Opinion
Civ. A. No. 95-1581.
August 16, 1995.
Henry A. King, Fred Brian Chase, Nesser, King LeBlanc, New Orleans, LA, for plaintiff.
James Ryan, III, Sessions Fishman, New Orleans, LA, for defendant.
ORDER AND REASONS
Pending before the Court is a "Motion to Dismiss or Stay Action" filed by defendant Industrial Risk Insurers (hereinafter "IRI"), which was taken under submission on a previous date without oral argument. After considering the memoranda of the parties, the record and the applicable law, the Court DENIES the motion.
Background
Plaintiff Abell Corporation (hereinafter "Abell") filed this lawsuit against IRI, allegedly an unincorporated association with its principal place of business in Hartford, Connecticut, engaged in the business of selling and providing insurance services. (R.Doc. 1.) Abell contends that IRI issued a commercial property insurance policy on property Abell owned in Houston, Texas, and that an explosion caused extensive damage to the property in June 1983. Id.
Abell further alleged that with the consent of the other assureds and/or loss payees of the property, i.e., lessees Hi-Port Industries, Inc. (hereinafter "Hi-Port"), and Khempak Industries, Inc. (hereinafter "Khempak"), Abell entered into an agreement with IRI for adjustment of its claim for the property damage in the amount of $164,293.45. Id. Despite this agreement, however, Abell alleged that IRI issued a check in that amount made payable solely to Hi-Port, despite IRI's specific knowledge that the payment was intended solely as compensation for damages suffered by Abell. Id. Later, IRI allegedly issued another check in the same amount made payable to Khempak, Hi-Port and Abell, but Hi-Port refused to endorse the check. Id.
Because IRI has refused to issue a check made payable to Abell, it claimed that IRI has breached its duty to adjust claims fairly and properly and seeks damages under Louisiana law, including penalties and attorneys' fees. Id.
IRI responded to the lawsuit with the instant motion, claiming that it had filed an interpleader action in state court in Connecticut prior to the present lawsuit being filed. (Exh. A to IRI's motion, R.Doc. 4.) That lawsuit names as defendants Abell, Khempak and Hi-Port and seeks judicial determination of whether the $164,293.45 at issue should be distributed to Abell alone or to Abell and either or both Khempak and Hi-Port. Id. The IRI lawsuit also seeks to allow it to deduct attorneys' fees and costs under Connecticut law. Id.
Because of the interpleader action, IRI contends that this Court should stay or dismiss the instant lawsuit under the principles set forth by the Supreme Court in Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976) and Moses H. Cone Memorial Hospital v. Mercury Construction Corporation, 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).
In opposition, Abell argues that the facts applied to the factors of Colorado River and Moses H. Cone militate against any stay or dismissal.
Law and Application
The issue is whether the Court should dismiss or stay this matter on the basis of "considerations of `[w]ise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation'" because of the pending state court action in Connecticut. Colorado River, 424 U.S. at 817, 96 S.Ct. at 1246, quoting Kerotest Mfg. Co. v. C-O-Two Fire Equipment Co., 342 U.S. 180, 183, 72 S.Ct. 219, 221, 96 L.Ed. 200 (1952).
Although the pendency of a state court action "is no bar" to this proceeding and the federal courts have a "virtually unflagging obligation . . . to exercise the jurisdiction given them," Colorado River, 424 U.S. at 817, 96 S.Ct. at 1246, quoting McClellan v. Carland, 217 U.S. 268, 282, 30 S.Ct. 501, 504, 54 L.Ed. 762 (1910), the Supreme Court in Colorado River identified several factors that should be taken into account in determining whether to abstain out of respect for "wise judicial administration." These are:
1) whether a court has assumed jurisdiction over property at issue;
2) "the inconvenience of the federal forum";
3) "the desirability of avoiding piecemeal litigation"; and,
4) "the order in which jurisdiction was obtained by the concurrent forums."Colorado River, 424 U.S. at 818-19, 96 S.Ct. at 1246-47.
In Moses H. Cone, the Supreme Court added two additional factors: whether "federal law provides the rule of decision on the merits" and whether the state court can adequately protect the parties' rights. Moses H. Cone, 460 U.S. at 23, 26, 103 S.Ct. at 941, 942.
"The weight to be given to any one factor may vary greatly from case to case, depending on the particular setting of the case." Id. at 16, 103 S.Ct. at 937. However, a court must always keep in mind that "the decision whether to dismiss [or stay] a federal action because of parallel state-court litigation does not rest on a mechanical checklist, but on a careful balancing of the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction." Id. (Emphasis added.)
Additionally, "[a]bdication from the exercise of federal jurisdiction is the exception, not the rule." Colorado River, 424 U.S. at 813, 96 S.Ct. at 1244.
With these principles in mind, the Court analyzes whether to dismiss or stay this action. The first factor is of little consequence here, for there has been no indication that the state court in Connecticut has exercised jurisdiction over the monies at issue. Although IRI has requested in its lawsuit an order discharging it from liability upon deposit of the sum in dispute less attorneys' fees and costs, Abell has indicated in its opposition memorandum that the only pleading filed in the Connecticut matter is a motion to dismiss by Abell. (Memorandum in opposition, p. 8, R.Doc. 8.)
As to the second factor, "inconvenience of the federal forum," the Fifth Circuit has stated that the primary focus of this factor is on "physical proximity of the federal forum to the evidence and witnesses." Evanston Insurance Co. v. Jimco, Inc., 844 F.2d 1185, 1191 (5th Cir. 1988). Therefore, the Court briefly reviews the facts in this matter as to physical proximity to this forum.
The acts complained of by Abell surround the alleged settlement of an insurance claim. According to the complaint and its attachments, the settlement negotiations took place between Monroe, Louisiana, plaintiff's principal place of business, Chicago, Illinois, and Hartford, Connecticut. Attached to plaintiff's memorandum in opposition is an affidavit from W. Jeffrey Burford, plaintiff's vice president and chief financial officer, which states that the contacts with IRI "took place principally in a series of telephone conversations between Monroe, Louisiana, and Chicago, Illinois." (Affidavit of Burford, paragraph 8, attached to R.Doc. 8.) Attached to the affidavit is a letter to an IRI attorney from Abell's attorney in New Orleans as to payment of the claim at issue. Id., Exh. D. Also attached is a letter from that same IRI attorney to another attorney in Connecticut who apparently represented Hi-Port. Id., Exh. E. However, it is unclear from the record where Hi-Port is domiciled or has its principal place of business.
IRI maintains that this forum is exceedingly inconvenient without any supporting facts other than those in the instant complaint, i.e., that IRI is not authorized or registered to do business in Louisiana, that the loss arose in Texas, and that plaintiff's only connection with Louisiana is that its principal place of business is in Monroe.
In view of correspondence attached to the complaint as well as the Burford affidavit and correspondence attached thereto, the Court finds that because none of the negotiations or followup correspondence took place in New Orleans, the evidence and witnesses of defendant are no more inconvenienced by this forum than the evidence and witnesses of plaintiff. There is no proof in view of the negotiations between Abell in Monroe and IRI in Chicago that this forum is "any less convenient to the parties than the state forum" in Connecticut. Moses H. Cone, 460 U.S. at 19, 103 S.Ct. at 939. Thus, the Court finds that this factor does not weigh in favor of abstention.
The third factor is the desirability of avoiding piecemeal litigation. While the Connecticut action involves the same alleged sum plaintiff claims is due and owing in the present lawsuit, the present lawsuit also involves allegations of breach of good faith and fair dealing under Louisiana insurance statutes, for which plaintiff claims damages, penalties and attorneys' fees. As a result, the Court believes that the present situation is indicative of "duplicative, not piecemeal, litigation." Evanston, 844 F.2d at 1192.
IRI contends that the subject matter of the Connecticut complaint is "intertwined" with issues before this Court and that the only distinguishing factor between the two lawsuits is that in the state suit Abell must assert its rights to a limited fund whereas in the instant suit Abell "seeks to improve its position" by asserting its rights against IRI. This argument completely ignores Abell's claims under Louisiana statutory law.
As to the order in which jurisdiction was obtained, IRI maintains that its lawsuit was filed first. Hence, this matter should be stayed or dismissed. Evanston is again instructive. "Although the federal court suit was filed after the state court had acquired jurisdiction, very little had occurred in any of the parallel state proceedings with the regard to the claims against" the defendant. Id. Here, IRI does not contest Abell's contention that the only action taken in the state-court proceeding is a motion to dismiss for lack of jurisdiction has been filed by Abell. Thus, as in Evanston, very little has occurred in Connecticut state court which would counsel in favor of abstention in the present case. IRI's argument fails because it concentrates merely on which party got to the courthouse first, an improper analysis of this factor.
The next factor is whether state or federal law will be applied. IRI argues that Connecticut law will be applied such that abstention is proper. However, that is not the question. The issue is not which state's law will be applied but whether state or federal law applies. See American Bankers Ins. v. First State Ins., 891 F.2d 882, 885 (11th Cir. 1992).
There does not appear to be any federal law issue in this matter, only issues involving state law. However, as the Supreme Court instructed, the Court's "task . . . is not to find some substantial reason for the exercise of federal jurisdiction" but to "ascertain whether there exist `exceptional' circumstances, the `clearest of justifications,' that can suffice under Colorado River to justify the surrender of that jurisdiction." Moses H. Cone, 460 U.S. at 25-26, 103 S.Ct. at 942. While the presence of a federal law issue is a major consideration weighing against abstention, the presence of state law issues weighs in favor of abstention only in "rare circumstances." Evanston, 844 F.2d at 1193, citing Moses H. Cone, 460 U.S. at 26, 103 S.Ct. at 942. IRI has not shown — and this Court does not find — that rare circumstances exist here such that complex questions of state law should be decided by state courts. See American Bankers, 891 F.2d at 886.
The final factor for consideration is whether there will be adequate protection for Abell in the Connecticut court. The Fifth Circuit has described this as "a neutral factor or one that weighs against, not for, abstention." Evanston, 844 F.2d at 1193. Further, "[a] party who could find adequate protection in state court is not thereby deprived of its right to the federal forum, and may still pursue the action there since there is no ban on parallel proceedings." Id. Abell argues that the Connecticut court cannot protect its rights because it has raised Louisiana-based causes of action in this matter. While this Court refuses to doubt the ability of a Connecticut court to apply Louisiana law should Abell raise its claims there, the Court finds that this is at most a neutral factor as to whether to abstain. As the Eleventh Circuit stated in Noonan South, Inc. v. County of Volusia, 841 F.2d 380, 382 (11th Cir. 1988), the "fact that both forums are adequate to protect the parties' rights merely renders this factor neutral on the question of whether the federal action should be dismissed."
In support of its argument as to the applicability of this factor, Abell cites two cases for the proposition that interpleader is not available to an insurance company where the insured seeks statutory penalties or attorneys' fees. Notwithstanding that the case cites for this proposition are incorrect, it is unclear whether Abell has raised that defense and/or claim in the Connecticut proceeding. Abell also argues that because IRI has not tendered its policy limits, interpleader is improper. Again, it is unclear whether Abell has raised this defense in Connecticut. Nevertheless, in view of the Court's discussion of the sixth abstention factor above, the Court finds it unnecessary to address these arguments raised by Abell.
IRI raises one other argument in support of its motion, specifically that vexatious or reactive federal litigation may influence the decision as to whether to defer to a parallel state action. Moses H. Cone, 460 U.S. at 17, n. 20, 103 S.Ct. at 937, n. 20. As the Supreme Court noted in Moses H. Cone, however, while this argument may have had considerable merit, it did not have to rely on it because there had been no exceptional circumstances shown warranting a stay. Id. Similarly, this Court has found no exceptional circumstances warranting dismissal or a stay. Moreover, the Court notes that, from the record, it appears that IRI may have acted in a vexatious or reactive manner, filing the interpleader lawsuit in Connecticut after being informed of Abell's intent to sue. (Affidavit of Burford, paragraph 9, attached to plaintiff's memorandum in opposition, R.Doc. 8.)
In conclusion, having reviewed this matter in light of the applicable factors of Colorado River and Moses H. Cone, the Court finds that no exceptional circumstances exist warranting abstention. There is an absence of "the clearest of justifications [that] will warrant dismissal" or a stay of this matter. Colorado River, 424 U.S. at 818-19, 96 S.Ct. at 1246-47.
Accordingly,
IT IS ORDERED that the "Motion to Dismiss or Stay Action" filed by defendant Industrial Risk Insurers is DENIED.