United States District Court, D. Idaho
MEMORANDUM DECISION AND ORDER RE: BANCINSURE'S MOTION FOR STAY (DKT. 152)
RONALD E. BUSH, Magistrate Judge.
On August 6, 2014, Defendant BancInsure filed a "Notice of Appointment of Receiver and Issuance of Stay by Oklahoma Courts, and Ex Parte Motion for Entry of a Temporary Stay of This Action." (Dkt. 152.) The Motion is not being treated, either by the Court or the parties, as an "ex-parte" motion at this juncture. For the reasons described in this decision, the Court grants the Motion for Temporary Stay.
FACTS AND PROCEDURAL BACKGROUND
On January 24, 2012, Defendant BancInsure removed this case from state court to this Court, on the basis of diversity jurisdiction. (Dkt. 1.) The Complaint brought by Plaintiff Idaho Trust contained breach of contract and declaratory relief claims against two insurers - BancInsure and Continental Casualty Company (CNA). Idaho Trust alleged that both Defendants failed to fully indemnify and defend Idaho Trust in a layer of underlying litigation. CNA and Idaho Trust settled out of court. (Dkt. 81.) On March 20, 2014, the Court issued an order entering partial summary judgment in favor of Idaho Trust on its claim against BancInsure (Dkt. 132), holding that the BancInsure Policy provided coverage for the underlying claims. The amount owed, however, was in factual dispute for various reasons that required a trial to resolve. A four-day jury trial is set to begin on September 2, 2014 (Dkt. 139).
On August 6, 2014, BancInsure filed its motion for temporary stay. It relied in doing so upon an August 1, 2014 Oklahoma state court "Order Directing Insurer to Show Cause and Allowing Injunctive Relief. (The "Oklahoma Order.") The Oklahoma Order required Red Rock Insurance Company (the new name of the company formerly known as BancInsure) to show cause why the court should not grant the Oklahoma Insurance Commissioner's request that BancInsure be placed into receivership and its assets liquidated. Among other things, the Oklahoma Order recites that (a) the Commissioner has alleged that BancInsure is insolvent and impaired; (b) an Order of Supervision was entered on May 19, 2014; and (c) an Agreed Order of Conservatorship was entered on July 1, 2014. (BancInsure's Motion, Ex. 1 (Dkt. 152-1.)) The show cause hearing is set for August 21, 2014. ( Id. )
In its pending Motion before this Court, BancInsure relies upon this language of the Oklahoma Order to argue that this Idaho case should come to a halt:
[BancInsure], its officers, directors, stockholders, members, subscribers, agents, and all other persons are hereby enjoined and prohibited from wasting and disposing of [BancInsure's] assets until further order of the Court; that all persons and entities are enjoined and prohibited from interfering with the Insurance Commissioner or these proceedings; that all persons and entities are enjoined and prohibited from wasting the assets of [BancInsure], commencing or prosecuting any actions against [BancInsure], obtaining any preferences, judgments, attachments, or other liens against [BancInsure], or making of any levy against [BancInsure] or its assets or any part thereof.
At this time, BancInsure seeks a temporary stay through August 21, 2014, the date of the hearing in the Oklahoma court. It would seem, however, that the writing is upon the wall for the future of BancInsure, as the documents submitted to the Oklahoma Court (as also placed in this record) evidence an insurance company in both acute and chronic financial distress, having already been subject to regulatory orders intended to provide an opportunity to restore its financial moorings, but which apparently have not been successful in their goal. Accordingly, the Court presumes for these purposes that it is more likely than not that the Oklahoma state court will enter a similar or more expansive order following the August 21, 2014 show cause hearing, and that BancInsure will again move to stay or otherwise bring this case to a halt. This Order anticipates the filing of such a motion, in part because the motion to stay has been filed a few short weeks before the trial date and on the eve of a number of deadlines related to the trial date. Hence, the reasoning set out here will likely be applied to any subsequent motion of the same nature, although the Court is aware that there may be intervening factual or other developments which might affect any decision on a subsequent motion.
ANALYSIS AND HOLDINGS
A court may stay proceedings pursuant to a power that is "incidental to the power inherent in every court to control the disposition of the cases on its docket with economy of time and effort for itself, for counsel, and for the litigants." Landis v. N. Am. Co., 299 U.S. 248, 254, 57 S.Ct. 163, 81 L.Ed. 153 (1936). A district court's decision to grant or deny a stay is a matter of discretion. See Dependable Highway Express, Inc. v. Navigators Ins. Co., 498 F.3d 1059, 1066 (9th Cir. 2007); Rohan ex rel. Gates v. Woodford, 334 F.3d 803, 817 (9th Cir. 2003). A stay should not be granted "unless it appears likely the other proceedings will be concluded within a reasonable time in relation to the urgency of the claims presented to the court." Leyva v. Certified Grocers of Cal., Inc., 593 F.2d 857, 864 (9th Cir. 1979).
In deciding whether to grant a stay the court must weigh the competing interests of the parties, considering in particular: (1) the possible damage that may result from grant of a stay, (2) the hardship or inequity a party may suffer in being required to go forward with the case, and (3) the orderly course of justice. CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962) (citing Landis, 299 U.S. at 254-55). The burden on the party seeking a stay is reduced when the opposing party will not incur any cognizable damage from the stay. Lockyer v. Migrant Corp., 398 F.3d 1098, 1112 (9th Cir. 2005).
1. Uniform Insurance Liquidation Act
In one of the rare exceptions to the federal bankruptcy statutory scheme, the process by which insolvent insurance companies are liquidated, and claims against them are handled, remains a matter of state law. Nonetheless, there has been considerable effort for many decades to make that process as uniform as possible because of the fact that most insurance companies, regardless of where domiciled, write policies and conduct business in many states. That effort has led to the creation of the Uniform Insurance Liquidation Act ("UILA"), which both Idaho and Oklahoma (and numerous other states) have adopted. Under the UILA, Idaho and Oklahoma are considered "reciprocal states." The import of that status, at least under Idaho law, is that:
In a liquidation proceeding in a reciprocal state against an insurer domiciled in that state, claimants against the insurer who reside within this state may file claims either with the ancillary receiver, if any, in this state, or with the domiciliary liquidator. Claims must be filed on or before the last ...