Capitol Specialty Ins. Corp. v. Sw. Clubs, Inc., Civ. No. 12-01299 MCA/LAM

CAPITOL SPECIALTY INSURANCE CORPORATION, Plaintiff, v. SOUTHWEST CLUBS, INC.; 6001, INC.d/b/a TD'S NORTH; NC PROPERTY LLC;

HTR LLC; PRISCILLA THREADGILL,

Individually and as Personal Representative of the Wrongful Death Estate of JOSEPH THREADGILL;

DAVID THREADGILL and DANIELLE THREADGILL, Defendants,

and

SOUTHWEST CLUBS, INC.; 6001, INC.

d/b/a TD'S NORTH; NC PROPERTY LLC;

HTR LLC, Counterclaimants, v. CAPITOL SPECIALTY INSURANCE CORPORATION, Counter-Defendant.

Civ. No. 12-01299 MCA/LAM

UNITED STATES DISTRICT COURT DISTRICT OF NEW MEXICO

March 31, 2015

MEMORANDUM OPINION AND ORDER

THIS MATTER is before the Court on Defendants/Counterclaimants Southwest Clubs, Inc. ("Southwest") , 6001, Inc. d/b/a/ TD's North ("TD's"), NC Property, LLC ("NC Property"), and HTR, LLC's ("HTR") Partially Opposed Motion to Stay Proceedings and Memorandum inSupport ("Motion to Stay") [Doc. 101]. Having considered the parties' submissions, the relevant law, and otherwise being fully advised in the premises, the Court grants the motion.

BACKGROUND

Plaintiff Capitol Specialty Insurance Corporation ("Capitol") brought this declaratory judgment action seeking a declaration that it is not required, under a commercial general liability insurance policy, to defend or indemnify Defendants Southwest, TD's, NC Property, and HTR ("Insured Parties") for damages arising out of an underlying wrongful death litigation now pending in the Thirteenth Judicial District Court, County of Sandoval, State of New Mexico (the "Underlying Action"). [Doc. 32 ¶¶ 1-2, at 2]. The gravamen of the complaint filed in the Underlying Action is that Thomas Hancock, a patron of TD's, fatally shot Joseph Threadgill, an employee working as a bouncer for TD's.¹

In its complaint for declaratory relief, Capitol names the Insured Parties as defendants. Capitol also names as defendants to this insurance coverage dispute the plaintiffs in the Underlying Action—namely, Priscilla Threadgill, in her individual capacity and in her capacity as the personal representative of the wrongful death estate of Joseph Threadgill, as well as David Threadgill and Danielle Threadgill (collectively, the "Threadgills"). [Doc. 13]. The Insured Parties filed a counterclaim against Capitol alleging a claim for declaratory relief as well as claims for bad faith, breach of fiduciary duty, and statutory violations. [Doc. 16].

The Insured Parties previously filed a motion to stay this action pending resolution of the Underlying Action, which Capitol opposed. [Doc. 23]. The Court entered a memorandumopinion and order denying that motion on March 31, 2014. [Doc. 61].

Presently before the Court is the Insured Parties' second motion to stay this action pending resolution of the Underlying Action. [Doc. 101]. The Insured Parties argue that although the Court previously declined to enter a stay, "developments in the underlying case now warrant staying this action to conserve the resources of the parties and the Court." [Id. at 2]. Although Capitol objected to the Insured Parties' first motion for a stay, Capitol now asserts that a stay is appropriate. [Id.]. Capitol filed a notice of concurrence, in which it states that, "[i]n light of recent developments, Plaintiff Capitol Specialty Insurance concurs with the [Insured Parties] that this action should be stayed pending resolution of the underlying Threadgill action." [Doc. 102].

The only parties to this action that object to the entry of a stay are the Threadgills. [Doc. 101 at 2; Doc. 106].

STANDARD

It is well established that a district court has broad discretion to stay proceedings as an incident to its power to control its own docket. See Landis v. N. Am. Co., 299 U.S. 248, 254 (1936); Clinton v. Jones, 520 U.S. 681, 706-07 (1997); Commodity Futures Trading Comm'n v. Chilcott Portfolio Mgmt., Inc., 713 F.2d 1477, 1484 (10th Cir. 1983); Petrella v. Brownback, 980 F. Supp. 2d 1293, 1299 (D. Kan. 2013); Hartford Cas. Ins. Co. v. Samuel Eng'g, Inc., No. 13-CV-0594-REB-KMT, 2014 WL 1224316, *2 (D. Colo. Mar. 25, 2014); FDIC v. Renda, No. 85-2216-O, 1987 WL 348635, *2 (D. Kan. Aug. 6, 1987). Justice Cardozo articulated the parameters of this discretion in Landis v. North American Co., explaining that "the power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants. How this can best be done calls for the exercise of judgment, which must weigh competing interests andmaintain an even balance." 299 U.S. at 254-55 (citations omitted). A district court may exercise its inherent power to control its docket by entering a stay of a federal proceeding in favor of another proceeding even if the parties and issues in the two proceedings are not identical. See id. at 254. This rule applies "whether the separate proceedings are judicial, administrative, or arbitral in character, and does not require that the issues in such proceedings are necessarily controlling of the action before the court." Leyva v. Certified Grocers of California, Ltd., 593 F.2d 857, 863-64 (9th Cir.1979)

The Landis Court cautioned that "the suppliant for a stay must make out a clear case of hardship or inequity in being required to go forward, if there is even a fair possibility that the stay for which he prays will work damage to some one else." Id. at 255. In Commodity Futures Trading Commission v. Chilcott Portfolio Management, Inc., the Tenth Circuit likewise explained that a discretionary motion for stay calls "for balancing the competing interests on both sides." 713 F.2d at 1484 (citation omitted). "In particular, [the court held,] where a movant seeks relief that would delay court proceedings by other litigants he must make a strong showing of necessity because the relief would severely affect the rights of others." Id.

Consistent with the Landis Court's instruction to consider the competing interests of the parties and require a movant to make out a "clear case of hardship" if there is even a "fair possibility" that the stay will harm the other party, one of the factors courts consider in determining whether to enter a stay is the relative interests of, and any hardship to, the parties. See Commodity Futures, 713 F.2d at 1484 (citation omitted); CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962); accord Lockyer v. Mirant Corp., 398 F.3d 1098, 1110 (9th Cir. 2005) (quoting CMAX, 300 F.2d at 268). In addition, district courts also consider judicial economy, "measured in terms of the simplifying or complicating of issues, proof, and questions of law which could beexpected to result from a stay." CMAX, 300 F.2d at 268; accord Lockyer, 398 F.3d at 1110 (quoting CMAX, 300 F.2d at 268); see also CopyTele Inc. v. A.U. Optronics, Inc., No. C-13-0380 EMC, 2013 WL 3458162, *3 (N.D. Cal. July 9, 2013) (noting that courts consider judicial economy, in addition to hardship to the parties, in deciding whether to grant a Landis stay); cf. Landis, 299 U.S. at 256 (considering, among other factors, that "in all likelihood [resolution of a parallel proceeding] will settle many [issues] and simplify them all").

The decision whether to grant a stay under a district court's inherent power to control its docket is within the court's discretion and is reviewed by the Tenth Circuit for an abuse of discretion. See Commodity Futures, 713 F.2d at 1484 (holding that "[t]he ruling on the stay involved an exercise of discretion, and [that the Tenth Circuit] focuse[s] on the question whether the appellants have carried the weighty burden of showing an abuse of discretion") (citation omitted). The proponent of the stay bears the burden of establishing its need. See Clinton, 520 U.S. at 808.²

DISCUSSION

In deciding whether to enter a stay under the Court's inherent power to control its docket,the Court considers two factors: (1) the parties' competing interests; and (2) judicial economy. See CopyTele, 2013 WL 3458162, *3 (noting that courts consider judicial economy, in addition to hardship to the parties, in deciding whether to grant a Landis stay); see supra at 4. The Court first considers judicial economy because it is this factor that sets the context for the Court's analysis of the parties' competing interests and any resulting hardship to the Threadgills.

The factor of judicial economy is "measured in terms of simplifying or complicating of issues, proof, and questions of law which could be expected to result from a stay." CMAX, 300 F.2d at 268; see also Landis, 299 U.S. at 256 (considering, among other factors, that "in all likelihood [resolution of a parallel proceeding] will settle many [issues] and simplify them all"); Lockyer, 398 F.3d at 1112 (considering, in addition to balance of hardships, whether "the prospect of narrowing the factual and legal issues in the other proceeding, justifies a stay"); CopyTele, 2013 WL 3458162, *3 (noting that the factor of judicial economy requires a court to consider whether awaiting the results of another proceeding would "simplify any issues, proof, and/or questions of law in the pending litigation"). Movants contend that the trial court in the Underlying Action has entered "several significant orders" narrowing the claims at issue, that these orders likewise narrow the scope of this insurance coverage dispute, and that the Court and parties can conserve resources and prevent unnecessary litigation by allowing the developments in the Underlying Action to streamline this case.

The developments in the Underlying Action include the court's decision to grant summary judgment to TD's on the Delgado claim (and the New Mexico Court of Appeals' denial of the interlocutory appeal of this dismissal), to grant summary judgment to NC Property and dismiss this entity from the case, to permit the Threadgills to amend their complaint to include the spoliation claim against TD's, to grant summary judgment to the defendants on joint and several liability,...