Great West Casualty Company v. Fredrics et al

Filing 123

ORDER granting 89 Motion to Stay Interpleader Action. The Court STAYS this case pending the resolution of the state court proceedings. The Court DIRECTS Movants to notify the Court within thirty (30) days of the final resolution of the Illinois state court action. The Court, however, maintains jurisdiction over this case and the $1 million in insurance proceeds. Signed by Magistrate Judge Dennis Howell on 11/4/11. (nll)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
1:10cv267
GREAT WEST CASUALTY COMPANY,
on behalf of its Insureds, Globe Carrier
Company, Roumen T. Velkov and Gergana
Lazova,

)
)
)
)
)
Plaintiff,
)
)
v.
)
)
LACEY FREDRICS, et al.,
)
)
Defendants/Claimants.
)
________________________________________ )

ORDER

Pending before the Court is the Motion to Stay Interpleader Action [# 89].
This is an interpleader action brought pursuant 28 U.S.C. § 1335 arising out of a
collision on I-26 in Henderson County, North Carolina. Plaintiff, believing the
monetary value of the claims that will arise out of this collision will exceed the $1
million available under the applicable insurance policy, deposited the entire
amount with the Court. Eight of the Defendants/Claimants (“Movants”) now move
to stay these proceedings pending the final resolution of litigation in state court on
the issue of tort liability. Plaintiff opposes staying the proceedings. The Court
GRANTS the motion [# 89].

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I.

Background

Plaintiff Great West Casualty Company is a Nebraska corporation that
provides insurance coverage for commercial trucking operations. (Pl.’s Third Am.
Compl. ¶ 1.) Plaintiff issued an insurance policy to Globe Carrier Company
(“Globe”), which is a commercial trucking company based in Illinois. (Id. ¶ 2.)
This policy has a $1 million coverage limit. (Id. ¶ 26.)
On October 23, 2010, Roumen T. Velkov, who was employed by Globe as a
commercial truck driver, was driving a tractor trailer eastbound on Interstate 26 in
Henderson County, North Carolina when he collided with or caused collisions with
numerous vehicles. (Id. ¶ 27.) At least five individuals died as a result of this
accident. (Id. ¶ 28.) Other individuals suffered severe injuries, and many of
Claimants’ automobiles were destroyed. (Id.) Because Plaintiff believes the total
value of all the claims arising out of the October 23, 2010, accident will exceed the
$1 million policy limit, Plaintiff brought this statutory interpleader action pursuant
to 28 U.S.C. § 1335 so that the Court can determine the fair and equitable
allocation of the policy proceeds. (Id. ¶ 36.) Plaintiff does not dispute that the
distribution of the total policy limit is warranted. (Id.)
Subsequently, some of the Claimants brought Crossclaims against Taylor
and Murphy Construction Company, Inc. and Ferrar Pan Candy Co., Inc. Movants

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also filed suit in the Circuit Court of Cook County, Illinois against Ferrar Pan
Candy Company, Inc., Great West Casualty Company, Inc., Globe Carrier
Company, Roumen Velkov, and Gergana Lazova. (Ex. 3 to Def.’s Mot. to Stay.)
The Illinois action asserts negligence and other torts against the defendants and
seeks to determine liability and fault of the alleged tortfeasors in the October 23,
2010, accident. Movants also represent that some of the other
Defendants/Claimants in the interpleader action are contemplating filing a state
court action in North Carolina against other potential tortfeasors.
Movants now move the Court to stay this interpleader action pending a final
determination of liability in these state court actions. Upon the entry of a final
judgment or settlement in the state court proceedings, the Court can lift the stay
and determine the appropriate allocation of the $1 million. Plaintiff opposes
staying this case. Movants’ motion is now properly before the Court.
II.

Analysis

The threshold question for this Court is determining what standard governs
the Court’s decision as to whether to stay these interpleader proceedings pending
resolution of the concurrent state court proceedings. Movants rely on the inherent
power of the Court to control its docket.1 In contrast, Plaintiff contends that

1

As Plaintiff correctly points out in response to Movants’ motion, however, the cases
relied on by Movants do not address staying an interpleader action pending the resolution of a
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whether to stay these proceedings pending the concurrent state court litigation is
controlled by the exceptional circumstances test set forth by the United States
Supreme Court in Colorado River Water Conservation Dist. v. U.S., 424 U.S. 800,
96 S. Ct. 1236 (1976).
The long standing general rule is that the pendency of a similar action in
state court is not a bar to parallel federal proceedings. McClellan v. Carland, 217
U.S. 268, 282, 30 S. Ct. 501, 504-05 (1910); Will v. Calvert Fire Ins. Co., 437 U.S.
655, 662, 98 S. Ct. 2552, 2557 (1978). In certain circumstances, however, a
district court may decline or postpone the exercise of its jurisdiction. See Colorado
River, 424 U.S. at 813, 96 S. Ct. at 1244. For example, in Brillhart v. Excess Ins.
Co. of Am., 316 U.S. 491, 494, 62 S. Ct. 1173, 1175 (1942), the Supreme Court
explained that district courts are under no compulsion to exercise their jurisdiction
in federal declaratory judgment cases. See also Will, 437 U.S. at 662-3, 98 S. Ct.
at 2557. In deciding whether to stay the federal proceedings, the district court
should consider factors such as the scope of the state court proceedings, whether all
the parties in interest can satisfactorily adjudicate their claims in the state
proceedings, whether necessary parties have been joined, and whether the parties
are amenable to process in that proceeding. Brillhart at 495, 62 S. Ct. at 1176; see

state court proceeding.
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also Wilton v. Seven Falls Co., 515 U.S. 277, 282-83, 115 S. Ct. 2137, 2140-41
(1995). As the Supreme Court explained in Brillhart:
Ordinarily it would be uneconomical as well as vexatious for a federal
court to proceed in a declaratory judgment suit where another suit is
pending in a state court presenting the same issues, not governed by
federal law, between the same parties. Gratuitous interference with the
orderly and comprehensive disposition of a state court litigation should
be avoid.
316 U.S. at 495, 62 S. Ct. at 1175-76. Ultimately, the decision to stay a declaratory
judgment action is left to the sound discretion of the district court. Wilton, 515 U.S.
287-89, 115 S. Ct. 2143-44.
Subsequently, in Colorado River the Supreme Court noted that federal
district courts have a “virtually unflagging obligation” to exercise their jurisdiction
over cases where the parties properly invoke the court’s jurisdiction. 424 U.S. at
817, 96 S. Ct. at 1246. The Supreme Court then held that federal courts may
postpone or decline the exercise of jurisdiction only in “exceptional
circumstances.” Id. at 813, 96 S. Ct. at 1244. District courts, therefore, have
significantly more latitude in deciding whether to stay a case under Brillhart than
Colorado River. See Wilton, 515 U.S. at 286, 115 S. Ct. at 2142.
Despite the potential conflict between Brillhart and Colorado River, both
remain good law. See id. As the Supreme Court held in Wilton, the more relaxed
Brillhart standard governs declaratory judgment actions. Id. at 289, 115 S. Ct. at
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2144. Some courts, however, have also held that the more discretionary Brillhart
standard, rather that the exceptional circumstances standard of Colorado River,
governs a district court’s decision whether to stay a statutory interpleader action
due to the pendency of related state court proceedings. See NYLife Distributors,
Inc. v. Adherence Group, Inc., 72 F.3d 371, 382 (3rd Cir. 1996); Q3 JMC,Inc. v.
Mason Plastics, Inc., No. 1:99cv923, 2000 WL 1229567, at *1 (M.D.N.C. Jun. 20,
2000) (adopting the reasoning of the Third Circuit in NYLife and applying
Brillhart in the statutory interpleader context); Crommelin v. Woodfield, No. 958697, 1998 WL 188101 (S.D. Fla. Mar. 2, 1998) (applying Brillhart in statutory
interpleader context); but see West Side Transport, Inc. v. APAC Miss., Inc., 237
F. Supp. 2d 707, 714 (S.D. Miss. 2002) (holding that Colorado River applied in the
context of a statutory interpleader action).
After a careful review of the relevant authority, the Court agrees with the
reasoning of the Third Circuit and those courts that have held that the discretionary
standard of Brillhart applies in the statutory interpleader context.2 This standard is

2

Although the Court finds that the Brillhart standard is applicable when determining
whether the Court will exercise its discretion and refrain from exercising jurisdiction over a case
due to the pendency of a state court proceeding, the Court has some reservations as to whether
the standard applies in the context of this case. The Court is not declining to exercise its
jurisdiction over this dispute but, rather, staying the distribution of the insurance proceeds
pending the resolution of the state court proceedings. In such a context, the Court questions
whether cases addressing the abstention doctrines are applicable. In an abundance of caution,
however, the Court will apply the more restrictive abstention standard to this case.
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consistent with the Fourth Circuit’s recognition that the basis of an interpleader
action is equity. Humble Oil & Ref. Co. v. Copeland, 398 F.2d 364, 368 (4th Cir.
1968) (“The genesis of interpleader is equity, and we perceive no reason why it
should be denied the remedial flexibility that is characteristic of a chancellor’s
decree. Thus, the district court can stay its proceedings, permit the parties to
litigate ownership of the royalties in Texas . . . and . . . after this issue has been
determined, distribute the funds in the registry.”).
Finally, the Court finds that the exercise of its discretion to stay this action
pending the outcome of the state court proceedings is warranted in this case.
Movants brought claims against Ferrara Pan Candy Company, Inc., Great West
Casualty Company, Inc., Globe Carrier Company, Roumen Velkov, and Gerganz
Lazova for damages arising out the October 24, 2010, accident. The parties have
already engaged in discovery in the Illinois action.

Allowing this case to proceed

simultaneously with the same parties as the Illinois action is uneconomical and
would intertwine this Court with the state court proceedings. Moreover, unlike
West Side Transport, no party has sought a declaratory judgment in this Court that
under the terms of the insurance policy at issue, Plaintiff Great West’s liability
exceeds the $1 million it deposited with the Court. See 237 F. Supp. 2d at 711.3 In

3

Moreover, the Court in West Side Transport noted that once it resolved the issue of the
insurer’s total liability it would address the issue of whether to stay the distribution of any
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fact, Plaintiff does not even dispute that a distribution of the $1 million is
warranted.
The proper course of action in this case is for this Court to maintain
jurisdiction over the case and the $1 million and stay these proceedings while the
parties litigate the issue of liability in state court. Once the state court proceedings
are resolved, and the issues of liability and contribution are determined, this Court
will take up the issue of the proper allocation of the funds held in the Registry of
the Court. In short, the Court finds that it can best determine the proper equitable
distribution of the insurance proceeds once the state court proceedings are
resolved. Accordingly, the Court GRANTS Movant’s motion [# 89].
III.

Conclusion

The Court GRANTS the Motion to Stay Interpleader Action [# 89]. The
Court STAYS this case pending the resolution of the state court proceedings. The
Court DIRECTS Movants to notify the Court within thirty (30) days of the final
resolution of the Illinois state court action. The Court, however, maintains
jurisdiction over this case and the $1 million in insurance proceeds.

insurance proceeds pending the resolution of the state court proceedings. 237 F. Supp. 2d at 717.
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Signed: November 4, 2011

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