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Weitz Company LLC v. Rci Systems Incorporated

United States District Court, D. Arizona

July 28, 2014

Weitz Company LLC, Plaintiff,
v.
RCI Systems Incorporated, et al., Defendants.

ORDER

DAVID G. CAMPBELL, District Judge.

Plaintiff Weitz Company LLC ("Weitz") has filed a motion for partial summary judgment. Doc. 14. The motion has been fully briefed. Defendants Engineered Fire Solutions, Inc. ("EFS"), RCI Systems Inc. ("RCI"), and Travelers Casualty & Surety Co. of America ("Travelers") have filed a motion to dismiss or, alternatively, stay the case pending resolution of a parallel case in state court. Doc. 21. That motion has also been fully briefed. For the reasons stated below, the Court will deny RCI's motion to dismiss or stay and grant Weitz's motion for partial summary judgment.[1]

I. Background.

Weitz was the general contractor for the construction of a retirement home project known as the Sagewood Lifecare Facility ("Sagewood"). Doc. 21 at 2. Weitz entered into a subcontract with RCI (the "subcontract") to hire RCI to design, fabricate, and install the fire sprinkler system at Sagewood. Doc. 24 at 2. EFS designed the system for RCI, and Travelers was the surety who covered RCI's liability to Weitz under the subcontract. Id. The subcontract required RCI to "defend, indemnify and hold harmless [Weitz]... from and against all claims, damages, losses, expenses, including, but not limited to, attorneys' fees, property damage, bodily injury, and loss of use arising out of, caused by, or related to, in any way, the performance by [RCI] of its Work... or any breach of any provisions of the [subcontract]." Docs. 15-1 at 74.

Weitz completed the project, incorporating RCI's design, fabrication and installation of the sprinkler system, including RCI's selection of a corrosion inhibitor called the Potter Pipe Shield ("Potter Shield"). Doc. 14 at 3.[2] Between January and March, 2011, the fire sprinkler system experienced leaks, and in April of that year Weitz was ordered to repair it by the owner of Sagewood, LCS-Westminster Partnership IV, LLP ("LCS"). Id. The repairs ultimately cost Weitz more than $6 million. Id.

In July 2012, Weitz filed an action in Maricopa County Superior Court against LCS for breach of contract, unjust enrichment, and breach of duty to cooperate. Doc. 21-1 at 2-13. Weitz alleged that, under its contract with LCS, the cost of the sprinkler system repairs should have been covered by LCS's property insurance coverage and, under that coverage, LCS was required to reimburse Weitz for the cost of repairing the sprinkler system. Id., ΒΆΒΆ 4-12. Weitz sought to recover the costs it incurred to fix the system. Id. at 11.

In December 2012, LCS filed a third-party complaint in the state court action against RCI and a variety of vendors and manufacturers of parts of the sprinkler system. Id. at 14. That complaint identified RCI as the designer and installer of the fire suppression system at Sagewood and sought indemnification, apportionment, and contribution from the additional defendants for negligence that contributed to the damages sustained by Weitz, id. at 18-19, and for claims of breach of implied warranty and negligence, id. at 21-22. LCS singled out RCI for breach of contract and express warranty, claiming that LCS was a third-party beneficiary to the subcontract between RCI and Weitz. Id. at 19.

Weitz then filed its own complaint against the third party defendants in the state court action, asserting claims for product liability, negligent misrepresentation, negligence, and breach of warranties. Id. at 25. This complaint alleged claims against all of the vendors and manufacturers named in LCS's third-party complaint except RCI. Id. at 31-35.

Finally, Weitz filed this action in federal court on November 18, 2013, against RCI, EFS, and Travelers. Doc. 1. The complaint in this case seeks indemnification from RCI under the subcontract between RCI and Weitz (Doc. 1 at 5), and asserts breach of the subcontract against RCI ( id. at 6). The complaint also asserts claims for negligence and breach of implied and expressed warranties against RCI and EFS, id. at 7-9, and seeks to recover on the performance bond from Travelers that guaranteed RCI's obligations under the subcontract, id. at 8-9.

II. Motion to Dismiss or Stay.

A. Legal Standard.

Defendants seek dismissal or a stay of the federal proceeding under the Colorado River doctrine. See Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976). "Under the doctrine enunciated by the United States Supreme Court in Colorado River, a federal district court may postpone or decline to exercise its jurisdiction in deference to a parallel state proceeding. The doctrine is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it." Morisada Corp. v. Beidas, 939 F.Supp. 732, 735 (D. Haw. 1995) (citing Colorado River, 424 U.S. at 813, 817 and Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 17 n.20 (1983)) (internal quotation marks omitted). Considerations of "wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation, " may in appropriate cases result in a federal court staying litigation when there is concurrent state court litigation involving the same matter. Colorado River, 424 U.S. at 817. The Supreme Court has counseled, however, that federal courts have a "virtually unflagging obligation... to exercise the jurisdiction given them, " id. at 817, and that the Colorado River doctrine should be invoked only in "exceptional circumstances, " Moses H. Cone, 460 U.S. at 19.

Courts have identified several factors to be considered in deciding whether a case should be stayed under Colorado River. These include (1) whether either the state or federal court has assumed jurisdiction over property, (2) the relative convenience of the two forums, (3) the desirability of avoiding piecemeal litigation, (4) the order in which the forums obtained jurisdiction, (5) whether state or federal law controls, and (6) whether the state proceeding is adequate to protect the parties' rights. See Nakash v. Marciano, 882 F.2d 1411, 1415 (9th Cir. 1989) (citing Colorado River, 424 U.S. at 818, and Moses Cone, 460 U.S. at 25-26). The Ninth Circuit has identified at least three additional factors: (7) whether the state and federal cases are "substantially similar, " (8) whether the second suit filed by the plaintiff is an attempt to forum shop or avoid adverse rulings by the state court, and (9) whether the state proceedings will resolve all of the issues in the federal action. See id. at 1416-17; Intel Corp. v. Advanced Micro Devices, Inc., 12 F.3d 908, 912-13 (9th Cir. 1993). The relevant factors in a Colorado River analysis "are to be applied in a pragmatic and flexible way, as part of a balancing process rather than as a mechanical checklist.'" American Int'l Underwriters, (Philippines), Inc. v. Cont'l Ins. Co., 843 F.2d 1253, 1257 (9th Cir. 1988) (quoting Moses Cone, 460 U.S. at 16).

B. Analysis.

The first two factors have no bearing on this case because there is no real property at issue and both this Court and the state court are convenient for the parties. See R.R. St. & Co. Inc. v. Transp. Ins. Co., 656 F.3d 966, 979 (9th Cir. 2011). The remaining factors are discussed in turn, and the Court remains "mindful that [a]ny doubt as to whether a factor exists should be resolved against a ...


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