# Certain Underwriters at Lloyd's, London v. Hill, Kertscher & Wharton, LLP

> District Court, S.D. California · March 14, 2022

URL: https://www.frixlaw.com/law-library/cases/10085458

## Case

- **Court:** District Court, S.D. California
- **Decided:** March 14, 2022
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

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- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10085458

## How later opinions describe it (automated extraction)

- stating a federal court may take judicial notice of “documents on 20 file in federal or state courts”

## Opinion text

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8 UNITED STATES DISTRICT COURT
9 SOUTHERN DISTRICT OF CALIFORNIA
10
11 CERTAIN UNDERWRITERS AT Case No.: 21-CV-1158 JLS (WVG)
LLOYD’S, LONDON,
12
ORDER (1) GRANTING
Plaintiff,
13 DEFENDANT’S REQUEST FOR
v. JUDICIAL NOTICE; (2) GRANTING
14
DEFENDANT’S MOTION TO STAY;
HILL, KERTSCHER & WHARTON,
15 (3) DENYING PLAINTIFF’S
LLP; DOUGLAS R. KERTSCHER;
MOTIONS FOR DEFAULT
16 ROBERT R. JOSEPH; DARYL
JUDGMENT; AND (4) GRANTING
MOODY; MAST NINE, INC.; UAS
17 PLAINTIFF’S EX PARTE MOTION
INVESTMENTS, LLC; LEUCADIA
TO EXTEND TIME TO SERVE
18 INVESTMENT HOLDINGS, INC.;
SUMMONS AND ALLOWING
RONALD E. STADTMUELLER,
19 SERVICE BY PUBLICATION ON
Defendants. DARYL MOODY
20

21 (ECF Nos. 6, 23, 42, 43)
22
23 Presently before the Court is Defendant Ronald E. Stadtmueller, Chapter 7 Trustee
24 for Leucadia Group, LLC’s (the “Trustee”) Motion to Dismiss, or, in the alternative, Stay
25 the Complaint (“Mot.,” ECF No. 6), as well as the Trustee’s Request for Judicial Notice in
26 support of the same (“RJN,” ECF No. 6-1). Plaintiff Certain Underwriters at Lloyd’s,
27 London (“Plaintiff” or the “Underwriters”) filed an Opposition to the Motion (“Opp’n,”
28 ECF No. 25), and the Trustee filed a Reply in Support of the Motion (“Reply,” ECF No.
1 26). Defendants Hill, Kertscher & Wharton, LLP (“HKW”); Douglas R. Kertscher; and
2 Robert R. Joseph (collectively, the “HKW Defendants”) filed a Notice of Joinder in the
3 Trustee’s Motion to Stay Proceedings and Request for Judicial Notice (ECF No. 15).
4 Plaintiff also has filed Motions for Default Judgment against Defendants Leucadia
5 Investment Holdings, Inc.; Mast Nine, Inc.; and UAS Investments, LLC (ECF Nos. 42,
6 43), as well as an Ex Parte Motion to Extend Time to Serve Summons and Complaint and
7 for Order Allowing Service on Daryl Moody by Publication (ECF No. 23). The Court took
8 these matters under submission without oral argument pursuant to Civil Local Rule
9 7.1(d)(1). See ECF Nos. 24, 44. Having carefully reviewed Plaintiff’s Complaint
10 (“Compl.,” ECF No. 1), the Parties’ arguments, and the law, the Court rules as follows.
11 BACKGROUND
12 The Underwriters issued a professional liability insurance policy (the “Policy”) to
13 the Georgia law firm HKW and attorneys Douglas R. Kertscher and Robert R. Joseph.
14 Compl. ¶ 14. There are two malpractice lawsuits pending against the HKW Defendants
15 arising from legal advice the HKW Defendants provided in litigation in California and
16 Georgia. See id. ¶¶ 18, 21–22. First, Georgia resident Daryl Moody (“Mr. Moody”) and
17 his Georgia entities Mast Nine, Inc.; UAS Investments, LLC; and Leucadia Investment
18 Holdings, Inc. (collectively, the “Moody Defendants”) filed a legal malpractice action
19 against the HKW Defendants in Cobb County Superior Court on April 28, 2017. Id. ¶ 21;
20 see Moody v. Hill, Kertscher & Wharton, LLP, No. 17-A-1127 (Ga. Sup. Ct. 2017) (the
21 “Underlying Georgia Action”). Second, Leucadia Group LLC, which is currently the
22 subject of Chapter 7 bankruptcy proceedings, filed a professional negligence action against
23 the HKW Defendants and others in San Diego Superior Court on August 31, 2018. Compl.
24 ¶ 22; see Stadtmueller v. Hill, Kertscher & Wharton, LLP, No. 37-2018-00044438-CU-
25 BC-CTL (Cal. Sup. Ct. 2018) (the “Underlying California Action”).
26 I. The Georgia Declaratory Relief Action
27 On May 16, 2017, one month after the Moody Defendants filed the Underlying
28 Georgia Action against the HKW Defendants, the Underwriters filed a separate declaratory
1 relief action in Georgia state court against the HKW Defendants and Mr. Moody. See
2 Certain Underwriters at Lloyd’s, London v. Moody, No. 17103671 (Ga. Sup. Ct. 2017) (the
3 “Georgia Declaratory Relief Action”). The Georgia Declaratory Relief Action seeks an
4 adjudication that the Policy does not cover the Underlying Georgia Action brought by the
5 Moody Defendants against the HKW Defendants. See ECF No. 6-2. Plaintiff advanced
6 several arguments as to why the Policy did not provide coverage. Relevant to the present
7 action, Plaintiff argued coverage was barred because (1) the claims in the Underlying
8 Georgia Action arose from an incident that occurred before the effective date of the Policy;
9 (2) the conditions for the claims to be covered had not been met; and (3) the HKW
10 Defendants had knowledge of the incident that would form the basis of the Moody
11 Defendant’s claim prior to the effective date of the Policy. Id. ¶¶ 68–70.
12 The Georgia Declaratory Relief Action proceeded to summary judgment, where
13 Plaintiff argued that the court should hold that the Underwriters “have no legal duty to
14 provide for a defense or to indemnify any of the [HKW] Defendants for any judgment,
15 settlement, or claim in the [Underlying Georgia Action].” ECF No. 6-3 at 37. Plaintiff
16 prevailed at summary judgment. See ECF No. 6-4. The Georgia court found that the Policy
17 did not cover any of the claims in the Underlying Georgia Action because the claims were
18 made prior to the Policy’s effective date, and the HKW Defendants had pre-Policy
19 knowledge of the incident that they could reasonably expect to form the basis of Mr.
20 Moody’s claim. Id. at 19.
21 On June 15, 2020, the Court of Appeals of Georgia overturned the lower court’s
22 summary judgment ruling. See ECF No. 6-5. The appellate court held that there were
23 issues of material fact as whether the HKW Defendants had pre-Policy knowledge and that
24 the lower court erred in finding the Moody Defendants’ claim was made prior to the
25 effective date of the Policy. Id. at 17–18. On June 9, 2021, the HKW Defendants filed a
26 motion in the state court requesting leave to amend their answer and assert a counterclaim
27 against the Underwriters. See Georgia Declaratory Relief Action, ECF No. 151. The
28 Georgia Court granted the motion, and the HKW Defendants subsequently filed a
1 counterclaim seeking declaratory judgment that the Policy obligates Plaintiff to defend and
2 indemnify the HKW Defendants in the Underlying Georgia Action. See id., ECF No. 153.
3 II. The Present Action
4 On June 23, 2021, fourteen days after the HKW Defendants asserted their
5 counterclaim in Georgia state court, Plaintiff filed the present action. The Complaint seeks
6 a determination that “the Policy is rescinded ab initio based on material misrepresentations
7 in the HKW Defendants’ application for the policy, and that the policy therefore provides
8 no coverage to any of the HKW Defendants.” Compl. ¶ 16. Alternatively, Plaintiff seeks
9 a judgment declaring that the Policy by its terms provides no coverage for the Underlying
10 California Action and the Underlying Georgia Action. Id. ¶ 17. The Underwriters named
11 the HKW Defendants; the Moody Defendants; Leucadia Investment Holdings, Inc.; and
12 the Trustee as defendants. See generally Compl.
13 The HKW Defendants answered Plaintiff’s Complaint on August 25, 2021. ECF
14 No. 7. In lieu of answering, the Trustee filed the present Motion to Dismiss or Stay the
15 Complaint. See generally Mot. The HKW Defendants filed a Notice of Joinder in Part in
16 the Trustee’s Motion, limited to the Trustee’s request to stay the proceedings until the
17 Georgia Declaratory Relief action has concluded. ECF No. 15.
18 REQUEST FOR JUDICIAL NOTICE
19 As an initial matter, the Trustee requests that the Court take judicial notice of several
20 documents filed in the Georgia Declaratory Relief Action. See generally RJN. Plaintiff
21 does not oppose the Trustee’s request, and the HKW Defendants joined in the Trustee’s
22 request.
23 As a general rule, a district court cannot rely on evidence outside the pleadings in
24 ruling on a Rule 12(b)(6) motion without converting the motion into a Rule 56 motion for
25 summary judgment. See United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003) (citing
26 Fed. R. Civ. P. 12(b); Parrino v. FHP, Inc., 146 F.3d 699, 706 n.4 (9th Cir. 1998)). “A
27 court may, however, consider certain materials—documents attached to the complaint,
28 documents incorporated by reference in the complaint, or matters of judicial notice—
1 without converting the motion to dismiss into a motion for summary judgment.” Id. at 908
2 (citing Van Buskirk v. CNN, 284 F.3d 977, 980 (9th Cir. 2002); Barron v. Reich, 13 F.3d
3 1370, 1377 (9th Cir. 1994); 2 James Wm. Moore et al., Moore’s Federal Practice § 12.34[2]
4 (3d ed. 1999)). Federal Rule of Evidence 201(b) provides that “[t]he court may judicially
5 notice a fact that is not subject to reasonable dispute because it: (1) is generally known
6 within the trial court’s territorial jurisdiction; or (2) can be accurately and readily
7 determined from sources whose accuracy cannot reasonably be questioned.” “Judicially
8 noticed facts often consist of matters of public record, such as prior court proceedings . . .
9 or other court documents.” Botelho v. U.S. Bank, N.A., 692 F. Supp. 2d 1174, 1178 (N.D.
10 Cal. 2010) (citation omitted); see also Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d
11 741, 746 n.6 (9th Cir. 2006) (The court “may take judicial notice of court filings and other
12 matters of public record.”). While “[a] court may take judicial notice of the existence of
13 matters of public record, such as a prior order or decision,” it should not take notice of “the
14 truth of the facts cited therein.” Marsh v. San Diego Cty., 432 F. Supp. 2d 1035, 1043
15 (S.D. Cal. 2006).
16 The Court therefore takes judicial notice of the existence of the documents from the
17 Georgia Declaratory Relief Action attached to the Trustee’s Request for Judicial Notice,
18 but not the truth of the facts cited therein. See Harris v. Cty. of Orange, 682 F.3d 1126,
19 1131–32 (9th Cir. 2012) (stating a federal court may take judicial notice of “documents on
20 file in federal or state courts”). Accordingly, the Court GRANTS the Trustee’s Request
21 for Judicial Notice.
22 MOTION TO DISMISS OR STAY
23 I. Legal Standard
24 The Declaratory Judgment Act provides in relevant part: “In a case of actual
25 controversy within its jurisdiction . . . any court of the United States, upon the filing of an
26 appropriate pleading, may declare the rights and other legal relations of any interested party
27 seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C.
28 § 2201(a) (emphasis added). Because “the Declaratory Judgment Act is ‘deliberately cast
1 in terms of permissive, rather than mandatory, authority,’” Gov’t Emps. Ins. Co. v. Dizol,
2 133 F.3d 1220, 1223 (9th Cir. 1998) (quoting Pub. Serv. Comm’n of Utah v. Wycoff Co.,
3 344 U.S. 237, 250 (1952) (Reed, J., concurring)), once jurisdiction is established, courts
4 have discretion whether to entertain an action for a declaratory judgment. Pub. Affairs
5 Assocs., Inc. v. Rickover, 369 U.S. 111, 112 (1962); Brillhart v. Excess Ins. Co. of Am.,
6 316 U.S. 491, 494. But “this discretion is not unfettered,” and “[a] District Court cannot
7 decline to entertain such an action as a matter of whim or personal disinclination.” Dizol,
8 133 F.3d at 1223 (quoting Pub. Affairs Assocs., Inc., 369 U.S. at 112). Indeed, “this
9 discretionary jurisdictional rule does not apply to ‘[c]laims that exist independent of the
10 request for a declaration.’” Scotts Co. v. Seeds, Inc., 688 F.3d 1154, 1158 (9th Cir. 2012)
11 (quoting Snodgrass v. Provident Life & Accident Ins. Co., 147 F.3d 1163, 1167 (9th Cir.
12 1998)). Consequently, “[a] district court may, in its discretion, stay or dismiss a federal
13 case in favor of related state proceedings: (1) when an action seeks only declaratory relief
14 . . . , or (2) when exceptional circumstances exist.” Id. (citing Wilton v. Seven Falls Co.,
15 515 U.S. 277, 282–88 (1995); Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460
16 U.S. 1, 14 (1983)). If an action seeking declaratory judgment presents an actual case or
17 controversy and fulfills jurisdictional prerequisites, a district court must make a
18 discretionary determination that entertaining the action is appropriate. Id. at 1222–23.
19 Though discretionary, “the court must decide whether to exercise its jurisdiction by
20 analyzing the factors set out in Brillhart v. Excess Ins[urance] Co., 316 U.S. 491 (1942),
21 and its progeny.” Principal Life Ins. Co. v. Robinson, 394 F.3d 665, 669 (9th Cir. 2005).
22 “Essentially, the district court ‘must balance concerns of judicial administration, comity,
23 and fairness to the litigants.’” Am. States Ins. Co. v. Kearns, 15 F.3d 142, 144 (9th Cir.
24 1994) (citing Chamberlain v. Allstate Ins. Co., 931 F.2d 1361, 1367 (9th Cir. 1991)).
25 Brillhart sets forth a non-exclusive list of factors advising that a “district court should avoid
26 needless determination of state law issues; it should discourage litigants from filing
27 declaratory actions as a means of forum shopping; and it should avoid duplicative
28 litigation.” Dizol, 133 F.3d at 1225. A number of other considerations may be relevant:
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purpose in clarifying the legal relations at issue; whether the
3 declaratory action is being sought merely for the purposes of
procedural fencing or to obtain a ‘res judicata’ advantage; or
4
whether the use of a declaratory action will result in
5 entanglement between the federal and state court systems. In
addition, the district court might also consider the convenience
6
of the parties, and the availability and relative convenience of
7 other remedies.

8 Id.
9 The Ninth Circuit in Dizol outlined the rule that, in general, a court should not
10 decline to entertain a claim for declaratory judgment “when other claims are joined with
11 [the] action for declaratory relief (e.g., bad faith, breach of contract, breach of fiduciary
12 duty, rescission, or claims for other monetary relief).” Id. (internal citation omitted). “If a
13 federal court is required to determine major issues of state law because of the existence of
14 non-discretionary claims, the declaratory action should be retained to avoid piecemeal
15 litigation.” Id. at 1225–26 (internal citation omitted). If the district court has subject matter
16 jurisdiction over the monetary claim alone and the monetary claim need not necessarily be
17 joined with the declaratory action, the court should follow the general rule in Dizol. United
18 Nat’l Ins. Co. v. R & D Latex Corp., 242 F.3d 1102, 1113 (9th Cir. 2001).
19 II. Analysis
20 The Trustee requests that the Court “dismiss[] or stay[]” the action “pending
21 resolution of the currently pending [Georgia Declaratory Relief Action].” Mot. at 2. The
22 Trustee claims that this action “is an attempt at forum shopping and it is improper.” Id. at
23 5. The Trustee argues that Plaintiff waited three years after Leucadia filed the Underlying
24 California Action to bring the present action, and that the Parties have extensively litigated
25 the same coverage issue asserted in the Complaint in the Georgia Declaratory Relief
26 Action. Id. In response, Plaintiff claims that the Court does not have discretion to dismiss
27 or stay the action because its Complaint asserts coercive claims for rescission and
28 reimbursement of costs. Opp’n at 1. Alternatively, if the Court were to find this is a
1 declaratory relief action, Plaintiff argues that the Brillhart factors weigh in favor of this
2 action proceeding in this Court. Id.
3 First, the Court determines that the statutory requirements for diversity jurisdiction
4 are met: the Underwriters are an unincorporated association whose members are citizens
5 of the United Kingdom, Compl. ¶ 1; HKW and Leucadia Investment Holdings, Inc. were
6 both incorporated in Georgia with their principal places of business in Georgia, id. ¶¶ 2, 8;
7 Douglas R. Kertscher, Robert R. Joseph, and Daryl Moody are residents of Georgia, id.
8 ¶¶ 3–4, 9; Ronald E. Stadmueller is a resident of California, id. ¶ 7; and Leucadia Group
9 LLC is a California limited liability company, id. ¶ 6. The Underwriters also allege that
10 “the amount in controversy exceeds $75,000, exclusive of attorney’s fees, interests, and
11 costs.” Id. ¶ 19. Consequently, the complete diversity and statutory amount-in-controversy
12 requirements are met. See 28 U.S.C. § 1332.
13 Second, the Court must determine whether Plaintiff seeks relief independent of its
14 declaratory relief claims, thereby mandating federal jurisdiction. Plaintiff argues that this
15 action includes claims for coercive relief, specifically rescission and reimbursement of
16 defense costs, and therefore the Court lacks discretion to stay or dismiss this case. Opp’n
17 at 4. The Ninth Circuit has instructed that when a district court is “determin[ing] whether
18 there are claims in the case that exist independent of any request for purely declaratory
19 relief,” the court must examine whether the claims “would continue to exist if the request
20 for a declaration simply dropped from the case.” Snodgrass, 147 F.3d at 1167–68. The
21 Court will first examine Plaintiff’s argument that it has asserted a separate claim for
22 rescission, then Plaintiff’s argument that its prayer for reimbursement of defense costs
23 mandates jurisdiction.
24 Plaintiff asserts two claims in the Complaint: “Declaratory Relief as to Rescission
25 and Cancellation of Insurance Policy for Misrepresentation, Concealment and
26 Nondisclosure” and “Declaratory Relief as to Coverage.” Compl. at 16–17. Plaintiff
27 explicitly seeks “a declaration from the Court that [Plaintiff] may rescind the Policy,” id.
28 ¶ 76, or “a judicial determination as to the rights and duties of each party under the Policy,”
1 id. ¶ 85; see also id. at Prayer (requesting that the Court “enter a declaratory judgment” in
2 its favor). Plaintiff relies on out-of-Circuit authority to argue that it has asserted a
3 rescission claim distinct from its declaratory relief claims. Opp’n at 4 (quoting Home Ins.
4 Co. v. Townsend, 22 F.3d 91, 92 (5th Cir. 1994)). In Townsend, the Fifth Circuit ruled that
5 an insurer’s claim for rescission was not a claim for declaratory relief because the insurer
6 “plainly asks for rescission.” Id. The insurer’s complaint asserted claims for “Recission
7 of the 1990 Policy” and “Rescission of the 1992 Policy.” Id. The Fifth Circuit relied on
8 the plain language of the insurer’s complaint to find that these claims were not solely for
9 declaratory relief. Id. Townsend is distinguishable from the present case because the plain
10 language of Plaintiff’s Complaint seeks solely declaratory relief. See Compl. at 16–17.
11 Plaintiff seeks a declaration that it has no duty to defend the HKW Defendants in the
12 Underlying California Action and the Underlying Georgia Action or that Plaintiff may
13 rescind the Policy. Without these declaratory relief claims, Plaintiff’s request for rescission
14 would not exist. Therefore, Plaintiff’s rescission request is not independent and does not
15 mandate the Court exercise jurisdiction in this case.
16 Additionally, Plaintiff’s prayer for reimbursement of defense costs is derivative of
17 its declaratory judgment claims. See United Nat. Ins. Co. v. R&D Latex Corp., 242 F.3d
18 1102, 1112 (9th Cir. 2001) (finding monetary claim for reimbursement was not
19 independent of declaratory claim, but rather “derivative” of it). Plaintiff will not receive
20 reimbursement of costs unless the Court finds there is no coverage under the Policy. Here,
21 “the request for a declaration lies at the heart of the action[.]” Snodgrass, 147 F.3d at 1167.
22 Therefore, the Court finds Plaintiff does not seek any relief independent of its declaratory
23 relief claims, and the Court is not required to exercise jurisdiction in this matter.
24 Third, the Court must examine the Brillhart factors articulated by the Supreme Court
25 and elaborated upon in subsequent Ninth Circuit precedent to determine whether to
26 exercise its discretion to dismiss or stay this declaratory relief action. The Parties do not
27 dispute that the issues involving the Policy are governed by Georgia state law. See ECF
28 No. 1-8 at 5, 18 (stating the law governing the Policy is Georgia state law). Therefore, the
1 decision of Plaintiff’s declaratory relief claim as to rescission and prayer for reimbursement
2 of defense costs will require the Court to apply Georgia law. The only reason Plaintiff is
3 in federal court is on diversity grounds. This suggests that the federal interest in this matter
4 is at its lowest.
5 Although the present action and the Georgia Declaratory Relief Action are not
6 identical, the actions are parallel. See Am. Nat. Fire Ins. Co. v. Hungerford, 53 F.3d 1012,
7 1017 (9th Cir. 1995), overruled on other grounds by Dizol, 133 F.3d 1220 (“[T]he federal
8 action does parallel the state action in the sense that the ultimate legal determination in
9 each depends upon the same facts.”). Courts often find cases are parallel if they involve
10 common issues of fact, even if the actions involve different parties. See, e.g., Diamond
11 State Ins. Co. v. Fame Operating Co., 917 F. Supp. 736 (D. Nev. 1996). The present action
12 includes all the Parties of the Georgia Declaratory Relief Action but also includes the
13 Trustee and Leucadia Group LLC. Plaintiff claims that there is no jurisdiction over the
14 Trustee and Leucadia in Georgia, and therefore this Court is the only forum that can afford
15 complete relief to the Parties. Opp’n at 8. Although this action also encompasses coverage
16 issues related to the Underlying California Action, the determination of coverage under the
17 Policy involves the same factual allegations Plaintiff advanced and extensively litigated in
18 the Georgia Declaratory Relief Action. Thus, Plaintiff’s request for declaratory relief
19 requires this Court to resolve issues that are similar to those before the Georgia state
20 court—many of which the Georgia court has already ruled on, and which the parties have
21 litigated through appeal. It is not in the interest of judicial economy to have this Court and
22 the Georgia court resolve the same issue of coverage under the Policy for the Underlying
23 Georgia Action. It is also possible that the outcome of the Georgia Declaratory Relief
24 Action will have collateral effect on the unresolved issues in dispute in this action.
25 Additionally, it is clear to the Court that Plaintiff is engaging in forum shopping.
26 The Trustee argues that Plaintiff “now seek[s] a new forum to take a second bite of the
27 apple after the order granting their motion for summary judgment to rescind the policy was
28 reversed on appeal.” Opp’n at 5. The Court agrees. The second Brillhart factor favors
1 “discouraging an insurer from forum shopping.” Am. Cas. Co. of Reading, Pa. v. Krieger,
2 181 F.3d 1113, 1118 (9th Cir. 1999); Dizol, 133 F.3d at 1225 (“[F]ederal courts should
3 generally decline to entertain reactive declaratory actions.”). Forum shopping occurs when
4 a party files a federal declaratory judgment suit “to see if it might fare better in federal
5 court at the same time the insurer is engaged in a state court action.” Krieger, 181 F.3d at
6 1119. A court must look to the “sequence of events” leading to a federal action to
7 determine if a party has engaged in forum shopping. See Int’l Ass’n of Entrepreneurs of
8 Am. v. Angoff, 58 F.3d 1266, 1270 (8th Cir. 1995) (“This sequence of events alerts us to be
9 on guard for ties between the state and federal actions, because the Declaratory Judgment
10 Act is not to be used either for tactical advantage by litigants or to open a new portal of
11 entry to federal court for suits that are essentially defensive or reactive to state actions.”
12 (emphasis in original)).
13 Although Plaintiff claims that this is the only forum that can exert jurisdiction over
14 the Trustee and Leucadia, Plaintiff waited almost three years after Leucadia filed the
15 Underlying California Action to bring this declaratory relief action in federal court.
16 Meanwhile, Plaintiff, the HKW Defendants, and Mr. Moody were litigating many of the
17 issues asserted in the Complaint in the Georgia Declaratory Relief Action. In Georgia, the
18 parties conducted discovery and litigated Plaintiff’s declaratory relief action through
19 summary judgment and appeal. Plaintiff only brought this action after receiving an
20 unfavorable ruling on appeal. C.f. Dizol, 133 F.3d at 1224 (“Some litigants have initiated
21 a federal declaratory action, then claimed error in the trial court’s exercise of jurisdiction
22 upon receiving an adverse decision by the trial court or on appeal.”). Additionally, Plaintiff
23 filed this action only ten days after the HKW Defendants asserted a counterclaim in
24 Georgia seeking adjudication that the Policy is valid and obligates Plaintiff to defend and
25 indemnify the HKW Defendants in the Underlying Georgia Action. The timing of these
26 events and when Plaintiff brought the present action indicates forum shopping.
27 In sum, the Court concludes that the Brillhart factors, along with the additional
28 factors identified in Dizol, cumulatively weigh in favor of the Court staying this case. The
1 Court finds that a stay is necessary to discourage litigants from filing declaratory actions
2 as a means of forum shopping and to avoid duplicative litigation. Cont’l Cas. Co. v. Robsac
3 Indus., 947 F.2d 1367, 1372 (9th Cir. 1991), overruled on other grounds by Dizol, 133 F.3d
4 at 1220 (“[I]f a declaratory judgment suit is defensive or reactive, that would justify a
5 court’s decision not to exercise discretion.” (citing Transamerica Occidental Life Ins. Co.
6 v. Digregorio, 811 F.2d 1249, 1254 n.4 (9th Cir. 1987))). The Court declines the Trustee’s
7 invitation to dismiss this case, as Plaintiff has alleged this is the only forum that may assert
8 jurisdiction over some of the Defendants. Therefore, the Court GRANTS the Trustee’s
9 Motion and STAYS, instead of dismisses, this action pending resolution of the Georgia
10 Declaratory Relief Action.
11 MOTIONS FOR DEFAULT JUDGMENT
12 Plaintiff moved for Default Judgment against Defendants UAS Investments, LLC;
13 Leucadia Investment Holdings, Inc.; and Mast Nine, Inc. (ECF Nos. 42, 43). It is within
14 the Court’s discretion whether to enter a default judgment. Aldabe v. Aldabe, 616 F.2d
15 1089, 1092 (9th Cir. 1980). If entering a final default judgment as to some, but not all, of
16 the parties in an action might lead to logically inconsistent adjudications, the better practice
17 is to wait until either all defendants have defaulted or there has been a complete
18 adjudication of the case. See, e.g., Pfanenstiel Architects, Inc. v. Chouteau Petroleum Co.,
19 978 F.2d 430, 432–33 (8th Cir. 1992); In re Uranium Antitrust Litigation, 617 F.2d 1248,
20 1256–57 (7th Cir. 1980). In light of the Court’s findings supra, entering default judgment
21 as to some Defendants in this action could lead to logically inconsistent adjudications.
22 Accordingly, the Court DENIES WITHOUT PREJUDICE Plaintiff’s Motions for
23 Default Judgment (ECF Nos. 42, 43).
24 EX PARTE MOTION REGARDING SERVICE
25 Plaintiff filed an Ex Parte Motion to Extend Time to Serve Summons and Complaint
26 and for Order Allowing Service on Daryl Moody by Publication (ECF No. 23). Plaintiff
27 seeks an Order providing for an additional ninety days to serve Mr. Moody with the
28 Summons and Complaint and allowing service on Mr. Moody by publication. Id. at 1.
1 I. Legal Standard
2 Pursuant to Federal Rule of Civil Procedure 4(e), an individual may be served by
3 “following state law for serving a summons in an action brought in courts of general
4 jurisdiction in the state where the district court is located or where service is made” or by
5 personal service, leaving a copy of the summons and complaint “at the individual’s
6 dwelling or usual place of abode with someone of suitable age and discretion who resides
7 there” or “delivering a copy of each to an agent authorized by appointment or by law to
8 receive service of process.”
9 The Federal Rules of Civil Procedure do not expressly provide for service of process
10 by publication. However, Mr. Moody is located in Georgia, which does provide for service
11 by publication at section 9-11-4(f)(1) of the Georgia Annotated Code. This section
12 provides that,
13 [w]hen the person on whom service is to be made . . . conceals
himself or herself to avoid the service of the summons, and the
14
fact shall appear, by affidavit, to the satisfaction of the judge or
15 clerk of the court, and it shall appear, either by affidavit or by a
verified complaint on file, that a claim exists against the
16
defendant in respect to whom the service is to be made, and that
17 he or she is a necessary or proper party to the action, the judge or
clerk may grant an order that the service be made by the
18
publication of summons[.]
19
20 Ga. Code Ann. § 9-11-4(f)(1)(A). When a party moves for service by publication, the court
21 must “determine whether the movant has exercised due diligence in pursuing every
22 reasonably available channel of information” in attempting to perfect service. Abba Gana
23 v. Abba Gana, 304 S.E. 2d 909, 912 (Ga. 1983). “This inquiry includes ensuring that the
24 movant has exhausted all channels of information of which it was actually aware or could
25 have become aware through the exercise of due diligence.” Progressive Mountain Ins. Co.
26 v. Rangel, No. 3:17-CV-098-TCB, 2017 WL 10087268, at *1 (N.D. Ga. Nov. 14, 2017)
27 (citing Abba Gana, 304 S.E.2d at 913 n.2) (finding that the petitioner demonstrated due
28 diligence because its search for respondents included attempting to personally serve at the
1 last known addresses, performing skip traces, using a private investigator, and speaking
2 with former counsel and neighbors).
3 II. Analysis
4 Plaintiff has demonstrated its diligence in attempting service of process on Mr.
5 Moody. Plaintiff’s process server attempted to personally serve Mr. Moody seven times
6 over the course of eighteen days in the afternoon and evenings at his residence. Affidavit
7 of Gordon Smith (“Smith Aff.”) ¶ 9, ECF No. 23-1. Plaintiff used multiple sources to
8 confirm the address of Mr. Moody’s residence, including searching Westlaw Public
9 Records; the Fulton County, Georgia, Board of Assessors Property Records; court dockets;
10 and the Georgia Secretary of State website. Id. ¶¶ 5–7. Plaintiff also tried unsuccessfully
11 to reach Mr. Moody’s counsel concerning whether Mr. Moody’s counsel would accept
12 service on Mr. Moody’s behalf. Id. ¶ 4. Finally, Plaintiff’s process server made
13 observations that suggest Mr. Moody was deliberately evading service, including lights on
14 in the residence, cars in the driveway, and children playing in the front yard. Id., Ex. A.
15 Plaintiff has made the necessary showing under Georgia law that it has identified the
16 address of Mr. Moody’s residence but has been unable to effect personal service on him
17 despite diligent attempts to do so. Therefore, Plaintiff has carried its burden of
18 demonstrating that service by publication is appropriate. See Progressive Mountain Ins.
19 Co., 2017 WL 10087268, at *1 (granting service by publication where plaintiff utilized a
20 skip trace service, hired a private investigator, and interviewed former neighbors);
21 Chronister v. Butts Cty., No. 5:15-CV-150, 2016 WL 236235, at *1 (M.D. Ga. Jan. 20,
22 2016) (finding service by publication appropriate when the process server made three
23 attempts to serve the defendant, waited 30 minutes during each attempt, and observed
24 various facts indicating the defendant was deliberately evading service); Great Am. Ins.
25 Co. v. Am. Pan & Eng’g Co., No. 3:12-CV-129, 2012 WL 13028207, at *1 (N.D. Ga. Nov.
26 7, 2012) (allowing service by publication when the plaintiff interviewed defendant’s
27 children, neighbors, and former counsel and searched cell phone records).
28 ///
1 As it appears Mr. Moody is evading service, Plaintiff has shown that outside factors
2 ||have prevented timely service upon Mr. Moody. Accordingly, good cause exists for
3 || Plaintiff’s failure to effect service of process upon Mr. Moody and warrants an extension
4 time to do so. Therefore, the Court GRANTS Plaintiff's Ex Parte Motion to Extend
5 || Time to Serve Summons and Complaint and for Order Allowing Service on Daryl Moody
6 || by Publication (ECF No. 23). However, in the interests of ensuring that Mr. Moody has
7 actual notice of the present action, the Court additionally orders Plaintiff to serve Mr.
8 || Moody by mail at his residential address.
9 CONCLUSION
10 In light of the foregoing, the Court GRANTS the Trustee’s Request for Judicial
11 || Notice (ECF No. 6) and STAYS, rather than dismisses, this action pursuant to the Trustee’s
12 Motion to Dismiss, or, in the alternative, Stay the Complaint (ECF No. 6). The Parties
13 ||SHALL FILE a Joint Status Report no more than fourteen (14) days after the date a verdict
14 rendered or settlement is reached in the Georgia Declaratory Relief Action.
15 Additionally, the Court DENIES WITHOUT PREJUDICE Plaintiff's Motions for
16 || Default Judgment (ECF Nos. 42, 43) and GRANTS Plaintiff's Ex Parte Motion to Extend
17 Time to Serve Summons and Complaint and for Order Allowing Service on Daryl Moody
18 || by Publication (ECF No. 23).
19 IT IS SO ORDERED.
20 ||Dated: March 14, 2022 . tt
21 pee Janis L. Sammartino
79 United States District Judge
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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10085458. Public record. Not legal advice.