Pulte Home Corp. v. Am. Safety Indem. Co.

• Decision Date: 14 July 2017
• Docket Number: Case No.: 16–cv–02567–H–AGS
• Citation: 268 F.Supp.3d 1091
• Court: U.S. District Court — Southern District of California
• Parties: PULTE HOME CORPORATION, Plaintiff, v. AMERICAN SAFETY INDEMNITY COMPANY, Defendant.

268 F.Supp.3d 1091

PULTE HOME CORPORATION, Plaintiff,

v.AMERICAN SAFETY INDEMNITY COMPANY, Defendant.

Case No.: 16–cv–02567–H–AGS

United States District Court, S.D. California.

Signed July 14, 2017

Sharon Ann Huerta, Koeller Nebeker Carlson and Haluck LLP, San Diego, CA, for Plaintiff.

Robert Wayne Keaster, Chamberlin & Keaster LLP, Encino, CA, for Defendant.

ORDER DENYING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT

MARILYN L. HUFF, District Judge

On May 26, 2017, Plaintiff Pulte Home Corporation filed a motion for partial summary judgment. (Doc. No. 11.) On June 26, 2017, Defendant American Safety Indemnity Company ("ASIC") filed an opposition to Plaintiff's motion. (Doc. No. 16.) On June 28, 2017, the Court took the matter under submission. (Doc. No. 17.) On June 30, 2017, Plaintiff filed a reply. (Doc. No. 18.) For the reasons below, the Court denies Plaintiff's motion for summary judgment.

Background

This is a motion for summary judgment over choice of law. The present action is an insurance coverage dispute between Plaintiff Pulte and Defendant ASIC, where Plaintiff asserts that it qualifies as an "additional insured" under the relevant insurance policies issued by Defendant. (Doc. No. 1, Compl. ¶ 8.) Each of the relevant policies contains a choice-of-law provision stating: "This policy and all additions to, endorsements to, or modifications of the policy shall be interpreted under the laws of the State of Georgia." (Doc. No. 16–8, Newton Decl., Ex. 1 at 64, Ex. 2 at 127, Ex. 3 at 197, Ex. 4 at 262, Ex. 5 at 331, Ex. 6 at 397.)

On October 14, 2016, Plaintiff Pulte filed a complaint against Defendant ASIC, alleging claims for declaratory relief, breach of contract, and breach of the duty of good faith and fair dealing. (Doc. No. 1, Compl. ¶¶ 25–60.) On December 16, 2016, Defendant filed an answer to the complaint. (Doc. No. 5.) In the answer, Defendant alleges as an affirmative defense that the ASIC policies at issue are governed by Georgia law pursuant to the Choice of Law/Consent to Jurisdiction endorsements in the policies. (Id. at 20.) By the present motion, Plaintiff moves for summary judgment as to Defendant's choice-of-law affirmative defense. (Doc. No. 11–1 at 2.) Specifically, Plaintiff argues that the choice-of-law provision contained in the relevant policies is unenforceable and that California law governs the substantive issues in the case. (Id. at 1.)

Discussion

I. Legal Standards for Summary Judgment

Summary judgment is appropriate under Rule 56 of the Federal Rules of Civil Procedure if the moving party demonstrates that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a) ; Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A fact is material when, under the governing substantive law, it could affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ; Fortune Dynamic, Inc. v. Victoria's Secret Stores Brand Mgmt., Inc., 618 F.3d 1025, 1031 (9th Cir. 2010). "A genuine issue of material fact exists when the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Fortune Dynamic, 618 F.3d at 1031 (internal quotation marks and citations omitted); accord Anderson, 477 U.S. at 248, 106 S.Ct. 2505. "Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment." T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987).

A party seeking summary judgment always bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323, 106 S.Ct. 2548. The moving party can satisfy this burden in two ways: (1) by presenting evidence that negates an essential element of the nonmoving party's case; or (2) by demonstrating that the nonmoving party failed to establish an essential element of the nonmoving party's case that the nonmoving party bears the burden of proving at trial. Id. at 322–23, 106 S.Ct. 2548 ; Jones v. Williams, 791 F.3d 1023, 1030 (9th Cir. 2015). Once the moving party establishes the absence of a genuine issue of material fact, the burden shifts to the nonmoving party to "set forth, by affidavit or as otherwise provided in Rule 56, ‘specific facts showing that there is a genuine issue for trial.’ " T.W. Elec. Serv., 809 F.2d at 630 (quoting former Fed. R. Civ. P. 56(e) ); accord Horphag Research Ltd. v. Garcia, 475 F.3d 1029, 1035 (9th Cir. 2007). To carry this burden, the non-moving party "may not rest upon mere allegation or denials of his pleadings." Anderson, 477 U.S. at 256, 106 S.Ct. 2505 ; see also Behrens v. Pelletier, 516 U.S. 299, 309, 116 S.Ct. 834, 133 L.Ed.2d 773 (1996) ("On summary judgment, ... the plaintiff can no longer rest on the pleadings."). Rather, the nonmoving party "must present affirmative evidence ... from which a jury might return a verdict in his favor." Anderson, 477 U.S. at 256, 106 S.Ct. 2505. "Choice of law determinations, as well as contract interpretation issues, are pure legal questions well-suited to summary judgment." Flintkote Co. v. Aviva PLC, 177 F.Supp.3d 1165, 1172 (N.D. Cal. 2016) (citing Shannon–Vail Five Inc. v. Bunch, 270 F.3d 1207, 1210 (9th Cir. 2001) ; TH & T Int'l Corp. v. Elgin Indus., Inc., 216 F.3d 1084 (9th Cir. 2000) ).

When ruling on a summary judgment motion, the court must view the facts and draw all reasonable inferences in the light most favorable to the non-moving party. Scott v. Harris, 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). The court should not weigh the evidence or make credibility determinations. See Anderson, 477 U.S. at 255, 106 S.Ct. 2505. "The evidence of the non-movant is to be believed." Id. Further, the Court may consider other materials in the record not cited to by the parties, but it is not required to do so. See Fed. R. Civ. P. 56(c)(3) ; Simmons v. Navajo Cnty., 609 F.3d 1011, 1017 (9th Cir. 2010).

II. Analysis

Plaintiff moves for summary judgment as to Defendant's choice-of-law affirmative defense. (Doc. No. 11–1 at 1–2.) In its motion, Plaintiff argues: (1) that the choice-of-law provision in the relevant ASIC policies is unenforceable and that California law governs the substantive issues in this case; (2) that Defendant should be estopped from asserting that Georgia law applies in this case; and (3) that even if the choice-of-law provision is enforceable, Georgia law would not apply to Plaintiff's tort claims. (Id. at 3–13.) The Court addresses each of these arguments raised by Plaintiff in turn below.

A. Enforceability of the Choice-of-Law Provision

Plaintiff argues that the choice-of-law provision in the ASIC policies is unenforceable and that California law governs the substantive issues in this case. ( Id. at 1, 3–9.) In response, Defendant argues that the choice-of-law provision is enforceable and presumptively applies because ASIC was located in Georgia at the time the relevant polices were issued. (Doc. No. 16 at 1, 12–21.)

A "federal court sitting in diversity ordinarily must follow the choice-of-law rules of the State in which it sits." Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, ––– U.S. ––––, 134 S.Ct. 568, 582, 187 L.Ed.2d 487 (2013) ; see Sarver v. Chartier, 813 F.3d 891, 897 (9th Cir. 2016). This Court sits in the Southern District of California. Thus, the parties agree that California law governs the determination of the enforceability of the choice-of-law provision at issue. (See Doc. No. 11–1 at 3; Doc. No. 16 at 12.)

In determining the enforceability of a choice-of-law provision, California courts apply the principles set forth in Restatement § 187 "which reflect a strong policy favoring enforcement of such provisions." Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th 459, 464–65, 11 Cal.Rptr.2d 330, 834 P.2d 1148 (1992). Under that approach:

[T]he court first ... determine[s] either: (1) whether the chosen state has a substantial relationship to the parties or their transaction, or (2) whether there is any other reasonable basis for the parties' choice of law. If neither of these tests is met, that is the end of the inquiry, and the court need not enforce the parties' choice of law. If, however, either test is met, the court must next determine whether the chosen state's law is contrary to a fundamental policy of California. If there is no such conflict, the court shall enforce the parties' choice of law. If, however, there is a fundamental conflict with California law, the court must then determine whether California has a "materially greater interest than the chosen state in the determination of the particular issue...." If California has a materially greater interest than the chosen state, the choice of law shall not be enforced, for the obvious reason that in such circumstance we will decline to enforce a law contrary to this state's fundamental policy.

Id. at 466, 11 Cal.Rptr.2d 330, 834 P.2d 1148. " ‘The party advocating application of the choice-of-law provision has the burden of establishing a substantial relationship between the chosen state and the contracting parties.’ ‘The burden then shifts to the party opposing application to show that application would violate a fundamental policy of California.’ " Ridenhour v. UMG Recordings, Inc., No. C 11-1613 SI, 2012 WL 463960, at *3 (N.D. Cal. Feb. 13, 2012) ; see 1–800–Got Junk? LLC v. Superior Court, 189 Cal.App.4th 500, 515, 116 Cal.Rptr.3d 923 (2010) ; Washington Mut. Bank, FA v. Superior Court, 24 Cal.4th 906, 917, 103 Cal.Rptr.2d 320, 15 P.3d 1071 (2001).

Under the approach set forth in Restatement § 187 and Nedlloyd, the Court begins its analysis by determining whether the chosen state has a substantial relationship to the parties or their transaction. Here, the chosen state is Georgia. At the time the policies were issued, Defendant ASIC's principle place of business was in Atlanta, Georgia. (Do...