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abstaining where "the claims of the parties, including plaintiffs in this action, are either already before the Illinois court, or may be adjudicated in the Illinois Action by way of third-party claim, counterclaim or affirmative defense"
Summary of this case from Precision Imaging of N.Y., P.C. v. Allstate Ins. Co.Opinion
02 Civ. 9800 (WHP)
February 3, 2004
Daren S. McNally, Esq., Connell Foley LLP, New York, NY, for Plaintiff Travelers Indemnity Co
Richard L. McConnell, Esq., Wiley Rein Fielding LLP, Washington, B.C., for Plaintiff Travelers
Nicholas W.C. Corson, Esq., Hogan Hartson L.L.P., New York, NY, for Plaintiff Hartford
Nicholas J. Zoogman, Esq., Dickstein Shapiro Morin Oshinsky LLP, New York, NY, for Defendants Philips and THAN
Albert C. Hilber, Esq., Tressler, Soderstrom, Maloney Priess, Newark, New Jersey, for Defendant Allstate
Patrick T. Walsh, Esq., Lord Bissell Brook, Chicago, Illinois
Stephen T. Roberts, Esq., Mendes Mount LLP, New York, NY, for Defendant Certain London Market Insurance Companies
MEMORANDUM AND ORDER
Plaintiffs The Travelers Indemnity Company, Travelers Indemnity Company of Connecticut (collectively, "Travelers"), and Hartford Accident and Indemnity Company ("Hartford") bring this insurance coverage action pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201-02. Plaintiffs seek a declaration of comparative rights and responsibilities under various liability insurance policies relating to thousands of underlying asbestos bodily injury claims pending against defendants Philips Electronics North America Corporation ("Philips") and TH Agriculture and Nutrition, L.L.C. ("THAN"). Currently before this Court are motions by defendants Philips, THAN and the London Market Insurers to dismiss plaintiffs' amended complaint. For the reasons set forth below, defendants' motions to dismiss are granted on the grounds of abstention.
The term "London Market Insurers" refers to the consortium of Lloyd's of London Names and syndicates, named as defendants in this action, that underwrote certain liability insurance policies at issue. For a comprehensive description of the syndicated underwriting system, which is beyond the scope of this Memorandum and Order, this Court refers to the Second Circuit's decision in E.R. Squibb Sons, Inc. v. Accident Cas. Ins. Co., 160 F.3d 925, 929 (2d Cir. 1998).
BACKGROUND
From 1961 through 1981, THAN, a subsidiary of Philips, is alleged to have been a distributor of raw asbestos and asbestos-containing products. (Affidavit of Steven L. Carter, dated March 20, 2003 ("Carter Aff.") ¶¶ 4-5.) As a result, THAN is named as a defendant in hundreds of asbestos bodily injury lawsuits filed in Illinois, Texas, and other states. (Carter Aff. ¶ 5; Second Affidavit of Anne W. Grant, dated April 10, 2003 ("Second Grant Aff.") ¶¶ 6-8.)
From 1956 through 1985, Philips and THAN purchased primary and umbrella liability insurance policies from Travelers and Hartford, as well as umbrella and excess policies from other insurance companies including Allstate Insurance Company and the London Market Insurers. (Affidavit of Robin L. Cohen, dated March 21, 2003 ("Cohen Aff.") ¶ 2; Affidavit of Michael V. Ignatowicz, dated December 12, 2002 ("Ignatowicz Aff.") ¶¶ 1-5.) On October 21, 2002, THAN filed an insurance coverage action in Illinois state court against, inter alia. Travelers and Hartford (the "Illinois Action"). (Cohen Aff. ¶ 2, Ex. A: Complaint in the action captioned TH Agric. Nutrition, LLC v. Hartford Accident Indem. Co., et al., Case No. 02 CH 19037 (Cir.Ct., Cook County, Illinois).) Over six weeks later, Travelers and Hartford, defendants in the Illinois Action, filed this insurance coverage action in the Southern District of New York. It arises from the same underlying asbestos actions before the court in the Illinois Action, but adds the London Market Insurers as defendants. (Compare Cohen Aff. Ex. A with plaintiffs' Amended Complaint.) On March 24, 2003, Philips, THAN, and the London Market Insurers moved to dismiss the amended complaint in this action on numerous grounds. Because this Court finds the doctrine of abstention to be dispositive, it does not reach defendants' other grounds for dismissal.
DISCUSSION
Under the Declaratory Judgment Act, a district court "may declare the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C. § 2201(a). In passing the Act, "Congress sought to place a remedial arrow in the district court's quiver; it created an opportunity, rather than a duty, to grant a new form of relief to qualifying litigants." Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995). Because of its remedial nature, the Declaratory Judgment Act confers upon district courts "unique and substantial discretion" in deciding whether to declare the rights of federal litigants.Wilton, 515 U.S. at 286. Thus, unlike in most actions where a district court has a "virtually unflagging obligation" to exercise its jurisdiction, Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976), district courts "possess discretion in determining whether and when to entertain an action under the Declaratory Judgment Act, even when the suit otherwise satisfied subject matter jurisdictional prerequisites." Wilton, 515 U.S. at 282.
In determining whether to invoke the doctrine of abstention in the context of a declaratory judgment action where there exists a concurrent state court action, a district court must "ascertain whether the questions in controversy between the parties to the federal suit . . . can better be settled in the proceeding pending in the state court." Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 495 (1942). The non-exclusive factors to be considered by a district court in the exercise of its discretion include: (1) the scope of the pending state proceeding and the nature of the defenses available there; (2) whether the claims of all parties in interest can satisfactorily be adjudicated in that proceeding; (3) whether the necessary parties have been joined; (4) whether such parties are amenable to process in that proceeding; (5) avoiding duplicative proceedings; (6) avoiding forum shopping; (7) the relative convenience of the fora; (8) the order of filing; and (9) choice of law.Wilton, 515 U.S. at 282-83; Brillhart, 316 U.S. at 495. Further, the Supreme Court has cautioned that "[o]rdinarily it would be uneconomical as well as vexatious for a federal court to proceed in a declaratory judgment suit where another suit is pending in state court presenting the same issues, not governed by federal law, between the same parties." Brillhart, 316 U.S. at 495; accord Wilton, 515 U.S. at 283 ("[A]t least where another suit involving the same parties and presenting opportunity for ventilation of the same state law issues is pending in state court, a district court might be indulging in Mglratuitous interference,' if it permitted the federal declaratory action to proceed.") (quoting Brillhart, 316 U.S. at 495);Cadle Co. v. Bankers Fed. Sav. FSB, 929 F. Supp. 636, 639 (E.D.N.Y. 1996) ("Declaratory judgment actions which have as their underlying basis rights that are essentially governed by state law present particularly appropriate cases for application of the abstention doctrine.").
Indeed, district courts routinely invoke the doctrine of abstention in insurance coverage actions, which necessarily turn on issues of state law. See Reliance Ins. Co. of Illinois v. Multi-Financial Sec. Corp., No. 94 Civ. 6971 (SS), 1996 WL 61763, at *3-4 (S.D.N.Y. Feb. 13, 1996) ("Tipping heavily in favor of abstention in this case . . . is the fact that state law will govern the outcome of this action. With very narrow exception, Congress has long explicitly exempted the federal government from regulation of the insurance industry."); accord Wilton, 515 U.S. at 277; Nat'l Union Fire Ins. Co. v. Karp, 108 F.3d 17, 20-23 (2d Cir. 1997); Am. Motorists Ins. Co. v. Glidden Co., 129 F. Supp.2d 640, 641 (S.D.N.Y. 2001); Nat'l Union Fire Ins. Co. v. Warrantech Corp., No. 00 Civ. 5007 (NRB), 2001 WL 194903, at *3 (S.D.N.Y. Feb. 27, 2001); Commercial Underwriters Ins. Co. v. Glowmaster Corp., 105 F. Supp.2d 268, 270 (S.D.N.Y. 2000);Fed. Ins. Co. v. Safeskin Corp., No. 98 Civ. 2194 (DC), 1998 WL 832706, at *3-4 (S.D.N.Y. Nov. 25, 1998); Employers Ins. of Wausau v. El Paso Tennessee Pipeline Co., No. 98 Civ. 4612 (JSR), 1998 WL 790937, at *l-2 (S.D.N.Y. Nov. 13, 1998).
Considering the various Brillhart and Wilton factors, and mindful of the Supreme Court's admonition concerning declaratory judgment actions in the face of parallel state court actions, abstention is appropriate in this case. First, it is clear that the action before this Court and the Illinois Action are parallel, as there is an overwhelming commonality of issues and parties. Karp, 108 F.3d at 22 (noting that "[f]ederal and state proceedings are . . . `parallel' for purposes of abstention when the two proceedings are essentially the same," and holding that the presence of insurance company and insured in both suits rendered the two actions parallel even though the federal action involved more parties); see also Wilton, 515 U.S. at 283 (actions are parallel where they "present opportunity for ventilation of the same state law issues" and absent "parties are amendable to process" in both proceedings). Indeed, it is very likely that the London Market Insurers are more amenable to suit in Illinois state court than in the Southern District of New York, given the unsettled nature of the law concerning federal subject matter jurisdiction over individual Lloyd's Names and syndicates. See generally Howard M. Tollin Mark Deckman, Lloyd's of London and the Problem With Federal Diversity Jurisdiction, 9 J. Transnat'l L. Pol'y 289 (2000); John M. Sylvester Roberta D. Anderson, Is It Still Possible to Litigate Against Lloyd's in Federal Court?, 34 Tort Ins. L.J. 1065 (1999).
Further, the claims of the parties, including plaintiffs in this action, are either already before the Illinois court, or may be adjudicated in the Illinois Action by way of third-party claim, counterclaim or affirmative defense. See, e.g.,Warrantech, 2001 WL 194903, at *3 (holding that even if there is not an absolute commonality of claims between state and federal actions as currently constituted, abstention is appropriate where the absent claims are "readily assertable as defenses to the third party claims and/or counterclaims in that [state] suit"); accord Safeskin, 1998 WL 832706, at *3.
While the parties may disagree as to which state's law will ultimately apply, it is clear that state law, not federal law, will govern the resolution of the underlying claims in this insurance coverage action. This absence of federal issues weighs heavily in favor of abstention.See Reliance, 1996 WL 61763, at *3; accord Karp, 108 F.3d at 20-23; Glidden, 12 F. Supp.2d at 641; Cadle, 929 F. Supp. at 639.
Finally, the Illinois Action, which was filed over six weeks prior to this action, is progressing rapidly, thus raising the specter of an unnecessary duplication of effort and waste of judicial resources should this Court decline to abstain. For example, on June 17, 2003, the Illinois court denied Hartford and Traveler's motion to dismiss the Illinois Action on forum non conveniens grounds. (Letter to the Court, dated June 18, 2003, from Nicholas J. Zoogman, Esq.; Letter to the Court, dated June 19, 2003, from Daren S. McNally, Esq. and attachment; Letter to the Court, dated June 25, 2003, from Daren S. McNally, Esq. and attachment.) On September 18, 2003, an Illinois intermediate appellate court denied Hartford and Traveler's petition for leave to appeal that decision, and on January 21, 2004, the court in the Illinois Action denied Hartford and Travelers' motion to dismiss, or in the alternative to stay, the Illinois Action based on the pendency of this action. (Letter to the Court, dated September 22, 2003, from Nicholas J. Zoogman, Esq.; Letter to the Court, dated January 23, 2004, from Nicholas J. Zoogman, Esq.)
Continuing with this action in the face of the procedurally advanced Illinois Action would cause precisely the "vexatious" waste of judicial resources and "gratuitous interference" the Supreme Court cautioned against in Brillhart and Wilton. Taking into account all of these factors, and considering the totality of the circumstances, it is clear that abstention by this Court is appropriate.
CONCLUSION
For the foregoing reasons, the motions by defendants Philips, THAN and the London Market Insurers to dismiss plaintiffs' amended complaint are granted on the grounds of abstention. The Clerk of Court is directed to mark this case closed.
SO ORDERED