Pioneer Chlor Alkali Co. v. NAT. UNION FIRE INS.

• Decision Date: 01 September 1994
• Docket Number: No. CV-S-93-276-RLH.,CV-S-93-276-RLH.
• Parties: PIONEER CHLOR ALKALI COMPANY, INC., Plaintiff, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA, Defendant.
• Court: U.S. District Court — District of Nevada

863 F. Supp. 1237

PIONEER CHLOR ALKALI COMPANY, INC., Plaintiff, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA, Defendant.

No. CV-S-93-276-RLH.

United States District Court, D. Nevada.

September 1, 1994.

J. Randall Jones and William Kemp of Harrison, Kemp & Jones, and Kevin R. Stolworthy of Jones, Jones, Close & Brown, Las Vegas, NV, for plaintiff.

Philip Silverberg of Mound, Cotton & Wollan, New York City, and Thomas D. Beatty, Las Vegas, NV, for defendant.

ORDER

(Motion for Partial Summary Judgment — # 164, # 165, # 166)

HUNT, United States Magistrate Judge.

This matter comes before the Court on the following documents filed by Defendant National Union Fire Insurance Company of Pittsburgh, Pennsylvania ("National Union") which are collectively referred to as "Motion for Partial Summary Judgment": Defendant's Notice of Motion for Partial Summary Judgment on the Issue of Alleged Bad Faith (# 164, filed June 17, 1994); Memorandum of Points and Authorities in Support of Defendant's Motion for Partial Summary Judgment on Plaintiff's Bad Faith Claims (# 165, filed June 17, 1994); and Defendant's Statement Pursuant to Local Rule 140-7 in Support of its Motion for Partial Summary Judgment on Plaintiff's Bad Faith Claims (# 166, filed June 17, 1994).

Plaintiff Pioneer Chlor Alkali Co., Inc. ("Pioneer") responded with Plaintiff's Opposition to Defendant's Motion for Partial Summary Judgment on Plaintiff's Bad Faith Claims (# 189, filed July 8, 1994) and Plaintiff's Counterstatement of Facts Relating to Opposition to Defendant's Motion for Partial Summary Judgment on the Issue of Bad Faith (# 191, filed July 12, 1994).

On July 19, 1994, National Union filed its Reply Memorandum of Points and Authorities in Further Support of Defendant's Motion for Partial Summary Judgment on Plaintiff's Bad Faith Claims (# 199).

INTRODUCTION

This action arises out of the May 6, 1991 chlorine gas leak which occurred at Pioneer's plant in Henderson, Nevada. On May 6, 1991, Pioneer's Henderson plant was insured by an "all risk" insurance policy (the "Policy") issued by National Union. Pioneer's Second Amended Complaint asserts three causes of action: (1) Pioneer's First Claim for Relief is for declaratory relief, and was previously addressed in earlier summary judgment proceedings, (see Order # 174); Pioneer's Second Claim for Relief alleges unfair claim practices in violation of Chapter 686A of the Nevada Revised Statutes; and (2) After obtaining leave of Court, Pioneer amended its Complaint to add a Third Claim for Relief for breach of the implied covenant of good faith and fair dealing, a tort action often referred to as "bad faith."

Pioneer's Second and Third Claims for Relief and Pioneer's request for punitive damages are the subject of the present Motion for Partial Summary Judgment by National Union.

DISCUSSION

A. Summary Judgment

Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).

The party moving for summary judgment has the initial burden of showing the absence of a genuine issue of material fact. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 883 (9th Cir.1982). Once the movant's burden is met by presenting evidence which, if uncontroverted, would entitle the movant to a directed verdict at trial, the burden then shifts to the respondent to set forth specific facts demonstrating that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). If the factual context makes the respondent's claim implausible, that party must come forward with more persuasive evidence than would otherwise be necessary to show that there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); California Arch. Bldg. Prod. v. Franciscan Ceramics, 818 F.2d 1466, 1468 (9th Cir.1987), cert. denied, 484 U.S. 1006, 108 S.Ct. 698, 699, 98 L.Ed.2d 650 (1988).

If the party seeking summary judgment meets this burden, then summary judgment will be granted unless there is significant probative evidence tending to support the opponent's legal theory. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 290, 88 S.Ct. 1575, 1593, 20 L.Ed.2d 569 (1968); Commodity Futures Trading Comm'n v. Savage, 611 F.2d 270 (9th Cir. 1979). Parties seeking to defeat summary judgment cannot stand on their pleadings once the movant has submitted affidavits or other similar materials. If the opposing party does submit affidavits, they must affirmatively demonstrate personal knowledge. British Airways Bd. v. Boeing Co., 585 F.2d 946, 952 (9th Cir.1978), cert. denied, 440 U.S. 981, 99 S.Ct. 1790, 60 L.Ed.2d 241 (1979). Likewise, "legal memoranda and oral argument are not evidence and do not create issues of fact capable of defeating an otherwise valid motion for summary judgment." Id.

A material issue of fact is one that affects the outcome of the litigation and requires a trial to resolve the differing versions of events. See Admiralty Fund v. Hugh Johnson & Co., 677 F.2d 1301, 1305-06 (9th Cir.1982); Admiralty Fund v. Jones, 677 F.2d 1289, 1293 (9th Cir.1982). "Summary judgment must be entered against a party `who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.'" Berg v. First State Ins. Co., 915 F.2d 460, 466 (9th Cir.1990) (quoting Celotex Corp., 477 U.S. at 322-23, 106 S.Ct. at 2552-53).

All facts and inferences drawn must be viewed in the light most favorable to the responding party when determining whether a genuine issue of material fact exists for summary judgment purposes. Poller v. CBS, Inc., 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962). After drawing inferences favorable to the respondent, summary judgment will be granted only if all reasonable inferences defeat the respondent's claims. Admiralty Fund v. Tabor, 677 F.2d 1297, 1298 (9th Cir.1982).

The Supreme Court's 1986 trilogy of cases cited above¹ establish that "summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.'" Celotex Corp., 477 U.S. at 327, 106 S.Ct. at 2555 (quoting Fed.R.Civ.P. 1).

B. Choice of Law

Generally, a federal court sitting in diversity jurisdiction applies the choice of law rules of the forum state. Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). However, when a case has been transferred to a different venue, the transferee court applies the choice of law rules that the transferor court would have applied. Ferens v. John Deere Co., 494 U.S. 516, 110 S.Ct. 1274, 108 L.Ed.2d 443 (1990). The present case originated in Texas state court and was removed by Pioneer to a federal court in Texas as the case satisfied diversity jurisdictional requirements. On a motion by National Union, the case was then transferred from the Southern District of Texas to this Court pursuant to 28 U.S.C. § 1404(a). This Court then must apply the choice of law rules which the Texas federal court would have applied, i.e., Texas choice of law rules.

Texas follows the "most significant relationship" test of the Restatement (Second) of Conflicts. Duncan v. Cessna Aircraft Co., 665 S.W.2d 414 (Tex.1984).

National Union argues that Texas law should control. National Union asserts that the case was initiated in Texas by Pioneer; Pioneer's principal place of business is in Texas; the Policy insures premises in several states including Texas; and the Policy was executed in Texas.

The place of contracting insurance is generally not a significant contact. See Industrial Indem. Ins. Co. v. United States, 757 F.2d 982, 986 (9th Cir.1985) (citing Restatement (Second) of Conflicts § 188 cmt. e). In the insurance area, the state with the most significant relationship is usually the state in which the insured risk was located. See Restatement (Second) of Conflicts § 193²; see also Industrial Indem., 757 F.2d at 986 ("when insurance is involved, the principal location of the insured risk normally is the state whose law applies") (applying most significant relationship test). In this case, the insured premises were of course Pioneer's Henderson, Nevada chemical plant.

National Union points out that Pioneer's Policy covered several facilities in several states. Section 193 of the Restatement envisions such multiple risk policies. In multiple risk policies, courts treat the policy as though it were several separate policies so that a dispute involving a particular facility will be governed by the law of the state in which that facility is located. See Restatement (Second) of Conflicts § 193, cmt. f (1971) (if a policy insures premises in states X, Y, and Z, a dispute concerning damage to the facility in state X will normally be governed by the law of state X).

This principal is not so incredible. For if National Union chooses to transact business in several states by insuring properties in several states, National Union should expect to be subject to the laws of each of those states. Each state has a significant interest in regulating insurance practices which concern its residents or property within its borders. Thus, Nevada is the principal place of the insured risk relevant to this suit, Pioneer's Henderson facility. Pioneer's claims are...