Flintkote Company v. Aviva PLC
Filing
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MEMORANDUM OPINION re 38 motion to transfer. Signed by Judge Leonard P. Stark on 3/25/15. (ntl)
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
THE FLINTKOTE COMP ANY,
Plaintiff,
C.A. No. 13-103-LPS
v.
AVNA P.L.C., formerly known as
COMMERCIAL UNION ASSURANCE
COMPANY LTD.,
Defendant.
MEMORANDUM OPINION
Presently before the Court is Defendant Aviva's Renewed Motion to Dismiss or, in the
Alternative, Transfer Venue (the "Motion") (D.I. 38), in response to Plaintiff Flintkote
Company's Complaint (D.I. 1) for declaratory relief. For the reasons discussed, the Court will
grant the Motion in part and transfer this case.
I.
BACKGROUND
On May 1, 2004, Flintkote and related entities (collectively "Flintkote") filed for chapter
11 bankruptcy relief in the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court"). (Bankr. Case No. 04-11300, D.I. 1) On December 21, 2012, the
Bankruptcy Court entered an Opinion and Order confirming Flintkote's Amended Joint Plan of
Reorganization. (Id. at D.I. 7253-54) This Plan provides for the creation of a statutory trust
pursuant to 11 U.S.C. §524(g), in which Flintkote will eventually channel all of its prior asbestos
liabilities. (D.I. 42-1) Presently, the Bankruptcy Court has approved a Modified Plan for voting,
with a confirmation hearing scheduled for April 10, 2015. (Bankr. Case No. 04-11300, D.I.
8768) This Modified Plan would supersede the existing Plan.
Defendant Aviva is a London-based insurance company that issued asbestos liability
insurance policies to Flintkote. Flintkote has been litigating with Aviva for decades regarding
the scope of coverage and the rights and obligations of the parties under settlement agreements
reached in 1985 and 1989. (D.I. 39 at 4) From 2006 to 2012, Flintkote and Aviva mediated
these coverage disputes. (D.I. 11 at,-[,-[ 10-11) Following an impasse, on December 24, 2012,
Aviva moved the Bankruptcy Court to lift the automatic stay imposed by 11 U.S.C. § 362(d),
intending to file suit for declaratory relief in the Northern District of California. (D.I. 39-1;
Bankr. Case No. 04-11300, D.I. 7256-2) One week before the scheduled hearing on Aviva's
motion to lift the stay, 1 Flintkote preemptively filed for identical declaratory relief in this Court.
(D.I. 1) Flintkote then filed a Motion to Compel Arbitration on February 18, 2013. (D.I. 9)
Aviva filed a Motion to Dismiss or, in the Alternative, Transfer Venue on March 1, 2013. (D.I.
13) The parties briefed those matters and the Court heard oral arguments on July 31, 2013. (D.I.
10, 14, 15, 16, 18, 20) The Court entered an Order on September 30, 2013, granting Flintkote's
Motion to Compel Arbitration and dismissing as moot Aviva's Motion for Summary Judgment
and Motion to Dismiss or, in the Alternative, Transfer. (D.I. 29)
On October 31, 2014, the United States Court of Appeals for the Third Circuit reversed
this Court's September 30, 2013 Order compelling arbitration and vacated the Order denying the
motion to transfer as moot. (D.I. 37) Accordingly, Aviva filed its Renewed Motion to Dismiss
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The Bankruptcy Court granted Aviva's motion for relief from stay on February 4, 2013,
(Bankr. Case No. 04-11300, D.I. 7349), and Aviva filed its Complaint in the Northern District of
California on February 19, 2013, which was the first day it could do so pursuant to Fed. R.
Bankr. P. 4001(a)(3). (D.I. 39-2)
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or, in the Alternative, Transfer Venue on November 5, 2014. (D.I. 38) The parties fully briefed2
the issues and the Court heard oral argument on March 18, 2015. (D.I. 39, 42, 43)
II.
CONTENTIONS
Aviva seeks to dismiss this case as an anticipatory filing, which is an exception to the
first-filed rule. (D.I. 39 at 7; see E.E.O.C. v. Univ. ofPa., 850 F.2d 969, 971 (3d Cir. 1988),
ajf'd, 493 U.S. 182 (1990)) Aviva claims that Flintkote's filing was an attempt to forum shop,
based on the fact that the motion to lift the stay provided Flintkote with clear knowledge of
Aviva's intent to file suit in California. (Id.) In response, Flintkote maintains that the Court
should give deference to its choice of forum in accordance with the equitable "first-filed" rule.
(D.I. 42 at 7) Flintkote offers four arguments disputing Aviva's invocation of the anticipatory
filing exception to the first-filed rule. First, Flintkote argues that it was misled by Aviva's
ongoing participation in alternative dispute resolution. (Id. at 8) Second, Flintkote contends that
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Aviva's initial California Suit was legally deficient, which negates the anticipatory filing
exception. (Id. at 9) Third, Flintkote reasons that Aviva's forum shopping allegation ignores the
reality that Delaware is the most convenient forum for both litigants. (Id. at 11) Finally,
Flintkote argues that it properly used the Bankruptcy Code's automatic stay to protect assets.
(Id. at 13) Alternatively, Aviva moves to transfer this case under 28 U.S.C. § 1404(a). (D.I. 38)
Each party claims that the totality of the applicable§ 1404(a) factors weighs in its favor. (D.I.
39 at 14; D.I. 42 at 15)
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Flintkote attempts to supplement its Answering Brief by "incorporating by reference"
the earlier papers it filed in response to Aviva's initial Motion to Dismiss. (D.I. 42 at 6)
("Flintkote incorporates by reference its Opposition to Aviva's original motion to dismiss or
transfer this matter and refers the Court to those papers.") The Court cannot permit this practice
as it effectively subverts the briefing page limits. Accordingly, Aviva's objection to this
purported incorporation is sustained and the Court will not consider Flintkote' s earlier briefing.
(D.I. 43 at 1 n.3)
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III.
LEGAL STAND ARDS
A.
"First-Filed" Doctrine
The first-filed rule provides that "[i]n all cases of concurrent jurisdiction, the court which
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first has possession of the subject must decide it." Crosley Corp. v. Hazeltine Corp., 122 F.2d
925, 929 (3d Cir. 1941). This rule "encourages sound judicial administration and promotes
comity among federal courts of equal rank. It gives a court the power to enjoin the subsequent
prosecution of proceedings involving the same parties and the same issues already before another
district court." Univ. ofPa., 850 F.2d at 971. The Third Circuit in Univ. ofPa. recognized,
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however, that this rule may not apply if a litigant's behavior demonstrates "extraordinary
circumstances, inequitable conduct, bad faith, or forum shopping." Id. at 972. The first-filed
rule will not apply "when the first-filing party instituted suit in one forum in anticipation of the
opposing party's imminent suit in another, less favorable, forum." Id. at 976.
B.
Motion to Transfer
Pursuant to§ 1404(a), "[f]or the convenience of 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 or to any district or division to which all parties have consented." 28
U.S.C. § 1404(a). "While there is no definitive formula or list of the factors to consider ...
courts have considered many variants of the private and public interests protected by the
language of§ 1404(a)." Jumara v. State Farm Ins. Co., 55 F.3d 873, 879 (3d Cir. 1995). "The
court engages in a two-step inquiry, asking first whether the action could have been brought
originally in the proposed transferee forum and then whether transfer would best serve the
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convenience of the parties and witnesses as well as the interests of justice." Woodbolt
Distribution, L.L.C. v. Natural Alternatives Int'!, 2013 WL 247041, at *2 (D. Del. Jan. 23, 2013).
Relevant private interests include plaintiffs forum preference, defendant's forum
preference, whether the claim arose elsewhere, the convenience of the parties as indicated by
their relative physical and financial condition, the convenience of the witnesses, and the location
of books and records. Jumara, 55 F.3d at 879. Public interests include the enforceability of the
judgment, practical considerations, the relative administrative difficulty in the two fora resulting
from court congestion, the local interest in deciding local controversies at home, the public
policies of the fora, and the familiarity of the trial judge with the applicable state law. Id.
IV.
DISCUSSION
Aviva argues that although Flintkote filed this action first, the Court should depart from
the first-filed rule because of Aviva's anticipatory filing. (D.I. 39 at 7) The Third Circuit, in
Univ. ofPa., 850 F.2d at 972, held that an anticipatory filing could provide a basis for a district
court to depart from the conventional first-filed rule. The underlying dispute in that case arose
when a faculty member of the University was denied tenure and filed an EEOC charge. This
prompted the EEOC to open an investigation. Id. at 972. The EEOC filed a subpoena against
the University seeking various documents, and the University responded by requesting that the
EEOC limit the scope of its subpoena. Id. Subsequently, "[t]he EEOC notified the University
that unless it responded to the subpoena within twenty days of receiving the agency decision,
subpoena enforcement proceedings would be initiated." Id. at 973. Three days before this grace
period expired, the University filed suit for declaratory judgment and injunctive relief in the
District of Columbia. Id. The EEOC then instituted its subpoena enforcement action in the
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Eastern District of Pennsylvania. Id. The University invoked the first-filed rule and moved to
dismiss the second-filed EEOC action in the Eastern District of Pennsylvania. Id.
That Court denied the University's motion to dismiss. Id. On appeal, the Third Circuit
affirmed that decision and allowed the case to proceed in the Eastern District of Pennsylvania
despite the fact that the University had filed for declaratory relief first in the District Court for
the District of Columbia. Id. at 977. The Court's decision to uphold the district court's
departure from the first-filed rule rested principally upon two factors: (1) the timing of the
University's lawsuit in light of the EEOC's litigation threat, and (2) the finding that the
University was motivated to seek an alternative forum to avoid adverse case law. Id. The Court
reasoned:
The timing of the University's filing in the District of
Columbia indicates an attempt to preempt an imminent subpoena
enforcement in the Eastern District of Pennsylvania. . . . Instead of
complying with the ruling or notifying the EEOC of its intent to
contest the ruling, the University filed suit in the District of
Columbia three days before the expiration of the grace period during
which the EEOC stated it would not resort to a judicial enforcement
proceeding.
Moreover, the University has acknowledged that our
decision in Franklin & Marshall presented a problem with respect
to its plan to contest the EEOC's refusal to modify the subpoena to
recognize first amendment considerations of academic freedom.
Even if this factor, standing alone, were insufficient to justify
departure from the first filed rule, when viewed through the factual
prism of this proceeding, the University's effort to evade a decision
in this Circuit violates the equitable basis for the rule, and creates
several problems that cannot be ignored.
Id. The Court concluded that "[b ]ecause the first-filed rule is based on principles of comity and
equity, it should not apply when at least one of the filing party's motives is to circumvent local
law and preempt an imminent ... action." Id.
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The identical two offending factors from Univ. of Pa. are present in this case. On
December 24, 2012, Aviva filed its motion to lift the automatic stay. (D.I. 39 at Ex. A) It is
abundantly clear from the substance of that motion and the attached proposed complaint that
Aviva intended to file suit for declaratory relief against Flintkote in the Northern District of
California. (Id. at 7; see Bankr. Case No. 04-11300, D.I. 7256-2) One week before the
Bankruptcy Court heard and granted the motion to lift the stay, Flintkote filed a Complaint in
this Court seeking relief on the same issues A viva intended to raise in the California suit.
(Compare D.I. 1 at 9 with D.I. 39 at Ex. A) (both complaints seeking declaratory judgment of
parties' rights and obligations under 1989 asbestos liability coverage settlement agreement)
Much like the University's use of the EEOC's grace period in Univ. of Pa., Flintkote used the
automatic stay to its advantage to file in this Court before Aviva's forthcoming California suit.
Also similar to the offending party in Univ. of Pa., the record establishes that Flintkote
filed preemptively in Delaware in order to circumvent unfavorable local California law. 3
Flintkote clearly recognizes that California law could now be detrimental to its position, noting
that "[in 2006], the California Appellate Court issued its ruling in Fuller-Austin Insulation Co. v.
Highlands Ins. Co., 38 Cal. Rptr. 3d 716 (Cal. App. 2006), which if applied to Flintkote Trust
claims would be financially beneficial to Aviva." (D.I. 42 at 3-4; see also D.I. 39, Ex.Hat 7)
In response, Flintkote accuses A viva of forum shopping, by attempting to file in the Northern
District of California to take advantage of the Fuller-Austin decision. (D.I. 42 at 12 n. 4)
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It is unnecessary (and would be premature) for the Court to decide whether California
law applies to the underlying insurance dispute, or how the choice oflaw doctrines differ
between California and Delaware. It is sufficient for purposes of evaluating the pending motion
to find that Flintkote has identified California law as being unfavorable to its position, and seeks
to avoid that forum in order to reduce the possibility that the adverse law will apply. See Univ.
of Pa., 850 F.2d at 972 ("When the University filed the first suit, ... it knew the EEOC's
enforcement action was imminent, and that precedent in th[ e Third Circuit] ... might favor
resolution of the dispute in favor of the EEOC.") (emphasis added).
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To some extent, when a decision exists that is detrimental to one party's position, each
party could be rightfully accused of forum shopping by attempting to select a forum either to
invoke or avoid that decision. However, under the totality of the circumstances, the Court finds
that Flintkote's behavior is closer to the type of forum shopping the law intends to discourage.
First, in contrast to Flintkote's action, there is no evidence that Aviva engaged in an anticipatory
filing. Second, Aviva's decision to file suit in the Northern District of California was a logical
forum considering that Flintkote is headquartered within that district, it has litigated in that state
for decades, and Aviva is a foreign entity. 4 Most notably, prior to the 2006 Fuller-Austin
decision, Flintkote had commenced an insurance coverage litigation action against Aviva in the
Northern District of California. See Flintkote Co. v. Gen. Accident Assurance Co. of Canada,
2004 WL 1977220 (N.D. Cal. Sept. 7, 2004) (alleging breach of contract action against Aviva
relating to asbestos liability coverage). A litigant "should not oppose litigating in a court in
which it previously litigated without complaint." Cellectis S.A. v. Precision Biosciences, Inc.,
881 F. Supp. 2d 609, 613 (D. Del. 2012). In that prior litigation, Flintkote specifically argued
that the California court should have jurisdiction over Aviva. (D.I. 39 at Ex. J)
Flintkote responds that Aviva misled it into believing that both parties would participate
in binding arbitration, and cites to this Court's earlier finding in this case. (D.I. 42 at 8) (citing
D.I. 28 at 8) However, following an appeal of that decision, the Third Circuit rejected this
argument and found that "Flintkote could not have reasonably relied on Aviva's participation in
mediation as a basis to believe binding arbitration would occur if the mediation failed."
The Court agrees with Flintkote that Delaware is also a logical forum in which to litigate the
parties' dispute. However, for the reasons explained throughout this Opinion, Flintkote's
anticipatory filing in a logical forum is not dispositive under the totality of circumstances
presented here.
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Flintkote Co. v. Aviva P.L.C., 769 F.3d 215, 223 (3d Cir. 2014). This Court is bound by that
finding.
Flintkote contends that when Aviva instituted the second-filed California suit on
February 19, 2013, its initial pleading was legally deficient and thus had to be refiled on March
15, 2013. (D.I. 41 at 9) Flintkote's position is that because the District Court for the Northern
District of California did not properly acquire subject matter jurisdiction over the case, the firstfiled rule is inapplicable. (Id.) Flintkote cites to this Court's decision in Schering Corp. v.
Amgen Inc., 969 F. Supp. 258, 267-68 (D. Del. 1997), to support its position. This argument is
misplaced. Aviva is not arguing that it filed the first complaint. Aviva instead seeks to dismiss
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the actual first-filed complaint on the equitable basis ofFlintkote's complaint being an
anticipatory filing. (D.I 39 at 9) It is irrelevant that the Northern District of California did not
acquire subject matter jurisdiction until March 15, 2013, rather than February 19, 2013.
Regardless, Aviva was unquestionably the second filer. The issue in Schering Corp. was
whether a plaintiffs initial complaint could still be considered first-filed, despite the fact that the
plaintiff lacked proper standing to sue until it filed an amended complaint after the opposing
party properly filed its complaint. Schering Corp., 969 F. Supp. at 266. The analysis of that
issue has no bearing on the present dispute.
Flintkote denies forum shopping because it claims Delaware is a more convenient forum
for both litigants. (Id. at 11) For support, Flintkote relies on Zelenkofske Axelrod Consulting,
L.L.C. v. Stevenson, 1999 WL 592399, at *3 (E.D. Pa. Aug. 5, 1999). According to Zelenkofske,
Flintkote argues that filing suit in the most convenient forum negates the allegation of forum
shopping. Flintkote leans on that opinion's statement that "to justify a disregard of the first-filed
rule, forum shopping must be the sole reason for choosing one forum over another and thus will
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rarely be found where the first action was filed in a logical place." Id.; see also D.I. 42 at 1112)5
Flintkote contends that Delaware is a more convenient and logical forum because it now
is the location of its bankruptcy estate. Flintkote also explains that as of the Effective Date of
Flintkote's Plan, all the insurance actions (including the underlying dispute against Aviva) will
vest in a§ 524(g) "channeling" trust, which will be formed under Delaware law. (D.I. 42 at 13,
see Ex. A at~ 7, 12) Since this trust will soon be the proper party in interest to this dispute,
Flintkote argues, Delaware will be the more appropriate forum, rather than the location of
Flintkote's former operations. 6 The Court finds that this argument is unpersuasive. First, unlike
the defendant in Zelenkofske, there is ample evidence in the record to support a finding that
Flintkote filed suit in anticipation of Aviva's forthcoming suit, and did so to avoid adverse law.
Conversely, in Zelenkofske, the Court found that the plaintiff could "not show[] that defendants
engaged in forum shopping or maneuvering to secure a forum with more favorable substantive or
procedural law." Id. at *3. Second, essentially all of the characteristics Flintkote cites as support
for the convenience of this Court existed in 2009, when Flintkote nevertheless filed suit in the
Northern District of California and argued in favor of the application of California law. (D.I. 39,
Ex. G) At that time, Flintkote had already filed for bankruptcy in Delaware, had long ceased
operating, and had already proposed to create a § 524(g) trust under Delaware law. (See D.I. 43,
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The Court questions whether forum shopping must be the "sole reason" a party chose a
forum in order to warrant applying the anticipatory filing exception. As the Third Circuit stated
in Univ. ofPa., "[b ]ecause the first-filed rule is based on principles of comity and equity, it
should not apply when at least one of the filing party's motives is to circumvent local law and
preempt an imminent ... action." Univ. ofPa., 850 F.2d at 977 (emphasis added).
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Aviva argues that Flintkote's advocacy ofthis position is a violation of the Plan's
Insurance Neutrality Language ("INL"). (See Bankr. Case No. 04-11300, D.I. 6336-2, at 41)
The Court does not reach this question because it has decided transfer is warranted even
assuming that Flintkote is not violating the INL.
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Ex.Bat 20, 47) (documenting proposal of§ 524(g) trust under Delaware law in 2007)) This
undermines Flintkote's argument that Delaware has become (or imminently will become)
materially more convenient than previously.
Consequently, the Court finds that Flintkote engaged in an anticipatory filing that merits
a departure from the first-filed rule. In accordance with the Third Circuit's opinion in Univ. of
Pa., this decision is compelled by: (1) Flintkote's filing this present action at a time it undeniably
had knowledge of Aviva's intent to file an action adjudicating the same issues in the Northern
District of California, and (2) Flintkote's motivation to avoid the adverse Fuller-Austin decision,
which is evidenced by Flintkote's willingness to litigate insurance disputes in California before
that decision was issued. See Univ. ofPa., 850 F.2d at 977.
Rather than dismiss this case, the Court will instead transfer it to the United States
District Court for the Northern District of California. At the March 18, 2015 hearing, both
parties stated that if the Court finds that the anticipatory filing exception applies, they would
prefer that the Court transfer the case to Aviva's chosen venue instead of dismissing it. The
Court finds that this conditional consent provides an appropriate basis to transfer this case under
28 U.S.C. § 1404(a), as it will avoid another layer of inconvenience and cost attendant to
refiling.
V.
CONCLUSION
Accordingly, and for the foregoing reasons, the Court will grant Aviva's motion (D.I. 38)
and transfer this case to the Northern District of Ca ·fornia. An a}Jropriate Order follows.
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March 25, 2015
Wilmington, Delaware
~ \,Ov
Honorable Leonard P. Stark
UNITED STATES DISTRICT JUDGE
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