United States Fire Insurance Company et al v. Equitas Insurance Limited et al

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
United States Fire Insurance
Company et al.
v. Civil No. 18-cv-1205-LM
Opinion No. 2019 DNH 183
Equitas Insurance Limited et al.
O R D E R
Plaintiffs United States Fire Insurance Company (“U.S.
Fire”) and The North River Insurance Company (“North River”)
bring suit against several insurance companies,1 seeking damages
for breach of contract and a declaratory judgment arising out of
defendants’ refusal to pay plaintiffs amounts they claim are due
under certain insurance contracts. Defendants move to dismiss
or stay the case (doc. no. 33), and plaintiffs object.
Plaintiffs move to strike portions of defendants’ memorandum in
support of their motion to dismiss (doc. no. 50), and defendants
object.
1 Defendants are Tenecom Limited (“Tenecom”); Winterthur
Swiss Insurance Company (“Winterthur”); Sompo Holdings, Inc.
(“Sompo”); Berkshire Hathaway Specialty Insurance Company
(“Berkshire”); Allianz Suisse Versicherungs-Gesellschaft; Delta-
Lloyd Non-Life Insurance Company Ltd.; Banco de Seguros del
Estado (“Banco”); and Equitas Insurance Limited (“Equitas”).
Plaintiffs also named as a defendant American Home Assurance
Company, but plaintiffs have since dismissed that defendant from
the case.
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BACKGROUND
I. Factual Background2
From 1972 to 1985, U.S. Fire and North River, both New
Jersey companies, issued twelve umbrella and excess umbrella
liability policies to Mine Safety Appliances Company (“MSA”), a
Pennsylvania corporation that manufactured and sold products
such as respiratory protection equipment and asbestos-containing
personal protective products.3 The policies had combined limits
of approximately $244 million (the “MSA Policies”).
During that same timeframe, plaintiffs entered into
reinsurance contracts that covered the twelve MSA Policies (the
“Reinsurance Contracts”). In their complaint, plaintiffs allege
that they entered into at least one Reinsurance Contract with
each defendant, other than Equitas. They allege, however, that
Equitas assumed obligations of its predecessors-in-interest
under the Reinsurance Contracts “pursuant to a transaction
approved by the English High Court of Justice on or about June
30, 2009.” Doc. no. 5 at ¶ 8. Each of the Reinsurance
Contracts was entered into in the United Kingdom. Plaintiffs
2 The facts in this section are taken from plaintiffs’
amended complaint (doc. no. 5) unless otherwise noted.
3 Defendants state that plaintiffs issued fifteen total
policies to MSA. The discrepancy is not relevant to the court’s
analysis.
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allege that RiverStone Claims Management LLC (“RiverStone”), a
New Hampshire-based company that is not a party to this
litigation, managed the claims under the Reinsurance Contracts.
Beginning in the 1990s, MSA sought insurance coverage from
plaintiffs under the MSA Policies for hundreds of bodily injury
claims based on exposure to asbestos, coal, and silica dust.
MSA’s attempts to have plaintiffs provide coverage under the MSA
Policies resulted in many litigations, none of which was in New
Hampshire.
In October 2016, MSA obtained a jury verdict in
Pennsylvania state court against plaintiffs for breach of three
of the MSA Policies and violation of Pennsylvania’s bad faith
statute. Plaintiffs paid a substantial portion of the claims
tendered by MSA in 2017, and then fully resolved its disputes
with MSA in mid-2018 in a confidential settlement.
Beginning in March 2017 and continuing through 2018,
plaintiffs, through RiverStone, billed defendants for amounts
they claimed were due under the Reinsurance Contracts on account
of the MSA settlement payments. Certain defendants, as well as
other reinsurers not named as defendants in this case, paid some
of the reinsurance billings subject to a full reservation of
rights, including the right to recoup any payments. Eventually,
certain defendants refused to pay additional billings. On
December 21, 2018, plaintiffs brought this suit, alleging breach
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of several of the Reinsurance Contracts and seeking a
declaratory judgment arising out of defendants’ refusal to pay
the additional billings.
II. The New Jersey Action
Also on December 21, 2018, less than an hour before
plaintiffs initiated the instant lawsuit, certain underwriters
at Lloyd’s of London (“Underwriters”), along with Tenecom,
Winterthur, Sompo, and Berkshire (collectively, the “New Jersey
Plaintiffs”) sued North River and U.S. Fire in the Complex
Business Litigation Program of the New Jersey Superior Court
(the “New Jersey Action”).4 The complaint in the New Jersey
Action alleges claims for breach of contract and breach of the
implied covenant of good faith and fair dealing. Specifically,
the New Jersey Plaintiffs, who have made payments to North River
and U.S. Fire pursuant to the Reinsurance Contracts under a
reservation of rights, seek reimbursement of those amounts. In
addition, like plaintiffs in this action, the New Jersey
Plaintiffs seek a declaratory judgment regarding the parties’
“respective rights and liabilities” and “rights, duties, and
obligations” under the Reinsurance Contracts.
4 Defendants state that the Complex Business Litigation
Program of the New Jersey Superior Court “is designed to resolve
complex business and commercial cases ‘in an expedited manner.’”
Doc. no. 34 at 6 (quoting N.J. Court Rules, R. 4:102-5).
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Unlike in this case, the Underwriters are parties in the
New Jersey Action. In addition, Equitas, a defendant in this
case, is not a party in the New Jersey Action.
DISCUSSION
Defendants move to dismiss or stay this case. They advance
several arguments, including: (1) the court should exercise its
discretion to dismiss or stay this case pursuant to the prior-
pending action doctrine or the related first-filed doctrine in
light of the New Jersey Action; (2) abstention is warranted
under the Colorado River doctrine5 in light of the New Jersey
Action; and (3) the court should dismiss the case because the
Underwriters are indispensable parties under Federal Rule of
Civil Procedure 19 but cannot be joined for several reasons,
including that they would destroy diversity jurisdiction.
Plaintiffs object to defendants’ motion. In addition,
plaintiffs move to strike portions of defendants’ memorandum in
support of the motion to dismiss or stay. Plaintiffs contend
that although defendants assert in their memorandum that the
Underwriters would destroy the court’s diversity jurisdiction if
they were joined, defendants have submitted no factual support
for that assertion. Therefore, plaintiffs move to strike any
5 Colo. River Water Conserv. Dist. v. United States, 424
U.S. 800 (1976).
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unsupported contentions as to the Underwriters’ citizenship in
defendants’ memorandum. Defendants object.
I. Motion to Dismiss or Stay
While defendants’ motion to dismiss or stay was pending,
defendants filed a notice of an order issued in the New Jersey
Action, pursuant to Local Rule 42.1. Doc. no. 56. That order,
issued by the court in the New Jersey Action (the “New Jersey
Order”), ruled on a number of motions filed by U.S. Fire and
North River in that case. Among other things, the New Jersey
Order: (1) denied U.S. Fire and North River’s motion to dismiss
or stay on comity grounds; (2) denied U.S. Fire and North
River’s motion to dismiss or stay for Forum non Conveniens; (3)
denied U.S. Fire and North River’s motion to join Equitas as a
party; (4) denied U.S. Fire and North River’s motion to dismiss
the breach of contract claims for failure to state a claim; and
(5) ordered the New Jersey Plaintiffs to join Banco as an
indispensable party.
A. Prior-Pending Action
Under the prior-pending-action doctrine, “‘the pendency of
a prior action, in a court of competent jurisdiction, between
the same parties, predicated upon the same cause of action and
growing out of the same transaction, and in which identical
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relief is sought, constitutes good ground for abatement of the
later suit.’” Quality One Wireless, LLC v. Goldie Grp., LLC, 37
F. Supp. 3d 536, 540 (D. Mass. 2014) (quoting O’Reilly v. Curtis
Pub. Co., 31 F. Supp. 364, 364–65 (D. Mass. 1940)). “As a
general rule, the suit filed first should have priority ‘absent
the showing of balance of convenience in favor of the second
action.’” Quality One, 37 F. Supp. 3d at 540-41 (quoting Adam
v. Jacobs, 950 F.2d 89, 93–94 (2d Cir. 1991)); see TPM Holdings,
Inc. v. Intra-Gold Indus., Inc., 91 F.3d 1, 4 (1st Cir. 1996)
(“Where the overlap between the two suits is nearly complete,
the usual practice is for the court that first had jurisdiction
to resolve the issues and the other court to defer.”). “The
doctrine arises out of concerns about judicial efficiency and
avoiding inconsistent judgments” and “derives from a court’s
inherent power to control its docket.” Quality One, 37 F. Supp.
3d at 541.
“Generally, a court may stay or dismiss a later-filed
action under the doctrine if two conditions are met: (1) there
exists an identity of issues between the two actions and (2) the
controlling issues in the later-filed action will be determined
in the earlier-filed action.” Id. (quoting 5C Charles A. Wright
& Arthur R. Miller, Federal Practice and Procedure, § 1360 at 89
(3d ed. 2004)). In addition, to determine whether dismissal in
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favor of a prior-pending action is appropriate, courts may
consider a variety of factors, including:
(1) considerations of comity; (2) promotion of
judicial efficiency; (3) adequacy and extent of relief
available in the alternative forum; (4) identity of
parties and issues in both actions; (5) likelihood of
prompt disposition in the alternative forum; (6)
convenience of parties, counsel and witnesses; and (7)
possibility of prejudice to a party as a result of the
stay [or dismissal].
Qutab v. Kyani, Inc., 324 F. Supp. 3d 243, 247 (D. Mass. 2018)
(quoting Quality One, 37 F Supp. 3d at 542).
Here, dismissal pursuant to the prior-pending action
doctrine is appropriate. Although presented in a different
posture, the New Jersey Action involves the same issues
presented in this case: the various reinsurers’ obligations to
provide payments to plaintiffs under the Reinsurance Contracts.
As the New Jersey Plaintiffs seek not only the return of
payments they previously made to North River, but also a
declaratory judgment as to the parties’ respective rights and
obligations under the Reinsurance Contracts, the controlling
issues in this litigation will be determined in the New Jersey
Action.
Consideration of the remaining factors further favors
dismissal of the case in light of the New Jersey Action. As
discussed supra, U.S. Fire and North River already moved to
dismiss the New Jersey Action on a variety of grounds. The
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court in the New Jersey Action denied the motions and made
several rulings that directly impact the arguments raised by the
parties in this case. For example, defendants in this case
contend that the Underwriters, and not Equitas, have obligations
under certain of the Reinsurance Contracts, and that plaintiffs
have incorrectly named Equitas as a defendant in this case.6 The
court in the New Jersey Action addressed that very issue,
holding that Equitas is not “a real party in interest whose
rights will be affected” by a ruling regarding obligations under
the Reinsurance Contracts. Doc. no. 56-1 at 17. The court
further held that “it is difficult to believe that litigating in
[U.S. Fire and North River’s] home state” would be inconvenient
for them, despite their arguments to the contrary. Therefore,
principles of comity and the convenience of the parties and
witnesses weigh in favor of dismissal of this case in favor of
the New Jersey Action.
So, too, do the remainder of the factors. Judicial
efficiency and the likelihood of prompt disposition in the
alternative forum favors dismissal of this case in favor of the
New Jersey Action. The court in the New Jersey Action, which is
designed to resolve complex business and commercial cases “in an
6 Defendants contend that plaintiffs improperly sued
Equitas, and not the Underwriters, in a deliberate attempt to
maintain diversity jurisdiction. The court need not address
that contention.
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expedited manner,” has already issued several substantive
rulings that affect the rights of the parties, and the parties
have already set certain discovery deadlines in that case.
Further, U.S. Fire and North River will suffer no prejudice as a
result of dismissal of this action, as they can pursue their
claims in the New Jersey Action if they so choose.
Plaintiffs contend briefly that the prior-pending action
doctrine applies only when two identical actions proceed
concurrently in two federal courts. Although certain cases
outside of the First Circuit have declined to apply the prior-
pending action doctrine when a state court action is pending and
instead analyze the abstention question under the Colorado River
doctrine, at least one district court in the First Circuit has
applied the prior-pending action doctrine to the situation at
hand. See Quality One, 37 F. Supp. 3d at 542; cf. Mathews v.
Advised Assets Grp., LLC, No. CV 19-11057-LTS, 2019 WL 4645503,
at *1–2 (D. Mass. Sept. 24, 2019) (staying case under the prior-
pending action doctrine in light of a pending arbitration
proceeding involving substantially the same claims and parties).
Regardless of which abstention doctrine applies, particularly in
light of the New Jersey Order, which the court in the New Jersey
Action issued after the parties’ briefing in this case, deferral
to the New Jersey Action is appropriate. See doc. no. 51-1 at
31-32 (noting that the factors to be considered under the first-
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to-file, prior-pending action, and Colorado River doctrines are
similar).
The New Jersey Action renders adjudication of this case
duplicative and unnecessary. Because the New Jersey Action
“will likely determine all (or nearly all) of the issues
presented here,” dismissal of this case is appropriate. Bradeen
v. Bank of New York Mellon Tr. Co., Nat’l Ass’n, No. 18-CV-
11753, 2018 WL 5792319, at *3 (D. Mass. Nov. 2, 2018).
B. Remaining Arguments
Because the court dismisses this case based on the prior-
pending action doctrine, the court need not reach defendants’
remaining arguments raised in their motion.
II. Motion to Strike
Plaintiffs move to strike portions of defendants’
memorandum in support of their motion to dismiss or stay.
Specifically, plaintiffs move to strike any reference to the
argument that joining of the Underwriters as defendants in this
case would destroy diversity jurisdiction because there is no
factual support for that contention. Putting aside whether
striking portions of defendants’ memorandum would be the
appropriate remedy if plaintiffs’ arguments were meritorious,
the court need not reach the substance of plaintiffs’ motion.
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Because the court dismisses this case under the prior-pending
action doctrine, the court need not consider defendants’
arguments concerning diversity jurisdiction. Therefore,
plaintiffs’ motion to strike is denied as moot.
CONCLUSION
For the foregoing reasons, defendants’ motion to dismiss or
stay this action (doc. no. 33) is granted, to the extent it
seeks dismissal of the case. Plaintiffs’ motion to strike (doc.
no. 50) is denied as moot. The clerk of court shall enter
judgment accordingly and close the case.
SO ORDERED
______________________________
Landya B. McCafferty
United States District Judge
October 24, 2019
cc: Counsel of Record
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