MEMORANDUM-DECISION and ORDER
Plaintiff National Union Fire Insurance Company of Pittsburgh, PA ("National Union"), commenced this action by filing a complaint "in the nature of interpleader" pursuant to 28 U.S.C. § 1335 on February 21, 1996. National Union seeks relief against defendants Drzislav Coric, Theresa Higgins, Herbert Karp, Matthew Massaro and Kerrie Rogers, each of whom claim -- or may claim -- an interest in a $ 5 million insurance policy issued by National Union. National Union has moved for an injunction pursuant to 28 U.S.C. § 2361 restraining defendants from instituting or prosecuting any other lawsuits regarding the insurance policy during the pendency of this action. Defendants generally oppose the injunction and have cross-moved to dismiss the case for lack of subject-matter jurisdiction or, in the alternative, to have the case transferred under 28 U.S.C. § 1404 to the District of Connecticut.
On April 12, 1993, a small plane crashed while attempting to land in instrument weather conditions at an uncontrolled airport near Cortland, New York. The craft had traveled to Cortland from Groton, Connecticut. At the time of the crash the plane was piloted by Robert Freeman ("Pilot"), a certified flight instructor who apparently was providing instrument flight training to Ethel Karp, who was also on board. Both Robert Freeman and Ethel Karp were killed as a result of the crash. Also killed was the Pilot's daughter, Stephanie Freeman, who was one of the plane's passengers. The remaining two passengers, Matthew Massaro and Kerrie Rogers, survived the crash.
EG&H Corporation, the owner of the plane, had purchased liability insurance ("Policy") on the craft through National Union in 1992, and the Policy "was in full force and effect at the time of the crash." (Pl.'s Mem. Supp. Inj. at 3.) By its terms, the Policy provided liability coverage to all "insureds," which were defined as "not only the Named Insured [(EG&H)] but also any person while using or riding in the aircraft [except] any ... (other than any employee of the Named Insured ...) engaged in ... the operation of [a] ... commercial flying service or flying school with respect to any occurrence arising out of such operations." (Faiia Dec. Ex. 1 at 5.) The Policy also required National Union to defend "any suit against the Insured seeking damages on account of ... bodily injury or property damage, even if any of the allegations of the suit are groundless, false, or fraudulent." (Id. at 2.)
After the plane crash, the occupants of the plane or their estates -- with the exception of the Pilot's estate
-- brought personal injury or wrongful death lawsuits in Connecticut state court against the Pilot's estate and/or Ethel Karp's estate.
Stephanie Freeman's estate, represented by defendant Theresa Higgins as Administratrix, and Ethel Karp's estate, represented by defendant Herbert Karp as Executor, obtained default judgments of $ 4.7 million and $ 1.8 million, respectively, against the Pilot's estate in the Connecticut actions. According to plaintiff, both judgments currently are on appeal. The remaining claims against the Pilot's estate, and all the claims against Ethel Karp's estate, have yet to be tried, however.
Because National Union believes it is required by the Policy to do so, the insurer has defended Ethel Karp's estate without reservation in the state court lawsuits. National Union also admits that it will be liable to pay any non-appealable judgments that may be entered against Ethel Karp's estate "subject to the Policy's $ 5 million limits." (Pl.'s Mem. Supp. Inj. at 5 (emphasis in original).) But because National Union does not believe that the Pilot was an "insured" under the Policy -- according to the insurer, he was engaged in the operation of a "commercial flying service or flying school" and was not an employee of BG&H -- the company initially disclaimed coverage and declined to defend the Pilot's estate. After Stephanie Freeman's estate and Ethel Karp's estate obtained default judgments against the Pilot's estate on liability, National Union apparently decided to defend the Pilot's estate under a "reservation of rights" whereby the company continues to deny that it is required to either defend or indemnity the claims.
On January 19, 1996, Stephanie Freeman's estate commenced a subrogation action pursuant to Conn. Gen. Stat. § 38a-321 against National Union in Connecticut Superior Court, District of New London. Because Stephanie Freeman's estate was awarded a $ 4.7 million judgment against the Pilot's estate, Connecticut law permits her to be subrogated to all the rights of the Pilot and his estate under the Policy. The complaint in the subrogation lawsuit seeks (1) payment by National Union of the $ 4.7 million judgment Stephanie Freeman's estate was awarded against the Pilot's estate, and (2) additional damages based on allegations that National breached its contract by failing to immediately defend and indemnify the Pilot's estate and committed "unfair insurance practices"
by misrepresenting the terms and available coverage under the Policy.
National Union contends that it has brought this statutory interpleader action in order to "provide a single forum for the resolution of all coverage issues, ... avoid the possibility of multiple coverage lawsuits and the possibility of inconsistent judgments arising therefrom, [and] avoid inequitable distribution of the policy limits to the defendants." (Id. at 5-6.) Thus the insurer has named as defendants "all of the potential claimants to the Policy, including all of the plaintiffs in the [Connecticut] lawsuits as well as the Pilot's estate." (Id. at 6.) In terms of specific relief, National Union asks that the Court grant the company a declaratory judgment that it does not have a duty under the Policy to defend or indemnity the Pilot's estate because, at the time of the crash, the Pilot was operating a commercial flying service or flying school and was not an employee of EG&H. In the event that the Court determines that any of defendants are entitled to policy benefits, National Union asks that they be required "to interplead their claims to the policy limits" and that the insurer be discharged from further liability.
Again, National Union now moves for an injunction pursuant to 28 U.S.C. § 2361 restraining Stephanie Freeman's estate from prosecuting its Connecticut subrogation action against the insurer and enjoining all other defendants from instituting lawsuits regarding the policy during the pendency of this federal action. National Union notes that Section 2361 permits a court to enter an order "restraining [all claimants] from instituting or prosecuting any proceeding in any State or United States court affecting the property ... involved in the interpleader action" if the case has been correctly filed under the interpleader statute. See 28 U.S.C. § 2361. Furthermore, the insurer argues that it has properly invoked statutory interpleader jurisdiction here because (1) it has filed a complaint against all claimants; (2) the $ 5 million policy limits at issue exceed the statutory minimum of $ 500; (3) at least two claimants of diverse citizenship have or may assert entitlements to the Policy; and (4) National Union has deposited a bond in the amount of $ 5 million with the Court and has agreed to abide by the Court's judgment.
National Union also assures the Court that it should not abstain from exercising its jurisdiction over this case because of the simultaneous state proceedings. In the insurer's view, none of the three bases for abstention that have been recognized by courts in the past applies here. Finally, National Union notes that while a federal court may refrain in some situations from exercising its jurisdiction -- even absent ordinary grounds for abstention -- where a concurrent state proceeding exists involving the same parties and similar subject matter, the Court should not do so in this case. First, the insurer contends that the subject matter of the Connecticut subrogation action brought by Stephanie Freeman's estate is not sufficiently similar to the present suit. According to National Union,
this is an in rem proceeding against all possible claimants that will decide coverage issues and equitably divide the policy proceeds if necessary. [On the other hand, Stephanie Freeman's] estate purposefully limited its state lawsuit to a direct action by only one claimant to obtain virtually all of the $ 5 million Policy proceeds for itself. "While there may be some overlap of subject matter, it is not sufficient to make these actions concurrent."
(Id. at 12 (quoting Alliance of American Insurers v. Cuomo, 854 F.2d 591, 603 (2d Cir. 1988).) Second, National Union argues that even if the Connecticut action is "concurrent" with this case, the Court should still not refrain from exercising jurisdiction unless "exceptional circumstances" are present, and such circumstances are not present here.
Each of defendants have (1) cross-moved to transfer the venue of this suit from the Northern District of New York to the District of Connecticut pursuant to 28 U.S.C. § 1404(a); (2) cross-moved to have the case dismissed for lack of subject-matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1); and (3) opposed plaintiffs request for injunctive relief.
In regard to the venue motions, defendants argue not only that this action could have been brought in Connecticut, but also that the convenience of the parties and the convenience of the witnesses indicate that it should be transferred there now.
From defendants' perspective, plaintiff filed suit in this district only to "vex, harass, or oppress" defendants. (See Def. Higgins' Mem. Supp. Transf. at 20.)
Where the motions to dismiss are concern, defendants first contend that this is not an interpleader action, but rather a declaratory judgment action not authorized by the interpleader statute. They believe that "National Union's contingent interpleader request [is] merely a collateral concern to its desire to obtain a declaration of 'no coverage' under the policy." (Def. Karp's Mem. Supp. Dism. at 8.) Second, defendants assert that interpleader is inappropriate anyway, because National Union has liabilities here that are not limited by the terms of the Policy. In other words, because the insurer may be liable for breach of contract and other transgressions, it is not an "innocent stakeholder" and is not entitled to interpleader relief Third, defendants contend that an interpleader action is an equitable remedy that cannot be employed by National Union, a company guilty of "inequitable and improper conduct" as well as "undue delay and laches." (Id. at 14.) Fourth, defendants request that even if the Court retains jurisdiction over the interpleader claim, it should abstain from exercising supplemental jurisdiction over the claim for declaratory relief. Finally, in defendants' view, the bond submitted by National Union is inadequate because it was issued by a company with ties to National Union and does not account for the possibility of liability on the part of the insurer for breach of contract, unfair insurance practices, etc.
In their opposition to National Union's motion for an injunction, defendants contend that interpleader was never intended to be a "bill of peace" through which all other actions were silenced. Moreover, defendants see this case as especially problematic. Due to National Unions delay in bringing this action and because defaults were entered in the wrongful death actions after National Union initially refused to defend the Pilot's estate, "numerous actions pending in other courts, raising a myriad of issues, are now pending." (Id. at 21.) Defendants consequently urge the Court to reject National Union's attempt to sweep all these actions into one federal proceeding.
A. THE TRANSFER MOTION
The Court will address defendants' cross-motions to transfer the case first, because they may make adjudication of the other motions unnecessary. Motions for transfer of venue are made pursuant to 28 U.S.C. § 1404, which provides that "for the convenience of the parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404(a). A motion for transfer under this statute rests with the sound discretion of the Court. Golconda Mining Corp. v. Herlands, 365 F.2d 856, 857 (2d Cir. 1966). Among the variables that the Court should consider when making such a determination are:
The convenience of the parties; the convenience of the witnesses; the relative ease of access to the sources of proof, the availability of the process to compel attendance of unwilling witnesses; the cost of obtaining willing witnesses; practical problems that make trial of a case easy, expeditious, and inexpensive; and the interest of justice.