United States District Court, S.D. New York
February 3, 2004.
THE TRAVELERS INDEMNITY COMPANY, et al., Plaintiffs, -against- PHILIPS ELECTRONICS NORTH AMERICA CORPORATION, et al., Defendant
The opinion of the court was delivered by: WILLIAM PAULEY, District Judge
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*fn1 to dismiss plaintiffs' amended complaint. For
the reasons set forth below, defendants' motions to dismiss are
granted on the grounds of abstention.
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
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.
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
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.
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
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
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.
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.
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.
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.