1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 SOUTHERN DISTRICT OF CALIFORNIA 8 9 CITIZENS INSURANCE COMPANY Case No.: 20-cv-1075-MMA (AGS) OF AMERICA, 10 ORDER GRANTING DEFENDANTS’ Plaintiff, 11 MOTION TO STAY v. 12 CHIEF DIGITAL ADVISORS, et al., [Doc. No. 29] 13 Defendants. 14

15 CATHY PARKES, et al., 16 Counter Claimants, 17 v. 18 CITIZENS INSURANCE COMPANY 19 OF AMERICA, 20 Counter Defendant. 21

22 On October 26, 2020, Cathy Parkes (“Parkes”) and Chief Digital Advisors 23 (“CDA”, and collectively “Defendants”) filed a motion to stay this action pending 24 resolution of related underlying litigation.1 Plaintiff Citizens Insurance Company of 25 26 27 1 Defendant Assessment Technologies Institute, LLC (“ATI”) did not join in or oppose the motion to stay. Because ATI is—at this juncture and for this purpose—a passive party, the Court’s references to 28 1 America (“CICA”) filed an opposition, to which Defendants replied. See Doc. Nos. 30, 2 31. The Court found the matter suitable for disposition on the papers and without oral 3 argument pursuant to Federal Rule of Civil Procedure 78(b) and Civil Local Rule 7.1.d.1. 4 See Doc. No. 32. For the reasons set forth below, the Court GRANTS Defendants’ 5 motion to stay. 6 I. BACKGROUND 7 The facts are set forth more fully in the Court’s order denying CICA’s motion to 8 dismiss, which the Court incorporates by reference here. See Doc. No. 33. The Court 9 will nonetheless provide the following relevant summary. On August 27, 2019, ATI filed 10 a complaint against Parkes in the United States District Court for the District of Kansas 11 (the “Kansas Action”). See Case No. 19-CV-2514-JAR-KGG. ATI alleges copyright 12 infringement, trade secret misappropriation, breach of contract, and unfair competition. 13 See Doc. No. 13 (“CC”) ¶ 7. 14 CICA insures CDA under a Businessowners Liability Insurance Coverage Policy 15 (the “Policy”). See Doc. No. 1 (“Compl.”) ¶ 10; CC ¶ 19. Although Parkes is not 16 specifically named on the Policy, ATI alleges that Parkes does business as Level Up 17 RN—one of CDA’s lines of business. See Doc. No. 29-1 at 6. Pursuant to the Policy, 18 Parkes tendered her defense in the Kansas Action to CICA. See id. CICA agreed to 19 provide a full defense while reserving its rights.2 See id. at 7. 20 On June 12, 2020, CICA initiated this action against CDA, Parkes d/b/a Level Up 21 RN, and ATI. See Compl. CICA seeks declaratory relief establishing its coverage 22 obligations in connection with the Kansas Action. See id. In response, Defendants filed 23 a Countercomplaint against CICA and The Hanover Insurance Group, Inc.3 See CC. 24

25 26 2 It is undetermined whether Parkes, and thus her defense against the Kansas Action, are covered by the Policy. See Doc. No. 30 at 7. 27 3 As the Court explained in its order denying CICA’s motion to dismiss, it considers CICA and The 28 1 They request, among other things, a declaratory judgment that CICA must in fact defend 2 and indemnify Parkes. See id. 3 On November 24, 2020, the Court denied CICA’s motion to dismiss, or in the 4 alternative to strike the fifth and sixth counterclaims. See Doc. No. 33. Now Defendants 5 ask the Court to stay this case pending resolution of the Kansas Action. 6 II. LEGAL STANDARD 7 “A district court has discretionary power to stay proceedings in its own court.” 8 Lockyer v. Mirant Corp.,

(9th Cir. 2005) (citing Landis v. N. Am. 9 Co.,

(1936)). “[T]he power to stay proceedings is incidental to the 10 power inherent in every court to control the disposition of the causes on its docket with 11 economy of time and effort for itself, for counsel, and for litigants.” Landis,

254. A district court may stay a case “pending resolution of independent proceedings 13 which bear upon the case,” even if those proceedings are not “necessarily controlling of 14 the action before the court.” Leyva v. Certified Grocers of Cal., Ltd.,

, 863– 15 64 (9th Cir. 1979) (citations omitted). 16 In determining whether to grant a stay, courts in the Ninth Circuit weigh the 17 “competing interests which will be affected by the granting or refusal to grant a stay,” 18 including: 19 [1] the possible damage which may result from the granting of a stay, [2] the 20 hardship or inequity which a party may suffer in being required to go 21 forward, and [3] the orderly course of justice measured in terms of the simplifying or complicating of issues, proof, and questions of law which 22 could be expected to result from a stay. 23 24 Lockyer,

(quoting CMAX, Inc. v. Hall,

(9th Cir. 25 1962) (identifying the Landis factors)). “‘[I]f there is even a fair possibility that the stay . 26 . . will work damage to someone else,’ the stay may be inappropriate absent a showing by 27 the moving party of ‘hardship or inequity.’” Dependable Highway Express, Inc. v. 28 Navigators Ins. Co.,

(9th Cir. 2007) (quoting Landis,

255). The burden is on the movant to show that a stay is appropriate. See Clinton v.

U.S. 681, 708 (1997) (citing Landis,

). 3 III. DISCUSSION 4 Defendants seek to stay this case pending conclusion of the Kansas Action. 5 Accordingly, the Court analyzes each Landis factor in turn. 6 1. Possible Damage from Granting a Stay 7 CICA urges the Court to deny the motion because it is actively defending Parkes in 8 the Kansas Action and seeks a timely determination that it owes no coverage and thus 9 need not continue providing a defense. Specifically, it says that it is incurring a 10 “continuing harm in the form of ongoing payments to defend.” Doc. No. 30 at 4. As an 11 initial matter, Defendants acknowledge that CICA will be entitled to reimbursement of all 12 costs should they ultimately succeed in this coverage action. See Doc. No. 29-1 at 10. 13 Moreover, “courts in this circuit have concluded that delaying a determination of an 14 insurer’s coverage obligations does not constitute damage under the factors set forth in 15 Landis.” Hudson Specialty Ins. Co. v. Hofer, No. 3:20-cv-00852-BEN-RBB,

Dist. LEXIS 152228, at *4 (S.D. Cal. Aug. 21, 2020) (first citing Safeco Ins. Co of Am. v. 17 Nelson, 20-cv-0211-MMA-DEB,

(S.D. Cal. Jul. 7, 2020); 18 and then citing Zurich Am. Ins. Co. v. Omnicell, Inc., No. 18-CV-05345-LHK,

Dist. LEXIS 22907 (N.D. Cal. Feb. 12, 2019)). “These courts reasoned that because the 20 duty to defend is both an obligation of insurers and a ‘cost of doing business,’ a stay in 21 these circumstances does not equate to damage.”

The Court of course agrees with 22 this line of reasoning. See Safeco Ins. Co. of Am.,

, at *14. 23 CICA’s continued defense is not damage under Landis. And CICA does not allege, nor 24 does the Court find, that any other damage will result from a stay. Accordingly, this 25 factor weighs in favor of granting a stay. 26 2. Hardship or Inequity 27 Defendants cite two particularly compelling reasons why proceeding forward with 28 this litigation will constitute hardship upon them. First, they contend they will be forced 1 to litigate on two fronts. See Doc. No. 29-1 p. 15 (“[S]imultaneously defend[ing] two 2 lawsuits [] will have a crippling effect on Chief Digital Advisors.”). Second, Defendants 3 assert that “because of the significant overlap of issues in the two suits, [they] will be 4 subjected to the possibility of inconsistent rulings in the two actions as well as the 5 possibility that adverse findings in the present coverage action will be binding in the 6 [Kansas] Action but beneficial rulings will not.”

7 CICA is correct that “being required to defend a suit, without more, does not 8 constitute a ‘clear case of hardship or inequity’ within the meaning of Landis.” Lockyer, 9

. But here there is more. This insurance coverage case is fairly 10 complex. It involves several claims and counterclaims, and numerous exclusions that 11 implicate issues in the Kansas Action. For example, CICA’s first and seventh causes of 12 action seek to deny coverage on the basis that there was no “accident” or “occurrence” 13 within the meaning of the Policy. See Compl. ¶¶ 25, 67. But the Court must examine 14 Parkes’s conduct—which is directly before the court in the Kansas Action—in order to 15 determine whether it was “accidental” or qualifies as an “occurrence.” Similarly, in its 16 third and ninth causes of action, CICA asks the Court to decide whether Parkes’s conduct 17 occurred within the Policy period. See id. at ¶¶ 31, 77. The timing, however, will also be 18 decided in the Kansas Action as ATI must show that Parkes caused its injury. Moreover, 19 CICA’s sixth and twelfth causes of action seek to deny coverage on the basis that 20 exclusions are applicable. See Compl. ¶¶ 61, 111. CICA makes no attempt to narrow the 21 scope by alleging specific exclusions. Instead, CICA generally refers to all exclusions 22 contained in the Policy. See id. 23 Elsewhere in the Complaint, however, CICA specifically highlights the following 24 exclusions, which demonstrate how these two cases are intertwined: 25 a. Knowing violation of rights of another: “personal and advertising injury” 26 caused by or at the direction of the insured with the knowledge that the act 27 would violate the rights of another and would inflict “personal and advertising injury.” 28 1 . . . . 2

3 d. Infringement of Copyright, Patent, Trademark, or Trade Secret: “personal and advertising injury” arising out of the infringement of copyright, patent, 4 trademark, trade secret or other intellectual property rights. Under this 5 exclusion, such other intellectual property rights do not include the use of another’s advertising idea in your “advertisement”. However, this exclusion 6 does not apply to infringement, in your “advertisement”, of copyright, trade 7 dress, or slogan.

8 9 Compl. ¶¶ 22(a), (d). The Court previously determined that the former exclusion 10 involves an examination of Parkes’s conduct, which is directly at issue in the Kansas 11 Action. See Doc. No. 33 at 7–8. Also, the Kansas Action includes a claim for violation 12 of the Kansas Uniform Trade Secret Act. See Doc. No. 29-1at 12. This overlaps with the 13 latter exclusion identified above. These are just two examples. Nonetheless, it seems 14 inevitable that the Kansas Action and this coverage action will require similar fact 15 discovery, such as into the nature of Parkes’s conduct and the level of propriety of ATI’s 16 materials. Not only would this be duplicative, but should the cases proceed 17 simultaneously, there is a risk of inconsistent results on these disputed questions. 18 In opposition, CICA explains that coverage can be decided absent determination of 19 the issues identified above. See Doc. No. 30 at 8. It is true that at least one theory for 20 coverage denial may be independent of the Kansas Action issues—i.e., whether Parkes is 21 an insured under the Policy. See Doc. No. 30 at 7. But as explained above, this action as 22 a whole is largely duplicative of issues in the Kansas Action. The Court therefore 23 concludes that the overlapping factual and legal issues, coupled with the risk of 24 inconsistent results, weigh in favor of a stay. See Landis,

; see also 25 Safeco Ins.,

, at *14–15 (finding that the second Landis 26 factor weighs in favor of a stay because there were several policies and exclusions at 27 issue); James River Ins. Co. v. RV Tomlinson Constr., Inc.,

66582, at *10–11 (E.D. Cal. May 8, 2013) (finding that the second Landis factor weighs 1 in favor of a stay where “at least one factual issue identified [] is not merely a matter of 2 interpretation of the Policies”); cf. Hofer,

, at *5 3 (explaining that the lack of complexity of the coverage action—only involving only one 4 insurance policy and only one exclusion—undermines the second Landis factor). 5 3. Orderly Course of Justice 6 Finally, the third Landis factor requires the Court to assess the orderly 7 administration of justice that will be served by a stay. The Court has already explained 8 that there are factual issues that overlap with the Kansas Action. Avoiding inconsistent 9 rulings promotes judicial efficiency and supports a stay. Further, developing the facts in 10 the Kansas Action will assist the Court in ultimately determining the coverage issues. 11 Finally, “[t]here is a real risk that, were both actions to proceed, by the time this Court 12 resolved the issues of insurance coverage the underlying action could have reached a 13 critical juncture as well.” Safeco Ins.,

, at *18. “At which 14 point, a finding that either eliminated or limited [Parkes’s] coverage could derail the 15 efficient administration of the underlying action.”

As this Court has previously 16 explained: 17 Were the issue of insurance coverage before the same judge presiding over 18 the underlying action, that judge would be able to appropriately exercise 19 discretion to resolve the scope of coverage before proceeding to the merits and could do so in a manner that would promote the efficient resolution of 20 the dispute. However, that is not the case here. Instead, Plaintiff asks this 21 Court to resolve issues that may materially affect the progress of another case that is pending in another courtroom. The Court finds doing so would 22 not promote the orderly course of justice. 23 24

(internal citations and quotation marks omitted). Similarly, CICA chose to bring this 25 matter before this Court rather than the District Court in Kansas. It would be inefficient 26 to allow both cases to proceed simultaneously. See Leyva, 593 F.2d at 863–64 (“A trial 27 court may, with propriety, find it is efficient for its own docket and the fairest course for 28 the parties to enter a stay of an action before it, pending resolution of independent 1 || proceedings which bear upon the case .. . . In such cases, the court may order a stay of 2 action pursuant to its power to control its docket and calendar and to provide for a just 3 || determination of the cases pending before it.”). Accordingly, the Court finds that the 4 ||orderly course of justice weighs in favor of a stay. 5 IV. CONCLUSION 6 For the foregoing reasons, the Court GRANTS Defendants’ motion to stay. The 7 Court further DIRECTS the parties to file status reports within five (5) business days of 8 conclusion of the Kansas Action. ? IT IS SO ORDERED. 10 Dated: December 22, 2020 U - Lol holes 12 HON. MICHAEL M. ANELLO 13 United States District Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28