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TIG Insurance Co. v. Fairchild Corp.

May 23, 2008

TIG INSURANCE COMPANY PLAINTIFF,
v.
THE FAIRCHILD CORPORATION AND NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA



The opinion of the court was delivered by: John G. Koeltl, District Judge

OPINION AND ORDER

This is an action for declaratory judgment pursuant to 28 U.S.C. § 2201, brought by the plaintiff, TIG Insurance Company ("TIG"), for the purpose of determining its liability to the defendant, The Fairchild Corporation ("Fairchild"), in a matter pending in the state courts of Ohio. Jurisdiction is based on diversity of citizenship. See 28 U.S.C. § 1332. Fairchild, along with its co-defendant in this matter, National Union Fire Insurance Company of Pittsburgh, Pa. ("National Union"), one of Fairchild's primary insurance carriers, separately move to dismiss TIG's suit for declaratory relief pursuant to the Wilton abstention doctrine.

I.

There is no dispute with respect to the following facts. Fairchild was sued in the Court of Common Pleas, Hamilton County, Ohio ("Ohio Action"), by Milacron, Inc. ("Milacron"), in May 2004, regarding an industrial product sold by D-M-E Company ("DME"). (Compl. ¶ 30.) On January 23, 1996, Milacron bought DME from Fairchild through an Asset Purchase Agreement. (Compl. ¶ 23.) In January 2002, Milacron was sued in fourteen separate actions in the United States District Court for the Eastern District of Missouri for injuries allegedly arising from exposure to the Jiffy Air Profiler, an industrial product sold by DME. (Compl. ¶¶ 25-26.) This alleged exposure took place from approximately 1987 through 2003. (Compl. ¶ 26.) Milacron settled these suits for $5.8 million. (Compl. ¶ 29.) Milacron then proceeded with the Ohio Action, seeking indemnification from Fairchild and other relief. (Baugher Decl., Ex. 2, ¶ 1.) In October 2004, Fairchild filed a third-party complaint in the Ohio Action against its primary insurance carriers, including National Union. (Compl. ¶ 31.) The Ohio Action was bifurcated, severing the claim between Milacron and Fairchild into one trial ("Milacron Ohio Action"), and the claims between Fairchild and the third-party defendants ("Third-Party Ohio Action") into a separate trial. (Baugher Decl., Ex. 4.)

The Milacron Ohio Action was decided in July 2007, holding Fairchild liable in the amount of $3,346,346.13, plus prejudgment interest of $598,535.94, post-judgment interest and court costs. (Compl. ¶¶ 37-38.) The Milacron Ohio Action allocated $1,911,739.09 of this amount to the period covering January 1, 1990 through October 1, 1996, which is pertinent to Fairchild's insurance coverage under various insurance contracts. (Compl. ¶ 39.)

Also in July 2007, subsequent to the liability determination, Fairchild sent a letter to TIG seeking a pro rata contribution to Fairchild's liability under their excess insurance policy with TIG, particularly seeking a contribution of $911,739.09 for the amount allocated to the January 1990 through October 1996 period. (Compl. ¶¶ 41-42.)

TIG filed the present action on September 20, 2007, seeking declaratory relief that is was not liable to Fairchild. Shortly thereafter, on September 27, 2007, Fairchild filed their Second Amended Third-Party Complaint in the Ohio Action, adding TIG, as well as Fairchild's other excess insurance carriers, to the Third-Party Ohio Action. (Baugher Decl. Ex. 5.) Fairchild filed this motion to dismiss in December 2007. On January 7, 2008, National Union filed a cross-motion to dismiss, essentially joining in Fairchild's motion to dismiss and incorporating the presentation set forth by Fairchild.

II.

Fairchild argues that this Court should abstain from deciding the merits of this declaratory judgment suit, and either stay or dismiss this action, based on the Wilton abstention doctrine. Wilton v. Seven Falls Co., 515 U.S. 277 (1995).

A.

The Declaratory Judgment Act permits, rather than mandates, district courts to grant declaratory relief. 28 U.S.C. § 2201(a). Wilton explains that the purpose of the Act is 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, 515 U.S. at 288; see also Travelers Indem. Co. v. Philips Electronics North America Corp., No. 02 Civ. 9800, 2004 WL 193564, at *1 (S.D.N.Y. Feb. 3, 2004). According to Wilton, suits brought under the Declaratory Judgment Act "justify a standard vesting district courts with greater discretion in declaratory judgment actions than that permitted" by the related Colorado River abstention doctrine. Wilton, 515 U.S. at 286; see Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817-20 (1976). "In the declaratory judgment context, the normal principle that federal courts should adjudicate claims within their jurisdiction yields to considerations of practicality and wise judicial administration." Wilton, 515 U.S. at 288; see also Dow Jones & Co., Inc., v. Harrods Ltd., 346 F.3d 357, 359 (2d Cir. 2003) (per curiam); National Union Fire Ins. Co. v. Karp, 108 F.3d 17, 22-23 (2d Cir. 1997).

Wilton did not offer a definitive test for deciding whether to abstain from deciding a declaratory judgment action involving the same issues being litigated by the parties in a state court action, but it did endorse the factors enunciated in Brillhart v. Excess Ins. Co., 316 U.S. 491 (1942), as a non-exclusive guide. Wilton, 515 U.S. at 282-83 (citing the Brillhart factors, but also noting that Brillhart itself left open the possibility of new factors also being relevant to the abstention analysis). The general goal of the inquiry is to determine whether the question at issue in the federal suit "can better be settled in the proceeding pending in the state court." Wilton, 515 U.S. at 282 (quoting Brillhart, 316 U.S. at 495) (internal quotation marks omitted); see also Karp, 108 F.3d at 22.

Based on Wilton and Brillhart, courts have considered the following factors:

(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; and (4) whether such parties are amenable to process in that proceeding. . . . (5) avoiding duplicative proceedings; ...(6) avoiding forum ...


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