Judge Lee W. Tsao, Case Number: 22NWCV00258, Date: 2024-09-10 Tentative Ruling

Judge: Lee W. Tsao, Case: 22NWCV00258, Date: 2024-09-10 Tentative Ruling

Case Number: 22NWCV00258 Hearing Date: September 10, 2024 Dept: C

Henry Aguila vs Penn-Star Insurance Company, et al.

Case No.: 22NWCV00258

Hearing Date: September 10, 2024

Tentative Ruling

Defendant Penn-Star Insurance Company’s unopposed Motion to Lift Stay is GRANTED.

Defendant’s Anti-SLAPP Motion is CONTIUNED to October 17, 2024 at 10:30 a.m. in Department SE-C.

Defendant Penn-Star to give notice.

Defendant Penn-Star Insurance Company moves the Court for an order:

1. To lift the Court’s stay of this action as the related federal court matter has now resolved;

2. To set a hearing on Penn-Star’s already filed and previously stayed Special Motion to Strike Plaintiff’s Complaint and attendant request for an award of prevailing-party attorneys’ fees, both made pursuant to Code Civ. Proc. §425.16;

3. Entry of an order granting the Special Motion to Strike and Dismissing Plaintiff’s Complaint Against Penn-Star with prejudice; and

4. An award of prevailing-party attorneys’ fees against Plaintiff Henry Aguila and in favor of Defendant Penn-Star in an amount of $78,424.

No opposition has been filed as of September 6, 2024.

Background

This action was filed by Plaintiff Henry Aguila on May 5, 2022. The Complaint alleges that Defendant Penn-Star was Plaintiff’s commercial liability insurer who tendered a defense for Plaintiff in one of the lawsuits between Eva Meneses, Edgar Fragoso, Century Law Group (“CLG”) and Plaintiff. (Complaint, ¶ 12.) Penn-Star refused Meneses, Fragoso, and CLG’s policy limit demand and withdrew its defense of Plaintiff. (Id.) Plaintiff sued Penn-Star, and Penn-Star accepted Plaintiff’s 998 offer for $1,995,000.00, despite being aware that CLG did not consent to the settlement and that Penn-Star did not comply with CCP § 708.440. (Id., ¶¶ 13-15.) Plaintiff further alleges that he, Meneses, and Fragoso had reached an agreement that Meneses and Fragoso would direct CLG, to withdraw its liens (Id., ¶ 13), but Meneses and Fragoso failed to so advise CLG and thus are being sued for breach of contract. (Id., ¶ 17.) Penn-Star refused to pay Plaintiff the amount due under the 998 offer, and have instead sought retroactive relief of its violation of CCP § 798.440 by way of filing an interpleader. (Id., ¶ 18.) Based thereon, the Complaint asserts the following causes of action:

1. Breach of Contract

2. Breach of Covenant of Good Faith and Fair Dealing

3. Inducing Breach of Contract

4. Intentional Infliction of Emotional Distress

5. Negligence

On February 28, 2023, Plaintiff requested dismissal with prejudice as to CLG. On the same date, Plaintiff also requested dismissal without prejudice as to Defendants Edgar Fragoso and Eva Meneses.

On December 11, 2023, at a case management conference, Defense counsel reported the 9th Circuit District Court [sic] has issued a ruling. Defendant Penn-Star subsequently filed a motion to lift the stay in order to have judgment entered on its demurrer and the anti-SLAPP motion reset for hearing.

JUDICIAL NOTICE is taken, on the Court’s own motion, of the following additional facts:

Thee Aguila, Inc. sued CLG, Eva Meneses, and Edgar Fragoso in Case No. BC532354. The case resulted in multiple attorney fees and cost awards in favor of CLG and against Thee Aguila, Inc. These awards became the basis for CLG’s liens.

Aguila and/or Thee Aguila, Inc. (“the Aguila Parties”) were also defendants in ERDM v. Aguila (Case No. BC482246). Penn-Star, the Aguila’s business liability insurer, initially defended the Aguila Parties but then withdrew from the defense. (RJN 72-88.) Aguila then sued Penn-Star for insurance bad faith in Thee Aguilla [sic], Inc. v. Penn-Star (Case No. 2:19-cv-01621-PSG (“the Insurance Action”).

In that action, CLG filed (in June and early July 2021) multiple notices of liens against the Aguila Parties’ recovery in the Insurance Action, arising out of the CLG Judgment and monetary awards in CLG’s favor in the Acuna, Fragoso, and ERDM Actions. (RJN 2, 4-24, and 26-38.)

Shortly before trial, the Aguila Parties served a CCP § 998 offer upon Penn-Star, offering not to enter a monetary judgment, but to dismiss their lawsuit against Penn-Star in exchange for a release agreement, in which Penn-Star would pay Henry Aguila $1,995,000 (amongst other terms, including that the Aguila Parties would resolve all liens), which offer Penn-Star timely accepted on August 5, 2021.

On August 8, 2021, CLG filed a limited objection to the proposed settlement of the Insurance Action, which settlement would have called for payment of all settlement sums directly to Henry Aguila, who would then assume responsibility for satisfying liens.

In accordance with CCP § 708.440, CLG requested that the Aguila Parties file a noticed motion for Court approval of the settlement. The Aguila Parties did not file any motion for settlement approval, as requested by CLG. Instead, on August 9, 2021, the Aguila Parties submitted a proposed, “more typical” monetary judgment simply for $1,995,000 (“Judgment Sums”), with “each party to bear its own costs and fees.” This modified the terms of its prior CCP § 998 offer, as it dropped (1) any requirement of a release agreement; (2) the notion of entry of a mere dismissal of the Insurance Action and instead for entry of a monetary judgment against Penn-Star; (3) the term that the money would be paid solely to Henry Aguila; and (4) the term that the Aguila Parties would be responsible for resolving the liens.

Thus, under his new proposed judgment, consistent with CCP § 998(b)(1), the federal Court instead would enter a simple monetary Judgment against Penn-Star for $1,955.000 (and each party to bear its own costs and fees) (“Judgment”). On August 9, 2021, CLG filed a written approval of the Aguila Parties’ proposed judgment. Similarly, on August 13, 2021, Penn-Star filed a “Notice of Non Opposition” to Aguila Parties’ proposed judgment. With all parties and lienholders now agreeing in writing in the federal court’s register of action to the proposed Judgment, on August 17, 2021, the federal Court entered Judgment in accordance with the form proposed by Aguila Parties’ counsel. Aguila did not oppose Entry of Judgment in the Insurance Action (which was drafted and presented by his own counsel, followed by the filing of notices of approval and non-opposition by CLG and PennStar), never appealed it, nor did he subsequently move to set it aside. The 30- day time for appeal of that Judgment has since expired.

As multiple parties made claims to the Judgment Sums in the Insurance Action, on December 2, 2021, Penn-Star filed a Complaint-in-Interpleader in federal court titled Penn-Star Insurance Company, Inc. v. Thee Aguila, Inc. (C.D. Cal. Case No. 2:21-cv-09365 PSG (RAOx) (“Interpleader Action”). The Interpleader Action Complaint alleged that Aguila and CLG, among others, had made claims to the Judgment Sums. Penn-Star did not dispute it owed the Judgment Sums but could not determine to whom they were to be paid.

On March 29, 2022, the Court in the Interpleader Action issued an Order (“Interpleader Order”) on the motion, as follows:

1. The Clerk shall accept and deposit the interpleader funds in the amount of $1,995,000 plus applicable accrued interest into an interest-bearing account;

2. The interpleader funds are subject to Penn-Star’s reasonable attorneys’ fees and costs stemming from its attorneys’ services in this interpleader action. Penn-Star is directed to file a motion for attorneys’ fees and submit an accounting of its attorneys’ fees and costs associated with this action; and

3. Upon Penn-Star’s deposit of the interpleader funds, Penn-Star shall be discharged from further liability to Defendants-in-Interpleader for the judgment proceeds. Defendants-in-Interpleader, including Aguila, shall be restrained and enjoined from bringing any future action or proceeding in any state or federal court against Penn-Star for recovery of the judgment proceeds or any applicable interest thereon.

On April 5, 2022, the day before Penn-Star was able to deposit the Judgment Sums with the federal court clerk and without prior notice to Penn-Star, Aguila filed his Complaint in this action (hereinafter “This Action”) in pro per.

On April 6, 2022, Penn-Star deposited the Judgment Sums with federal court clerk.

On April 14, 2022, the Court in the Interpleader Action signed an order confirming the waiver of Defendants-in-Interpleader (including Aguila) of their rights to appeal the Interpleader Order in exchange for Penn-Star’s waiver of its right to recover attorneys’ fees in the Interpleader Action.

Aguila appealed the order on July 11, 2022.

JUDICIAL NOTICE is taken, at the Request of Defendant, of the following additional facts:

This Court stayed this entire action pending a ruling in the federal appeal.

On October 27, 2023, the Ninth Circuit affirmed the Federal Amended Interpleader Order holding, among other things, that the District Court did not err in ordering Plaintiff to dismiss this state-court action with prejudice, when it had already discharged Penn-Star from further liability to plaintiff for the interpleaded funds. The Ninth Circuit ruled that none of the claims in this action plausibly alleged that Penn-Star created the controversy over the interpleaded funds or that Penn-Star was liable to Plaintiff independent of its decision to file the interpleader action. (RJN, Ex. C.)

On November 20, 2023, the Ninth Circuit issued its mandate holding that its judgment of October 27, 2023 became effective as of the date of the Mandate. (RJN, Ex. D.)

Plaintiff also notified the Court that, in light of the appellate decision, he intends to dismiss the Complaint against Penn-Star.

To date, the Court has no indication that Plaintiff has dismissed the Complaint against Defendant Penn-Star.

Discussion

The Court’s prior Minute Orders of October 22, 2022 and November 10, 2022 stayed this action in its entirety, including the Anti-SLAPP Motion and request for attorneys’ fees. The Court indicated that the stay would be lifted when the Ninth Circuit ruled on the federal appeal. The Ninth Circuit has now ruled in favor of Defendant Penn-Star. In its order, the Ninth Circuit affirmed the Federal Amended Interpleader Order directing Plaintiff to dismiss this action. Thus, the basis for the stay no longer exists.

Accordingly, the Motion to Lift the Stay is GRANTED.

Given that the Stay has remained in effect until this date, the Court declines to rule on the Anti-SLAPP motion. However, the Court specially sets the Anti-SLAPP Motion for October 17, 2024 at 10:30 a.m. in Department SE-C. Opposition and Reply briefs to be filed in compliance with the new hearing date.