Liberty Mutual Insurance Company v. Fluor Enterprises, Inc. et al

Filing 42

ORDER AND REASONS denying 18 MOTION to Dismiss Case for Failure to Join Under Rule 19 and Based on Abstention Doctrine filed by Westchester Fire Insurance Company. Signed by Judge A. J. McNamara on 7/2/09.(blg)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA LIBERTY MUTUAL INSURANCE COMPANY VERSUS FLUOR ENTERPRISES, INC., ET AL * * * CIVIL ACTION NO: 08-5166 SECTION: "D"(3)

ORDER AND REASONS Before the court is the following motion: "Motion to Dismiss

for Failure to Join a Party Under Federal Rule of Civil Procedure 19 and Based on Applicable Principles of Abstention" (Doc. No. 18), filed by Defendant, Westchester Fire Insurance Company

(Westchester).

Defendants, Fluor Enterprises, Inc. (Fluor) and

Keith McLin, joined this motion, as well as Defendant, Great American Assurance Company, LP (Great American). (See Docs. Nos. 26, 27, 30 & 32). Plaintiff, Liberty Mutual Insurance Company,

filed a memorandum in opposition. The motion was set for hearing on Wednesday, July 1, 2009, on which date the court heard oral argument from counsel. Now, having considered the memoranda and argument of counsel, the record, and the applicable law, the court finds that the motion should be

denied. The Underlying Incident and State Court Litigation On or about August 25, 2006, a flash fire occurred in a FEMA trailer occupied by Jean Joseph and Bernard Mabry, II. Liberty Mutual's Amended Complaint at ¶24). (See

As a result of this

fire, allegedly, both Joseph and Mabry sustained serious injuries, and Mabry later died from his injuries. The incident spawned the

following lawsuits which were filed in Civil District Court for the Parish of Orleans, State of Louisiana: (1) (2) Jean Joseph, et al v. Fluor Corporation, et al; and Vernadine Mabry v. Fleetwood Enterprises, Inc., et al and Bernard Mabry, III, et al v. Fleetwood Enterprises, Inc., et al. (Amended Complaint at ¶ 25). The named Defendants in these lawsuits included: MMR, Fluor and McLin. MMR and Fluor had allegedly entered into a Blanket

Ordering Agreement related to the deliver and installation of the subject trailer. (Amended Complaint at ¶ 8 & 21). This Agreement

required MMR: (1) to indemnify Fluor against certain claims related to the performance of its work under the Agreement; and (2) to procure and maintain insurance with certain specified limits for the duration of the Agreement and to name Fluor as an additional insured on MMR's general liability and umbrella policies. 2 (Id. at

¶¶ 9-11). McLin is allegedly employed by a wholly-owned subsidiary of Fluor Corporation, TRS Staffing. (Id. at ¶ 23). On or about

August 22, 2006, McLin allegedly conducted the "lease-in" of the subject FEMA trailer. (Id.). The Insurers Liberty Mutual issued to MMR a commercial general liability policy and an Umbrella Excess Liability Policy. (Id. at 12).

Liberty Mutual assumed the defense of MMR and agreed to provide coverage for all liabilities that MMR may owe to the state court plaintiffs. (Liberty Mutual's Opp. Memo., Doc. No. 34, p. 5). (Amended Complaint at ¶29). and Great American.

Fluor's primary insurer was CNA. Fluor's excess insurers were

Westchester

(Amended Complaint at 19-20). Status of the Underlying Joseph and Mabry Tort Suits The underlying Joseph suit has settled. settlement, Liberty Mutual alleges that: On December 30, 2008, Fluor, CNA (Fluor's Primary), Westchester (Fluor's Excess), Great American (Fluor's Excess) and Liberty Mutual (MMR's Primary and excess) agreed to a settlement of the Joseph plaintiffs' claims against Fluor, McLin, MMR and other related parties ("the Settlement"). The Settlement exhausted the limits of the primary general liability insurance policy issued to Fluor. Under the Settlement terms, Liberty Mutual 3 Regarding this

agreed to contribute $5 million towards the total settlement amount. With respect to $2 million of this payment, Liberty Mutual reserved its right to seek reimbursement, contribution and/or indemnity from Westchester. Liberty Mutual also reserved its right to seek reimbursement, contribution and/or indemnity from Great American. (Id. at ¶¶29-30). The insurers including Liberty Mutual,

Westchester and Great American) were not named Defendants in the Joseph suit. The Mabry cases are ongoing, but due to the bankruptcy of Defendant Fleetwood Enterprises (the alleged manufacturer of the subject trailer), the underlying Mabry suits have been removed from state court and they are presently in Bankruptcy Court in the Eastern District of Louisiana. In the Mabry cases, Fluor and

McLin have demanded defense and indemnification from Liberty Mutual against the Plaintiffs' claims. (Id. at 28). Fluor and McLin

allegedly claim that: (1) the Blanket Agreement between MMR and Fluor constituted an "insured contract" under the Liberty Mutual policies, "such that MMR and thus Liberty Mutual, is obligated to defend and indemnify them;" and (2) Fluor and McLin are additional insureds under the Liberty Mutual policies. (Id.).1

Westchester and Great American are not parties in the Mabry

Liberty Mutual agreed to defend Fluor while fully reserving its rights to deny coverage. (Amended Complaint at ¶28).

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4

suits, and (after the filing of the federal suit) Liberty Mutual has purportedly been named as a third-party defendant by Fluor and McLin.2 The Instant Federal Suit In the instant federal suit, Liberty Mutual seeks a

declaration that it has no duty to defend Fluor and/or McLin in the Mabry suit, and no duty to indemnify Fluor and/or McLin in the Joseph or Mabry suits. Liberty Mutual also seeks to recover from Westchester and Great American (Fluor's excess insurers) $3 million of its

settlement in the Joseph suit based on "contribution, subrogation, unjust enrichment, and/or all other applicable legal or equitable theories of relief." (Id. at ¶40 & Prayer).

Defendants' Instant Motion to Dismiss In the instant Motion to Dismiss, Defendants argue that Liberty Mutual's claims should be dismissed because, under Federal Rule of Civil Procedure 19, MMR (Liberty Mutual's insured) is required party plaintiff, but MMR cannot be joined without

destroying the court's subject matter jurisdiction,3 and the matter

2 3

Liberty Mutual represents that it has not yet been served in the Mabry case.

Liberty Mutual brings its suit under the court's diversity jurisdiction. It is uncontested that MMR is a Louisiana domiciliary, and Defendant McLin is allegedly a Louisiana domiciliary. Thus, joinder of MMR would destroy this court's diversity jurisdiction.

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cannot

proceed

in

equity

and

good

conscience

without

MMR's

participation.

Westchester submits that all claims should be

litigated in the underlying consolidated Mabry suit to avoid inconsistent obligations. The court finds that a judgment in this case will determine: (a) which insurance company is responsible for the $3 million paid as part of the Joseph Settlement; and (2) which insurance company is obligated to defend and indemnify Fluor and McLin in the Mabry lawsuits. 19(a)(1)(A). Further, there is no other forum to recover this relief. Because the Joseph suit has settled, there is no other litigation within which to resolve the $3 million settlement liability issue. Further, Westchester and Great American are not parties to any of the underlying state litigation. Liberty Mutual has purportedly Thus, MMR is not a required party under Rule

been named in a third-party claim by Fluor and McLin in the Mabry suits, but purportedly has not yet been served. Additionally, the

Mabry lawsuits are presently in bankruptcy court. MMR has also not claimed an interest in whether Liberty Mutual, Westchester or Great American defends and indemnifies Fluor and McLin. Liberty Mutual further represents that it "is fully

defending and indemnifying MMR for all alleged liability to the tort plaintiffs in the underlying action." (Liberty Mutual Opp., 6

Doc. No. 34, p. 10).

The issue litigated in this case is the

insurers' obligations to Fluor and McLin, not to MMR. Thus, MMR is not a required party under Rule 19(a)(1)(B)(I). Next, the court finds that there is no risk of double, multiple or inconsistent obligations under Rule 19(a)(1)(B)(ii). The underlying Joseph case is over. Thus, if this court holds that Westchester and Great American must reimburse Liberty Mutual for the Joseph settlement (or not), the matter ends. In the underlying Mabry litigation, Westchester and Great American are not parties (but they are parties in this federal suit). As to the insurance

coverage issues, if this court decides in Liberty Mutual's favor, then Westchester and Great American must defend and indemnify Fluor and McLin in that litigation. If the court decides against Liberty Mutual, Liberty Mutual may have to defend and indemnify Fluor and McLin if the policies are not exhausted.4 Next, the court finds that the Rule 19(b)(1) factor favors proceeding this action without MMR. A judgment rendered without

MMR will not prejudice MMR or the existing parties. Again, Liberty Mutual is defending and indemnifying MMR for all liability it may have to the state court plaintiffs. (Liberty Mutual Opp., Doc. No. 34 at p. 14). Further, Liberty Mutual represents that MMR is not

The court recognizes that in deciding the coverage issues in this case, the court will have to make certain factual determinations.

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being asked by any party to contribute to the Joseph settlement. (Id.). And no matter which insurer wins in this case, Fluor (and

McLin) will be defended and indemnified by one of the insurance carriers. (Id.). Thus, a judgment rendered here (in the absence

of MMR) will be adequate under Rule 19(b)(3). The court concludes that "in equity and good conscience" this matter should proceed. Rule 19(b). This federal case and the The Joseph case has

underlying state cases are not parallel.

settled, and in the Mabry cases, the issues of coverage and policy interpretation are not being litigated because Westchester and Great American are not parties. Compare Exxon Corp. v. St. Paul

Fire & Marine Ins. Co., 129 F.3d 781 (5th Cir. 1997)(determination of insured's liability in state court suit is not prerequisite to a determination of coverage when state court case is strictly a personal injury action to which insurer was not a party). Refusing to exercise jurisdiction here would needlessly require Liberty Mutual to file another action in state court to address coverage issues. Finally, the Defendants alternatively argue that the court should dismiss or stay this federal case based on applicable principles of abstention. Because this is a declaratory action in

which Liberty Mutual also seeks coercive relief ($3 million in damages), the court analyzes Defendants' abstention argument under 8

the

Colorado

River

doctrine5

and

finds

that

there

are

no

"exceptional circumstances" that warrant abstention or a stay. Indeed, under the circumstance presented here, the court has a "virtually unflagging" obligation to exercise jurisdiction.

Colorado River Water Conservation Dist. v. U.S., 424 U.S. 800, 817 (1976); Southwind Aviation, Inc. v. Berger Aviation, Inc., 23 F.3d 948 (5th Cir. 1994). Accordingly; IT IS ORDERED that the "Motion to Dismiss for Failure to Join a Party Under Federal Rule of Civil Procedure 19 and Based on Applicable Principles of Abstention" (Doc. No. 18), filed by Defendant Westchester, and joined by Defendants, Fluor, McLin, and Great American, be and is hereby DENIED. New Orleans, Louisiana, this 2nd day of July, 2009.

______________________________ A.J. McNAMARA UNITED STATES DISTRICT JUDGE

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New England Ins. Co. v. Barnett, 561 F.3d 392, 396 (5th Cir. 2009).

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