, Plaintiff filed a cross-complaint in the Underlying Action against twenty subcontractors whose work, Plaintiff alleged, was defective. (RJN, Ex. D (Dkt. No. 16-4)). One of the twenty subcontractor cross-defendants was H&R. (Id. ).
On or about November 17, 2017, Plaintiff entered into a settlement agreement ("the Settlement Agreement") with H&R. (FAC ¶ 28, Ex. W (Dkt. No. 14-23)). Under this settlement, H&R agreed to assign to Plaintiff:
any and all rights which H&R may have against [Defendant] arising out of [the Underlying Action] including, but not limited to, all claims arising out of or in any way related to H&R's claim for coverage under [Defendant's] policy and any and all claims, causes of action or damages flowing from [Defendant's] actions in relation to such claims, whether founded on contract or tort, to the fullest extent permitted by law.
(Id. at 2) (emphasis added). On December 13, 2017, Plaintiff obtained a judgment for property damage against H&R, an insured under Defendant's Wrap Policy, for $1,236,720.98, plus interest at due rate of 10% per year. (FAC ¶ 29, Ex. X (Dkt. No. 14-24)).
On January 17, 2018, the Los Angeles Superior Court entered HOA's Request for Dismissal for its action against Avoca. (RJN, Ex. F (Dkt. No. 16-6)). On January 18, 2018, Plaintiff settled with HOA. (FAC ¶ 26, Ex. U (Dkt. No. 14-21)). Plaintiff, on PNR's and Avoca's behalf, paid HOA $200,000 to dismiss its lawsuit against PNR and Avoca. (Id. ). Defendant did not contribute to the $200,000 settlement. (FAC ¶ 27). HOA's Request for Dismissal for its action against PNR was entered on February 7, 2018. (RJN, Ex. G (Dkt. No. 16-7)).
B. Procedural Background
On February 20, 2020, Plaintiff filed its Complaint in this Court seeking damages and declaratory relief. (Complaint, Dkt. No. 1). Plaintiff asserted the following five claims: (1) declaratory relief with respect to Defendant's duty to defend and indemnify PNR, (2) declaratory relief with respect to Defendant's duty defend and indemnify Avoca, Coleman, and other parties involved in the Subject Project's construction, (3) equitable contribution, (4) breach of contract, and (5) violation of California Insurance Code § 11580. (Id. at 1). On May 6, 2020, Plaintiff filed its FAC. Plaintiff sought the same relief and asserted the same causes of action as it did in its original Complaint. (Id. ). On May 20, 2020, Defendant filed a Motion to Dismiss and an RJN. (MTD; RJN). On June 5, 2020, Plaintiff filed oppositions to Defendant's Motion to Dismiss and Defendant's RJN. (Opp'n; RJN Opp'n). On June 12, 2020, Defendant filed replies to both of Plaintiff's oppositions. (Reply; RJN Reply).
III. LEGAL STANDARD
Federal Rule of Civil Procedure ("Rule") 8 requires a plaintiff to present a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). Under Rule 12(b)(6), a defendant may move to dismiss a pleading for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6).
To defeat a Rule 12(b)(6) motion to dismiss, the complaint must provide enough factual detail to "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The complaint must also be "plausible on its face," that is, it "must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly , 550 U.S. at 570, 127 S.Ct. 1955 ). A plaintiff's "factual allegations must be enough to raise a right to relief above the speculative level." Twombly , 550 U.S. at 555, 127 S.Ct. 1955. "The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. Labels, conclusions, and "a formulaic recitation of the elements of a cause of action will not do." Twombly , 550 U.S. at 555, 127 S.Ct. 1955.
A complaint may be dismissed under Rule 12(b)(6) for the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dep't , 901 F.2d 696, 699 (9th Cir. 1988). When ruling on a Rule 12(b)(6) motion, "a judge must accept as true all of the factual allegations contained in the complaint." Erickson v. Pardus , 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007). But a court is "not bound to accept as true a legal conclusion couched as a factual allegation." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (2009) (internal quotation marks omitted).
The court generally may not consider materials other than facts alleged in the complaint and documents that are made a part of the complaint. Anderson v. Angelone , 86 F.3d 932, 934 (9th Cir. 1996). However, a court may consider materials if (1) the authenticity of the materials is not disputed and (2) the plaintiff has alleged the existence of the materials in the complaint or the complaint "necessarily relies" on the materials. Lee v. City of Los Angeles , 250 F.3d 668, 688 (9th Cir. 2001) (citation omitted). As discussed herein, the court may also take judicial notice of matters of public record outside the pleadings and consider them in resolving a motion to dismiss. Id. at 689–90.
Typically, when a district court considers evidence outside the pleadings while ruling on a Rule 12(b)(6) motion to dismiss, it must convert that motion into a Rule 56 motion for summary judgment and allow both parties the opportunity to "present all the material that is pertinent to the motion." Fed. R. Civ. P. 12(d) ; see United States v. Ritchie , 342 F.3d 903, 907–08 (9th Cir. 2003) (citing Parrino v. FHP, Inc. , 146 F.3d 699, 706 n.4 (9th Cir. 1998) ). However, a court may "consider certain materials—documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice—without converting the motion to dismiss into a motion for summary judgment." Ritchie , 342 F.3d at 908.
IV. DISCUSSION
A. Request for Judicial Notice ("RJN")
Pursuant to Federal Rule of Evidence ("FRE") 201, a court "must take judicial notice if a party requests it and the court is supplied with the necessary information." Fed. R. Evid. 201(c). Judicial notice permits a court to consider an adjudicative fact "that is not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b)(1)–(2) ; see Fed. R. Evid. 201(b), advisory committee's note ("With respect to judicial notice of adjudicative facts, the tradition has been one of caution in requiring that the matter be beyond reasonable controversy.").
Accuracy is only one component of a FRE 201(b) inquiry. Khoja v. Orexigen Therapeutics , 899 F.3d 988, 999 (9th Cir. 2018), cert. denied ––– U.S. ––––, 139 S.Ct. 2615, 204 L.Ed.2d 264 (2019). The Ninth Circuit has made clear that "[a] court must also consider—and identify—which fact or facts it is noticing from ... [a document]. Just because the document itself is susceptible to judicial notice does not mean that every assertion of fact within that document is judicially noticeable for its truth." Id.
Defendant asks this Court to take judicial notice of seven documents it contends are relevant to its Motion to Dismiss Plaintiff's FAC. (RJN; RJN Reply). Exhibits A, B, and G are court filings in a lawsuit brought by HOA against Pacific Northstar. (RJN ¶¶ 1–2, 7). Exhibits C, D, E, and F are court filings in a lawsuit brought by HOA against Avoca. (Id. ¶¶ 3–6). All of Defendant's exhibits are judicially noticeable as matters of public record. See Reyn's Pasta Bella, LLC v. Visa USA, Inc. , 442 F.3d 741, 746 n.6 (9th Cir. 2006) ("We may take judicial notice of court filings and other matters of public record."); see also Khoja , 899 F.3d 988 at 999 (quoting Lee , 250 F.3d at 689 ) (A court "may take judicial notice of matters of public record without converting a motion to dismiss into a motion for summary judgment.").
Although Defendant's documents are judicially noticeable, that does not mean that every assertion of fact within them is judicially noticeable for its truth. Khoja , 899 F.3d at 999. In its RJN, Defendant does not identify any specific facts it wishes this Court to notice. (See generally , RJN). In its reply to Plaintiff's opposition to its RJN, Defendant only describes facts that might be revealed if all of Defendant's documents' content was judicially noticed in the aggregate. (RJN Reply). First, Defendant contends that the court filings from the underlying construction defect actions are relevant because they establish when the statute of limitations began to run on Plaintiff's Third Claim for Relief for Equitable Contribution. (Id. at 2). Second, Defendant contends that the documents establish Plaintiff's legal positions in the underlying actions and the trial judge's respective rulings. (Id. ). Thus, Defendant only vaguely alludes to facts that Defendant might want this Court to judicially notice from its documents.
Nowhere does Defendant describe where the facts it seeks judicial notice of are located in its documents or how such facts are "not subject to reasonable dispute" because they are either "generally known" within this court's jurisdiction or "can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b). Accordingly, Defendant has failed to adequately identify specific facts it hopes this Court will notice from each of its exhibits. (See generally RJN; RJN Reply). In a sweeping manner, Defendant asks the Court to judicially notice all of the factual content contained in its seven exhibits, an action this Court is unwilling and unable to take. See Khoja , 899 F.3d at 999–1000.
To the extent that Defendant seeks judicial notice of the existence of the underlying lawsuits, the dates the documents were filed, Plaintiff's objective claims made in both actions, and the trial courts' dispositions, Defendant's request is GRANTED because these facts can be accurately and readily determined. See Advanced Risk Managers, LLC v. Equinox Mgmt. Grp., Inc. , No. 19-cv-03532-DMR, 2019 WL 6716292, at *3–5 (N.D. Cal. Dec. 10, 2019) (finding the existence of the underlying lawsuit, the parties' claims, and the fact that various documents were filed judicially noticeable, despite the defendant's failure to point to specific facts in a series of court filings it hoped the court would judicially notice); Khoja , 899 F.3d at 999–1000 ("If the district court judicially noticed that there was an investors' conference call on September 11, 2014, that would, in theory, be permissible under FRE 201(b) because that fact can be accurately and readily determined from the transcript.") (quoting Fed. R. Evid. 201(b) ) (internal quotation marks omitted).
However, without specifying which facts from each document this Court should notice and without further elaborating on how those facts satisfy the requirements set forth in FRE 201, Defendant leaves this Court no choice but to deny its request with respect to all factual assertions made in its exhibits. See DalPoggetto v. Wirecard AG , No. CV 19-0986 FMO (SKx), 2020 WL 2374948, at *2 (C.D. Cal. Apr. 15, 2020) (denying the defendant's request for judicial notice where the defendant had only requested that the court notice whole documents rather than specific facts); Capaci v. Sports Research Corp. , No. CV 19-3440 FMO (FFMx), 445 F.Supp.3d 607, 617 (C.D. Cal. Mar. 26, 2020) (denying request for judicial notice where defendant did "not indicate which facts within the exhibits" it sought notice of but rather "simply request[ed] that the court take judicial notice of the documents in their entirety."); Advanced Risk , 2019 WL 6716292 at *3–5 ; Crawford v. Countrywide Home Loans, Inc. , 647 F.3d 642, 649 (7th Cir. 2011) (finding that the district court did not abuse its discretion by refusing to take notice where the plaintiffs "sought judicial notice not of particular discrete facts, but of a number of whole documents[.]") (internal citation and quotation omitted); see also Khoja , 899 F.3d at 999.
Accordingly, Defendant's RJN is GRANTED in part and DENIED in part . The facts that the Court takes judicial notice of from Defendant's RJN exhibits are set forth in the background section above. (See supra II.A).
B. Motion to Dismiss
The Court now turns to analyze Plaintiff's five claims: (1) declaratory relief with respect to Defendant's duty to defend and indemnify PNR, (2) declaratory relief with respect to Defendant's duty defend and indemnify Avoca, Coleman, and other parties involved in the Subject Project's construction, (3) equitable contribution, (4) breach of contract, and (5) violation of California Insurance Code § 11580. (FAC at 1). The Court begins with Plaintiff's last three claims, and then addresses its two claims for declaratory relief. i. Claim 3: Equitable Contribution
Defendant argues that Plaintiff's equitable contribution claim is not legally viable because it is time-barred by the applicable two-year statute of limitations. (MTD at 20). Specifically, Defendant alleges that the statute of limitations clock started running in January or February 2018 when HOA dismissed its actions against Avoca and PNR, and then ran uninterrupted for two years thereafter. (Id. at 10–11). Because Plaintiff filed its complaint in this Court on February 20, 2020, nearly two weeks after the limitations period had allegedly expired, Defendant argues that Plaintiff is time-barred from bringing its equitable contribution claim. (Id. at 11). The Court agrees.
"Equitable contribution is the right to recover from a co-obligor who shares a liability with the party seeking contribution." N. Am. Capacity Ins. Co. v. Claremont Liab. Ins. Co. , 177 Cal. App. 4th 272, 295, 99 Cal.Rptr.3d 225 (2009) (citing Fireman's Fund Ins. Co. v. Md. Cas. Co. , 65 Cal. App. 4th 1279, 1293, 77 Cal.Rptr.2d 296 (1998) ). "[T]he right to contribution arises when several insurers are obligated to indemnify or defend the same loss or claim, and one insurer has paid more than its share of the loss or defended the action." Fireman's Fund , 65 Cal. App. 4th at 1293, 77 Cal.Rptr.2d 296.
California Code of Civil Procedure ("CCP") Section 339 establishes a two-year statute of limitations for equitable contribution claims. See Century Indem. Co. v. Super. Ct. , 50 Cal. App. 4th 1115, 1124, 58 Cal.Rptr.2d 69 (1996) (holding that CCP Section 339 requires that an equitable contribution action be commenced within two years); see also Cal. Code Civ. Proc. § 339 (providing that a claimant must bring "[a]n action upon a contract, obligation or liability not founded upon an instrument of writing" within two years); Underwriters of Interest Subscribing to Policy No. A15274001 v. ProBuilders Specialty Ins. Co. , 241 Cal. App. 4th 721, 735, 193 Cal.Rptr.3d 898 (2015). The statute of limitations accrues "when the noncontributing insurer first refuses the [contributing insurer's] demand to contribute[.]" Id. at 736, 193 Cal.Rptr.3d 898. However, the statute of limitations is equitably tolled "until all of the defense obligations in the underlying action are terminated by final judgment in the underlying action." Id. ; see also McDonald v. Antelope Valley Cmty. Coll. Dist. , 45 Cal. 4th 88, 99, 84 Cal.Rptr.3d 734, 194 P.3d 1026 (2008) ("Where applicable, the doctrine [of equitable tolling] will ‘suspend or extend a statute of limitations as necessary to ensure fundamental practicality and fairness.’ ") (quoting Lantzy v. Centex Homes , 31 Cal. 4th 363, 370, 2 Cal.Rptr.3d 655, 73 P.3d 517 (2003) ).
Separate and apart from the equitable tolling doctrine, parties may also enter into their own agreement to toll, or suspend, a statute of limitations. See Capital One, N.A. v. Saks , No. CV 13-06411 (PJWx), 2015 WL 3932749, at *15 (C.D. Cal. June 26, 2015) ("Generally, parties may contract to shorten or lengthen the statute of limitations otherwise applicable."); see also Don Johnson Prods., Inc. v. Rysher Entm't, LLC , 209 Cal. App. 4th 919, 929, 147 Cal.Rptr.3d 590 (2012) ("Under California law, tolling generally refers to a suspension of a statute of limitations."); Woods v. Young , 53 Cal. 3d 315, 326 n.3, 279 Cal.Rptr. 613, 807 P.2d 455 (1991) ("Tolling may be analogized to a clock that is stopped and then restarted. Whatever period of time that remained when the clock is stopped is available when the clock is restarted, that is, when the tolling period has ended."). Plaintiff argues that the plain meaning of the parties' Standstill Agreement, executed on October 10, 2017, evinces that the statute of limitations was tolled from March 22, 2016 until October 6, 2019. (Opp'n at 12). Thus, Plaintiff argues that its February 20, 2020 FAC was timely filed because the two-year limitations period had only started to run on October 6, 2019. (Id. at 11–12). Defendant counters that the agreement did not toll the statute of limitations. (Reply at 9–11). Rather, Defendant argues that the agreement had only tolled its ability to raise the statute of limitations as a defense until October 6, 2019. (Id. at 10–11).
Here, the relevant portion of the parties' Standstill Agreement provides as follows:
3. In consideration for this voluntary dismissal without prejudice, [Defendant] agrees that with regard to any claims made against them by [Plaintiff] relating to or arising out of the claims filed by Maison Reeves [HOA], including but not limited to, claims for subrogation and/or equitable contribution or indemnity, any defense relating to the Statute of Limitations is tolled from March 22, 2016 until the later of (i) 60 days after an Answer is due in response to any action filed by Maison Reeves [HOA] to enforce any judgment arising from the Construction Defect Actions or otherwise seek benefits under Ironshore's policy of insurance or (ii) October 6, 2019. It being understood and agreed that if [Plaintiff] elects to file a motion in lieu of answering, that the time does not begin to run unless such motion is denied and [Plaintiff] is required to file an Answer.
4. In the event that Maison Reeves [HOA] either dismisses the Construction Defect Actions or otherwise fails to obtain any monetary award in those actions, [Defendant] agrees that with regard to any claims made against them by [Plaintiff] relating to or arising out of the claims filed by Maison Reeves [HOA], any defense relating to the State of Limitations is tolled from March 22, 2016 until the later of (i) 90 days after any dismissal or judgment becomes final, in that all appeals have been decided or the time for appeal has passed or (ii) October 6, 2019. The purpose of this paragraph is to terminate the tolling of the Statute of Limitations if Maison Reeves [HOA] is either unwilling or unable to pursue the Construction Defect Actions.
(FAC ¶ 25, Ex. T (Dkt. No. 14-20) (emphasis added)).
Both parties impliedly agree that "toll" means "to suspend or stop temporarily." See Camico Mut. Ins. Co. v. Citizens Bank , 474 F.3d 989, 993 (7th Cir. 2007) (finding that the plaintiff and defendant had agreed that "toll" meant "to suspend or stop temporarily" where the plaintiff had argued that the tolling agreement suspended the entire statute of limitations and where the defendant had argued that the tolling agreement had only suspended its ability to raise the statute of limitations as a defense). However, both parties disagree as to what the Standstill Agreement substantively tolled and when the tolling period had expired.
Courts have generally treated tolling agreements as contracts. See Morning Star Packing Co., L.P. v. Crown Cork & Seal Co. (USA), Inc. , 303 F. App'x. 399, 401–02 (9th Cir. 2008) (applying California contract law to interpret the parties' tolling agreement); Westmark Dev. Corp. v. City of Burien , 371 F. App'x. 805, 806 (9th Cir. 2010) (applying Washington contract law to interpret the parties' tolling agreement); Monaco v. Bear Stearns Cos., Inc. , No. CV 09-05438 SJO JCX, 2011 WL 4059801, at *14 (C.D. Cal. Sept. 12, 2011). Therefore, this Court must interpret the Standstill Agreement's terms under California contract law. See Morning Star , 303 F. App'x. at 401.
Pursuant to California Civil Code Section 1639, the parties' intentions must be ascertained exclusively from the face of the Standstill Agreement itself. See Cal. Civ. Code § 1639 ("When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone"); Cal. Civ. Code § 1636 ("A contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting[.]"); see also Zepeda v. PayPal, Inc. , 777 F. Supp. 2d 1215, 1219 (N.D. Cal. 2011) (Under California law, "[t]he goal of contract interpretation is to give effect to the mutual intention of the parties, which is to be inferred, if possible, solely from the written provisions of the contract.") (quoting County of San Diego v. Ace Prop. & Cas. Ins. Co. , 37 Cal. 4th 406, 415, 33 Cal.Rptr.3d 583, 118 P.3d 607 (2005) ) (internal quotation marks omitted).
The Standstill Agreement's language governs its interpretation, so long as the agreement's language is clear and explicit and "does not involve an absurdity." Cal. Civ. Code § 1638 ; see Ticor Title Ins. Co. v. Ins. of Wausau , 40 Cal. App. 4th 1699, 1707, 48 Cal.Rptr.2d 368 (1995) ("Where contract language is clear and explicit and does not lead to absurd results, we ascertain intent from the written terms and go no further."). The Standstill Agreement's terms are to be understood and interpreted in their popular and ordinary sense, "rather than according to their strict legal meaning; unless used by the parties in a technical sense, or unless a special meaning is given to them by usage, in which case the latter must be followed." Cal. Civ. Code § 1644 ; see Block v. Golden Eagle Ins. Corp. , 121 Cal. App. 4th 186, 192, 17 Cal.Rptr.3d 13 (2004) ("The clear and explicit meaning of these provisions, interpreted in their ordinary and popular sense, unless used by the parties in a technical sense or a special meaning is given to them by usage, controls judicial interpretation.") (quoting Cal. Civ. Code § 1644 ) (internal quotation marks omitted).
In this case, the Standstill Agreement's terms are clear and unambiguous. The agreement clearly and explicitly evinces two separate promises Defendant made with respect to the statute of limitations. First, the prefatory sentences of paragraphs three and four reflect Defendant's promise to refrain from raising the statute of limitations as a defense until the later of the two specified dates in each paragraph. Second, paragraph four's final sentence reveals Defendant's promise to toll the entire statute of limitations until HOA was unwilling or unable to pursue further action in its litigation against Avoca and PNR. See Nat'l Credit Union Admin. Bd. v. Barclays Capital Inc. , 785 F.3d 387, 393 (10th Cir. 2015) (treating as two separate promises defendant's promise to toll the statute of limitations and defendant's promise to toll its ability to raise the statute of limitations as a defense); F.D.I.C. v. Williams , 60 F. Supp. 3d 1209, 1211 (D. Utah 2014) (noting that the parties' tolling agreement had clearly consolidated promises to toll the statute of limitations and to refrain from raising the statute of limitations as a defense into a single clause); see also Don Johnson , 209 Cal. App. 4th at 929, 147 Cal.Rptr.3d 590 (noting that while tolling involves the suspension of the statute of limitations, "[i]t is plausible that a defendant has not waived the right to assert the statute of limitations when a tolling agreement is entered into by potential litigants.").
Because the Standstill Agreement's two promises entail substantively different obligations, this Court reasons that "toll" is used both in its ordinary sense (e.g. "to suspend") and in its legal sense (e.g. "to suspend the statute of limitations"). First, "toll" is clearly used to mean "to suspend or stop temporarily" in the prefatory sentences of paragraphs three and four. In Camico , the plaintiff and defendant agreed "that all statute of limitations defenses and other defenses relating to the time that claims are asserted are tolled from the Effective Date through the date of termination of this Tolling Agreement." Camico Mut. Ins. Co. , 474 F.3d 989 at 993 (quoting the parties' Tolling Agreement) (emphasis added). As in this case, there the plaintiff had argued that the tolling agreement's language suspended the entire statute of limitations, while the defendant argued that the agreement's language had only suspended its ability to raise the statute of limitations as a defense. Id. In interpreting the plain meaning of the parties' agreement, the Seventh Circuit concluded that "tolled" was only used in reference to the defendant's ability to raise the statute of limitations as a defense , not to the entire statute of limitations itself. Id.
As in Camico , here the prefatory sentences of paragraphs three and four clearly show that Defendant was suspended from raising the statute of limitations as a defense to any claims made by Plaintiff until the later of the two specified dates. In its opposition, Plaintiff acknowledges that the contract unequivocally states that any defense related to the statute of limitations would be tolled from March 22, 2016 until the later of the two specified dates. (Opp'n at 11). However, in the same paragraph of its opposition, Plaintiff also asserts that the prefatory sentences referring to Defendant's statute of limitations defenses explicitly state that the statute of limitations itself is tolled until the later of the two specified dates. Id. Plaintiff completely ignores that "relating to the Statute of Limitations" modifies "defense." Here, Plaintiff asks this Court to defy the common sense reading of the Standstill Agreement to construe the first sentences of paragraphs three and four to mean that the statute of limitations , and not the defense thereto, had been tolled or suspended until the later of the two specified dates. As the Seventh Circuit reasoned in Camico , to adopt Plaintiff's interpretation would require this Court to ignore the parties' deliberate use of "defense," which this Court cannot do. Id. at 993–94.
Plaintiff might rightfully point toward the final sentence of paragraph four where "toll" is used in its legal sense – to suspend the statute of limitations. See Don Johnson , 209 Cal. App. 4th at 929, 147 Cal.Rptr.3d 590. Paragraph four's final sentence reads: "[t]he purpose of this paragraph is to terminate the tolling of the Statute of Limitations if Maison Reeves [HOA] is either unwilling or unable to pursue the Construction Defect Actions." (FAC ¶ 25, Ex. T (Dkt. No. 14-20)). First, the plain meaning of "tolling of the Statute of Limitations" evinces that the statute of limitations was tolled from March 22, 2016 until the HOA was either unwilling or unable to pursue the Construction Defect Actions. See Cuadra v. Millan , 17 Cal. 4th 855, 864–65, 72 Cal.Rptr.2d 687, 952 P.2d 704 (1998) (interpreting "tolling the statute of limitations" as an imprecise phrasing of "the statute of limitations is tolled[.]"). Second, paragraph four's final sentence provides a time upon which the tolling period would expire that directly contrasts with the dates and times specified in the prefatory sentences of paragraphs three and four. Therefore, paragraph four's final sentence establishes that: (1) the parties had agreed to toll the statute of limitations, from March 22, 2016 until the HOA was either unwilling or unable to pursue the Construction Defect Actions, independent of Defendant's promise to refrain from raising the statute of limitations as a defense; and (2) the statute of limitations would be tolled until either HOA was unwilling or unable to pursue the underlying actions, or when HOA dismissed its suit against Avoca on February 8, 2018. See Indep. Trust Corp. v. Fidelity Nat'l Title Ins. Co. of New York , No. 05 C 5749, 2007 WL 1017858, at *13–14 (N.D. Ill. Mar. 30, 2007) (finding an ambiguity in the parties' tolling agreement only where the agreement had highlighted two different, conflicting tolling expiration dates, in addition to the parties' inclusion of a provision prohibiting the defendant from raising the statute of limitations as a defense); see also Bullington v. Precise , 698 F. App'x. 565, 567 (11th Cir. 2017) (recounting a fact pattern where the parties recognized that "any defense based on the statute of limitations" did not toll the entire statute of limitations).
Again, Plaintiff would have this Court extend the meaning of "tolled," as it is used in paragraph four's final sentence, to the prefatory sentences of paragraphs three and four. (Opp'n at 11). To support its position, Plaintiff contends that numerous courts have interpreted "toll" to refer to the suspension of a statute of limitations. Id. ; see Pearson Dental Supplies, Inc. , 48 Cal. 4th 665, 674–75, 108 Cal.Rptr.3d 171, 229 P.3d 83 (2010) ("To ‘toll’ has been defined most pertinently as ‘to stop the running of; abate < toll the limitations period>.’ ") (quoting Black's Law Dict. (8th ed. 2004) p. 1525); Hunter-Boykin v. George Washington Univ. , 132 F.3d 77, 84 (D.C. Cir. 1998) (finding "toll" to mean "suspension of the statute of limitations" where the parties had agreed to "toll the running of any statute of limitations period," despite defendant's arguments that the agreement had only tolled its ability to raise the statute of limitations as a defense); Clark v. Milam , 847 F. Supp. 409, 421 (S.D. W. Va. 1994) ; Cuadra , 17 Cal. 4th at 864-65, 72 Cal.Rptr.2d 687, 952 P.2d 704.
However, all of the cases Plaintiff cites are clearly distinguishable with respect to how "toll" is used in the first sentences of paragraphs three and four. For instance, the California Supreme Court in Pearson Dental and Cuadra only found that "toll" had implied "suspension of the statute of limitations" in situations where "toll" was either ambiguously used without any modifiers or explicitly used to modify "statute of limitations." See Pearson Dental , 48 Cal. 4th 665 at 675, 108 Cal.Rptr.3d 171, 229 P.3d 83 (interpreting a statute that had provided that "tolling starts from the date the civil action is commenced" as referring to tolling of the entire statute of limitations) (quoting Cal. Code Civ. Proc. § 1281.12 ) (internal quotation marks omitted); Cuadra , 17 Cal. 4th at 864, 72 Cal.Rptr.2d 687, 952 P.2d 704.
In this case, the parties clearly and explicitly provided that "any defense relating to the Statute of Limitations" is tolled. (FAC ¶ 25, Ex. T (Dkt. No. 14-20) (emphasis added)). Further, "toll" is clearly used to refer to the entire statute of limitations in the final sentence of paragraph four. Thus, "toll" is not used ambiguously in the parties' agreement. In Hunter-Boykin , the parties had entered an agreement that had explicitly stated: "[t]his [letter] will confirm that we have agreed ... to toll the running of any statute of limitations period applicable to any purported claims." Hunter-Boykin , 132 F.3d at 78 (quoting the parties' tolling agreement) (internal quotation marks omitted). Unlike the first sentences of paragraphs three and four in the Standstill Agreement here, the parties' agreement in Hunter-Boykin plainly indicated that the entire statute of limitations would be tolled. Id. at 83–84. Therefore, "toll" could not possibly acquire Plaintiff's purported meaning in the parties' Standstill Agreement in this case.
Pursuant to CCP Section 339 and the Standstill Agreement, the statute of limitations for Plaintiff's equitable contribution action started running on or before February 8, 2018 when HOA dismissed its suit against Avoca. Plaintiff filed its original Complaint in this Court on February 20, 2020, nearly two weeks after the two-year limitations period had expired. Because Plaintiff is barred by the two-year statute of limitations from bringing its equitable contribution claim, that claim is DISMISSED with prejudice . See Deutsch v. Turner Corp. , 324 F.3d 692, 718 n.20 (9th Cir. 2003) (denying leave to amend where amendment would be futile because the statute of limitations had run).
ii. Claim 4: Breach of Contract
Defendant contends that Plaintiff's breach of contract claim is not viable as a matter of law because Plaintiff's and H&R's Settlement Agreement did not confer any assignable rights against Defendant. (MTD at 16). Specially, Defendant argues that the Settlement Agreement released H&R from any and all liability arising out of the Subject Project, and, thus, nullified the assignment of any claim against Defendant. (Id. at 15–16). Because the release extinguished the basis for the assignment, Defendant argues that Plaintiff cannot raise a cognizable breach of contract claim. (Id. at 16). The Court agrees.
For Plaintiff, standing in H&R's shoes, to prevail on a breach of contract claim against Defendant, H&R must have validly assigned to Plaintiff any rights that it may have had against Defendant. See Doser v. Middlesex Mut. Ins. Co. , 101 Cal. App. 3d 883, 890, 162 Cal.Rptr. 115 (1980) ("[A] valid cause of action must exist in the assignor insured before an assignee can prevail against the insurer."); see also Essex Ins. Co. v. Five Star Dye House, Inc. , 38 Cal. 4th 1252, 1259, 45 Cal.Rptr.3d 362, 137 P.3d 192 (2006) ; Pruyn v. Agric. Ins. Co. , 36 Cal. App. 4th 500, 508 n.1, 42 Cal.Rptr.2d 295 (1995).
"California, as set forth both in case law and by statute, maintains a policy encouraging the free transferability of all types of property." Essex Ins. Co. , 38 Cal. 4th at 1259, 45 Cal.Rptr.3d 362, 137 P.3d 192. Indeed, courts "start from the proposition that assignability is the rule." Id. Accordingly, "[a]ctions for bad faith against an insurer have generally been held to be assignable, including claims for breach of the duty to defend." Id. at 1263, 45 Cal.Rptr.3d 362, 137 P.3d 192 (citations omitted). "The assignee ‘stands in the shoes’ of the assignor and merely acquires the interest of the assignor." Doser , 101 Cal. App. 3d at 890, 162 Cal.Rptr. 115.
Furthermore, it is well settled under California law that an insured may, in the absence of fraud or collusion, assign rights of action against its insurer to a third-party claimant in exchange for the claimant's covenant not to execute on a judgment against the insured. See Pruyn , 36 Cal. App. 4th at 522, 42 Cal.Rptr.2d 295 ("[U]pon the breach by an insurer of its duty to defend, the insured may, in the absence of fraud or collusion, and without forfeiting his or her right of indemnification, assign that right to the third party claimant in exchange for the claimant's covenant not to execute or otherwise enforce the claim.") (emphasis omitted) (collecting cases).
Defendant contends that here, unlike prior cases where California courts have permitted insureds to assign their rights against insurers to third-party claimants in consideration for covenants to execute before a judgment's entry, the Settlement Agreement contained a full release and a covenant not to execute that precluded any valid assignment of rights from H&R to Plaintiff against Defendant. (MTD at 16). The Settlement Agreement provides, in relevant part:
B1. Consideration for Settlement:
a. H&R hereby agrees to a stipulated judgment in the amount of $1,236,720.89 and the SETTLING PARTIES [H&R and Plaintiff] shall execute a Stipulation for Entry of Judgment in the amount of $1,236,720.89 a copy of which is attached hereto as Exhibit "A". [Plaintiff] will file the Stipulation for Entry of Judgment with the Los Angeles Superior Court, but hereby agrees and covenants never to execute on the entered Judgment [.]
b. H&R hereby agrees to assign to [Plaintiff] any and all rights which H&R may have against [Defendant] arising out of this ACTION including, but not limited to, all claims arising out of or in any way related to H&R's claim for coverage under [Defendant's Wrap Policy] and any and all claims, causes of action or damages flowing from [Defendant's] actions in relation to such claims, whether founded on contract or tort, to the fullest extent permitted by law.
B6. Full Settlement and Compromise of Claims Released.
This AGREEMENT is intended as a full settlement and compromise of each and every claim and all claims of every kind that [Plaintiff] ever had, now have [sic], or will in the future have [sic] against H&R arising out of or accrued as a result of H&R's work at the SUBJECT PROPERTY alleged in connection with the ACTION .
(FAC ¶ 28, Ex. W (Dkt. No. 14-23), at 2, 4 (emphasis added)).
The Settlement Agreement's language is undisputed. In addition to other promises, Plaintiff had covenanted to: (1) refrain from executing the stipulated judgment entered against H&R; (2) receive an assignment from H&R of any rights against Defendant arising out of H&R's work on the Subject Project; and (3) release H&R from any liability it had accrued arising out of its work on the Subject Project. Therefore, the question before this Court is whether the Settlement Agreement, executed before the Superior Court's entry of the parties' stipulated judgment, extinguished any claim Plaintiff may have had against Defendant.
The Court has not located any authority within the Ninth Circuit or from California courts that has squarely addressed this issue. However, the Court looks to Empire Indemnity Insurance Co. v. N/S Corp. , a recent Fifth Circuit decision, to guide its analysis.
Empire 's facts largely parallel the facts alleged in this case. In Empire , an insured, an insurer ("Insurer A"), and a third-party claimant entered into a settlement agreement before judgment had been entered. Empire Indem. Ins. Co. v. N/S Corp. , 571 F. App'x. 344, 345 (5th Cir. 2014). The parties' settlement agreement contained promises mirroring covenants made by the parties in this case, including an assignment of any claims the insured had against the parent insurer ("Insurer B") from the insured to Insurer A, a covenant not to execute on the parties' stipulated judgment, and a provision releasing the insured from liability. Id. As in this case, Insurer B (here, Defendant) argued that its insured (here, H&R) could not be legally liable for the judgment, based on the full release and covenant not to execute. Id. at 346. The Fifth Circuit agreed and found that "[a]t the time of the final judgment in state court, [the insured] had no legal obligation to pay anything" and therefore, "as a matter of law, the condition that [the insured] ‘be obligated to actually pay’ an amount finally determined by judgment [under the insurer's policy] was not, and could never be, met." Id. at 347 (quoting Empire Indem. Ins. Co. v. N/S Corp. (Empire II ), No. 4:11-CV-166, 2013 WL 1103061, at *2 (E.D. Tex. Mar. 15, 2013) ).
In applying Empire 's holding to the facts in this case, the Court recognizes the numerous California court decisions affirming that covenants not to execute do not extinguish causes of action against an insurer, even if the covenant is executed before a judgment's entry. See, e.g., Pruyn , 36 Cal. App. 4th at 522, 42 Cal.Rptr.2d 295 ; Samson v. Transamerica Ins. Co. , 30 Cal. 3d 220, 240–242, 178 Cal.Rptr. 343, 636 P.2d 32 (1981) ; Zander v. Texaco, Inc. , 259 Cal. App. 2d 793, 802, 66 Cal.Rptr. 561 (1968).
However, the Court also recognizes that the Ninth Circuit has previously held that an insured may assign rights to a third-party claimant in exchange for a covenant not to execute principally because, unlike a full release, a covenant not to execute does not fully insulate the insured from liability. See Consolidated Am. Ins. Co. v. Mike Soper Marine Servs. , 951 F.2d 186, 191 (9th Cir. 1991) (reasoning that unlike a release, which would have shielded the insured from judgment and extinguished its claim against the insurer, "[a] covenant not to execute does not fully protect the insured ... [because] his credit may be impaired and he may be unable to enter certain business transactions."). Further, district courts outside the Ninth Circuit and other state courts have also affirmed that a covenant not to execute does not excuse liability, whereas a full release does. See Genesis Ins. Co. v. Crowley , 495 F. Supp. 2d 1110, 1120 (D. Colo. 2007) ("I agree with those courts that have considered similar language and concluded that where, as here, a covenant not to execute is not accompanied by a release of liability, amounts awarded under a consent judgment remain a legal obligation.") (emphasis added) (collecting cases); In re Feature Realty Litig. , 634 F. Supp. 2d 1163, 1168 (E.D. Wash. 2007) ("The vast majority of Courts follow the rule that the insured remains ‘legally obligated to pay’ because a covenant not to execute coupled with an assignment and settlement agreement is a contract and ‘not a release permitting the insurer to escape its obligation.’ ") (quoting Kagele v. Aetna Life & Cas. Co. , 40 Wash. App. 194, 198, 698 P.2d 90 (1985) ); Clock v. Larson , 564 N.W. 2d 436, 436–38 (Iowa 1997) ("[W]hen there is a full release[,] there is no further liability owed by the insurance company to its insured, and therefore the insured has no right to recover against the insurance company which can be assigned to the injured party."); State Farm Mut. Auto. Ins. Co. v. Paynter , 122 Ariz. 198, 593 P.2d 948, 953 (1979) (holding that a covenant not to execute is not a release from liability, however, if it were to find otherwise, the court would "wholly undermine the purpose of such agreements[.]"); Cf. Red Giant Oil Co. v. Lawlor , 528 N.W.2d 524, 531 (Iowa 1995) (holding that a covenant not to execute is not a release); but see Gray v. Grain Dealers Mut. Ins. Co. , 871 F.2d 1128, 1133 (D.C. Cir. 1989).
Critically, the Ninth Circuit has expressly recognized that a release, under California law, "is the ‘abandonment, relinquishment or giving up or a right to the person against whom it might have been demanded or enforced ... and its effect is to extinguish the cause of action.’ " Marder v. Lopez , 450 F.3d 445, 449 (9th Cir. 2006) (quoting Pellett v. Sonotone Corp. , 26 Cal. 2d 705, 711, 160 P.2d 783 (1945) ); see also Cal. Civ. Code § 1541 ("An obligation is extinguished by a release therefrom given to the debtor by the creditor, upon a new consideration, or in writing, with or without new consideration."); Marder , 450 F.3d at 449 ("In general, a written release extinguishes any obligation covered by the release's terms, provided it has not been obtained by fraud, deception, misrepresentation, duress, or undue influence.") (quoting Skrbina v. Fleming Cos. , 45 Cal. App. 4th 1353, 1366, 53 Cal.Rptr.2d 481 (1996) ).
Similar to Insurer B's policy in Empire , Defendant's Wrap Policy provides that Defendant "will pay those sums that the insured becomes legally obligated to pay as damages[.]" (FAC ¶ 10, Ex. D (Dkt. No. 14-4), at 42 of 58) (emphasis added). Once the parties had executed their Settlement Agreement, H&R could not become legally obligated to pay any sum, as it were released from any and all liability. Further, H&R could not have been damaged by the stipulated judgment and thus had no rights to assign to Plaintiff. Therefore, as the Fifth Circuit concluded in Empire , here too the Court concludes that Defendant cannot be held to pay a judgment for which H&R was never liable. See Empire Indem. Ins. Co. , 571 F. App'x. at 347.
Finally, Plaintiff failed to meaningfully respond to any of Defendant's allegations that the parties' full release precluded an assignment of rights against Defendant. As Defendant points out, "[i]n its Opposition, Ironshore does not even attempt to address the release issue." (Reply at 7). Courts routinely treat a plaintiff's failure to respond in such circumstances as a waiver of the claim and an abandonment of the issue. See, e.g., Stichting Pensioenfonds ABP v. Countrywide Fin. Corp. , 802 F. Supp. 2d 1125, 1132 (C.D. Cal. 2011) ("[I]n most circumstances, failure to respond in an opposition brief to an argument put forward in an opening brief constitutes waiver or abandonment in regard to the uncontested issue.") (quoting Sportscare of Am., P.C. v. Multiplan, Inc. , No. 2:10-4414, 2011 WL 589955, at *1 (D.N.J. Feb. 10, 2011) ). Therefore, for the foregoing reasons, Plaintiff's breach of contract claim is DISMISSED with prejudice.
iii. Claim 5: California Insurance Code § 11580
Defendant challenges Plaintiff's California Insurance Code Section 11580 (" Section 11580") claim on two distinct grounds. (MTD at 18–19). First, Defendant reasons that because H&R could not become legally obligated to pay any sum as they were released from liability pursuant to the Settlement Agreement, Defendant cannot be liable for any amount because Defendant's Wrap Policy does not cover the stipulated judgment. (Id. ). Second, Defendant argues that Plaintiff has not alleged sufficient facts demonstrating that the stipulated judgment was reasonable or was free from fraud or collusion. (Id. at 19). This Court agrees with both of Defendant's arguments.
" Insurance Code section 11580 provides an injured plaintiff with the right to bring a direct action against a defendant's insurer which does not defend its insured once the plaintiff obtains a judgment against the defendant." Travelers Casualty & Surety Co. v. Super. Ct. , 126 Cal. App. 4th 1131, 1141, 24 Cal.Rptr.3d 751 (2005). "Courts have for some time accepted the principle that an insured who is abandoned by its liability insurer is free to make the best settlement possible with the third party claimant, including a stipulated judgment with a covenant not to execute." Pruyn , 36 Cal. App. 4th at 515, 42 Cal.Rptr.2d 295 (collecting cases). However, the settlement will only bind the insurer if the insured "in the absence of fraud or collusion, and without forfeiting his or her right of indemnification, assign[ed] that right to the third party claimant in exchange for the claimant's covenant not to execute or otherwise enforce the claim." Id. at 522, 42 Cal.Rptr.2d 295 (emphasis omitted).
To bring a direct action against an insurer under Section 11580, a plaintiff must allege that:
1) [it] obtained a judgment for bodily injury, death, or property damage, 2) the judgment was against a person insured under a policy that insures against loss or damage resulting from liability for personal injury or insures against loss of or damage to property caused by a vehicle or draught animal, 3) the liability insurance policy was issued by the defendant insurer, 4) the policy covers the relief awarded in the judgment, [and] 5) the policy either contains a clause that authorizes the claimant to bring an action directly against the insurer or the policy was issued or delivered in California and insures against loss or damage resulting from liability for personal injury or insures against loss of or damage to property caused by a vehicle or draught animal.
Garamendi v. Golden Eagle Ins. Co. , 116 Cal. App. 4th 694, 709–10, 10 Cal.Rptr.3d 724 (2004) (quoting Wright v. Fireman's Fund Ins. Cos. , 11 Cal. App. 4th 998, 1015, 14 Cal.Rptr.2d 588 (1992) ).
Because "a stipulated or consent judgment which is coupled with a covenant not to execute against the insured brings with it a high potential for fraud or collusion[,] ... [the] judgment should only bind an insurer under circumstances which protect against the potential for fraud and collusion." Pruyn , 36 Cal. App. 4th at 518, 42 Cal.Rptr.2d 295 (emphasis added). Accordingly, a plaintiff must also allege, as an element of its Section 11580 claim, that a court had independently adjudicated the facts giving rise to the judgment and that, based on an evidentiary showing, the judgment "did not have the potential for abuse, fraud, or collusion." Travelers Casualty & Surety Co. , 126 Cal. App. 4th at 1141, 24 Cal.Rptr.3d 751. "If such a proceeding did not occur, then the insurer cannot be liable in an action brought against it by the plaintiff." Id.
Further, "[i]n a later reimbursement action against the insurer, based upon a breach of the contractual obligation to provide a defense, ‘a reasonable settlement made by the insured to terminate the underlying claim ... may be used as presumptive evidence of [1] the insured's liability on the underlying claim, and [2] the amount of such liability.’ " Pruyn , 36 Cal. App. 4th at 515, 42 Cal.Rptr.2d 295 (citations and emphasis omitted). Because liability is based only on evidence giving rise to a presumption, "the bona fides of the settlement, and thus its enforceability against the defendant insurers, cannot be determined against plaintiff on demurrer [,]" or a motion to dismiss. Id. at 523, 42 Cal.Rptr.2d 295 (emphasis added). However, to demonstrate the right to rely on such a presumption at the motion to dismiss stage, a plaintiff insured must allege that: "(1) the insurer wrongfully failed or refused to provide coverage or a defense, (2) the insured thereafter entered into a settlement of the litigation which was (3) reasonable in the sense that it reflected an informed and good faith effort by the insured to resolve the claim." Id. at 528, 42 Cal.Rptr.2d 295.
Here, Plaintiff lacks a cognizable Section 11580 claim on two distinct grounds. First, Plaintiff cannot raise its Section 11580 claim because Plaintiff cannot demonstrate that Defendant's Wrap Policy covered the damages awarded under the stipulated judgment. Defendant's Wrap Policy explicitly provided that Defendant "will pay those sums that the insured becomes legally obligated to pay as damages[.]" (FAC ¶ 10, Ex. D (Dkt. No. 14-4), at 42 of 58) (emphasis added). Under this Court's holding on Plaintiff's breach of contract claim, Defendant is not legally obligated to pay as damages any amount of the stipulated judgment, because Plaintiff had released H&R from any and all liability. (See supra II.B.ii). Therefore, Plaintiff cannot state a cognizable Section 11580 claim because Defendant's Wrap Policy does not cover the relief awarded in the judgment. See Nordby Constr., Inc. v. Am. Safety Indem. Co. , No. 14-CV-04074-LHK, 2015 WL 1737654, at *10 (N.D. Cal. Apr. 14, 2015) (granting a motion to dismiss where a plaintiff had failed to identify any plausible contractual basis for its Section 11580 claim); see also Miller v. Am. Home Assurance Co. , 47 Cal. App. 4th 844, 847–48, 54 Cal.Rptr.2d 765 (1996) (finding that a defendant is entitled to judgment as a matter of law if a plaintiff cannot show that it is covered or an insured under defendant's policy).
Second, Plaintiff failed to allege any facts demonstrating that its settlement with H&R was reasonable or that any previous independent adjudication of facts based on an evidentiary showing had occurred. See Travelers Casualty & Surety Co. , 126 Cal. App. 4th at 1141, 24 Cal.Rptr.3d 751 ; Pruyn , 36 Cal. App. 4th at 528, 42 Cal.Rptr.2d 295. Plaintiff only alleges that Defendant had wrongfully refused coverage and that it had entered into a settlement with H&R, without making any factual allegations as to that settlement's reasonableness. Thus, Plaintiff's allegations are not sufficient to raise a presumption that the settlement was reasonable, or reflected the existence and amount of Defendant's liability to Plaintiff. Cf. Pruyn , 36 Cal. App. 4th at 530–31, 42 Cal.Rptr.2d 295 (finding that a plaintiff had adequately plead its Section 11580 claim only where the plaintiff had alleged facts demonstrating that the settlement agreement was reasonable).
Finally, leave to amend would be futile here because Plaintiff's Section 11580 claim is clearly foreclosed by its inability to adequately show that the relief it seeks is covered under Defendant's Wrap Policy. See Carvalho v. Equifax Information Services, LLC , 629 F.3d 876, 892–93 (9th Cir. 2010) ("When the district court denies leave to amend because of futility of amendment, we will uphold such denial if ‘it is clear, upon de novo review, that the complaint would not be saved by any amendment.’ ") (quoting Leadsinger, Inc. v. BMG Music Publ'g , 512 F.3d 522, 532 (9th Cir. 2008) ). Therefore, Plaintiff could not possibly cure its pleading deficiencies. See Reed v. Lieurance , 863 F.3d 1196, 1207 (9th Cir. 2017) (The Ninth Circuit "will uphold a sua sponte dismissal without leave to amend only where the plaintiff cannot possibly win relief.") (quoting Wong v. Bell , 642 F.2d 359, 362 (9th Cir. 1981) ) (internal quotation marks omitted).
Because Plaintiff has failed to state a viable Section 11580 claim, that claim is DISMISSED with prejudice.
iv. Claims 1 and 2: Declaratory Relief
Pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, "[i]n a case of actual controversy within its jurisdiction ... any court of the United States ... may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201 ; see also Catholic Foreign Mission Soc. of Am., Inc. v. Arrowood Indem. Co. , 76 F. Supp. 3d 1148, 1155 (D. Haw. 2014) ("A district court has the unique and substantial discretion to decide whether to issue a declaratory judgment ... but is under no compulsion to exercise that jurisdiction."). To satisfy the Declaratory Judgment Act's "actual controversy" requirement, the parties' dispute must be "definite and concrete, touching the legal relations of parties having adverse legal interests; that ... [the dispute] be real and substantial and admit of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts." MedImmune, Inc. v. Genentech, Inc. , 549 U.S. 118, 127, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007) (citation omitted) (quoting Aetna Life Ins. Co. v. Haworth , 300 U.S. 227, 240–241, 57 S.Ct. 461, 81 L.Ed. 617 (1937) ).
A court may consider several factors when deciding whether to entertain a party's request for declaratory relief. First, it may consider whether a party's request operates prospectively or merely seeks to redress past wrongs. See United States v. Washington , 759 F.2d 1353, 1356–57 (9th Cir. 1985) (en banc) ("Declaratory relief should be denied when it will neither serve a useful purpose in clarifying and settling the legal relations in issue nor terminate the proceedings and afford relief from the uncertainty and controversy faced by the parties."), cert. denied 474 U.S. 994, 106 S. Ct. 407, 88 L.Ed.2d 358 (1985) ; Vascular Imaging Prof'ls, Inc. v. Digirad Corp. , 401 F. Supp. 3d 1005, 1010 (C.D. Cal. Jul. 30, 2019) ; see also Societe de Conditionnement en Aluminium v. Hunter Eng'g Co. , 655 F.2d 938, 943 (9th Cir. 1981) (The Declaratory Judgment Act "brings to the present a litigable controversy, which otherwise might only be tried in the future."); Olenicoff v. UBS AG , No. SACV 08–1029 AG (RNBx), 2010 WL 8530286, at *34 (C.D. Cal. Mar. 16, 2010) ("Declaratory relief is not available to merely adjudicate past conduct or to establish liability.") (citations omitted); Ruiz v. Mortg. Elec. Registration Sys., Inc. , No. CIV. S-09-0780 FCD DAD, 2009 WL 2390824, at *5 (E.D. Cal. Aug. 3, 2009). ("The purpose of a declaratory judgment is to set controversies at rest before they cause harm to the plaintiff, not to remedy harms that have already occurred.").
A court may also consider whether a party's request is attached to or operates in conjunction with another viable claim. See Shaterian v. Wells Fargo Bank, N.A. , 829 F. Supp. 2d 873, 888 (N.D. Cal. 2011) (Under federal law, a claim for declaration concerning the rights and duties of the parties is "ultimately a request for relief, and [a plaintiff] is not entitled to such relief absent a viable claim."); see also Mehta v. Wells Fargo Bank, N.A. , No. CV 17-02532-AB (SSx), 2018 WL 5880758, at *4 (C.D. Cal. Feb. 6, 2018) ("Plaintiff cannot obtain declaratory relief without pleading a valid underlying claim."); VIA Techs., Inc. v. SONICBlue Claims LLC , No. C 09-2109 PJH, 2010 WL 2486022, at *3 (N.D. Cal. June 16, 2010) ("Under federal law, declaratory relief is not an independent cause of action, but only a remedy.").
In asserting its first claim for declaratory relief, Plaintiff appears to seek the Court's determination on whether Defendant owes Plaintiff $1,000,000 plus prejudgment interest from January 25, 2016 to the present, costs, and for any and all other further relief that this Court deems necessary and appropriate under the circumstances, in light of representation costs Plaintiff incurred in the Underlying Action. (FAC ¶ 38).
In Plaintiff's second claim for declaratory relief, Plaintiff also seeks the Court's determination regarding: (1) whether Defendant was required to afford primary coverage for the defense and indemnity of PNR and other insured parties pertaining to the Underlying Action; (2) whether Defendant "is responsible to defend and indemnify any contractors, sub-contractors or other entities, and to provide coverage and contribute to any claims or settlements based on any claims of contribution or indemnity that may apply"; (3) whether Defendant's Wrap Policy "affords primary coverage for the defense and indemnity of PNR, Avoca and other insured parties pertaining to the underlying lawsuit"; and (4) whether Defendant "was responsible to defend and indemnify any contractors, sub-contractors or other entities, and to provide coverage and contribute to any claims or settlements based on any claims of contribution or indemnity that may apply." (FAC ¶¶ 41–44).
Defendant argues that Plaintiff's declaratory relief claims are improper on three distinct grounds. First, Defendant contends that Plaintiff is barred from seeking declaratory relief because Plaintiff has fully matured causes of action for money damages against Defendant. (MTD at 21). Second, Defendant argues that Plaintiff's declaratory relief claims are inappropriate because Plaintiff's requests impermissibly attempt to redress past wrongs, not to shape future conduct. (Id. at 23). Third, Defendant argues that Plaintiff cannot demonstrate an actual controversy because Plaintiff cannot assert any valid claim for damages against Defendant. (Reply at 8).
Plaintiff counters that it has alleged an actual controversy by asking that the Court determine the limits of coverage on Defendant's policy in order to evaluate Defendant's liability for its alleged failure to contribute to PNR's and Avoca's defense. (Opp'n at 13). Plaintiff further contends that the mere availability of other remedies does not preclude declaratory relief. (Id. ). Conversely, Plaintiff further argues that a determination of coverage owed to PNR, Avoca, and H&R under Defendant's policy serves as a prerequisite to Plaintiff's other claims. (Id. at 14).
This Court finds that Plaintiff's declaratory relief claims fail on two grounds. First, all of Plaintiff's requests for relief inappropriately seek to remedy past conduct. The question of whether Defendant is liable to Plaintiff for damages Plaintiff had incurred from Defendant's alleged breach of contract and failure to defend other parties in the Underlying Action necessarily seeks to remedy past wrongs, and thus operates retroactively, instead of prospectively. Granting Plaintiff declaratory relief would be inappropriate because such a request would not resolve a controversy that might be further litigated into the future. See Screen Capital Intern. Corp. v. Library Asset Acquisition Co., Ltd. , 510 B.R. 248, 261 (C.D. Cal. 2014) (dismissing a plaintiff's declaratory relief claim on grounds that the plaintiff had only sought to remedy past conduct); see also Washington , 759 F.2d at 1357 ; Cf. Trishan Air, Inc. v. Fed. Ins. Co. , No. CV-076204-RGK-FMOx, 2008 WL 11343542, at *3 (C.D. Cal. Feb. 12, 2008) ("Declaratory relief is often sought in actions between insurers and insureds to determine rights and obligations under an insurance policy."); Rutter Group Prac. Guide Fed. Civ. Pro. Before Trial Ch. 10-A (2020) ("Declaratory relief is also proper in disputes between or among several insurers on the same risk," such as "to determine which coverage is ‘primary,’ or which is obligated to furnish a defense, etc.").
Further, all of Plaintiff's requests for relief in its second cause of action for declaratory relief are also inherently retrospective and necessarily involve an inquiry into past conduct. Plaintiff has already covered, represented, and defended PNR and other parties in the Underlying Action. Thus, the questions of whether Defendant and Defendant's Wrap Policy were required to afford primary coverage for the defense and indemnity of PNR, and whether Defendant "was responsible to defend and indemnify any contractors, sub-contractors or other entities" necessarily requires the Court to not only inquire into past conduct, but also to resolve issues that do not bear on future litigation. (FAC ¶¶ 41–44). Therefore, this Court finds that all of Plaintiff's requests for declaratory relief in its second cause of action are inappropriate. See Screen Capital Intern. Corp. , 510 B.R. at 261 ; see also Shaterian , 829 F. Supp. 2d at 888.
Finally, Plaintiff lacks any remaining viable underlying claim that it could pursue in conjunction with its requests for declaratory relief. As such, Plaintiff's declaratory relief claims fail, given the Court's dismissal of Plaintiff's other claims. See Flores v. EMC Mortgage Co. , 997 F. Supp. 2d 1088, 1112 (E.D. Cal. 2014) (dismissing a plaintiff's declaratory relief claim on grounds that the plaintiff's other claims had been dismissed and that the plaintiff's requests had only sought to remedy past conduct).
Accordingly, Plaintiff's claims for declaratory relief are DISMISSED with prejudice .
V. CONCLUSION
For the foregoing reasons, the Court GRANTS in part and DENIES in part Defendant's Request for Judicial Notice (Dkt. No. 16), and GRANTS in full Defendant's Motion to Dismiss Plaintiff's First Amended Complaint (Dkt. No. 15). Plaintiff's five claims are all DISMISSED with prejudice .