National Union Fire Insurance Company of Pittsburgh, PA v. St. Paul Fire and Marine Insurance Company

Filing 21

MEMORANDUM AND ORDER/ORDER STAYING CASE: IT IS HEREBY ORDERED that defendant's motion to stay all proceedings in this action [Doc. # 10 ] is granted. IT IS FURTHER ORDERED that all proceedings in this action are stayed pending resolution of t he appeal of the judgment entered by the Circuit Court of St. Louis County, Missouri in Cause No. 10SL-CC01716. The parties shall promptly notify the Court when the state court proceedings are concluded.. Signed by District Judge Carol E. Jackson on 5/10/16. (KKS)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA,
Plaintiff,
vs.
ST. PAUL FIRE AND MARINE
INSURANCE COMPANY,
Defendant.

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Case No. 4:16-CV-87 (CEJ)

MEMORANDUM AND ORDER
This matter is before the Court on defendant’s motion to stay all proceedings
in this action pursuant to the Court’s discretion under the Declaratory Judgment
Act, 28 U.S.C. §§ 2201–2202, and the Court’s inherent authority to control its own
docket. Plaintiff has responded in opposition, and the issues are fully briefed.
I.

Background

Plaintiff National Union Fire Insurance Company of Pittsburgh, Pa., filed this
action seeking reimbursement from defendant St. Paul Fire and Marine Insurance
Company for all defense costs plaintiff has paid and continues to pay in defending
lawsuits consolidated under Reid v. Doe Run Resources Corporation, 4:11-CV-0044
(CDP) (hereinafter “the Reid lawsuits”).

The Reid lawsuits allege that Doe Run

Resources Corporation is liable for alleged bodily injury and property damage from
lead and other contaminants used or produced at or around the corporation’s
metallurgical complex in Peru since October 24, 1997.
On April 28, 2010, Doe Run filed a petition for declaratory relief in state
court against National Union and other insurers to obtain defense coverage for the

Reid lawsuits. The Doe Run Res. Corp. v. Am. Guar. & Liab. Ins. Co., et al., Cause
No. 10SL-CC01716 (Mo. Cir. Ct. 2010). Doe Run is insured under policies issued by
both National Union and St. Paul. However, Doe Run did not originally include St.
Paul in the coverage lawsuit. In response to National Union’s discovery requests in
the coverage lawsuit, Doe Run also did not identify St. Paul as an insurer or
produce St. Paul’s policies. On April 3, 2012, National Union and Doe Run entered
into a settlement agreement as to the payment of defense costs for the Reid
lawsuits. To date, National Union alleges it has reimbursed Doe Run more than $6
million in defense costs.
On April 27, 2012, Doe Run filed an amended complaint in the state
coverage lawsuit adding St. Paul as a defendant. On July 2, 2014, the state court
entered an order finding as a matter of law that St. Paul’s policies are primary
insurance and St. Paul has a duty to defend Doe Run in the Reid lawsuits as Doe
Run’s primary insurer. Order & J. [Doc. #1-1]. On April 23, 2015, the state court
entered final judgment in favor of Doe Run, ordering the reimbursement by St. Paul
of the reasonable and necessary defense fees and costs incurred in defending the
Reid lawsuits that were not reimbursed by Doe Run’s other insurers. [Doc. #1-1].
After receiving notice of the state court’s final judgment, National Union requested
that St. Paul reimburse it for all defense costs it advanced and take over the
defense of Doe Run.

On November 18, 2015, St. Paul rejected National Union’s

request. [Doc. #17-1].
In the complaint, National Union seeks a declaration that its policy is excess
to St. Paul’s policies; St. Paul must reimburse National Union for all defense costs it
has paid and will continue to pay to Doe Run while the Reid lawsuits are pending;

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St. Paul must take over the defense of Doe Run in the Reid lawsuits; and St. Paul is
precluded or collaterally estopped from re-litigating the fact that its policies have
been found to be primary to the National Union policies and that the duty to defend
attaches to the St. Paul policies for the Reid lawsuits.

National Union asserts

causes of actions for contribution, indemnification, equitable subrogation, and
unjust enrichment.
II.

Discussion

In the instant motion, defendant St. Paul requests a stay pending final
resolution of the appeal in the underlying coverage lawsuit between St. Paul and
Doe Run. St. Paul has appealed the state court’s April 23, 2015 judgment against
it. The issues on appeal have been fully briefed, and oral argument was held before
the Missouri Court of Appeals, Eastern District, on March 1, 2016.

The state

appellate court has yet to issue an opinion in the matter.
“[D]istrict courts . . . ordinarily have authority to issue stays, where such a
stay would be a proper exercise of discretion.” Ryan v. Gonzales, 133 S. Ct. 696,
708 (2013) (quoting Rhines v. Weber, 544 U.S. 269, 276 (2005)); see also Enelow
v. New York Life Ins. Co., 293 U.S. 379, 382 (1935) (explaining that a district court
may stay a case “pending before it by virtue of its inherent power to control the
progress of the cause so as to maintain the orderly processes of justice”). “[I]n
considering a motion for stay, a district court should consider both the interest of
judicial economy and the potential prejudice or hardship to the parties.” Krakowski
v. Am. Airlines, Inc., 927 F. Supp. 2d 769, 774 (E.D. Mo. 2013). The proponent of
a stay has the burden of establishing its need. Clinton v. Jones, 520 U.S. 681, 708
(1997).

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“Generally, a federal district court must exercise its jurisdiction over a claim
unless there are ‘exceptional circumstances’ for not doing so.” Scottsdale Ins. Co.
v. Detco Indus., Inc., 426 F.3d 994, 996 (8th Cir. 2005) (quoting Moses H. Cone
Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 16–19 (1983)); see Colo. River
Water Conservation Dist. v. United States, 424 U.S. 800, 817–18 (1976) (stating
that federal courts have a “virtually unflagging obligation . . . to exercise the
jurisdiction given them”). However, when a federal complaint seeks relief pursuant
to the Declaratory Judgment Act, district courts possess “unique and substantial
discretion in deciding whether to declare the rights of litigants.” Wilton v. Seven
Falls Co., 515 U.S. 277, 286 (1995).

“This broader discretion arises out of the

Declaratory Judgment Act’s language that a court ‘may declare the rights and other
legal relations of any interested party seeking such declaration.’” Royal Indem. Co.
v. Apex Oil Co., 511 F.3d 788, 792 (2008) (emphasis in original) (quoting 28 U.S.C.
§ 2201(a)).

The Supreme Court in Wilton reemphasized that the Declaratory

Judgment Act is properly characterized as “an enabling Act, which confers a
discretion on the courts rather than an absolute right upon the litigant.” 515 U.S.
at 287 (quoting Public Serv. Comm’n of Utah v. Wycoff Co., 344 U.S. 237, 241
(1952)).
Even when a plaintiff asserts claims in addition to seeking declaratory relief,
a court may still abstain “so long as the further necessary or proper relief would be
based on the court’s decree so that the essence of the suit remains a declaratory
judgment action.” Royal Indem. Co., 511 F.3d at 793–94. The damages National
Union seeks in this matter “are not independent of the requested declaratory
judgment, but are closely linked with it.” Id. at 794. National Union seeks, inter

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alia, a declaration that St. Paul must reimburse it for all defense costs it has paid
and will pay to Doe Run while the Reid lawsuits are pending. If the Court rejects
National Union’s declaratory judgment claims, National Union will be unable to
recover on its supplementary claims for contribution, indemnification, equitable
subrogation and unjust enrichment. Therefore, the essence of the lawsuit is one for
declaratory judgment and the Court has the discretion to enter a stay of
proceedings. Id. at 796.1
The scope of a district court’s discretion to abstain from exercising
jurisdiction under the Declaratory Judgment Act depends upon whether a “parallel”
state court action was pending when the plaintiff brought the declaratory judgment
action. Scottsdale, 426 F.3d at 999. “Suits are parallel if ‘substantially the same
parties litigate substantially the same issues in different forums.’”

Id. at 997

(quoting New Beckley Mining Corp. v. Int’l Union, United Mine Workers, 946 F.2d
1072, 1073 (4th Cir. 1991)).

When a parallel state court action is pending, a

district court enjoys broad discretion, guided by considerations of judicial economy.
Id. at 997.

When no such parallel state action is pending, discretion to abstain

exists but is less broad. Id. at 998. It is undisputed here that the federal and state
suits are not parallel. See id. at 997 (concluding that the proceedings pending in
state court were not parallel to the request for declaratory judgment pending in
federal court, “for the state court proceedings involve parties, arguments, and
issues different from those in the federal court proceedings”).

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No authority supports plaintiff’s contention that defendant is precluded from seeking a stay of
proceedings simply because it removed this action from state court.

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When no parallel state action is pending, district courts still retain discretion
to abstain, but that discretion should be exercised according to a six-factor test the
Eight Circuit adopted in Scottsdale:
(1) whether the declaratory judgment sought will serve a useful
purpose in clarifying and settling the legal relations in issue; (2)
whether the declaratory judgment will terminate and afford relief from
the uncertainty, insecurity, and controversy giving rise to the federal
proceeding; (3) the strength of the state's interest in having the issues
raised in the federal declaratory judgment action decided in state
courts; (4) whether the issues raised in the federal action can more
efficiently be resolved in the court in which the state action in pending;
(5) whether permitting the federal action to go forward would result in
unnecessary entanglement between the federal and state court
systems, because of the presence of overlapping issues of fact or law;
and (6) whether the declaratory judgment action is being used merely
as a device for procedural fencing—that is, to provide another forum in
a race for res judicata or to achieve a federal hearing in a case
otherwise not removable.
Id. at 998 (quoting and adopting a test articulated by the Fourth Circuit in Aetna
Cas. & Sur. Co. v. Ind-Com Elec. Co., 139 F.3d 419, 422 (4th Cir. 1998)) (internal
brackets and quotations omitted).
After comparing the coverage lawsuit pending in state court and the
complaint here, the Court concludes that the six-factor test in Scottsdale weighs in
favor of staying this action pending a final resolution of the appeal in the state court
action. In particular, factors four and five weigh heavily in favor of a stay. With
respect to factor five, whether or not St. Paul has a duty to defend Doe Run in the
Reid lawsuits is the threshold issue in this action and directly at issue in the
coverage action pending in state court. Whether St. Paul has a duty to reimburse
National Union for defense costs it has paid and will continue to pay during the
pendency of this litigation to Doe Run in the Reid lawsuits—the issue directly before
the Court in this matter—depends upon a finding that St. Paul has a duty to defend

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Doe Run in the Reid lawsuits. If the state appellate court reverses the circuit court
and holds that St. Paul does not have a duty to defend Doe Run in the Reid
lawsuits, this litigation will be moot. If the state appellate court finds that St. Paul
has a duty to defend Doe Run, that determination will narrow the issues before this
Court.2

Accordingly, permitting this action to go forward would result in an

unnecessary entanglement between by the federal and state court systems because
of the overlapping issues of law.
With respect to factor four, the issue of whether or not St. Paul owes a duty
to defend Doe Run will be more efficiently resolved in the state coverage lawsuit
given the advanced stages of litigation in that matter in contrast to the early stage
of this litigation.

This result allows the Court to conserve judicial resources.3

Furthermore, National Union is not unduly prejudiced by a stay; it may still pursue
a right to contribution after termination of a stay depending on the final disposition
of the appeal in state court. Accordingly, the six-factor test in Scottsdale weighs in
favor of staying the proceedings in this action pending resolution of St. Paul’s
appeal of the coverage lawsuit in state court.

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The narrowed issue before this Court would become how the St. Paul policies apply in connection
with National Union’s policy. While the state circuit court determined that St. Paul’s policies are
primary insurance and St. Paul has a duty to defend Doe Run in the Reid lawsuits, the court explicitly
noted that the question of how St. Paul’s policies apply in connection with the National Union policy
was outside the issues raised in the coverage lawsuit. Order & J. [Doc. #1-1] (“Upon finding that the
St. Paul policies are primary insurance, the question becomes how those policies apply in connection
with the National Union policy. However, that question is outside the instant motion.”). Thus, in
contrast to plaintiff’s contention, it is not reasonable to assume that St. Paul would consent to the
relief National Union requests in this lawsuit should the state appellate court affirm the circuit court’s
decision. The converse, however, is true. If the state appellate court reverses the circuit court’s
decision and finds that St. Paul does not have a duty to defend Doe Run in the Reid lawsuits, that
decision will obviate the need to proceed with this litigation.
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The third Scottsdale factor also weighs slightly in favor of staying the proceedings, since the claims
brought here require the application of only state law. See Am. Home Assur. Co. v. Pope, 487 F.3d
590, 602–03 (8th Cir. 2007) (finding the claims required the application of only state law and some of
the counts at issue raised sensitive issues of Missouri statutory interpretation, adding to the state’s
interest in having the issues decided in state court). The other Scottsdale factors are either neutral or
inapplicable.

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For the reasons set forth above,
IT IS HEREBY ORDERED that defendant’s motion to stay all proceedings in
this action [Doc. #10] is granted.
IT IS FURTHER ORDERED that all proceedings in this action are stayed
pending resolution of the appeal of the judgment entered by the Circuit Court of St.
Louis County, Missouri in Cause No. 10SL-CC01716.

The parties shall promptly

notify the Court when the state court proceedings are concluded.

____________________________
CAROL E. JACKSON
UNITED STATES DISTRICT JUDGE
Dated this 10th day of May, 2016.

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