upon the non-existence of coverage due to the cancellation of the policy based upon the nonpayment of premiums.
By summons and complaint dated September 6, 1996, Feidelson commenced a declaratory judgment action in Supreme Court, New York County, against Eagle, Continental as subrogee of Lexington Sales and J.S. Trading, Air Cargo, Shimoe and DCW. Feidelson v. Eagle Insurance Company, et al., Sup. Ct., N.Y. County, Index No. 604641/96 (the "Feidelson State Action").
There are four causes of action in the Feidelson State Action. In the second cause of action, Feidelson seeks a declaration that the Eagle policy covered him for the loss asserted by Continental. The fourth cause of action which is asserted against DCW, related tangentially to Eagle. In the fourth cause of action, Feidelson asserts that if the Eagle policy does not cover him, DCW is liable for allegedly failing to notify him of the cancellation of the policy. The first and third causes of action in the Feidelson State Action are directed to Air Cargo and Shimoe and are based upon alleged provisions of the lease agreements requiring indemnification and the procurement of insurance. Eagle served its answer to Feidelson's complaint on November 13, 1996, containing several affirmative defenses, including the cancellation of the Eagle policy prior to the date of loss.
There are, therefore, three state court actions (or four if the third-party action in the Continental Action is counted) -- the Continental Action, the Alliance State Action, and the Feidelson State Action -- in addition to this federal action, to enforce the judgment in the Alliance State Action, all implicating the insurance policies involved as a result of the February 1991 fire. The resolution of the Eagle defense of cancellation of the Shimoe policy in this action will bear upon relief in the Continental Action, is central to the third-party claim in that action and to the effect of the judgment in the Alliance State Action, the second cause of action in the Feidelson State Action and, of course, this action.
Generally speaking, "federal courts have a 'virtually unflagging obligation' to exercise their jurisdiction." Burnett v. Physician's Online, Inc., 99 F.3d 72, 76 (2d Cir. 1996), quoting Colorado River, 424 U.S. at 817. However, the district court has the discretion to abstain from exercising jurisdiction over an action where a concurrent state proceeding is pending based upon "considerations of 'wise judicial administration, giving regard to the conservation of judicial resources and comprehensive disposition of litigation.'" Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817, 47 L. Ed. 2d 483, 96 S. Ct. 1236 (1976), quoting Kerotest Mfg. Co. v. C-O-Two Fire Equipment Co., 342 U.S. 180, 183, 96 L. Ed. 200, 72 S. Ct. 219 (1952).
"To determine whether Colorado River abstention is appropriate, the district court must weigh six factors, with the balance heavily weighted in favor of the exercise of jurisdiction." Burnett, 99 F.3d at 76, quoting Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 16, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983). In Colorado River, the Supreme Court set forth four factors to be taken into account in deciding whether a federal court may abstain in favor of a parallel state action: (1) the assumption of jurisdiction over any res or property; (2) the inconvenience of the federal forum; (3) the desirability of avoiding piecemeal litigation; and (4) the order in which the concurrent forums obtained jurisdiction. Colorado River, 424 U.S. at 818. In Moses H. Cone, 460 U.S. at 23-26, the Supreme Court added two more factors to the Colorado River abstention analysis -- (5) the source of the applicable law; and (6) the adequacy of procedures in the state court to protect the federal plaintiff's rights.
Notably, "no one factor is necessarily determinative." Colorado River, 424 U.S. at 818. Moreover, "the weight to be given any one factor may vary from case to case, depending on the particular setting of the case." Moses H. Cone, 460 U.S. at 16. Thus, the Colorado River factors cannot be viewed as presenting a mechanical or exhaustive checklist. The district court is obligated to undertake a careful balancing of the applicable factors, but the decision to abstain is in the sound discretion of the district court. Arkwright-Boston Mfgs. Mut. Ins. Co. v. City of New York, 762 F.2d 205, 210 (2d Cir. 1985). As this Court has noted, the federal courts have frequently followed Colorado River and abstained from exercising jurisdiction in deference to parallel state actions. Mann v. Alvarez, 1996 U.S. Dist. LEXIS 13789, No. 96 Civ. 2641, 1996 WL 535540, at *2 (S.D.N.Y. Sept. 20, 1996), citing Weinstock v. Cleary, Gottlieb, Steen & Hamilton, 815 F. Supp. 127, 131 (S.D.N.Y. 1993).
This action and the Feidelson State Action are parallel proceedings for purposes of abstention under Colorado River in that they involve the same issue of the cancellation of the Eagle policy. Indeed, this action seeks enforcement of the default judgment obtained by Alliance in the Alliance State Action which has been consolidated for purposes of discovery with the Continental Action.
Based on careful assessment of the relevant factors as set forth below, abstention is warranted in this case.
Whether Either Court has Jurisdiction Over Property
Neither this action nor any of the state actions involves jurisdiction over property. Accordingly, this factor is inapplicable and therefore neutral. Arkwright-Boston, 762 F.2d at 210-211; Mann v. Alvarez, 1996 U.S. Dist. LEXIS 13789, 1996 WL 535540, at *2.
Whether the Federal Court is Inconvenient
The Feidelson State Action is pending in Supreme Court, New York County. Inasmuch as the Southern District of New York is convenient relative to the state forum, this factor is also neutral. Arkwright-Boston, 762 F.2d at 210-211; Mann v. Alvarez, 1996 U.S. Dist. LEXIS 13789, 1996 WL 535540, at *2.
Avoidance of Piecemeal Litigation
The desirability of avoiding piecemeal litigation was the most significant factor favoring abstention in Colorado River, 424 U.S. at 918-20, as it is here. See also Arkwright-Boston, 762 F.2d at 211. The concurrent litigation of this action, the Feidelson State Action and the Alliance State Action would require piecemeal and duplicative litigation of the issues regarding the cancellation of the Eagle policy and Eagle's potential obligations with respect to Shimoe and Feidelson.
The Second Circuit's decision in Arkwright-Boston compels the result here. That decision involved a number of state court actions which arose out of a water main break in New York's garment district and two subrogated federal actions to recover sums paid to insureds. The state actions had been consolidated and assigned to one state court justice. The Second Circuit concluded that the danger of piecemeal litigation was the paramount factor favoring abstention. 762 F.2d at 211. As the Court explained:
If the federal court refuses to abstain, it will force defendants to defend this complex litigation on two fronts. Further, inconsistent disposition of these claims between two concurrent forums would breed additional litigation on assertions of claim and issue preclusion. This could burden the parties for years to come. "The existence of such concurrent proceedings creates the serious potential for spawning an unseemly and destructive race to see which forum can resolve the same issues first [which would be] prejudicial, to say the least, to the possibility of reasoned decision making by either forum." Arizona v. San Carlos Apache Tribe of Arizona, 463 U.S. 545, 77 L. Ed. 2d 837, 103 S. Ct. 3201, [567-568] (1983). As the suits all arise out of the single water main failure, they should be tried in one forum. Maintaining virtually identical suits in two forums under these circumstances would waste judicial resources and invite duplicative effort. Plainly, avoidance of piecemeal litigation is best served by leaving these suits in the state court.