Scottsdale Insurance Company v. CNC Technologies LLC et al

MEMORANDUM in Opposition to NOTICE OF MOTION AND MOTION to AMEND Judgment,, 160 164

C.D. Cal.January 7, 2019

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 1 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 BROWER LAW GROUP, APC Steven Brower (SBN 93568) Tae J. Im (SBN 139334) Christian H. Na (SBN 283758) 25201 La Paz Road, Suite 202 Laguna Hills, CA 92653 Telephone: (949) 668-0825 Email: Steve@BrowerLawGroup.com Attorneys for Defendants and Counterclaimant UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SCOTTSDALE INSURANCE COMPANY, Plaintiff, v. CNC TECHNOLOGIES, LLC, et al, Defendants. Case No.: 2:17-cv-03190 VAP (Ex) MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO PLAINTIFF’S MOTION TO AMEND JUDGMENT AND RELATED COUNTER-ACTION Date: January 28, 2019 Time: 2:00 p.m. Place: Courtroom 8A Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 1 of 28 Page ID #:5498 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION i MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF OPPOSITION TO MOTION TO AMEND THE JUDGMENT TABLE OF CONTENTS Page TABLE OF AUTHORITIES ..................................................................................... ii I. INTRODUCTION ........................................................................................... 1 II. FACTUAL BACKGROUND ......................................................................... 2 A. The Policy ............................................................................................. 2 B. The Complaint in the Helinet Action…………………………………8 C. Scottsdale’s Handling of the Helinet Action………………………….8 D. The Instant Action …………………………………………………..10 III. ARGUMENT ................................................................................................ 14 A. Scottsdale Failed to Allege or Prove Breach of Contract……………14 B. The Allocation Provision in the Policy Trumps the Right to Reimbursement Under Blue Ridge...................................................... 14 C. The Amount Due Under the Allocation Provision Is Uncertain ........ 15 D. Scottsdale Has Waived and/or Is Estopped to Assert the Right to Prejudgment Interest…………………………………………………17 E. Scottsdale Was Not Entitled to Full Reimbursement Because the Settlement Was For Potentially Covered Claim…………..………. .. 19 F. The Claims Against CNC Were Not Excluded………………………19 G. Scottsdale Is Improperly Seeking to Substantively Amend the Judgment to Find No Coverage……………………………………...21 H. The Court May Not Have Subject Matter Jurisdiction…………… . 22 IV. CONCLUSION ............................................................................................. 24 Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 2 of 28 Page ID #:5499 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION ii MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 TABLE OF AUTHORITIES Page(s) Cases ACL Technologies, Inc. v. Northbrook Property & Casualty Ins. Co. 17 Cal.App.4th 1773 (1993) ......................................................................... 15, 18, 20 AIU Ins. Co. v. Superior Court 51 Cal.3d 807 (1990)……………………………………………………………….21 A–Z Int’l v. Phillips 323 F.3d 1141 (9th Cir. 2003)……………………………………………………. .22 Blue Ridge Ins. Co. v. Jacobsen 25 Cal.4th 489 (2001) ........................................................................................ passim Buss v. Superior Court 16 Cal.4th 35 (1997) ................................................................................................. 15 In Century Surety Co. v. Hicks 2012 WL 12964690 (C.D. Cal., December 13, 2012)……………………………..23 DRG/Beverly Hills, Ltd. v. Chopstix Dim Sum Café & Takeout III, Ltd. 30 Cal.App.4th 54 (1994) ........................................................................................ 18 Equitable Life Assurance Society v. Berry 212 Cal.App.3d 832 (1989)……………………………………………………… 21 Esgro Central, Inc. v. General Ins. Co. 20 Cal. App. 3d 1054 (1971) .............................................................................. 14, 16 Evanston Ins. Co. v. OEA, Inc. 566 F.3d 915 (2009) ................................................................................................. 14 Fireman's Fund Ins. Co. v. Allstate Ins. Co. 234 Cal.App.3d 1154 (1991) ................................................................................... 14 FW/PBS, Inc. v. City of Dallas 493 U.S. 215, 231, 110 S.Ct. 596 (1990)…………………………………………..22 Gould v. Corinthian Colleges, Inc. 192 Cal.App.4th 1176 (2011). .................................................................................. 17 Hartford Accident & Indemnity Co. v. Sequoia Ins. Co. 211 Cal. App. 3d 1285 (1989). ........................................................................... 14, 16 Johnson v. Columbia Props. Anchorage, LP 437 F.3d 894 (9th Cir. 2006)……………………………………………………….22 Kanter v. Warner–Lambert Co. 265 F.3d 853 (9th Cir. 2001)……………………………………………………….22 Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 3 of 28 Page ID #:5500 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION iii MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 Mansfield, Coldwater & Lake Michigan Ry. v. Swan 111 U.S. 379, 383 (1884)…………………………………………………………..23 Mirpad, LLC v. California Ins. Guarantee Assn. 132 Cal.App.4th 1058 (2005) ....................................................................... 15, 18, 20 Roesch v. De Mota 24 Cal.2d 563 (1944) ................................................................................................ 17 Van Daele Development Corp. v. Steadfast Ins. Co. 2012 WL 12882060 (C.D. Cal., September 5, 2012)………………………………22 Statutes California Civil Code § 3287, subdivision (a) .......................................................... 16 California Civil Code § 3289, subdivision (b) ................................................... 15, 16 California Evidence Code § 623 ............................................................................... 17 Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 4 of 28 Page ID #:5501 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 1 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF OPPOSITION TO MOTION TO AMEND THE JUDGMENT MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION Plaintiff and Counter-defendant Scottsdale Insurance Company’s (“Scottsdale”) Motion to Amend the Judgment (“Motion”) must be denied for many of the same reasons that Scottsdale was not entitled to a judgment in the first place.  Under the policy and the evidence presented to the Court it was legally impossible to grant judgment to Scottsdale, so that the granting of prejudgment interest would be clear error; and  It has never been established that this Court has subject matter jurisdiction over this matter. More specifically, Scottsdale’s Motion should be denied because:  Scottsdale failed to allege or prove a breach of contract as required by California Civil Code § 3289, subdivision (b);  Even if Scottsdale properly reserved the right to seek allocation, which Defendants CNC Technologies, LLC (“CNC”), Ronald Magocsi, James Hyman, Alex Giuffrida, Babette Schrank, and Keith Haney (collectively “Defendants”) deny, the express contractual allocation provision in Scottsdale’s Policy No. EKS3183243 (“Policy”) issued to CNC, should trump its quasi-contractual right under Blue Ridge Ins. Co. v. Jacobsen, 25 Cal.4th 489, 502 (2001) (“Blue Ridge”);  The express contractual allocation provision clearly applies to the settlement and not just defense costs;  Under the contractual allocation provision in the Policy, the amount due, if any, was not certain or capable of calculation;  In light of the fact that Scottsdale sought damages based on the allocation provision, Scottsdale is estopped and/or has waived the right to seek interest under Blue Ridge;  Scottsdale was not entitled to full reimbursement under Blue Ridge Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 5 of 28 Page ID #:5502 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 2 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 because the settlement was for potentially covered claims under the insuring clauses of the Policy;  The claims against CNC in the underlying action were not excluded;  Scottdale is improperly seeking to amend the judgment to add a finding of no coverage for the underlying action when Scottsdale never even sought a ruling that there was no coverage and therefore no duty to defend the underlying action and the Court never made such a ruling; and  It has never been established that the Court has subject matter jurisdiction over this matter because Scottsdale has not proven the citizenship of the owners or members of CNC. II. FACTUAL BACKGROUND A. The Policy The Policy contains the following insuring provision for the applicable directors and officers coverage: a. INSURING CLAUSES 1. The Insurer shall pay the Loss of the Directors and Officers for which the Directors and Officers are not indemnified by the Company and which the Directors and Officers have become legally obligated to pay by reason of a Claim first made against the Directors and Officers during the Policy Period or, if elected, the Extended Period, and reported to the Insurer pursuant to Section E.1. herein, for any Wrongful Act taking place prior to the end of the Policy Period. 2. The Insurer shall pay the Loss of the Company for which the Company has indemnified the Directors and Officers and which the Directors and Officers have become legally obligated to pay by reason of a Claim first made Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 6 of 28 Page ID #:5503 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 3 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 against the Directors and Officers during the Policy Period or, if elected, the Extended Period, and reported to the Insurer pursuant to Section E.1. herein, for any Wrongful Act taking place prior to the end of the Policy Period. 3. The Insurer shall pay the Loss of the Company which the Company becomes legally obligated to pay by reason of a Claim first made against the Company during the Policy Period or, if applicable, the Extended Period, and reported to the Insurer pursuant to Section E.1. herein, for any Wrongful Act taking place prior to the end of the Policy Period. (Policy, Defendant’s Appendix of Exhibits in Support of Defendant’s Opposition to Plaintiff’s Motion to Amend the Judgment, Exhibit (“Ex.”) A, p. 21.) The defense provision in the Policy states: 1. It shall be the duty of the Insurer and not the duty of the Insureds to defend any claim. Such duty shall exist even if any of the allegations are groundless, false, or fraudulent. The Insurer’s duty to defend any Claim shall cease when the Limits of Liability have been exhausted by the payment of Loss including Costs, Charges and Expense. (Ex. A, p. 19.) The definition of “Costs, Charges and Expenses” is as follows: 3. Costs, Charges and Expenses means; a. reasonable and necessary legal costs, charges, fees and expenses incurred by any of the Insureds in defending Claims and the premium for appeal, attachment or similar bonds arising out of covered judgments, but with no Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 7 of 28 Page ID #:5504 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 4 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 obligation to furnish such bonds and only for the amount of such judgment that is up to the applicable Limit of Liability; and b. reasonable and necessary legal costs, charges, fees and expenses incurred by any of the Insureds in investigating a written demand, by one or more of the securities holders of the Company upon the board of directors or the management board of the Company, to bring a civil proceeding against any of the Directors and Officers on behalf of the Company. Costs, Charges and Expenses do not include salaries, wages, fees, overhead or benefit expenses of or associated with officers or employees of the Company. (Ex. A, pp. 21-22.) The term “Loss” is defined in the Policy, in part, as follows: 7. Loss means damages, judgments, settlements, pre-judgment or postjudgment interest awarded by a court, and Costs, Charges and Expenses incurred by Directors and Officers under Insuring Clauses 1. or 2. or the Company under Insuring Clause 3. . . . (Ex. A, p. 22.) The term “Wrongful Act” is defined in the Policy as follows: 9. Wrongful Act means any actual or alleged error, omission, misleading statement, misstatement, neglect, breach of duty or act allegedly committed or attempted by: a. any of the Directors and Officers, while acting in their capacity as such, or any matter claimed against any Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 8 of 28 Page ID #:5505 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 5 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 Director and Officer solely by reason of his or her serving in such capacity; b. any of the Directors and Officers, while acting in their capacity as a director, officer, trustee, governor, executive director or similar position of any Outside Entity where such service is with the knowledge and consent of the Company; and c. the Company, but only with respect to Insuring Clause 3. of this Coverage Section. (Ex. A, p. 23.) The exclusions in the Policy include the following, Exclusions C(1)(j)-(l): j. for a Wrongful Act actually or allegedly committed or attempted by any of the Directors and Officers in his or her capacity as a director, officer, trustee, manager, member of the board of managers or equivalent executive of a limited liability company or employee of, or independent contractor for or in any other capacity or position with any entity other than the Company; provided however, that this exclusion shall not apply to Loss resulting from any such Claim to the extent that: i. such Claim is based on the service of any of the Directors and Officers as a director, officer, trustee, governor, executive director or similar position of any Outside Entity where such service is with the knowledge and consent of the Company; and ii. such Outside Entity is not permitted or required by law to provide indemnification to such Directors and Officers; and Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 9 of 28 Page ID #:5506 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 6 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 iii. such Loss is not covered by insurance provided by any of the Outside Entity’s insurer(s); k. alleging, based upon, arising out of, attributable to, directly or indirectly resulting from, in consequence of, or in any way involving: i. any prior or pending litigation or administrative or regulatory proceeding, demand letter or formal or informal governmental investigation or inquiry filed or pending on or before the Continuity Date; or ii. any fact, circumstance, situation, transaction or event underlying or alleged in such litigation or administrative or regulatory proceeding, demand letter or formal or informal governmental investigation or inquiry; l. alleging, based upon, arising out of, attributable to, directly or indirectly resulting from, in consequence of, or in any way involving, any Wrongful Act, fact, circumstance or situation which any of the Insureds had knowledge of prior to the Continuity Date where such Insureds had reason to believe at the time that such known Wrongful Act could reasonably be expected to give rise to such Claim; (Ex. A, pp. 24-25.) Exclusion C(1)(j) is modified by Endorsement 13 to the Policy, which states: Section C., EXCLUSIONS, subsection 1., paragraph j„ subparagraph ii. is replaced by: ii. such Outside Entity is not permitted or required by law to provide indemnification to such Directors and Officers, or is unable to indemnify such Directors and Officers as a result of Financial Impairment; and Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 10 of 28 Page ID #:5507 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 7 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 For the purposes of this endorsement Financial Impairment means the status of the Outside Entity resulting from (1) the appointment by any state or federal official, agency or court of any receiver, conservator, liquidator, trustee, rehabiiitator or similar official to take control of, supervise, manage or liquidate the Outside Entity, or (2) in the event a bankruptcy proceeding shall be instituted by or against the Outside Entity, the Outside Entity becoming a debtor-in-possession. All other terms and conditions of this Policy remain unchanged. (Ex. A, p. 41.) Endorsement 1 to the Policy contains an allocation provision (“Allocation Provision”), which states: O. ALLOCATION 1. In the event the Insurer has the duty to defend a Claim under any Coverage Section in which both Loss that is covered by the applicable Coverage Section and loss which is not covered by the applicable Coverage Section is incurred, either because such Claim includes both covered and uncovered matters or because such Claim is made against both covered and uncovered parties, then: a. this Policy shall pay one hundred percent (100%) of Costs, Charges and Expenses incurred by such Insured on account of such Claim; and b. there shall be a fair and equitable allocation of any remaining loss incurred by such Insured on account of such Claim between covered Loss and uncovered loss based upon the relative legal and financial exposures and the relative benefits obtained. Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 11 of 28 Page ID #:5508 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 8 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 (Ex. A, p. 29.) B. The Complaint in the Helinet Action On March 23, 2016, Helinet Aviation Services, LLC (“Helinet”) filed a lawsuit entitled Helinet Aviation Services, LLC v. Magocsi, et al. (“Helinet Action”) against Defendants for: (1) breach of duty of loyalty; (2) interference with contractual relations; (3) interference with prospective economic relations; (4) conspiracy; (5) conversion; (6) civil claim for violation of Penal Code section 502; (7) breach of contract; and (8) unfair competition. CNC was named as a defendant on the causes of action for interference with contractual relations; interference with prospective economic relations; conspiracy; and unfair competition. (Complaint in the Helinet Action, Ex. B.) The cause of action for unfair competition alleges in ¶ 63 that “Defendants have and continue to solicit and seek business from Plaintiff’s existing clients through their utilization, divulging and disclosure of Plaintiff’s Company Information, continued efforts to interfere with existing contracts . . ..” (Ex. B, p. 16.) C. Scottsdale’s Handling of the Helinet Action In an April 18, 2016 e-mail, Scottsdale advised Defendants that it would defend the Helinet Action, but it did not cite Blue Ridge; it did not cite the Allocation Provision; it did not expressly reserve the right to seek reimbursement of any settlement payment; nor did it expressly reserve the right to seek reimbursement of any defense costs. (April 18, 2016 e-mail from Emil Soskin, Ex. C.) On May 19, 2016, Scottsdale’s coverage counsel sent a letter to Joseph Preis confirming that Scottsdale would provide a defense through Ropers Majeski Kohn & Bentley (“Ropers”). (May 19, 2016 letter from Keith A. Little to Mr. Preis, Ex. D, p. 8.) Scottsdale’s letters did not cite Blue Ridge or the Allocation Provision; expressly reserve the right to seek reimbursement of any settlement payment; or expressly reserve the right to seek reimbursement of any defense costs. (Ex. D.) Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 12 of 28 Page ID #:5509 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 9 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 Counsel for plaintiff in the Helinet Action made a policy limits demand of $720,000 in a February 10, 2017 letter. (February 10, 2017 letter from Douglas R. Painter to Stephen Erigero, Ex. E, p. 3.) The letter alleged that the “Individual Defendants breached numerous legal obligations and duties while employed by Helinet and in forming and operating CNC.” (Ex. E, p. 3.) In a February 13, 2017 status report, written to Scottsdale in the midst of settlement negotiations in the Helinet Action, Mr. Erigero opined that it would cost over $600,000 more in defense fees and costs to take the Helinet Action through trial. (February 13, 2017 status report from Mr. Erigero to Scottsdale, Ex. F, p. 3.) Mr. Erigero also opined that the Defendants had a 70% chance of prevailing against Helinet. (Ex. F, p. 2.) A February 15, 2017 letter from Darius Kandawalla of Bailey Cavalieri to Mr. Preis advised that, in the opinion of Scottsdale, “very little (if any) indemnity is even potentially available.” (February 15, 2017 letter from Darius Kandawalla to Mr. Preis, Ex. G, p. 6.) Nonetheless, the letter stated that Scottsdale would contribute at least $300,000 to any settlement of the Helinet Action. (Ex. G, p. 6.) Mr. Kandawalla justified Scottsdale’s position based on the Allocation Provision: Finally, even if a small portion of any settlement was arguably covered, Scottsdale could never be liable for 100% of the Insureds’ contemplated settlement, as you suggest. Rather, any settlement of this matter would need to be properly allocated between covered and uncovered matters. To that end. Section O. of the Policy’s General Terms and Conditions Section, as amended by Endorsement No. 1, provides as follows: In the event the Insurer has the duty to defend a Claim under any Coverage Section in which both Loss that is covered by the applicable Coverage Section and loss which is not covered by the applicable Coverage Section is incurred, either because such Claim includes both covered and uncovered matters or because Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 13 of 28 Page ID #:5510 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 10 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 such Claim is made against both covered and uncovered parties then: a. this Policy shall pay one hundred percent (100%) of Costs, Charges and Expenses incurred by such Insured on account of such Claim; and b. there shall be a fair and equitable allocation of any remaining loss incurred by such Insured on account of such Claim between covered Loss and uncovered loss based upon the relative legal and financial exposures and the relative benefits obtained. (emphasis in original.) (Ex. G, pp. 5-6.) Mr. Kandawalla did not reserve the right to seek reimbursement of any defense costs. (Ex. G.) D. The Instant Action On April 27, 2017, Scottsdale filed the instant action against Defendants. (Scottsdale’s Complaint, Ex. H.) The Complaint sought recoupment based on the Allocation Provision (quoted in ¶ 20) and makes no mention of Blue Ridge or any quasi-contractual right to recoupment. (Ex. H.) The Complaint only specifically referenced one exclusion in the Policy, Exclusion C(1)(j) of the Policy, in ¶¶ 18, 30- 31. (Ex. H, pp. 6 and 8.) Scottsdale’s First Amended Complaint (“FAC”) in the instant action filed on June 9, 2017 sought recoupment based on the Allocation Provision (quoted in ¶ 23) and makes no mention of Blue Ridge or any quasi-contractual right to recoupment. (Scottsdale’s FAC, Ex. I.) The FAC again only specifically referenced one exclusion in the Policy, Exclusion C(1)(j) of the Policy, in ¶¶ 21, 33-34. (Ex. I, pp. 6 and 9.) On July 11, 2018, CNC propounded Interrogatories, Set One, to Scottsdale. (CNC’s Interrogatories, Set One, to Scottsdale, Ex. J.) Interrogatory No. One reads: Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 14 of 28 Page ID #:5511 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 11 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 State all facts that support YOUR contention in Paragraph 45 of the FAC, that Scottsdale is entitled to recoup the Settlement Payment from the Insureds and/or that the Insureds are obligated to reimburse Scottsdale for the Settlement Payment. (Ex. J, p. 4.) In Scottsdale’s Responses to Interrogatories, Set One, served on August 14, 2018, Scottsdale’s response to Interrogatory No. One, was: Scottsdale objects to this interrogatory as vague, ambiguous, overly broad, and unduly burdensome. Scottsdale also objects to the extent that this interrogatory seeks information that is neither relevant to any claims or defenses of a party, nor proportional to the needs of the case. In addition, the interrogatory is not reasonably calculated to lead to the discovery of admissible evidence. Scottsdale further objects on the grounds that this interrogatory appears to be seeking confidential, trade secret, and/or proprietary business information/documents, and/or information protected from disclosure by the attorney-client privilege and the work product doctrine. (Scottsdale’s Responses to CNC Technologies, LLC’s Interrogatories, Set One, Ex. K, p. 5.) In Scottsdale’s Supplemental Responses to Interrogatories, Set One, propounded by CNC in this action, Scottsdale provided a supplemental response to Interrogatory No. One. The supplemental response was over 5 pages long. (Scottsdale’s Supplemental Responses to CNC Technologies, LLC’s Interrogatories, Set One, Ex. L, pp. 5-11.) Nowhere in Scottsdale’s supplemental response to Interrogatory No. One does Scottsdale contend that it was seeking reimbursement under Blue Ridge. (Ex. L.) The first time that Scottsdale even referred to Blue Ridge was in its Response in Opposition to Defendants’ Motion for Partial Summary Judgment which was filed Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 15 of 28 Page ID #:5512 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 12 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 on September 17, 2018. (Scottsdale’s Response in Opposition to Defendants’ Motion, Ex. M.) Scottsdale next raised Blue Ridge in its Memorandum of Points and Authorities in Support of Motion for Summary Judgment, or in the Alternative, Partial Summary Judgment filed on October 22, 2018. (Scottsdale’s Memorandum of Points and Authorities in Support of Motion, Ex. N.) Scottsdale also offered the Declaration of Kathryn Purwyn in Support of Motion for Summary Judgment, or in the Alternative, Partial Summary Judgment filed on October 22, 2018. (Declaration of Kathryn Purwyn, Ex. O.) Ms. Purwyn stated, in part: 3. The vast majority of Helinet’s allegations against the Defendants were based on alleged wrongdoing committed by the Individual Defendants beginning in 2015 through late January 2016, while the Individual Defendants were still employed by Helinet. I do not recall any evidence produced in discovery that showed wrongdoing committed by the Individual Defendants after they left Helinet. (Ex. O, p. 3.) That declaration made no attempt to explain why Helinet had sued CNC if the only wrongful conduct was by the individuals before they were even affiliated with CNC. In its Reply Brief in Support of Scottsdale’s own Motion for Summary Judgment, or in the Alternative, Partial Summary Judgment, Scottsdale argued for the first time that the Allocation Provision was not applicable, stating: Finally, Defendants’ argument that “the allocation provision does not give Scottsdale the right to seek reimbursement and is ambiguous as to whether [the Parties] had to reach an agreement as to allocation before a settlement offer could be made” is misplaced because none of the Settlement Payment was for covered claims and the allocation Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 16 of 28 Page ID #:5513 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 13 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 provision in this Policy pertains only to the duty to defend and not the duty to indemnify. [emphasis added] (Scottsdale’s Reply Brief, Ex. P, pp. 5-6.) This is a stunning admission, because the Complaint and FAC were predicated solely on the Allocation Provision, and the duty to defend was never at issue. Moreover, the Allocation Provision clearly does, by its express terms, apply to the duty to indemnify, which is one of the many reasons why Blue Ridge does not apply here. As evidenced by Scottsdale’s Response to Defendants’ Statement of Additional Uncontroverted Facts and Conclusions of Law in support of its Motion for Summary Judgment, or in the Alternative, Partial Summary Judgment, Defendants raised 47 additional material facts, many of which were disputed by Plaintiff. (Scottsdale’s Response to Defendants’ Statement of Additional Uncontroverted Facts and Conclusions of Law, Ex. Q.) In its Order GRANTING Plaintiff’s Motion for Summary Judgment (Doc. No. 132.), the Court made no mention of Scottsdale’s duty to defend the Helinet Action, which was proper, because Scottsdale never denied that it had a duty to defend the Helinet Action. (Order GRANTING Plaintiff’s Motion for Summary Judgment, Ex. R.) The Court did make the following ruling regarding the Allocation Provision: At the November 19, 2018 hearing, Defendants argued that the Blue Ridge analysis is inapposite, as an analysis of the allocation provision of the contract demonstrates “it is legally impossible to find that [Plaintiff is] entitled to reimbursement of all the settlement.” The allocation provision of the contract, however, relates not to the duty to indemnify, but the duty to defend, (Doc. No. 139-1 at 29-30), and the Blue Ridge analysis is thus appropriate. (Ex. R, p. 10) Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 17 of 28 Page ID #:5514 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 14 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 In the Judgment signed by the Court on November 27, 2018, there is no mention of the Helinet Action or coverage under the Policy. (Judgment, Ex. S.) III. ARGUMENT A. Scottsdale Failed to Allege or Prove Breach of Contract Scottsdale is relying on California Civil Code § 3289, subdivision (b) to claim 10% pre-judgment interest. California Civil Code § 3289, subdivision (b) states: (b) If a contract entered into after January 1, 1986, does not stipulate a legal rate of interest, the obligation shall bear interest at a rate of 10 percent per annum after a breach. The fatal flaw with Scottsdale’s argument is that Scottsdale is not entitled to use California Civil Code § 3289 because Scottsdale has never alleged, much less proved, that Defendants breached any contract. Evanston Ins. Co. v. OEA, Inc., 566 F.3d 915 (2009) does not support Scottdale’s claim under California Civil Code § 3289 because the insurer in that case sued the insured for breach of contract, intentional misrepresentation, and rescission of insurance contract. Id., at 918. Fireman's Fund Ins. Co. v. Allstate Ins. Co., 234 Cal.App.3d 1154 (1991); Esgro Central, Inc. v. General Ins. Co., 20 Cal.App.3d 1054 (1971); and Hartford Accident & Indem. Co. v. Sequoia Ins. Co., 211 Cal.App.3d 1285 (1989) also do not support Scottsdale’s position because either breach of contract was alleged, or the losing party failed to raise California Civil Code § 3289’s breach requirement. B. The Allocation Provision in the Policy Trumps the Right to Reimbursement Under Blue Ridge Scottsdale could not rely on Blue Ridge’s quasi-contractual right to seek reimbursement of a settlement payment because of the Policy’s Allocation Provision. An express allocation provision clearly cannot be trumped by a quasi-contractual right. Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 18 of 28 Page ID #:5515 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 15 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 Scottsdale’s position that the Allocation Provision is only applicable to defense costs is contrary to the position Scottsdale’s coverage counsel took on February 15, 2017 and the position that Scottsdale took in the instant action for over a year. Scottsdale’s position is also clearly incorrect. Paragraph a. of the Allocation Provision says the Policy will pay 100% of “Costs, Charges and Expenses”, i.e., defense costs. Since paragraph a. of the Allocation Provision clearly applies to defense costs, paragraph b.’s requirement of a “fair and equitable allocation of any remaining loss” would be made superfluous by Scottsdale’s interpretation of the Allocation Provision. Under Scottsdale’s position, there would be no “remaining loss” to which to apply paragraph b. since paragraph a. already applies to 100% of the defense costs. Even Scottsdale’s coverage counsel, Mr. Kandawalla clearly knew this as he emphasized paragraph b. in his February 15, 2017 letter belatedly seeking allocation of any settlement payment. Under California law, an interpretation of the policy that renders words redundant or superfluous violates all rules of policy construction. ACL Technologies, Inc. v. Northbrook Property & Casualty Ins. Co., 17 Cal.App.4th 1773, 1785, 1786 (1993); and Mirpad, LLC v. California Ins. Guarantee Assn., 132 Cal.App.4th 1058, 1073 (2005). Scottsdale certainly is aware it was required to pay 100% of defense costs under the Allocation Provision because it has never even claimed a quasi-contractual right to reimbursement of defense costs solely expended on any noncovered claims under Buss v. Superior Court, 16 Cal.4th 35, 49 (1997) (“Buss”), despite Scottsdale’s mantra throughout this action that there were no covered claims in the Helinet Action. C. The Amount Due Under the Allocation Provision Is Uncertain California Civil Code § 3287 states in part: (a) Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 19 of 28 Page ID #:5516 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 16 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day . . .. Damages are deemed certain or capable of being made certain within the provisions of subdivision (a) of California Civil Code § 3287 where there is essentially no dispute between the parties concerning the basis of computation of damages if any are recoverable but where their dispute centers on the issue of liability giving rise to damage. Esgro Central, Inc. v. General Ins. Co., 20 Cal. App. 3d 1054, 1060 (1971). Prejudgment interest is not permitted where the amount of damage, as opposed to the determination of liability, depends upon a judicial determination based upon conflicting evidence. Esgro, at p. 1062. The certainty requirement of California Civil Code § 3287, subdivision (a) has been reduced to two tests: (1) whether the debtor knows the amount owed or (2) whether the debtor would be able to compute the damages. Hartford Accident & Indemnity Co. v. Sequoia Ins. Co., 211 Cal.App.3d 1285, 1307 (1989). The Allocation Provision requires allocation based on “relative legal and financial exposures and the relative benefits obtained.” If this matter had been permitted to go to trial, as the insurer seeking reimbursement, Scottsdale had the burden of proof. Buss, 16 Cal.4th at 39. There would certainly have been conflicting evidence as to how much it would have cost to take the Helinet Action to trial and a possible appeal and the probability and amount of any covered judgment, which would be Scottsdale’s relative legal and financial exposures, versus the probability and amount of any uncovered judgment, which would be Defendants’ relative legal and financial exposures. Defendants had no way of knowing what amount was owed, if any, to Scottsdale. Scottsdale has not offered evidence as to how much it contends it would have cost to take the Helinet Action to trial and a possible appeal, or the probability and amount of any uncovered judgment that the plaintiff in the Helinet Action could have obtained. Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 20 of 28 Page ID #:5517 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 17 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 In fact, the evidence that Defendants presented to this Court shows that defense hired by Scottsdale to defend the Helinet Action, Stephen Erigero, opined that it would cost over $600,000 more in defense fees and costs to take the Helinet Action through trial. (Doc. No. 142, p. 47.) Mr. Erigero also opined that the Defendants had a 70% chance of prevailing in Helinet Action. (Doc. No. 142, p. 48.) In other words, Scottsdale was almost certain to incur about $600,000 more in defense costs if the Helinet Action did not settle, for which Scottsdale had no right of reimbursement, while Defendants had a 70% chance of paying nothing. Moreover, Scottsdale’s coverage counsel offered $300,000 toward the settlement of the Helinet Action based on the Allocation Provision, even though Scottdale allegedly believed “very little (if any) indemnity is even potentially available.” Based on covered defense costs of about $600,000, which Scottsdale would have to pay 100% of under the Allocation Provision, Scottsdale’s offer to pay $300,000 and the settlement of $600,000, any fair allocation of the settlement payment under the Allocation Provision would have been far less than the $600,000 judgment Scottsdale obtained. D. Scottsdale Has Waived and/or Is Estopped to Assert the Right to Pre-Judgment Interest Waiver is the intentional relinquishment of a known right after knowledge of the facts. Roesch v. De Mota, 24 Cal.2d 563, 572 (1944). Waiver may be implied through conduct manifesting an intention to waive. Gould v. Corinthian Colleges, Inc., 192 Cal.App.4th 1176, 1179 (2011). The doctrine of estoppel is codified in California Evidence Code § 623, which states: When a party has, by his own statement or conduct, intentionally and deliberately led another to believe a particular thing true and to act upon Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 21 of 28 Page ID #:5518 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 18 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 such belief, he is not, in any litigation arising out of such statement or conduct, permitted to contradict it. Four elements must ordinarily be proved to establish an equitable estoppel: (1) the party to be estopped must know the facts, (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel had the right to believe that it was so intended, (3) the party asserting the estoppel must be ignorant of the true state of the facts, and (4) he must rely upon the conduct to his injury. DRG/Beverly Hills, Ltd. v. Chopstix Dim Sum Café & Takeout III, Ltd. 30 Cal.App.4th 54, 59 (1994). Scottsdale has waived the right to seek pre-judgment interest because Scottsdale affirmatively sought the right to seek reimbursement under the Allocation Provision starting on February 15, 2017, and only as to $300,000 of the settlement. Scottsdale did not assert the right to seek reimbursement under Blue Ridge until Scottsdale raised Blue Ridge in its Response in Opposition to Defendants’ Motion for Partial Summary Judgment filed September 17, 2018. This was one year, five months and 21 days after filing its Complaint on April 27, 2017; one year, seven months and 2 days after demanding allocation under the Allocation Provision on February 15, 2017; and two years, five months and 30 days after initially agreeing to defend on April 18, 2016. Scottsdale’s relinquishment of its alleged rights under Blue Ridge was intentional because Scottsdale originally asserted the Allocation Provision as the basis for its claim for reimbursement, even before the Helinet Action was settled. There were no new facts allegedly discovered by Scottsdale to justify its abandonment of the Allocation Provision, just Scottdale’s incorrect interpretation of the Policy that renders half of the Allocation Provision superfluous in violation of every rule of policy interpretation. See ACL Technologies, Inc. v. Northbrook Property & Casualty Ins. Co., 17 Cal.App.4th 1773, 1785, 1786 (1993); and Mirpad, LLC v. California Ins. Guarantee Assn., 132 Cal.App.4th 1058, 1073 (2005). Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 22 of 28 Page ID #:5519 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 19 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 Scottsdale is estopped from seeking prejudgment interest because Defendants had every reason to believe and could rely on the fact that Scottsdale was apparently only seeking $300,000 at most. E. Scottsdale Was Not Entitled to Full Reimbursement Because the Settlement Was for Potentially Covered Claims Even under Blue Ridge, Scottsdale was not entitled to full reimbursement of the settlement in the Helinet Action because the settlement was for potentially covered claims. Defendants and CNC were sued in the Helinet Action for alleged wrongful acts that occurred when the Policy was in effect. Under Insuring Clause 1, the individual Defendants were entitled to coverage under the Policy. Under Insuring Clauses 2 and 3, CNC was entitled to coverage under the Policy. Even Scottsdale’s coverage counsel, Mr. Kandawalla, never contended that the settlement in the Helinet Action would be for claims that were not even potentially covered. The only extrinsic evidence Scottsdale offered to try to show the Helinet Action only alleged uncovered claims, the Declaration of Kathryn Purwyn, actually supports Defendants’ position since she admitted the “vast majority of Helinet’s allegations against the Defendants were based on alleged wrongdoing committed by the Individual Defendants beginning in 2015 through late January 2016, while the Individual Defendants were still employed by Helinet.” In other words, even Ms. Purwyn was contending that some of the alleged wrongful acts were committed by the Defendant during the time the Policy was in effect. F. The Claims Against CNC Were Not Excluded The only exclusion in the Policy Scottsdale appears to have to really relied on to deny coverage is Exclusion C(1)(j). Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 23 of 28 Page ID #:5520 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 20 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 The exclusion clearly was meant to apply to claims for wrongful conduct while the individual Defendants were working for someone other than CNC. Exclusion C(1)(j), however, is different from Exclusion C(1)(k) and Exclusion C(1)(l), in that it does not contain the “alleging, based upon, arising out of, attributable to, directly or indirectly resulting from, in consequence of, or in way involving” language of the other two exclusions. In other words, Exclusion C(1)(j) applies to claims “alleging, based upon, arising out of, attributable to, directly or indirectly resulting from, in consequence of, or in way involving” wrongful acts done while the individual Defendants were working for Helinet, but does not apply to claims for wrongful acts done while at CNC, even if the claims are “alleging, based upon, arising out of, attributable to, directly or indirectly resulting from, in consequence of, or in way involving” wrongful acts done while the individual Defendants were working for Helinet. Any attempt to argue the “arising out” of language should be read into Exclusion C(1)(j) would violate California law that an interpretation of the policy that renders words redundant or superfluous violates all rules of policy construction since the “arising out” of language was put into Exclusions C(1)(k) and (l). See ACL Technologies, Inc. v. Northbrook Property & Casualty Ins. Co., 17 Cal.App.4th 1773, 1785, 1786 (1993); and Mirpad, LLC v. California Ins. Guarantee Assn., 132 Cal.App.4th 1058, 1073 (2005). Exclusion C(1)(j) is consistent with the reasonable expectations of the Defendants. Companies often sue former employees who join or form a competing company. It may be unreasonable to expect coverage for wrongful acts done while employed by the former company. On the other hand, an employee who has left a company would expect to be covered if sued by the former employer out of spite or to prevent the former employer Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 24 of 28 Page ID #:5521 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 21 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 from legitimately competing. If the alleged wrongful acts occurred while employed by the new employer, an insured would have a reasonable expectation of coverage. Protection of the insured’s reasonable expectation of coverage underlies the rules of construction dictating that courts construe exclusionary language against the insurer. Equitable Life Assurance Society v. Berry, 212 Cal.App.3d 832, 837 (1989). See also AIU Ins. Co. v. Superior Court, 51 Cal.3d 807, 822 (1990). Scottsdale cannot seriously argue that it is surprised that the former employer of the individual Defendants would sue to prevent them from competing, especially on a policy written for new company. If Scottsdale wanted to preclude coverage for claims by a former employer, Scottsdale should have written such an exclusion into the Policy. G. Scottsdale Is Improperly Seeking to Substantively Amend the Judgment to Find No Coverage Scottsdale seeks to fundamentally change the Judgment by adding the words “because the business and management indemnity policy issued by Scottsdale to Defendants does not cover the Helinet Action. Scottsdale has never contended that it did not have a duty to defend the Helinet Action and the Court’s Order GRANTING Plaintiff’s Motion for Summary Judgment (Doc. No. 132.) made no mention of Scottsdale’s duty to defend the Helinet Action. In the Judgment signed by the Court on November 27, 2018, there is also no mention of the Helinet Action or coverage under the Policy. Furthermore, Scottsdale has waived and/or is estopped from arguing it had no duty to defend the Helinet Action for the same reasons Scottsdale has waived and/or is estopped from arguing Blue Ridge. In fact, Scottsdale has never argued it had had no duty to defend the Helinet Action. Scottsdale has never sought reimbursement of defense costs under Buss. Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 25 of 28 Page ID #:5522 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 22 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 Furthermore, in its February 15, 2017 letter, Scottsdale sought allocation of the settlement under the Allocation Provision, which essentially conceded that Scottsdale would pay 100% of defense costs. H. The Court May Not Have Subject Matter Jurisdiction Federal courts presume that federal courts lack jurisdiction unless the contrary appears affirmatively from the record, so that the party asserting federal jurisdiction has the burden of establishing it when it is challenged. Kanter v. Warner–Lambert Co., 265 F.3d 853, 857 (9th Cir. 2001). The party seeking to invoke the district court’s diversity jurisdiction always bears the burden of both pleading and proving diversity jurisdiction. FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 231, 110 S.Ct. 596 (1990). An appellate court must examine de novo whether subject matter jurisdiction existed. A–Z Int’l v. Phillips, 323 F.3d 1141, 1145 (9th Cir. 2003). A limited liability corporation is “a citizen of every state of which its owners/members are citizens.” Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006). In Van Daele Development Corp. v. Steadfast Ins. Co., Case No. EDCV 12- 01294 VAP (SPx), 2012 WL 12882060 (C.D. Cal., September 5, 2012), this Court noted: The Court has an independent obligation to ensure that its subject- matter jurisdiction has been invoked properly. Fed. R. Civ. P. 12(h)(3). A party may invoke the Court’s diversity jurisdiction, under 28 U.S.C. § 1332, in “all civil actions where the matter in controversy exceeds ... $75,000 ... and is between [c]itizens of different States.” 28 U.S.C. § 1332(a)(1). Where subject-matter jurisdiction is based on 28 U.S.C. § 1332, complete diversity of citizenship is required. Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373 (1978). In other words, a court lacks subject-matter jurisdiction “unless each defendant is a citizen of a different State from each plaintiff.” Id. For the purpose of Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 26 of 28 Page ID #:5523 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 23 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 establishing diversity jurisdiction, a corporation is a citizen of both the state in which it is incorporated and the state in which it maintains its principal place of business. See 28 U.S.C. § 1332(c)(1). A limited liability corporation is “a citizen of every state of which its owners/members are citizens.” Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006). Id., at *1. In Century Surety Co. v. Hicks, Case No. EDCV 12–02145–VAP (SPx), 2012 WL 12964690 (C.D. Cal., December 13, 2012), this Court acknowledged that it must raise the issue of jurisdiction sua sponte. Whether or not a party questions a federal court’s subject matter jurisdiction, the district court must raise and address the issue sua sponte. See FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 230–31 (1990). Id., at *1. It is a well-settled regarding contention of law that a party cannot waive, consent to, or agree to overcome a lack of federal subject matter jurisdiction. Mansfield, Coldwater & Lake Michigan Ry. v. Swan, 111 U.S. 379, 383 (1884). Scottsdale has alleged, but never proven that diversity of citizenship exists. Therefore, this Court may have no jurisdiction to issue the Judgment, or to now amend the judgment. Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 27 of 28 Page ID #:5524 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BROWER LAW GROUP A PROFESSIONAL CORPORATION 24 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTION TO AMEND THE JUDGMENT 4815-5447-6165, v. 1 IV. CONCLUSION For the reasons stated above, Defendants respectfully request that this Court find that Scottsdale’s Motion lacks merit and deny the Motion. Dated: January 7, 2019 By: BROWER LAW GROUP A Professional Corporation /s/ Steven Brower Steven Brower Attorneys for Defendants and Counterclaimant Case 2:17-cv-03190-VAP-E Document 167 Filed 01/07/19 Page 28 of 28 Page ID #:5525