Great West Casualty Company v. Fredrics et al

Filing 136

ORDER granting Plaintiffs' Motion to Reconsider styled as 124 Objection to Magistrate Judge's Decision that this action be stayed; lifting stay entered by Magistrate Judge. (SEE ORDER FOR DETAILS) Signed by District Judge Martin Reidinger on 9/5/12. (nll)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
CIVIL CASE NO. 1:10cv267

GREAT WEST CASUALTY COMPANY, INC.,
of behalf of its Insureds,
GLOBE CARRIER COMPANY,
ROUMEN T. VELKOV and GERGANA LAZOVA,

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Plaintiffs,
vs.
LACEY FREDRICS, JASON PETER CLARK,
CATHERINE CLARK, CHRISTOPHER REED,
CHARLES CONARD, DANNY MATHIS,
HAROLD BRUCE STEVENS,
KEARA CARPENTER, ESTATE OF CHARLES
J. NOVAK, ESTATE OF THERESA N. SEAVER,
ESTATE OF AMBER REED, ESTATE OF ALVIN
KIMBLE, ESTATE OF GAIL KIMBLE,
YOKOHAMA CORPORATION OF NORTH
AMERICA, TAYLOR AND MURPHY
CONSTRUCTION COMPANY, INC., and
FERRARA PAN CANDY CO., INC.,
Defendants.
)
ORDER

THIS MATTER is before the Court on the parties’ responses to the
Court’s Order of August 9, 2012 (Doc. 126). [Doc. 127, Doc. 128, Doc. 129,
Doc. 130, Doc. 131, Doc. 132, Doc. 133, Doc. 134, Doc. 135].

PROCEDURAL HISTORY
On November 11, 2010, the Plaintiff Great West Casualty Company
(Great West) initiated this statutory interpleader action on behalf of its
insureds, Globe Carrier Company (Globe), Roumen T. Velkov (Velkov) and
Gergana Lazova (Lazova) 1 pursuant to 28 U.S.C. §1335. [Doc. 1]. Great
West issued a liability policy to Globe, an Illinois corporation and commercial
trucking company. Lazova is the president of Globe. Globe employed Velkov
who, on October 24, 2010, was driving a tractor trailer owned by Globe and
carrying a load for Ferrara Pan Candy Company (Ferrara) when an accident
occurred in Henderson County, North Carolina. The tractor trailer collided
with and allegedly caused collisions with numerous vehicles on Interstate 26
in Henderson County resulting in multiple deaths and numerous personal
injuries.
Prior to the accident, Great West had issued a single liability insurance
policy to Globe in the amount of one million dollars. At the time Great West
brought this interpleader action, it had not been able to locate any other
policies and was of the belief that no other liability policies covering its
insureds herein had been issued by another company. Great West also

1

Lazova was actually added as a named party in a subsequent amended
complaint. [Doc. 28].
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claimed that neither Globe nor Velkov, who has been discharged in
bankruptcy, has assets available to satisfy any potential judgments which may
result from the accident. Great West thus was confronted with the possibility
of claims exceeding one million dollars due to the extensive nature of the
collision and resulting deaths and injuries. As a result, Great West was in the
position of being unable to ascertain an equitable allocation of proceeds and
sought leave to pay into court the full proceeds of its insurance policy
pursuant to statutory interpleader. Great West also moved pursuant to 28
U.S.C. §2361 for an order restraining potential claimants from initiating or
pursuing state or federal actions which would impact the fund paid into court;
that is, the available liability insurance. [Doc. 5].
On November 22, 2010, the undersigned granted the Plaintiffs’ motion
and entered an Order for Deposit, Restraining Order and Order for Service of
Process.2

[Doc.

7].

The next day, Great W est filed a First Amended

Complaint which added new Defendants. [Doc. 8]. On January 14, 2011,
Great West dismissed certain Defendants after learning that they did not wish
to assert claims. [Doc. 26]. On January 20, 2011, Great West filed its Second
Amended Complaint which added Lazova as a Plaintiff as well as another

2

Great West deposited the policy proceeds on November 29, 2010.
3

Defendant. [Doc. 28].
On April 25, 2011, a Third Amended Complaint was filed with court
permission which, again, added potential claimants/defendants. [Doc. 73].
Taylor & Murphy Construction Company, Inc. (Taylor & Murphy) and Ferrara
were added due to concerns of a contribution claim involving them.3 Taylor
& Murphy owned a dump truck which had collided with a bridge about two
hours before the collision at issue. The dump truck’s collision with the bridge
is alleged to have been the cause of the traffic backup which existed at the
time the tractor trailer being driven by Velkov collided with several stopped
vehicles. [Id.]. As noted above, Velkov’s truck was carrying a load for Ferrara.
[Id.]. The relief sought in the Third Amended Complaint, however, remained
the same: statutory interpleader pursuant to which Great West had paid the
total proceeds of its insurance policy into Court in order for the Court to make
a determination of the distribution thereof.
On June 13, 2011, Defendants Reed, Clark, Frederics, Kimble,
Carpenter and Novak moved to stay this action pending the conclusion of an
action filed on April 26, 2011 in state court in Illinois. [Doc. 89].

The

Magistrate Judge granted the motion and the Plaintiffs sought reconsideration

3

Aimee Petit was also added as a Defendant/Claimant. She was a passenger in
one of the cars involved in the collision.
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thereof. [Doc. 124].
In considering the Plaintiffs’ motion to reconsider the stay of this action,
the Court determined it was necessary to hear from the parties concerning the
status of any other actions which have been filed arising out of this accident.
The parties have responded and the Motion to Reconsider is now ready for
disposition.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 72(a) provides:
W hen a pretrial matter not dispositive of a party’s claim ... is
referred to a magistrate judge to hear and decide, the magistrate
judge must ..., when appropriate, issue a written order stating the
decision. A party may serve and file objections to the order within
14 days after being served with a copy. ... The district judge in
the case must consider timely objections and modify or set aside
any part of the order that is clearly erroneous or is contrary to law.
Fed.R.Civ.P. 72(a).
A ruling is clearly erroneous if a reviewing court is “left with the definite
and firm conviction that a mistake has been committed.” United States v.
DeSilva, 613 F.3d 352, 356 (2d Cir. 2010); United States v. U.S. Gypsum Co.,
333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948). “An order is contrary
to law when it fails to apply or misapplies relevant statutes, case law, or rules
of procedure.” Rathgaber v. Town of Oyster Bay, 492 F.Supp.2d 130, 137

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(E.D.N.Y. 2007) (internal quotation and citation omitted); High Voltage
Beverages, LLC v. Coca-Cola Co., 2010 WL 2342458 (W.D.N.C. 2010).
DISCUSSION
In response to the Court’s Order, the parties have advised that there are
two state court actions which have been filed in connection with the accident
at issue. As noted above, a suit was brought in April 2011 in the Circuit Court
of Cook County, Illinois by Christopher Reed, individually and as the
Administrator for the Estate of Amber Reed, Jason Clark, Lacey Frederics,
Harvey Kimble as the Personal Representative for the Estates of Alvin Kimble
and Gail Kimble, Keara Carpenter and Jackie Novak, as the Administrator for
the Estate of Charles Novak.4 [Doc. 128 at 3-4]. In August 2012, these
plaintiffs amended their complaint to dismiss Great West as a defendant and
to add CJH Freight Services, Inc. (CJH Freight) as a defendant. [Doc. 128 at
4, Doc. 128-1]. The other defendants in that suit are Ferrara, Globe, Velkov
and Lazova. [Id.].
In August 2011, John Seaver as the Administrator of the Estate of
Theresa Seaver and Catherine Clark sued Ferrara, Great West, Globe,
Velkov, Lazova and Taylor & Murphy in the North Carolina General Court of

4

The plaintiffs in this second action are hereinafter referred to as the Illinois state
court claimants.
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Justice for Buncombe County, Superior Court Division.5 [Doc. 127-1]. Taylor
& Murphy moved to dismiss the action against it and on February 10, 2012,
the state court granted that motion, finding that Taylor & Murphy was entitled
to judgment as a matter of law. [Doc. 133, Doc. 133-1]. On February 15,
2012, the plaintiffs in that action were granted leave to amend the complaint
in order to add another defendant, CJH Freight.6 [Doc. 127-2]. That action
remains pending.
In this Court’s Order of August 9, 2012, the parties were instructed to
advise whether the claimants in such other suits seek recovery from the res
which has been paid into court in this action. [Doc. 126 at 9]. They were also
advised to inform the Court whether other state court actions would be pursued
and whether they support or oppose a stay of this action. [Id.]. Finally, the
parties were instructed to opine whether the initiation of such other suits
constituted a violation of the restraining order entered in this interpleader
action. [Id. at 9-10]. The parties responses are summarized herein.
The Illinois state court claimants state that the purpose of that action is
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The plaintiffs in this third action are hereinafter referred to as the North Carolina
state court claimants.
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In the caption of the Plaintiffs’ Report Pursuant to Court’s Order (Doc. 131), the
Plaintiffs included CJH Freight Services, Inc. (CJH) as a named defendant in this action.
The Plaintiffs herein, however, have never sought to add CJH as a defendant in this
action.
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to obtain “a determination of Globe Carrier and its employees’ liability, beyond
and separate from the one million that was interpleaded,” as well as the liability
of Ferrara as the shipper and CJH Freight as the broker. [Doc. 128 at 2].
(emphasis added). They further state that the Illinois complaint has been
amended to delete Great West as a defendant in order to show that they “are
not seeking any of the res currently interpleaded in this Court.” [Id. at 4].
These claimants also seek a stay of this action pending resolution of the Illinois
case.
The North Carolina state court claimants responded that the purpose of
that action is “to establish liability of the defendants [in that action], jointly and
severally[.]” [Doc. 127 at 2]. They have there stated claims for wrongful death
and personal injuries. [Id.]. The claimants state that
[t]he purpose of said lawsuit is not to affect, in any way, the $1 million
paid into Court in the interpleader action. In fact, depending upon the
outcome of Plaintiffs’ state court lawsuit, Plaintiff may or may not access
the funds. If Plaintiff[s] do[ ] attempt to access those funds, [they] will
appropriately apply to the Court for the contended amount of those funds
[sought].
[Id.]. (emphasis added). The North Carolina state court claimants also state
that “when and if” they obtain a judgment against the defendants in that action,
then they will make a decision whether to collect any such judgment, including
whether or not to proceed against the res in this action. [Id. at 3]. They ask
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that this action be stayed pending resolution of that state court action.
Taylor & Murphy take the position that the dismissal of it from the North
Carolina state court action operates as an adjudication that no claims may be
brought against it in connection with the accident. [Doc. 133 at 2]. It
nonetheless opposes a stay of this interpleader action because it “hopes to
reach an agreement with the other parties in which Taylor & Murphy will
disclaim any and all interest in the interpleader funds in exchange for an
agreement that the other parties will not bring any further actions against” it
arising out of this accident. [Id.].
Ferrara responded that it has not and will not file suit in any other court
concerning the accident at issue. [Doc. 134]. It takes the position that liability
must be determined before this Court may adjudicate the rights to the
interpleader fund. [Id.]. To that end, it requests that this Court either stay this
action pending resolution of the two state court actions or proceed with this
case and issue stays of the two state court matters. [Id.].
Yokohama Corporation of North America (Yokohama) responded that it
has not filed any other actions and appears in this action solely in connection
with a property damage claim. [Doc. 130]. It does not desire a stay of the
interpleader action and requests that it go forward. [Id.].

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Although Defendants Conard and Mathis filed a counterclaim in this
action for damages, they advise that they have not and will not file suit in any
other court. [Doc. 132]. They are “pursuing their claim only by participation in
this interpleader action[.]” [Id.]. “Conard and Mathis support the current motion
for stay, but have no objection to the other actions having been filed and their
proceedings.” 7 [Id.].
Like Conard and Mathis, Defendant Stevens has not brought any other
suit and does not intend to do so. [Doc. 135]. His claim in connection with this
accident will be pursed solely through this interpleader action. [Id.]. He does
not support a stay of this action “since it appears that the only issue to be
determined is the appropriate division of the insurance policy proceeds[,]” a
function he believes is properly before this Court. [Id. at 1].
The Plaintiffs oppose a stay of this action. [Doc. 131]. Of concern to
them is the possibility of inconsistent rulings in the Illinois and North Carolina
actions due to the differences in the law of negligence and fault allocation in
each state. [Id.].

They also note that two different juries could render

7

These two sentences in the filing of Defendants Conard and Mathis appear to be
inherently contradictory. Certainly they do not support a stay of the only action by which
they seek relief. Such would be to defeat their own claims. Hence, the Court interprets
this filing to mean that Defendant Conard and Mathis oppose a stay of this matter so
that they may pursue the relief they claim.
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inconsistent verdicts both as to liability and damages. [Id.]. Nonetheless, the
Plaintiffs do not oppose the continuation of those state court actions after the
resolution of this one, provided that those suits do not result in claims against
the interpleader fund. [Id.].
The Court notes that the only common defendants among the two state
court actions are Ferrara, which is also a named claimant/defendant in this
action, and the Plaintiffs herein Globe, Velkov and Lazova.
The utility of interpleader as a device for efficient, consistent
resolution of a multi-sided dispute would be threatened if several
courts could litigate the issues underlying the interpleader case
simultaneously. Absent self-restraint of the parties, the only way
to ensure that there will not be overlapping litigation is to have the
interpleader court issue an injunction against other proceedings.
In response, Congress empowered courts hearing statutory
interpleader cases to enjoin other proceedings – in state courts or
federal district courts – relating to the stake.
4 Moore’s Federal Practice, §22.04[5][a] (Matthew Bender 3d Ed.).
In keeping with the congressional intent behind the statute, this Court
entered a Restraining Order in 2010 which provides that “the claimants [in this
action] shall be restrained from initiating, instituting or prosecuting any
proceeding in any State or United States Court against the one million dollars
($1,000,000.00) in liability coverage insurance proceeds pursuant to the [Great
West] Policy GWP39171E.” [Doc. 7 at 7]. The Restraining Order also provides

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that it shall be applicable to parties added to the action after the entry thereof,
such as Ferrara and Taylor & Murphy. [Id.]. “In an interpleader action the
district court may ... enter an order restraining the claimants from instituting
any proceeding affecting the property until further order of the court.” Rhoades
v. Casey, 196 F.3d 592, 600-01 (5 th Cir.), cert. denied 531 U.S. 924, 121 S.Ct.
298, 148 L.Ed.2d 240 (2000) (emphasis added). The Order entered here thus
operates to restrain actions against the res at issue but does not extend “to
actions against the insured or other alleged tortfeasors if those suits are not
claims against the fund.” 4 Moore’s, ¶22.04[5][a] (emphasis added). In other
words, to the extent that the plaintiffs in the state court actions seek a recovery
outside the limits of the interpleader fund, there is no restraint. Id.; State Farm
Fire & Cas. Co. v. Tashire, 386 U.S. 523, 533, 87 S.Ct. 1199, 18 L.Ed.2d 270
(1967).
The Illinois state court claimants have specifically stated that in the
Illinois case they seek “a determination of Globe Carrier and its employees’
liability, beyond and separate from the one million that was interpleaded[.]”
[Doc. 128 at 2] (emphasis added).

They further stated that the Illinois

complaint has been amended to delete Great West as a defendant in order to
show that they “are not seeking any of the res currently interpleaded in this

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Court.” [Id. at 4]. In other words, regardless of any judgment obtained in that
state court action against Globe or its employees, the Illinois state court
claimants will not attempt to collect such judgment from the res deposited in
this interpleader action.

Thus, “the fund itself is [not] the target of the

claimants.” State Farm, 386 U.S. at 534. Moreover, Great West is no longer
a Defendant in that case and thus is protected from a second litigation.8 Id.
While the Illinois state court claimants seek to establish the liability, if
any, of Ferrara as the shipper and CJH Freight as the broker, claims against
these alleged tortfeasors are not claims against the fund deposited here. Id.
at 533, 535. Since these claims may not be satisfied out of the insurance fund
deposited in this Court, “[t]here is nothing in the statutory scheme” of the
interpleader action “which requires that the tail be allowed to wag the dog” and
thus, that action may proceed. Id. The Illinois state court claimants ask that
this action be stayed pending the resolution of that state court action.
However, since they specifically disclaim that their state court action is a claim
against the res deposited herein, there is no potential benefit in holding this
interpleader in abeyance pending any determination in that state court action.

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Whether Great West has a contractual obligation to its insureds to defend them
in that action, separate and apart from its obligation to pay the indemnity, is not at issue
herein.
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The North Carolina state court claimants are less than clear in their filing
with this Court. On one hand, they state that “[t]he purpose of said lawsuit is
not to affect, in any way, the $1 million paid into Court in the interpleader
action.” [Doc. 127 at 2]. On the other hand, however, they also state that
“when and if” they obtain a judgment against the defendants in the state court
action, they will then make a decision whether to collect any such judgment by
proceeding against the res in this action. [Id. at 3]. The case law and the
statute make clear that the claimants cannot have it both ways. Though they
may pursue the Defendants outside of this interpleader, they may only pursue
the deposited funds through this interpleader. “[The insurer]’s interest in this
case, which is the fulcrum of the interpleader procedure, is confined to its
[deposited] fund.

That interest receives full vindication when the court

restrains claimants from seeking to enforce against [that fund] any judgment
obtained against its insured, except in the interpleader proceeding itself.”
State Farm, 386 U.S. at 535. To the extent that those claimants desire to
proceed with that state court action even though the results thereof may not
be enforced against the res deposited in this Court, Id., this Court will not
enjoin that court from proceeding, although the statute appears to provide for
such relief. See also, Lorillard Tobacco Co. v. Chester,Willcox & Saxbe, 589

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F.3d 835, 844 (6 th Cir. 2009) (interpleader actions are a recognized exception
to the Anti-Injunction Act).
The interests of the Plaintiffs are that the rights to the deposited funds be
disposed of in this action, and for that to be done expeditiously. Those are
also the interests of the claimants who are pursuing recovery only through this
interpleader.

While some claimants may wish to pursue other potential

tortfeasors or overage claims against the insured Plaintiffs, that desire cannot
defeat the rights of the Plaintiffs and other Defendants under the interpleader
statute.

To stay this action while those other potentially lengthy matters

proceed would serve to defeat those rights of the Plaintiffs and other
Defendants.
The plaintiffs in the two state court actions argue that if this case is not
stayed they will have to litigate their claims twice; once in this interpleader and
once in the actions they have brought. The fail to recognize, however, that the
issues would not be the same. For instance, the application of joint and
several liability in the Illinois case may be completely different from that in the
North Carolina litigation. Cf., N.C. Gen. Stat. §1B-1; 735 Ill. Rev. Stat. Ch. 5,
¶¶2-1116, 2-1117, 2-1118. The results of those cases would then be of no
value to this Court in apportioning the deposited res. Also, if one of the

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claimants in the Illinois case is awarded a large judgment, but the claimants in
the North Carolina case are awarded small judgments, it would still be
incumbent upon this Court to compare the relative claims in order to equitably
apportion the deposited funds. The Illinois judgment would certainly not be
binding as to the North Carolina claimants, and vice versa, as they are not
common parties in either suit. In any event, the claimants who have not filed
other lawsuits will be seeking for this Court to make a determination as to
liability and damages regarding their claims. The only way for this Court to be
able to make an “apples to apples” comparison between the awards in
apportioning the res is for this Court to make relative liability and damages
determinations as to all the competing claims. These are the reasons why the
statutory scheme has been created the way that it has. It calls for this Court
to make the determinations necessary for dividing the deposited funds and
staying any collateral actions seeking some portion of those funds; rather than
the other way around.
For the reasons set forth herein, there is no reason to stay this action
pending the completion of the state court litigations. The Illinois state court
claimants have not violated the restraining order issued in this action because
they do not seek to enforce any judgment obtained therein against the res

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deposited herein.

In view of the North Carolina state court claimants’

ambivalent statements, it is at least arguable that they did violate that order.
The Court finds, however, that the limitations placed by this Order on any
judgment which may be obtained in that suit rectifies any possible violation.
ORDER
IT IS, THEREFORE, ORDERED that the Plaintiffs’ Motion to Reconsider,
styled as Objections to Magistrate’s Order (Doc. 124), is granted to the extent
that the Court has reconsidered the Magistrate Judge’s ruling that this action
be stayed.
IT IS FURTHER ORDERED that this action shall not be stayed pending
the resolution of the state court actions, and the stay entered by the Magistrate
Judge to that effect is hereby lifted.
IT IS FURTHER ORDERED that the Illinois state court claimants and the
North Carolina state court claimants may not enforce or execute any judgment
obtained in either state court action against the fund deposited in this Court by
Great West.

Signed: September 5, 2012

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