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T-Mobile Northeast, LLC v. Selective Insurance Company of America

United States District Court, W.D. Washington, Seattle

July 13, 2018

T-MOBILE NORTHEAST, LLC, Plaintiff,
v.
SELECTIVE INSURANCE COMPANY OF AMERICA, Defendant.

          ORDER ON MOTION TO DISMISS OR STAY

          JAMES L. ROBART, UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         Before the court is Defendant Selective Insurance Company of America's (“Selective”) motion to dismiss or stay. (MTD (Dkt. # 6); Selective Supp. (Dkt. # 17).) Plaintiff T-Mobile Northeast, LLC (“T-Mobile NE”) opposes dismissal and the basis on which Selective requests a stay but agrees that the court should stay this matter. (Resp. (Dkt. # 10); T-Mobile NE Supp. (Dkt. # 19).) The court has considered Selective's motion, the parties' submissions in support of and in opposition to the motion, the relevant portions of the record, and the applicable law. Being fully advised, [1] the court GRANTS Selective's motion and STAYS this matter but for reasons other than those raised by the parties.

         II. BACKGROUND

         A. The 2015 Action

         In a related case, T-Mobile USA-T-Mobile NE's parent company-asserted that (1) it was an additional insured under a Selective insurance policy or otherwise entitled to defense costs under that policy, and (2) Selective wrongfully failed to defend and indemnify T-Mobile USA in litigation in New York State (“the New York Action”).[2] See T-Mobile USA v. Selective Ins. Co. of Am., No. C15-1739JLR (W.D. Wash.) (“the 2015 Action”), Dkt. ## 1-1 (“Compl.”), 6/27/17 Order, 10/19/17 Order. T-Mobile USA sought a declaratory judgment that Selective was contractually obligated to defend and indemnify T-Mobile USA in the New York Action, and brought claims for (1) breach of the insurance contract, (2) attorneys' fees, (3) breach of the duty of good faith and fair dealing, (4) violation of the Washington State Consumer Protection Act (“CPA”), RCW 19.86, et seq., and (5) coverage by estoppel. Id., Compl. ¶¶ 24-44.

         The parties in that case cross-moved for summary judgment. See id., 6/27/17 Order. On June 27, 2017, the court denied T-Mobile USA's motion for partial summary judgment, granted in part Selective's motion for summary judgment, and reserved ruling in part on Selective's motion. (Id. at 2.) Specifically, on T-Mobile USA's breach of contract and insurance bad faith claims, the court denied T-Mobile USA summary judgment and granted Selective summary judgment, and reserved ruling on Selective's motion for summary judgment on the consumer fraud claim. See generally Id. Of particular relevance for the present case, the court concluded that T-Mobile USA was not entitled to coverage under the policy as T-Mobile NE's parent corporation. See Id. at 16-36. T-Mobile USA later moved for reconsideration, which the court denied. See id., Dkt. # 83 (“MFR”), 10/19/17 Order. The court also concluded that no further claims or issues remained for decision and denied as moot Selective's motion for summary judgment on the consumer fraud claim. Id., 10/19/17 Order. T-Mobile USA has since appealed to the Ninth Circuit Court of Appeals. See id., Dkt. ## 93 (“Judgment”), 94 (“Not. of Appeal”).

         B. The New Jersey Action and This Action

         Based on the court's rulings, on June 28, 2017, T-Mobile NE tendered its own claim for defense and indemnification to Selective. (See Sheridan Decl. (Dkt. # 11) ¶ 18, Ex. Q (Dkt. # 11-17) (“Tender”) at 3; see also Tindal Decl. (Dkt. # 7) ¶ 8, Ex. G (Dkt. # 7-7) (“Denial”) at 2.) Selective acknowledged receipt of T-Mobile NE's claim, investigated the claim, and on July 27, 2017, denied coverage based on the policy's Professional Services Exclusion. (See Denial at 2-5.) That same day, after T-Mobile NE received Selective's denial, counsel for T-Mobile NE emailed Selective's counsel to seek “confirm[ation] that Selective would agree not to try to institute litigation regarding the denial of the T-Mobile [NE] tender until [the undersigned judge] decides the pending motion for reconsideration” in the 2015 Action. (Sheridan Decl. ¶ 20, Ex. S (Dkt. # 11-19) at 2.) However, earlier that day at 8:48 a.m. PDT, Selective had filed a declaratory judgment action in the Superior Court of New Jersey (“the New Jersey Action”). (Tindal Decl. ¶ 9, Ex. H (Dkt. # 7-8) (“NJ Compl.”) at 5, 11-13.) At 2:03 p.m. PDT, T-Mobile NE filed this case in King County Superior Court, “prompted” by Selective's suit to file the case as a “‘placeholder.'” (Resp. at 3; see also Compl. (Dkt. # 1-1).)

         T-Mobile NE removed the New Jersey Action to the District Court for the District of New Jersey. (Tindal Decl. ¶ 11, Ex. J (Dkt. # 7-10) (“Not. of Removal”).) In that case, Selective seeks a declaration that it has no duty to defend or indemnify T-Mobile NE in the New York Action. (NJ Compl. at 5, 11-13.) On February 23, 2018, T-Mobile NE moved to stay the New Jersey Action pending resolution of T-Mobile USA's appeal of the 2015 Action. (See 2d Tindal Decl. (Dkt. # 18) ¶ 5, Ex. D (Dkt. # 18-4) (“T-Mobile NE Mot.”) at 24 (arguing for a stay based on the court's inherent authority).) Magistrate Judge Michael A. Hammer denied the motion, concluding that “T-Mobile [NE]'s central premise for its motion-i.e., that the Ninth Circuit's resolution of its appeal in the [2015 Action] will moot [the New Jersey Action]-is too speculative and attenuated to warrant a stay.” (Id. ¶ 8, Ex. G (Dkt. # 18-7) at 15.) T-Mobile NE appealed Magistrate Judge Hammer's decision to District Judge Madeline Cox Arleo. (See 2d Sheridan Decl. (Dkt. # 20) ¶ 2, Ex. A (Dkt. # 20-1) (“NJ Appeal”). Judge Arleo has not yet ruled on that appeal. See Selective Ins. Co. of Am. v. T-Mobile Ne., LLC, No. C17-6420-MCA-MAH, Dkt. (D.N.J.).[3]

         Here, T-Mobile NE seeks a declaration that Selective is obligated to defend and indemnify T-Mobile NE in the New York Action and brings claims for breach of contract, attorneys' fees, bad faith, violation of the CPA, and coverage by estoppel. (Compl. ¶¶ 141-58.) Selective removed the case on August 24, 2017 (see Not. of Removal (Dkt. # 1)), and shortly thereafter, filed the instant motion to dismiss or stay (see MTD). On May 17, 2018, the Honorable Robert S. Lasnik transferred this case to the undersigned judge as related to the 2015 Action. (See Dkt. (5/17/18 entry).) Upon transfer, the court ordered supplemental briefing on Selective's motion. (See 5/18/18 Order (Dkt. # 16).)

         III. ANALYSIS

         Selective contends that this action is identical to the New Jersey Action and therefore seeks a dismissal or stay under the first to file rule.[4] (See MTD at 2.) T-Mobile NE “nominally agrees” that the court should stay this case but argues that the stay should instead be based on finding that the 2015 Action is the first-filed case. (Resp. at 2.) Thus, the parties agree to a stay but dispute the basis on which it should be granted.

         The court concludes that a stay is appropriate but does so pursuant to its inherent authority rather than the first to file rule.[5] “[T]he power to stay proceedings is incidental to the power inherent in every court to control disposition of the cases on its docket with economy of time and effort for itself, for counsel, and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). “The exertion of this power calls for the exercise of sound discretion.” CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962); see Clinton v. Jones, 520 U.S. 681, 706 (1997) (“The [court] has broad discretion to stay proceedings as an incident to its power to control its own docket.”). “A trial court may, with propriety, find it is efficient for its own docket and the fairest course for the parties to enter a stay of an action before it, pending resolution of independent proceedings which bear upon the case.” Leyva v. Certified Grocers of Cal., Ltd., 593 F.2d 857, 863 (9th Cir. 1979). A court must weigh “the competing interests which will be affected by the granting or refusal to grant a stay.” Lockyer v. Mirant Corp., 398 F.3d 1098, 1110 (9th Cir. 2005) (citing CMAX, 300 F.2d at 268). Those interests are: (1) “the possible damage which may ...


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