Free Speech Foundation, Inc. v. Philadelphia Indemnity Insurance Company

[2] 3 UNITED STATES DISTRICT COURT 4 DISTRICT OF NEVADA 5 * * * 6 FREE SPEECH FOUNDATION, INC., et. Case No. 2:23-cv-01407-MMD-BNW al., 7 ORDER Plaintiffs, 8 v. 9 PHILADELPHIA INDEMNITY INSURANCE CO., [10] Defendant. [11] 12 I. SUMMARY 13 This is a directors’ and officers’ insurance coverage action arising from an 14 underlying dispute over control of the board of directors of Free Speech Foundation, Inc., 15 d/b/a America’s Frontline Doctors, Inc. (“AFLDS”). (ECF No. 1 (“Complaint”).) AFLDS, an 16 Arizona nonprofit corporation founded by Simone Gold, has been embroiled in an ongoing 17 dispute over its leadership since 2022, with two competing boards of directors each 18 accusing the other of fraud. (Id. at 1-2.) Formal control of AFLDS is at issue in litigation 19 pending in the United States District Court for the Middle District of Florida (“Florida 20 Action”). Defendant now moves to stay the case (ECF No. 36 (“Motion”))1 pending the 21 Florida Action’s resolution of who controls AFLDS. As further explained below, the Court 22 will grant the Motion because the balance of harms favors Defendant and a stay promotes 23 judicial efficiency. 24 II. DISCUSSION 25 Defendant argues a stay is warranted because the Florida Action will determine a 26 key component of this case: who has authority over AFLDS. (Id. at 2.) It also argues that 27 staying the case would not harm Plaintiffs, and, absent a stay, Defendant is at risk of [28] 2 case would harm them, that Defendant’s concern about incurring litigation costs is 3 unfounded, and that a stay would cause judicial inefficiency. (ECF No. 37 at 7-11.) The 4 Court agrees with Defendant. 5 A district court has discretionary power to stay proceedings in its own court. See 6 Landis v. N. Am. Co., 299 U.S. 248, 254-55 (1936); Lockyer v. Mirant Corp., 398 F.3d 7 1098, 1109 (9th Cir. 2005). There are “three non-exclusive factors courts must weigh 8 when deciding whether to issue a docket management stay: (1) ‘the possible damage 9 which may result from the granting of a stay’; (2) ‘the hardship or inequity which a party 10 may suffer in being required to go forward’; and (3) ‘the orderly course of justice measured 11 in terms of the simplifying or complicating of issues, proof, and questions of law.’” Pub. 12 Emps. Ret. Ass’n of N.M. v. Earley, 100 F.4th 1076, 1085 (9th Cir. 2024) (quoting Ernest 13 Bock, LLC v. Steelman, 76 F.4th 827, 842 (9th Cir. 2023)). 14 On the first factor, Plaintiffs argue that damage “may” result from a stay based on 15 the facts of another case and that Defendant moves for a stay to “try to destroy its 16 insured,” but do not articulate how a stay would practically cause damage specific to them. 17 (ECF No. 37 at 7-9.) Cf. Fallon Paiute-Shoshone Tribe v. U.S. Dep’t of the Interior, No. 18 3:21-cv-00512-RCJ-CSD, 2023 WL 2021303 , *2 (D. Nev. Feb. 14, 2023) (holding that 19 there was no “fair possibility” of damage where there was not a specific threat of damage 20 under a stay). Plaintiffs also argue they may experience damage because the Motion 21 could be an attempt by Defendant to prevent incriminating factual development through 22 discovery. (Id. at 7.) However, nothing in the record suggests this is Defendant’s aim. 23 Moreover, factual development—that could be incriminating—will continue in the Florida 24 Action, and once the Florida Action resolves the sole question of who has authority over 25 AFLDS, discovery may continue in this case. As there appears to be no “fair possibility” 26 that the stay presents tangible harm to Plaintiffs, the first factor favors Defendant. 27 Dependable Highway Express, Inc. v. Navigators Ins. Co., 498 F.3d 1059, 1066 (9th Cir. 28 2007). 2 competing and inconsistent orders. While Plaintiffs are correct to note that “being required 3 to defend a suit, without more, does not constitute a ‘clear case of hardship or inequity’” 4 (ECF No. 37 at 9-10 (quoting Lockyer, 398 F.3d at 1112 )), there indeed is more via the 5 threat to Defendant of duplicative liability or contradictory directives. See Watkins v. Rapid 6 Fin. Sols., Inc., No. 3:20-cv-00509-MMD-CSD, 2023 WL 7301491 , *3 (D. Nev. Nov. 3, 7 2023). This factor therefore favors a stay. 8 Finally, a stay would promote efficiency and judicial economy. As Defendant notes, 9 the Florida Action will resolve a key issue in this case. (ECF No. 36 at 4.) Staying this 10 case until control of AFLDS is determined will therefore allow the parties to understand 11 what claims and parties remain and to adjust their litigation strategies accordingly. It will 12 also prevent the Court from addressing unnecessary issues. See Leyva v. Certified 13 Grocers of California, Ltd., 593 F.2d 857, 864 (9th Cir. 1979) (“A trial court may, with 14 propriety, find it is efficient for its own docket and the fairest course for the parties to enter 15 a stay of an action before it, pending resolution of independent proceedings which bear 16 upon the case.”) A stay will, as a result, promote the “orderly course of justice” by 17 “simplifying . . . issues, proof, and questions of law.” Filtrol v. Kelleher, 467 F.2d 242 , 244 18 (9th Cir. 1972). This factor therefore also favors Defendant.2 19 As the three factors favor granting a stay, the Court will grant Defendant’s Motion. 20 III. CONCLUSION 21 The Court notes that the parties made several arguments and cited to several 22 cases not discussed above. The Court reviewed these arguments and cases and 23 determines that they do not warrant discussion as they do not affect the outcome of the 24 Motion before the Court. [25] 2Plaintiffs argue that staying the case opposes the orderly course of justice [26] because the Florida Action may not be decided on the merits as Plaintiffs could bring a 27 first-to-file claim. (ECF No. 37 at 11.) However, this concern is hypothetical as Plaintiffs have not made such an argument in the Florida Action, and even so, the judicial efficiency 28 to be gained warrants a stay. Moreover, discovery in the Florida Action will be limited to the sole question of who has authority to pursue an action on behalf of AFLDS. 1 It is therefore ordered that Defendant's motion to stay (ECF No. 36) is granted. 2 || The stay will be lifted upon the Middle District of Florida’s determination of who controls 3 || AFLDS. The parties are instructed to file a joint status report within ten days of the Middle 4 || District of Florida’s decision. 5 It is further ordered that the parties file a joint status report six months from the 6 || date of this order and every six months thereafter pending the Middle District of □□□□□□□□□ 7 || decision. 8 The Clerk of Court is directed to administratively close this case. 9 DATED THIS 29" Day of April 2024. [10] 11 ALA 12 MIRANDAM.DU- ——“‘“COC™~™~:C~S 13 UNITED STATES DISTRICT JUDGE