The Ninth Circuit Court of Appeals is set to hear arguments from Applied Underwriters, and the New Mexico alter ego of California Insurance Company, as to why they claim a federal District Court got it wrong by refusing to intervene in the ongoing conservation of the original carrier. The lower District Court found on two separate occasions that the state court has jurisdiction over the proper conservation and rehabilitation of the original California Insurance Company.
The court scheduled a hearing for December 7th after earlier rejecting Applied’s requests for an expedited review of the appeal. Applied originally asked the court to hear the case this month.
The December hearing will cover the appeal filed by Applied Underwriters and Applied Risk Services as well as the appeal filed separately by the New Mexico domiciled affiliate. The Ninth Circuit ordered the joint hearing after the lower courts recognized and chided Applied for the redundant filings as all of the plaintiffs are controlled by the same people.
“In all material respects, this action is identical to the action the court dismissed in its March 31 order,” U.S. District Court Judge William Shubb noted. “The plaintiff in this action, California Insurance Company, a New Mexico Corporation (‘CIC II’), is the shell company owned and formed by the owner of CIC.”
In both cases, Shubb refused to intervene in the conservation overseen by the San Mateo Superior Court. He found that the state court has jurisdiction and that Applied’s claimed concerns, as well as those of CIC II, can be addressed in the state proceeding and, if necessary, through appeals in the state court system.
The California Department of Insurance is urging the Ninth Circuit to come to the same conclusion and deny the appeals. Case watchers suggest CDI will prevail.
Meanwhile, the San Mateo Superior Court hearing to review and approve the proposed rehabilitation plan will be delayed further. The parties agreed to continue the hearing from November 18, 2021, to February 17, 2022.
The delay comes as the parties continue to fight over discovery issues. The San Mateo court was scheduled to hold a hearing and rule on Applied Underwriters’ discovery motion, but this too is being pushed back.
The court is now slated to hear the discovery motion and a motion to compel early next month. Applied is asking the court to force the Department to produce information about the conservation that CDI maintains is covered by attorney-client privilege and/or was part of the deliberative process and therefore protected. Applied claims that sanctions are warranted.