JKG Fitness, Inc. v. Brown & Brown of Colorado, Inc.

1 UNITED STATES DISTRICT COURT 2 DISTRICT OF NEVADA 3 Case No.: 2:23-cv-01800-JAD-MDC JKG Fitness, Inc., Plaintiff Order Denying Motion v. to Stay Proceedings Brown & Brown of Colorado, Inc., et al., [ECF No. 34] 7 Defendants 8 In the aftermath of a fire destroying one of the Planet Fitness gyms that it owns and operates, JKG Fitness, Inc. sues insurance broker Brown & Brown of Colorado and its Fitness Insurance division, alleging that Brown & Brown procured woefully inadequate insurance coverage for it and actively misrepresented the terms of the policy.1 But Brown & Brown seeks to bring that suit to a halt by moving for a stay under the Colorado River doctrine. The broker identifies two state-court actions as the basis of its motion: a subrogation suit by JKG’s insurer, Vantapro Specialty Insurance Company, against the owners of the building that housed JKG’s gym and a suit by JKG’s subsidiary, White Lane Fitness, LLC, against the building owners and other defendants that do not include Brown & Brown.2 It concedes that those are third-party liability claims but insists that this action should still be stayed because the state-court proceedings are “highly relevant” and “likely dispositive.”3 JKG opposes the motion, arguing that Brown & Brown hasn’t established the extraordinary circumstances required to justify a ECF No. 1 at 7–26.

23 2 ECF No. 34 at 6–9.

3 Id. at 5.

1 Colorado River stay.4 Because there is substantial doubt that the state-court proceedings will fully resolve this action, I deny Brown & Brown’s motion.

3 Discussion 4 The Supreme Court established in Colorado River Water Conservation District v. United States the principle that “[i]n exceptional circumstances, a federal court may decline to exercise its ‘virtually unflagging obligation’ to exercise federal jurisdiction, in deference to pending, parallel state proceedings.”5 Federal courts can decline to exercise jurisdiction “only in ‘exceptional’ cases, and only ‘the clearest of justifications’ support dismissal.”6 The Supreme Court has held that the exceptional-circumstances standard is no less applicable when a federal court stays rather than outright dismisses an action in deference to state-court litigation.7 To determine whether a Colorado River stay is justified, the Ninth Circuit considers eight factors: “(1) which court first assumed jurisdiction over any property at stake; (2) the inconvenience of the federal forum; (3) the desire to avoid piecemeal litigation; (4) the order in which the forums obtained jurisdiction; (5) whether federal law or state law provides the rule of decision on the merits; (6) whether the state court proceedings can adequately protect the rights of the federal litigants; (7) the desire to avoid forum shopping; and (8) whether the state court proceedings will resolve all issues before the federal court.”8 4 ECF No. 39.

5 Montanore Mins. Corp. v. Bakie, 867 F.3d 1160, 1165 (9th Cir. 2017) (quoting Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976)).

6 R.R. St. & Co. Inc. v. Transp. Ins. Co., 656 F.3d 966, 978 (9th Cir. 2011) (quoting Colo. River, U.S. at 818–19).

23 7 Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 27–28 (1983).

8 R.R. St. & Co. Inc., 656 F.3d at 978–79 (citation omitted).

1 The decision to stay a case under Colorado River “does not rest on a mechanical checklist;” it instead requires “a careful balancing of the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction.”9 “Some factors may not apply in some cases and, in some cases, a single factor may decide whether a stay is permissible.”10 Here, the eighth and final factor is determinative. The Ninth Circuit has “repeatedly emphasized that a Colorado River stay is inappropriate when the state court proceedings will not resolve the entire case before the federal court.”11 While this doesn’t require exact parallelism, the state-court proceedings must be “sufficiently similar to the federal proceedings to provide relief for all of the parties’ claims” or, in other words, “resolve all necessary issues.”12 11 The Ninth Circuit’s reasoning in Intel Corp. v. Advanced Micro Devices, Inc. is instructive.13 That panel considered a district court’s decision to grant a Colorado River stay pending state-court appellate review of an arbitration award.14 If upheld, the award could also serve as a defense in a federal-court copyright-infringement dispute between the same two semi- conductor companies that were parties to the state-level litigation.15 The state proceedings could resolve all disputed issues in the federal litigation, but “only if the arbitration award [was] confirmed and if the state court’s resolution of the copyright challenge to the award [was] Moses H. Cone Mem’l Hosp., 560 U.S. at 16.

20 10 United States v. State Water Res. Control Bd., 988 F.3d 1194, 1203 (9th Cir. 2021).

21 11 Id. at 1204.

12 Id. (cleaned up).

13 Intel Corp. v. Advanced Micro Devices, Inc., 12 F.3d 908, 913 (9th Cir. 1993).

23 14 Id. at 910.

15 Id. deemed to have collateral estoppel effect in federal court.”16 But if the arbitration award was overturned, the copyright claims would still need to be adjudicated in federal court.17 The panel concluded that, “[u]nder the rules governing the Colorado River doctrine, the existence of a substantial doubt as to whether the state proceedings will resolve the federal action precludes the granting of a stay.”18 It was possible that the state-court proceedings could end the federal litigation, but that depended on certain contingent outcomes. And that uncertainty barred a Colorado River stay.

8 Similarly, there is substantial doubt that the two state-court proceedings on which Brown & Brown stakes its motion will resolve this federal action. The parties and the claims are clearly distinct. The Vantapro subrogation suit concerns the building owners’ alleged failure to provide a functional fire-suppression system.19 White Lane Fitness, LLC’s suit also, in Brown & Brown’s own words, concerns “the lack of a functional fire-suppression system.”20 And this suit, in contrast, is about Brown & Brown allegedly failing to procure insurance that would fully cover the total loss of a JKG gym and misleading JKG about that failure.21 15 JKG insists that the state-level proceedings can end this suit despite the differing claims and parties because they will likely resolve “liability and damages” issues and could entirely moot JKG’s claims in this matter.22 But like in Intel Corp., complete resolution of this action Id. at 913.

20 17 Id. 18 Id. ECF No. 34 at 7.

20 Id. at 8 (cleaned up).

23 21 See ECF No. 1 at 7–26.

22 ECF No. 34 at 5. depends on contingencies. Plus, Brown & Brown is not a party to either state-court case, and federal action involves markedly different claims from the state-court suits. The mere 3|| possibility that state litigation could end a federal case is not enough to justify a Colorado River stay. So I find that a Colorado River stay is not available here.

5 Conclusion 6 IT IS THEREFORE ORDERED that defendant Brown & Brown’s motion to stay 7|| proceedings [ECF No. 34] is DENIED.

9 a DR USS. District Fudge J ennifér A, Dorsey 10 May 6, 2025 1]