United States District Court, D. Arizona
ORDER
Honorable Steven P. Logan United States District Judge
Plaintiff
Prosight-- Syndicate 1110 At Lloyd's (the
“Plaintiff”) filed suit against American Builders
and Developers LLC (“ABD”) seeking a declaratory
judgment that it is not liable to indemnify ABD for any
damages awarded pursuant to Maria Virginia Huizache and
Florenciano Axinicuilteco's (the “Claimants”)
lawsuit. The Claimants filed their Second Motion for Summary
Judgment (the “Claimants' MSJ”) (Doc. 197),
and the Plaintiff filed a separate Motion for Summary
Judgment (the “Plaintiff's MSJ”) (Doc. 199).
Both motions were fully briefed on October 15, 2019, and oral
argument was requested. (Docs. 206, 209, 213, 214) Because it
would not assist in resolution of the instant issues, the
Court finds the pending motions are suitable for decision
without oral argument. See LRCiv. 7.2(f); Fed.R.Civ.P. 78(b);
Partridge v. Reich, 141 F.3d 920, 926 (9th Cir.
1998). The Court's ruling is as follows.
I.
Background
The
Plaintiff issued an owner controlled insurance policy (the
“Policy”), often referred to as a wrap policy, to
ABD. (Doc. 197 at 3) Wrap policies allow for a general
contractor to purchase an insurance policy for a construction
project and enroll multiple subcontractors for insurance
coverage under the policy. (Doc. 188 at 11) ABD's wrap
policy was originally effective from March 31, 2013 to March
31, 2016, and the Policy covered two separate construction
sites, the Trio Condominium property located in Scottsdale,
Arizona, and the Clearwater Hills property located in
Paradise Valley, Arizona. (Doc. 197 at 3) ABD hired Paladin
Risk Management Limited, LLC (“Paladin”) to be
the administrator of the Policy. (Doc. 188 at 11) ABD
enrolled subcontractor Diamond House Painting, LLC
(“DHP”) in the Policy in November 2014. (Doc. 197
at 5)
In
January 2016, one of DHP's employees was killed in an
incident at the Trio Condominium property. (Doc. 197 at 2)
The Claimants, as the decedent's parents, brought a
wrongful death action against ABD, among others, in Arizona
state court. (Doc. 197 at 2) ABD settled the Claimants'
lawsuit against it by turning over its rights against the
Plaintiff and Paladin to the Claimants. (Doc. 197 at 8) ABD
also agreed for a stipulated judgment to be entered against
it for $3.5 million. (Doc. 197 at 8)
The
Plaintiff initiated this lawsuit for declaratory judgment
seeking a determination that it is not liable to indemnify
ABD for any damages awarded pursuant to the Claimants'
lawsuit. (Doc. 1) The Claimants filed counterclaims against
the Plaintiff and Paladin, arguing that they were each liable
for the $3.5 million stipulated judgment. (Doc. 188) However,
in July 2019, the Claimants and Paladin entered into a
settlement agreement (the “Settlement Agreement”)
in which the Claimants agreed to dismiss their claims against
Paladin in exchange for a settlement payment of approximately
$37, 500. (Doc. 203 at 51-57) On August 30, 2019, the
Plaintiff and the Claimants filed cross-motions for summary
judgment on all claims and counterclaims before the Court.
(Doc. 197; Doc. 199)
II.
Legal Standard
A court
shall grant summary judgment if the pleadings and supporting
documents, viewed in the light most favorable to the
non-moving party, “show that there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed.R.Civ.P. 56(a);
see also Celotex Corp. v. Catrett, 477 U.S. 317,
322-23 (1986). Material facts are those facts “that
might affect the outcome of the suit under the governing
law.” Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986). A genuine dispute of material fact
arises if “the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.”
Id.
The
party moving for summary judgment bears the initial burden of
informing the court of the basis for its motion and
identifying those portions of the record, together with
affidavits, which it believes demonstrate the absence of a
genuine issue of material fact. Celotex, 477 U.S. at
323. If the movant is able to do such, the burden then shifts
to the non-movant who, “must do more than simply show
that there is some metaphysical doubt as to the material
facts, ” and instead must “come forward with
‘specific facts showing that there is a genuine issue
for trial.'” Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 586-87 (1986).
III.
Analysis
In the
Claimants' MSJ, the Claimants request for the Court to
make certain findings of law, including (i) that the
Plaintiff's insurance policy provided coverage to ABD for
the Claimants' lawsuit, (ii) that the Plaintiff breached
its duty to indemnify ABD, and (iii) that the Plaintiff is
obligated to pay the $3.5 million judgment against ABD. (Doc.
197 at 2) In the Plaintiff's MSJ, the Plaintiff argues
that (i) the Claimants are judicially estopped from pursuing
claims against the Plaintiff, (ii) by the plain terms of the
Policy, DHP was not enrolled under the Policy, and (iii) the
Plaintiff has no duty to indemnify ABD for the result of the
Claimants' lawsuit. (Doc. 199-1 at 5-8)
The
Plaintiff argues that the Claimants cannot recover against
the Plaintiff as a matter of law because the Claimants
successfully recovered on their claims for relief against
Paladin. (Doc. 206 at 4; Doc. 199-1 at 9-10) The Plaintiff
identifies the Settlement Agreement between Paladin and the
Claimants, in which Paladin sought to settle the
Claimants' negligence and breach of contract claims
against it. (Doc. 203 at 51) The Plaintiff argues that the
Claimants are judicially estopped from pursuing their claims
against the Plaintiff because they obtained a favorable
settlement against Paladin on a mutually exclusive theory of
liability. (Doc. 199-1 at 14) In response, the Claimants
argue that they have not asserted inconsistent positions
against Paladin and the Plaintiff. (Doc. 209 at 10) The
Claimants argue that they have simply asserted alternative
theories of liability against Paladin and the Plaintiff,
which is permissible pursuant to Federal Rule of Civil
Procedure 8(d). (Doc. 209 at 10)
Plaintiffs
are allowed to plead alternative and even inconsistent
claims, but parties are not allowed to disavow claims and
then argue from them. Fed.R.Civ.P. 8(d); Martinez v.
Maricopa Cty. Cmty. Coll. Dist., 2018 WL 2119338, at *4
(D. Ariz. May 8, 2018); Revive You Media LLC v. Esquire
Bank, 2018 WL 2164379, at *5 (D. Ariz. May 10, 2018).
Judicial estoppel precludes a party from gaining an advantage
by taking one position and then seeking a second advantage by
taking an incompatible position. Gagne v. Zodiac Mar.
Agencies, Ltd., 274 F.Supp.2d 1144, 1148 (S.D. Cal.
2003) (citing Rissetto v. Plumbers & Steamfitters
Local 343, 94 F.3d 597, 600 (9th Cir.1996)). Judicial
estoppel is used “because of ‘general
consideration[s] of the orderly administration of justice and
regard for the dignity of judicial proceedings,' and to
‘protect against a litigant playing fast and loose with
the courts.'” Id. (citing Hamilton v.
State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th
Cir. 2001)). Further, double recovery is disfavored, and it
should be particularly avoided where punitive and
compensatory damages are assessed. Kissell Co. v.
Gressley, 591 F.2d 47, 51 (9th Cir. 1979); Hosp.
Mktg. Concepts, LLC v. Six Continents Hotels, Inc., 2016
WL 9045621, at *6 (C.D. Cal. Jan. 28, 2016) (stating double
recovery is precluded when alternative theories seeking the
same relief are pleaded and tried together).
The
Supreme Court of the United States has established certain
factors that district courts may take into consideration when
deciding whether judicial estoppel is appropriate in a given
case: (1) a party's later position is “clearly
inconsistent” with its earlier position; (2) the first
tribunal accepted and relied upon the prior inconsistent
position; and (3) the party maintaining the inconsistent
position stands to gain an unfair advantage over the opposing
party. Id. (citing New Hampshire v. Maine,
532 U.S. 742, 750-51 (2001)). These factors, however, are not
exhaustive. Id. The inconsistent positions need not
come from the same litigation, and a favorable settlement
constitutes judicial reliance. Id. (citing
Hamilton, 270 F.3d at 783; Rissetto, 94
F.3d at 605). The purpose of judicial estoppel is to protect
the ...