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December 7, 1992


The opinion of the court was delivered by: LEONARD B. SAND


 This controversy, in various incarnations, has generated litigation which has been pending in federal and state courts for the last ten years. The facts are fully set out in previous opinions of this Court, familiarity with which is presumed. Olin v. Insurance Company of North America, 762 F. Supp. 548, 550-55 (S.D.N.Y. 1991), aff'd, 966 F.2d 718 (2d Cir. 1992); Olin v. Insurance Company of North America, 743 F. Supp. 1044, 1046-48 (S.D.N.Y. 1990), aff'd, 929 F.2d 62 (2d Cir. 1991). The parties are currently before the Court on a number of motions, which fit into two categories. The first category includes motions by the plaintiff, Olin Corporation ("Olin"), to dismiss various pleadings of several defendants. The second category includes motions by several defendants to stay an action commenced by Olin in state court in Connecticut. After a brief discussion of the procedural history relevant to these motions, we will address each of the categories in turn.

 Procedural History

 Hanover Insurance Company ("Hanover") commenced an action on December 3, 1982, in this Court against Olin, Employers Insurance of Wausau ("Wausau"), Insurance Company of North America ("INA"), and National Union Fire Insurance Company of North America ("National Union"). (Complaint, Hanover Insurance Co. v. Olin Corp., 82 Civ. 8035 (LFM) (S.D.N.Y. 1982)). Six months later, on July 1, 1983, Olin filed an action in United States District Court for the District of Columbia. (Complaint, Olin Corp. v. Insurance Company of North America, 83-1900 (D.D.C., July 1, 1983)). Olin moved to dismiss or stay the first filed New York action, but the motion was denied by Judge MacMahon, because, among other considerations, he suspected that forum shopping was behind Olin's attempt to litigate in the District of Columbia.

 All parties to Olin's District of Columbia action then entered a stipulation providing for transfer of the Olin action to this Court, and an order was signed effecting that transfer on February 27, 1984 by Judge Bryant of the U.S. District Court in the District of Columbia. The stipulation provided in part that "whereas, the parties wish . . . to avoid a multiplicity of actions, [it is agreed that] during the pendency of the Olin Action, no party hereto will commence any other action asserting claims that have been asserted in the Olin Action or in the Hanover Action . . . ." Stipulation, P 4. In conjunction with the transfer, the Hanover action in this Court was dismissed without prejudice. On April 6, 1984, Olin filed an amended complaint in this Court.

 On December 9, 1991, the Court rendered two decisions. First, we denied Olin's motion to dismiss INA's second counterclaim, stating that "this Court [is] satisfied that in the context of this litigation, it states a cause of action over which this Court has jurisdiction." Second, we granted leave to Hanover and Wausau to file supplemental pleadings, stating that "this Court [is] satisfied that it was the intent of the parties, as well as being in the interest of judicial economy, that all of these related claims be litigated in this single forum."

 On December 13, 1991, four days after this Court denied Olin's motion to dismiss INA's second counterclaim and granted Hanover and Wausau's motion to supplement their pleadings, Olin made an ex parte application to the Connecticut Superior Court in Stamford seeking an order to show cause why INA, Hanover, and Wausau should not be enjoined from litigating the environmental claims involved in the Connecticut action in the Southern District of New York. The Clerk of the Court signed the order to show cause. In obtaining that ex parte order, Olin did not disclose to the Connecticut court this Court's December 9, 1991 decrees.

 On January 13, 1992, in lieu of answering Olin's Connecticut complaint, INA and certain other insurers made a joint motion to the Connecticut court seeking to dismiss Olin's Connecticut action on the ground of forum non conveniens, or alternatively, to stay the Connecticut action until the completion of the case before this Court. Those motions before the Connecticut state court have been held in abeyance by that court pending the decision on the motions currently before this Court.

 On January 24, 1992, INA filed a new motion in this Court to stay the proceeding in Connecticut. Many of the defendants have made similar motions or joined INA's motion. The Court will address the propriety of a stay in the context of INA's motion, addressing any issues which are specific to any particular defendant as they arise.

 By motions dated February 25, 1992, and September 14, 1992, Olin moved to dismiss Wausau's supplemental pleadings, as well as the counterclaims of certain defendants and the answers of certain other defendants, all of which will be discussed in further detail below.


 I. Olin's Motions to Dismiss Pleadings

 Hanover's supplemental pleading asserts a single counterclaim against Olin seeking a declaration of Hanover's and Olin's duties and obligations with respect to 12 enumerated environmental claims. Hanover also asserts cross-claims against INA, Wausau, National Union, and Certain Underwriters at Lloyds, London and Various London Market Insurance Companies, London and Edinburgh Insurance Company Limited, and North River Insurance Company (the "London Insurers"), seeking contribution with respect to those 12 environmental claims. Olin does not challenge Hanover's supplemental pleading.

 Wausau filed its supplemental pleading on December 23, 1991. No party having answered Wausau's pleading, Wausau filed a First Amended Counterclaim and Cross-Claim pursuant to Rule 15(a) on December 31, 1991. Wausau's amended counterclaim identifies ten additional counterclaim defendants, three of which, Aetna Casualty & Surety Co. ("Aetna"), General Reinsurance Corporation ("General Re") and Greenwich Insurance Company ("Greenwich"), maintain their principal place of business in Connecticut, the same state in which Olin maintains its principal place of business. Wausau's amended pleading also includes a cross-claim against all other defendants. Wausau's pleading seeks a declaration of the rights and obligations of all the parties with respect to approximately 100 environmental sites.

 A number of the defendants, in the course of answering Wausau's pleading, counterclaimed against Olin, seeking judgment declaring their respective rights and obligations under the policies. Olin moves to dismiss the counterclaims asserted by Fireman's Fund Insurance Company ("Fireman's Fund"), Commercial Union Insurance Company ("Commercial Union"), C.E. Heath Compensation & Liability insurance Company ("C.E. Heath"), and The Home Insurance Company ("The Home"). By a later dated motion, Olin also seeks to dismiss the answers filed in response to Wausau's amended pleading by Federal Insurance Company ("Federal"), Government Employees Insurance Company ("Geico"), Aetna, and Harbor Insurance Company ("Harbor"), as well as the answers filed by Wausau, Federal, and Aetna in response to the subsequently filed claim and cross-claim of Harbor.

 A. Olin's motion to dismiss Wausau's Counterclaim:

 At the heart of Olin's motions is its attempt to have the Court dismiss Wausau's counterclaim on the ground that the Court lacks subject matter jurisdiction. Olin's argument is that although Wausau denominates as counterclaim defendants (along with plaintiff) two Connecticut insurance companies, *fn1" the Court should realign those parties as adverse to Olin. Such a realignment would deprive the Court of subject matter jurisdiction, because complete diversity would be lacking. For the reasons detailed below, the Court rejects Olin's argument that the parties must be realigned.

 There is no question that to sustain jurisdiction based on the diversity of the parties, there must exist a substantial, actual controversy "between citizens of different states, all of whom on one side of the controversy are citizens of different states from all parties on the other side." Indianapolis v. Chase Nat'l Bank, 314 U.S. 63, 69, 86 L. Ed. 47, 62 S. Ct. 15 (1941). Furthermore, it is the court's duty to look beyond the pleadings and arrange the parties according to their sides in the dispute. Id. Relying on these two principles, Olin argues that the newly joined counterclaim defendants are really on the opposite side of the dispute from Olin, because the primary goal of all the insurers is to avoid obligation to Olin under the policies.

 Realignment is proper where a plaintiff, in the complaint, aligns the parties in a way which is not in accord with the actual controversy between the parties. In such a situation, a court must determine whether there is a "collision of interests", looking to the "principal purpose of the suit and the primary and controlling matter in dispute." Indianapolis, 314 U.S. at 69, (citations omitted). If no such actual controversy exists between the parties as aligned, the court must realign the parties to reflect their true interests. If such realignment destroys diversity, then the claim must be dismissed for lack of subject matter jurisdiction.

 Plaintiff's argument, that the two Connecticut companies currently aligned on the same side of the counterclaim with plaintiff should actually be on the opposite side, thus destroying diversity, fails on two separate grounds.

 First, plaintiff cites no case where realignment was found to be appropriate on a counterclaim where the court had proper subject matter jurisdiction over the main action. Plaintiff instead relies on three cases, Employers Ins. of Wausau v. Crown Cork & Steel Co., 942 F.2d 862 (3d Cir. 1991); United States Fidelity & Guaranty Co. v. Thomas Solvent Co., 955 F.2d 1085 (6th Cir. 1992); and The Travelers Indem. Co. of Illinois v. Metropolitan Life Ins. Co. et al, 798 F. Supp. 156 (S.D.N.Y. 1992), all of which involve realignment by the court of the original complaint, not of a subsequent counterclaim. In both Crown and Thomas, the courts used the "primary purpose" test, that is they looked to the plaintiff's primary purpose in bringing the claim, to determine the proper alignment of the parties with regard to the complaint. Judge Leval, in the Travelers case, used both the "primary purpose" test and the "collision of interests" test, *fn2" (without deciding which test should govern in this district), with regard again to Plaintiff's claims. Performing that same test on this case, it is clear that the parties are correctly aligned on Olin's complaint, since the primary purpose of Olin's suit is to determine the liability of its insurers. These cases are not authority for realigning parties on a counterclaim.

 The Fifth Circuit, in Zurn Indus., Inc. v. Acton Constr. Co., 847 F.2d 234 (5th Cir. 1988), holds that it is improper for a court to consider counterclaims or cross-claims for purposes of determining whether realignment is appropriate. In Zurn, a Pennsylvania subcontractor brought suit against two Texas defendants and a Minnesota defendant. The Fifth Circuit reversed the district court which, having taken into consideration counterclaims and cross-claims, had realigned the parties such that there was a Texas party on either side. Although the passage is lengthy, it is apposite and persuasive, and will be quoted in full:

 The district court realigned the parties according to what it viewed as the two "primary" claims. The court took all of the various claims including the counterclaims and cross-claims and determined which two were the "primary" claims. Joining all of the claims and deciding which are the "primary" claims is not warranted by City of Indianapolis. The objective of City of Indianapolis realignment is only to insure that there is a bona fide dispute between citizens of different states (citation omitted). The determination of the "primary and controlling matter in dispute" does not include the cross-claims and counterclaims filed by the defendants. Instead, it is to be determined by plaintiff's principal purpose for filing its suit. In complex litigation . . . with its various claims flying back and forth, there are two distinct steps in the jurisdiction determination. First, the court examines the primary or original purpose for filing suit. If the parties are not realigned on that claim, and there is no showing that the claim was a ...

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