Stafford v. Stanton et al

Filing 237

MEMORANDUM RULING re 162 SEALED MOTION to Dismiss filed by Walter J Stanton, III, 159 MOTION to Dismiss Stanton's Second Filed Action, MOTION to Transfer Case, MOTION to Consolidate Case filed by Berkley Assurance Co. Signed by Chief Judge S Maurice Hicks, Jr on 3/1/2021. (crt,McDonnell, D)

Case 5:17-cv-00262-SMH-MLH Document 237 Filed 03/01/21 Page 1 of 9 PageID #: 2710

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
SHREVEPORT DIVISION
RAYMOND STAFFORD

CIVIL ACTION NO. 17-0262

VERSUS

JUDGE S. MAURICE HICKS, JR.

WALTER J. STANTON, III, ET AL.

MAGISTRATE JUDGE HORNSBY

MEMORANDUM RULING
Before the Court are two Motions to Dismiss (Record Documents 159 & 162)
filed by Defendants Berkley Assurance Company (“Berkley”) and Walter J. Stanton, III
(“Stanton”). Berkley has moved to dismiss Stanton’s duplicative coverage action filed in
Florida federal court pursuant to Federal Rule of Civil Procedure 12(b)(1), or
alternatively, to transfer and consolidate that action with the instant suit pursuant to 28
U.S.C. § 1404. See Record Document 159. Stanton has moved for his dismissal from
this action pursuant to a settlement agreement between himself, the Plaintiff Raymond
Stafford (“Stafford”) and National Union Fire Insurance Company (“National Union”).
See Record Document 162. For the reasons assigned herein, both Motions are hereby
DENIED.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
This lawsuit centers on a failed investment in which Stanton convinced Stafford
to invest $2.5 million in David deBerardinis’s (“deBerardinis”) company Financial
Resources, LLC (“FR”) with the promise of a substantial return that never came. 1 See
An entry of default in this matter has occurred as to both deBerardinis and FR. See Record Document
66. The Court also notes that on March 29, 2018, deBerardinis was charged by superseding indictment
with mail fraud, bank fraud, wire fraud, money laundering, and making a false statement to a bank in
relation to various fuel sales agreements involving FR. See United States v. deBerardinis, No. 18-cr0030, Western District of Louisiana, Record Document 17.
1

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Record Document 12 at ¶19. Stanton had provided legal assistance regarding fuel
purchase contracts to deBerardinis and FR for over twenty-five years and had been
friends with Stafford for over twenty years. See id. at ¶¶9-11. Stafford is a resident of
Dublin, Ireland. See id. at ¶1. Stanton is a resident of Coral Gables, Florida. See id. at
¶2. deBerardinis and FR are based out of Shreveport, Louisiana. See id. at ¶5.
The instant suit was filed in this Court on February 10, 2017. See Record
Document 1. Stafford’s claims against Stanton include breach of fiduciary duty and
negligent misrepresentation. See id. at ¶¶29-30. Stafford also asserted direct claims
against Stanton’s professional liability insurers—National Union and Berkley—under
Louisiana’s Direct Action Statute, La. Rev. Stat. 22:1269. See id. at ¶¶ 4-5, 32. In July
2018, Stafford reached an agreement (the “Gasquet Settlement”) with Stanton and
National Union by which National Union would be dismissed from the suit with
prejudice, but Stafford reserved his right to continue the case against Stanton to the
extent necessary to reach Berkley. See Record Documents 51 & 180-1. This Gasquet
Settlement is the subject of Stanton’s Motion to Dismiss. See Record Document 162.
Several other lawsuits have been filed against deBerardinis, his entities, and
Stanton. These include state court proceedings in the District Court of Dallas, Texas
(PlainsCapital Bank v. FR III Funding, LLC, No. DC-16-07601) and the First Judicial
District, Caddo Parish, Louisiana (Byrum W. Teekell, et al. v. Walter J. Stanton, et al.,
No. 599295-A). See Record Document 159 at 2. Stanton himself, however, filed a
strikingly similar coverage action against Berkley in the United States District Court for
the Southern District of Florida on May 1, 2020. See Walter J. Stanton v. Berkley
Assurance Co., No. 1:20-cv-021829; Record Document 159-1. This coinciding lawsuit in

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Florida federal court is the subject of Berkley’s Motion to Dismiss. See Record
Document 159.
BERKLEY’S MOTION TO DISMISS/TO TRANSFER AND CONSOLIDATE
Berkley’s central request is for the Court to dismiss the pending action in Florida
federal court as a duplicative lawsuit. See Record Document 159. In the alternative,
Berkley argues the Court should transfer and consolidate the Florida action with the
instant one before it. See id. at 7. Upon this occurrence, Berkley seeks dismissal of
Count II of the Florida suit for failure to state a cause of action. See id. at 9. Finally,
should the Court elect not to dismiss Count II, Berkley asks it to “at least dismiss or
strike Stanton’s unsupported fraud allegation.” Id. at 10. Perhaps in a sign of the
extraordinary actions Berkley asks this Court to undertake, both Stafford and Stanton
oppose the Motion. See Record Documents 170 & 181. Berkley’s reply enlightens the
Court of a recent stay of the proceedings in Florida pending ruling on this Motion. See
Record Document 183.
I.

Dismissal under the First-Filed Rule
Berkley argues this Court should dismiss Stanton’s second-filed action in the

Southern District of Florida under Rule 12(b)(1). See Record Document 159. While
Berkley’s arguments raise no direct subject matter jurisdiction issues, they do
emphasize that the Fifth Circuit’s first-filed rule mandates dismissal. 2 See id. at 3. The
first-filed rule provides, “when related cases are pending before two federal courts, the
court in which the case was last filed may refuse to hear it if the issues raised by the
As correctly stated by Berkley, the Eleventh Circuit also follows the first-filed rule. See Manuel v.
Convergys Corp., 430 F.3d 1132, 1135 (11th Cir. 2005).
2

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cases substantially overlap.” Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d 599, 603
(5th Cir. 1999). The first-filed rule is rooted in principles of comity and judicial economy,
while aiming to avoid the waste of duplication, encroachment upon the authority of sister
courts, and piecemeal resolution of issues that require a uniform result. See West Gulf
Maritime Ass’n v. ILA Deep Sea Local 24, 751 F.2d 721, 728 (5th Cir. 1985).
The Court does not see how it has the power to dismiss a case before a sister
district court with sound jurisdiction. Such action flies directly in the face of the makeup
of our federal judicial system. The language of the first-filed rule itself grants the
authority to refuse to hear a case to the court overseeing the second-filed action, and
the jurisprudence on the subject reflects this principle. See e.g., Hartford Cas. Ins. Co.
v. Ark., La., and Miss. Pipe Trades Ass’n, 2011 WL 1211518 (W.D. La. Mar. 30, 2011)
(Drell, J. dismissing second-filed action in favor of first-filed in S.D. Miss.); Caillou Island
Towing Co., Inc. v. Navigators Ins. Co., 2010 WL 3168420 (E.D. La. Aug. 6, 2010)
(action was dismissed in favor of S.D. Tex. suit filed day prior).
Nevertheless, Berkley stresses it is the prerogative of the first-filed court to
determine the applicability of the rule and how the second-filed action should be
handled. See Record Document 183 at 3. While it is accurate that the first-filed court
must make these determinations, such analysis cannot take place until the issue is
properly before it. As explained by this Court, “the proper course of action is ordinarily
for the second-filed court to transfer the case to the first-filed court. The first-filed court
can then decide whether the second suit filed must be dismissed, stayed, or transferred
and consolidated.” Joy Global Conveyors, Inc. v. Richard Goettle, Inc., 2018 WL
1249277 at *2 (W.D. La. Mar. 9, 2018) (Hornsby, Mag. J.) (citing Cadle Co., 174 F.3d at

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606). This procedure has not yet been followed. Instead, Berkley filed and was granted
a short stay of proceedings in the Southern District of Florida pending the resolution of
the instant Motion before this Court. See Record Document 183-1.
This Court cannot order the dismissal of a case not yet before it. As has occurred
numerous times in analogous situations, the second-filed case must be transferred to
this Court, at which point it will be able to determine the applicability of the first-filed rule
and the proper outcome of that suit. See e.g., Marks v. Mackey, 2014 WL3530137
(W.D. La. July 15, 2014) (Hanna, Mag. J. transferring second-filed action to D. Utah);
Hartford Underwriters Ins. Co. v. Foundation Health Services, Inc., 359 F.Supp.2d 1297
(M.D. La. Feb. 24, 2005) (transferring second-filed suit to N.D. Miss). Judge Gayles of
the Southern District of Florida analyzed Berkley’s Motion to Stay as other second-filed
courts have done in transferring cases to the first-filed jurisdiction. See Record
Document 183-1. However, he also recognized the limited nature of Berkley’s request
for a short stay. 3 See id. at 3. While the analysis has been conducted, the proper steps
have not yet taken place for this Court to be able to consider the Florida action. As
such, Berkley cannot obtain dismissal under the first-filed rule at this time.
II.

Alternative Arguments
Alternatively, Berkley asks the Court to order the action in the Southern District of

Florida transferred or consolidated with the instant suit. For the reasons detailed above,
the Court cannot do so. The Southern District of Florida, after analyzing a proper motion
to transfer or consolidate, may find the issues in the two cases substantially overlap and

In granting the motion to stay proceedings, Judge Gayles writes, “the Louisiana court necessarily must
decide the issue of coverage. Importantly, Berkley seeks only a stay here.” Record Document 183-1.
3

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order a transfer to this Court; however, this Court does not have the ability to do this for
them. Having rejected Berkley’s requests for dismissal and transfer or consolidation, the
Court need not entertain Berkley’s request for subsequent actions pertaining to specific
causes of action in the Florida suit. If this suit arrives before this Court in the future,
those arguments may be the subject of motion practice. Berkley’s Motion to Dismiss
(Record Document 159) is hereby DENIED.
STANTON’S MOTION TO DISMISS PURSUANT TO GASQUET SETTLEMENT
Turning to the second Motion to Dismiss before the Court, Stanton argues that
he is entitled to dismissal from this suit as a result of the Gasquet Settlement reached
between himself, Stafford, and National Union. See Record Document 162-1. Berkley
opposes this dismissal, arguing the terms of the Gasquet Settlement explicitly
contemplate Stanton remaining in the suit as a nominal defendant while Stafford
pursues an award from Berkley. See Record Document 178. They argue the law of
such settlements supports Stanton’s continuance as a defendant, and further point to
Stanton’s litigious actions that reflect anything but a desire to exit the suit. See id. at 2-3.
Stafford echoes these arguments, attaching the Gasquet Settlement itself. See Record
Document 180. Stanton’s reply discusses case law permitting the dismissal of nominal
defendants in certain post-Gasquet settlement situations, while also arguing Berkley
does not have standing to contest this Motion. See Record Document 182.
Gasquet settlements are a uniquely Louisianan phenomenon arising from a 1980
state appellate court case concerning an airboat accident in Plaquemines Parish. See
generally Gasquet v. Commercial Union Ins. Co., 391 So.2d 466 (La. App. 4 Cir. 1980).
A Gasquet settlement permits the plaintiff to (1) release the primary insurer entirely; and
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(2) release the insured from all claims which might be recoverable from him directly
while reserving claims against him only to the extent that collectible coverage is
afforded by an excess insurance policy. See Aggreko, L.L.C. v. Chartis Specialty Ins.
Co., 942 F.3d 682, 695 (5th Cir. 2019) (citing RSUI Indem. Co. v. Am. States Ins. Co.,
127 F. Supp.3d 649, 658 (E.D. La. 2015)) (emphasis in original). Procedurally, the
insured remains in the lawsuit as a nominal defendant while the plaintiff pursues
recovery from the excess insurer. See id.
Although much of the case law surrounding Gasquet concerns post-settlement
motions to remand, 4 Stanton has located and cites an instance where the Louisiana
Supreme Court held the dismissal of the post-Gasquet, nominal, insured defendant did
not deprive the plaintiff of the ability to pursue the excess insurer alone. See Soileau v.
Smith True Value and Rental, 2012- 1711 (La. 6/28/13), 144 So.3d 771, 787. Stanton
argues Soileau stands for the proposition that he is entitled to be dismissed from this
action, whereas both oppositions distinguish Soileau as an instance where the dismissal
of the nominal defendants was voluntarily made by the plaintiff. See Record Documents
178 &180.
The Court agrees with Stafford and Berkley. Soileau analyzed whether the
Louisiana Direct Action Statute, La. R.S. 22:1269, allowed the continuance of suit
against Hartford Insurance Company alone after the plaintiff had voluntarily dismissed
the insured tortfeasors, Harry and Claire Smith, at trial. See 144 So.3d at 774. The
parties had previously entered into a settlement—although not explicitly labeled a
See e.g., McLain v. Herrington, 2020 WL 1025527 (W.D. La. Jan. 24, 2020); Tipton v. Landen, 2016 WL
919539 (W.D. La. Mar. 8, 2016); Roby v. Britton, 2020 WL 7768513 (E.D. La. Dec. 30, 2020); Brumfield
v. Burde, 2019 WL 4387153 (E.D. La. Sept. 13, 2019).
4

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Gasquet settlement—in which the Smiths were to remain in the lawsuit as nominal
defendants to the extent necessary to pursue claims against Hartford. See id. After
engaging in statutory interpretation of the Direct Action Statute, the Court concluded
that by commencing the lawsuit against both the insured and the insurer, the six limited
circumstances against which the plaintiff could pursue the insurer alone were not
implicated. See id. at 778-79. As such, the appellate court had erred in reversing the
decision of the trial court to allow the suit to proceed against Hartford by itself. See id. at
787.
Stanton misreads Soileau as standing for his mandatory dismissal from this
lawsuit. While Stafford may dismiss Stanton and will not lose his right to continuing
litigating against Berkley under the Direct Action Statute, he is in no way required to do
so. The terms of their Gasquet Settlement explicitly contemplate that Stanton may no
longer be held personally liable and any recovery will be had against Berkley. See
Record Document 180-1. However, the only party to be dismissed from the lawsuit with
prejudice by the terms of the Gasquet Settlement was National Union. See id. at ¶3.
The Court must honor the terms of this agreement. Accordingly, Stanton’s Motion to
Dismiss (Record Document 162) is hereby DENIED.
CONCLUSION
Both Motions to Dismiss ask this Court to undertake actions it simply cannot do.
Berkley’s Motion (Record Document 159) asks the Court to make a ruling on a lawsuit
pending in a sister federal district court. Stanton’s Motion (Record Document 162) asks
the Court to make a litigation strategy decision for Stafford. Consequently, both Motions

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are hereby DENIED. An order consistent with the terms of this memorandum ruling shall
issue herewith.
THUS DONE AND SIGNED in Shreveport, Louisiana on this 1st day of March,
2021.

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