Judge Olivia Rosales, Case 22NWCV00258 2022-10-18 Tentative Ruling

Judge: Olivia Rosales, Case: 22NWCV00258, Date: 2022-10-18 Tentative Ruling

Case Number: 22NWCV00258 Hearing Date: October 18, 2022 Dept: SEC

AGUILA v. PENN-STAR INSURANCE COMPANY, et al.

CASE NO.: 22NWCV00258

HEARING: 10/18/22 @ 10:30 AM

The court will hear from the parties.

Defendant Penn-Star Insurance Company demurs to Plaintiff’s Complaint on the ground that it fails to state facts sufficient to constitute a cause of action.

This action was filed by Plaintiff Henry Aguila on May 5, 2022. Plaintiff 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 it 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

JUDICIAL NOTICE is taken of the following additional facts:

Thee Aguila, Inc. sued Century Law Group (“CLG”), Eva Meneses, and Edgar Fragoso in Case No. BC532354, which 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. (RJN 6-8, 12-17, 21-22, 42-44, 48-53, 57-59, and 64-69.)

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”). (RJN 75.)

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. (RFJN 90-93.)

On August 8, 2021, CLG filed a limited objection to the proposed settlement of the Insurance Action (RJN 95-96), which settlement would have called for payment of all settlement sums directly to Henry Aguila, who would then assume responsibility for satisfying liens. (RJN 90-93.) In accordance with CCP § 708.440, CLG requested that the Aguila Parties file a noticed motion for Court approval of the settlement. (RJN 96.) The Aguila Parties did not file any motion for settlement approval, as requested by CLG. (RJN, Fact D.1.) 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.” (RJN 98-102.) 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. (Compare RJN 92 vs. 101-102.)

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. (RJN 104.) Similarly, on August 13, 2021, Penn-Star filed a “Notice of Non Opposition” to Aguila Parties’ proposed judgment. (RJN 106-107.) 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. (RJN 109-110.) 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 Penn-Star), never appealed it, nor did he subsequently move to set it aside. (RJN, Fact D.2.) The 30-day time for appeal of that Judgment has since expired. (RJN 113.)

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”). (RJN 123-132.) The Interpleader Action Complaint alleged that Aguila and CLG, among others, had made claims to the Judgment Sums. (RJN 124-128.) Penn-Star did not dispute it owed the Judgment Sums but could not determine to whom they
were to be paid. (RJN 129.)

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. (RJN 155.)

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. (RJN 187.)

On April 6, Penn-Star deposited the Judgment Sums with federal court clerk. (RJN 157-158.)

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. (RJN Ex. U, April 14, 2022 register of action.)

Aguila appealed the motion to amend the order on July 11, 2022. (RJN Ex. U, April 14, 2022 register of action.)

LITIGATION PRIVILEGE

The court finds that all of the causes of action alleged against Penn-Star are barred by the litigation privilege pursuant to CC § 47(b) and the federal litigation privilege pursuant to the Noerr-Pennington doctrine (Theme Promotions v. News Am. Mktg. FSI (9th Cir. 2008) 546 F.3d 991, 1007.) The U.S. Supreme Court-recognized Noerr-Pennington doctrine can be applied in tandem with California’s litigation privilege to bar claims. (UMG Recordings v. Global Eagle Entertainment (C.D. Cal. 2015) 117 F.Supp.3d 1092.) “Under the Noerr-Pennington doctrine, those who petition...the government for redress are generally immune from statutory liability for their petitioning conduct.” (Sosa v. DIRECTV, Inc. (9th Cir. 2006) 437 F.3d 923, 929.)

Aguila’s Complaint alleges that Penn-Star’s acceptance of Aguila’s CCP § 998 offer (which his own counsel prepared and presented to the Court for entry - RJN 98-102) and Penn-Star’s filing of the subsequent Interpleader action deprived him of the settlement monies. The court finds that Penn-Star’s litigation conduct is privileged and any claims based on such conduct is barred.

Res Judicata and Collateral Estoppel

The basic purpose of interpleader actions is to protect the stakeholder (person holding the funds or property) from multiple lawsuits and from possibly inconsistent or multiple determinations of liability. (Texas v. Florida (1939) 306 U.S. 398, 406-407; In re Republic of Philippines (9th Cir. 2002) 309 F.3d 1143, 1153 [purpose is to “resolve in one proceeding all claims to a res”]; Prudential Ins. v. Hovis (3rd Cir. 2009) 553 F.3d 258, 265 [stakeholder should not be obliged at his peril to determine which claimant has the better claim].)

Once a plaintiff-in-interpleader has satisfied the jurisdictional requirements of an
interpleader claim, the court will discharge the plaintiff from liability and dismiss it from the action. (United States v. High Tech. Products (6th Cir. 2007) 497 F.3d 637, 642; Marcus v. Dufour (E.D. NY 2011) 796 F.Supp.2d 386, 390.) California courts also recognize that, once the stakeholder's right to interplead is established, and it deposits the money in court, it may be discharged from liability to any of the claimants. This enables the stakeholder to avoid multiplicity of actions and the risk of inconsistent results if each of the claimants were to sue him or her separately. (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 874; City of Morgan Hill v. Brown (1999) 71 Cal.App.4th 1114,1122.)

The Interpleader Order discharged Penn-Star from liability. However, Aguila appealed the motion to amend the order on July 11, 2022. (RJN Ex. U, April 14, 2022 register of action.)

The court finds that res judicata does not yet apply because the federal order has not resulted in a final judgment. However, based on principles of judicial comity, this court is inclined to stay this action pending the appeal.

The court will hear from the parties.