Opinion
NOT TO BE PUBLISHED
ORIGINAL PROCEEDING. Petition for writ of mandate. Judith A. Vander Lans, Judge. No. NC051514
Smith Ellison, Phillip E. Smith and Suzanne Burke Spencer for Petitioner.
No appearance for Respondent.
No appearance for Real Parties in Interest.
OPINION AND ORDER FOR PEREMPTORY WRIT OF MANDATE
ASHMANN-GERST, J.
Real party Mission Fiber Group, Inc. (Mission) filed a breach of contract/bad faith action against its commercial insurance carrier, Hartford Casualty Insurance Company (Hartford). Hartford filed a cross-complaint. The superior court granted the motion of Mission and its principals to stay the entire civil action pending resolution of an administrative proceeding filed against Mission by the California Department of Conservation (DOC).
Upon Hartford’s petition, we issued an order pursuant to Palma v. U.S. Industrial Fasteners, Inc. (1984) 36 Cal.3d 171, 180, directing the superior court to set the motion for a new hearing, and consider the motion under the criteria set forth in Haskel, Inc. v. Superior Court (1995) 33 Cal.App.4th 963, 980, and Montrose Chemical Corp. v. Superior Court (1994) 25 Cal.App.4th 902, 908-909 (Montrose II). The court declined to set the matter for a new hearing. Accordingly, we direct the issuance of a peremptory writ of mandate.
FACTS AND PROCEDURAL HISTORY
Mission operates a recycling business in Long Beach. It receives recycled materials and arranges for their shipment overseas. On August 13, 2007, Hartford issued Mission a commercial insurance policy. Hartford contends it issued the policy based on Mission’s representation that its annual revenues were $2 million. On October 22, 2007, a fire destroyed Mission’s entire inventory. Mission submitted a claim under the Hartford policy. According to Hartford, Mission alleged it was losing business income at the rate of $4.5 million per month. Hartford contends it paid Mission $4.5 million for lost business income and $300,000 for business personal property loss, fire management and cleanup expenses, but stopped making payments because it believed Mission’s claim for lost business income was “overstated and/or fraudulent.”
Mission sued Hartford for breach of the insurance contract, bad faith breach of the implied covenant of good faith and fair dealing, and estoppel. Hartford filed a cross-complaint asserting 12 causes of action, including fraud, rescission, negligent misrepresentation, conspiracy, conversion, unfair competition, breach of contract, declaratory relief and recoupment.
Mission is also the subject of an accusation filed by the DOC, which administers California’s recycling program pursuant to the California Beverage Container Recycling and Litter Reduction Act (the Recycling Act) (Pub. Res. Code, § 14530 et seq.) The Recycling Act establishes a process by which certified recycling centers pay California Refund Value (CRV) to consumers for empty eligible beverage containers. The recycling centers then submit claims to the DOC for reimbursement. The DOC has accused Mission of submitting fraudulent CRV claims.
Mission’s Motion to Stay Civil Action.
Mission and its principals (referred to in the record as the “Anderson parties”) filed a motion to stay the entire superior court action pending completion of the DOC proceeding. The moving parties asserted that “Hartford and the State are cooperating” so that the DOC could obtain discovery it would not be entitled to in the administrative proceeding. Thus, the DOC was able to “do indirectly what it could not do directly.”
The “Anderson parties” are David Scott Anderson, the Anderson Family Trust LLC, and Stephen Matthew Collins.
The moving parties likened their situation to that of the insureds in Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287 (Montrose I). In Montrose I, the court addressed a number of issues relating to an insurer’s duty to defend its insured in a third party lawsuit, where the insurer brings a declaratory relief action to determine coverage while the lawsuit against the insured is still pending: The court stated that in order “[t]o eliminate the risk of inconsistent factual determinations that could prejudice the insured, a stay of the declaratory relief action pending resolution of the third party suit is appropriate when the coverage question turns on facts to be litigated in the underlying action. [Citations.] For example, when the third party seeks damages on account of the insured’s negligence, and the insurer seeks to avoid providing a defense by arguing that its insured harmed the third party by intentional conduct, the potential that the insurer’s proof will prejudice its insured in the underlying litigation is obvious. This is the classic situation in which the declaratory relief action should be stayed. By contrast, when the coverage question is logically unrelated to the issues of consequence in the underlying case, the declaratory relief action may properly proceed to judgment....” (Id. at pp. 301-302.)
Hearing on motion to stay.
The motion to stay was heard July 14, 2009. On July 17, 2009, the superior court issued an order granting the motion. The court stated that the moving parties had “sufficiently established that this is a case where there is a second action pending and the coverage questions here turn on facts to be litigated in the underlying action, i.e., whether or not Mission Fiber’s submissions under the Recycling Act were illegal and whether or not payments under the Recycling Act were properly suspended. As such, to eliminate the risk of inconsistent factual determinations that could prejudice the insured, a stay of this action is proper.”
DISCUSSION
We note first of all that this is not a typical Montrose case, because the insured (Mission) has not called upon its carrier (Hartford) to provide a defense in the DOC proceeding, and Hartford is not seeking declaratory relief on the issue of its duty to defend. However, this case is similar to Montrose I in that certain causes of action in Hartford’s cross-complaint (particularly the 9th and 10th causes of action for declaratory relief) are predicated upon much of the same facts as the DOC proceeding. The superior court could correctly determine that the civil action should be stayed as to these causes of action pending resolution of the DOC proceeding.
However, Hartford has also sought declaratory relief with respect to its claim that Mission was not entitled to recover any lost business income after October 31, 2007, the date on which the City of Long Beach denied Mission’s business license application. Hartford has also asserted causes of action based on Mission’s alleged fraud in its policy application and in the presentation of its claim under the policy. Arguably, the superior court could find that these claims bear no relation to the issues in the DOC proceeding, and allow discovery with respect to these claims. The court could also fashion a protective order to preclude a risk of prejudice to Mission in the DOC proceeding.
Because the superior court’s order addresses only those issues related to Mission’s submissions and payments under the Recycling Act, and not any issues relating to its insurance application or claim, we agree with Hartford that the trial court should conduct a new hearing on Mission’s motion to stay to determine if there are issues in the civil case that do not overlap with the DOC case. Haskel, Inc. v. Superior Court, supra, 33 Cal.App.4th at page 980, and Montrose II, supra, 25 Cal.App.4th at pages 908-909, set forth factors that might be relevant to the court’s inquiry. These factors include, but are not limited to, the nature of each of Hartford’s claims, whether they are related to the issues in the DOC proceeding, the nature of the evidence available to prove Hartford’s claims, whether Mission will suffer prejudice if the court allows discovery of that evidence, and whether the court could fashion a protective order that would minimize the risk of such prejudice.
DISPOSITION
A peremptory writ of mandate shall issue directing the respondent superior court to vacate its July 17, 2009, order granting real parties’ motion to stay the underlying superior court action pending resolution of the administrative proceeding filed by the DOC, and thereafter conduct a new hearing on the motion in accordance with the views expressed in this opinion. Costs of this proceeding are awarded to Hartford.
We concur: BOREN, P. J., DOI TODD, J.