TNT Gaming Center LLC et al v. American Specialty Insurance & Risk Services Inc et al

Filing 39

MEMORANDUM OPINION AND ORDER - Because Arch met its burden of proof in moving for abatement, the Court grants Arch's Opposed Motion to Abate Pending Examinations Under Oath (Doc. No. 4). The Court hereby ABATES this case. Plaintiff TnT Family SHALL submit its representatives for EUOs as requested by Arch pursuant to the Policy.Plaintiffs and Arch are DIRECTED to file a joint status report by May 19, 2025, informing the Court whether the EUOs of Plaintiff TnT Family's representatives have been completed. (Ordered by Judge Ed Kinkeade on 3/11/2025) (chmb)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
TNT GAMING CENTER LLC and TNT §
FAMILY ENTERTAINMENT, INC.,
§
§
Plaintiffs,
§
§
v.
§
§
AMERICAN SPECIALTY INSURANCE §
& RISK SERVICES, INC., ARCH
§
SPECIALTY INSURANCE COMPANY, §
ST. PAUL FIRE AND MARINE
§
INSURANCE COMPANY, NANCY
§
WEIS, MICHAEL TRUMBULL,
§
CHRISTIAN AUXIER, NEAL
§
ANDERSON, and CRAWFORD &
§
COMPANY,
§
§
Defendants.
§

Civil Action No. 3:24-CV-1995-K

MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Arch Specialty Insurance Company’s Opposed
Motion to Abate Pending Examinations Under Oath (Doc. No. 4) and Appendix in
support (Doc. No. 5) (together, the “Motion to Abate”). Plaintiffs TnT Gaming Center
LLC and TnT Family Entertainment, Inc. filed a Response (the “Response”) (Doc. No.
36) and Defendant Arch Specialty Insurance Company (“Arch”) filed a Reply (the
“Reply”) (Doc. No. 29). The Court has carefully considered the Motion, the Response,
the Reply, the relevant portions of the record, and the applicable law. The Court
concludes that: (1) the policy includes provisions that clearly and unambiguously
require Plaintiff TnT Family Entertainment, Inc. (“TnT Family”) to submit its
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representatives to an examination under oath (“EUO”) on Arch’s request, to fully
cooperate with Arch, and to comply with all policy terms before being able to file suit
against Arch; (2) these policy provisions are valid under Texas law; and (3) Arch made
its requests for EUOs prior to Plaintiffs filing this lawsuit. Accordingly, the proper
remedy is to abate this lawsuit pending completion of the EUOs. For these reasons,
the Court GRANTS the Motion to Abate and, hereby, ABATES this matter pending
completion of the EUOs of Plaintiff TnT Family’s representatives.
I.

Factual and Procedural Background
All case documents cited herein are to the CM/ECF assigned page number. The

Court recites only those portions of the background that are relevant to its
determination of the Motion to Abate.
Plaintiffs TnT Gaming Center LLC (“TnT Gaming”) and TnT Family (together,
the “Plaintiffs” or “TnT”) own and operate an entertainment center that caters to
families and offers an event space, entertainment/gaming center, and restaurant (the
“Business”). Doc. No. 1-12 at 4. According to Plaintiffs, they insured the real property
of the Business for TnT Gaming through Defendant St. Paul Fire and Marine Insurance
Company (“St. Paul”) (the “St. Paul Policy”) and the Business personal property for
TnT Family through Arch (the “Arch Policy”) (together with the St. Paul Policy, the
“Policies”). Id. at 5. The effective dates of the relevant Arch Policy are November 14,
2022, to November 14, 2023. Doc. No. 4 at 2 (citing Ex. A-1).

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Plaintiffs claim that, on May 18, 2023, the building and the contents of the
Business were damaged by smoke and water because of a kitchen fire (the “Incident”).
Doc. No. 1-12 at 5; Doc. No. 36 at 4. Plaintiffs contend that they initiated insurance
claims with St. Paul and Arch for the building and its contents on May 19, 2023. Doc.
No. 36 at 4. In a letter dated November 27, 2023, Arch requested, among other items,
“dates for the examinations under oath of” TnT Family’s representatives and owners,
Teresa Walles and Kendall Walles and advised Plaintiffs of their obligations under the
Policy and the potential consequences of their failure to respond or comply. Doc. No.
5-3 at 2, 6-7.
In multiple subsequent emails, Arch repeated its requests for EUOs with Teresa
Walles, a TnT Family representative. See, e.g., Doc. Nos. 5-4, 5-5, 5-6. According to
their own timeline, Plaintiffs did not attempt to schedule the EUOs until they retained
an attorney who then contacted Arch in April 2024 about available dates. Doc. No.
36 at 7. Plaintiff TnT Family and Arch scheduled he EUOs of Teresa Walles and
Kendall Walles for June 18, 2024. Doc. No. 5-10; see Doc. No. 5-1 at 4. On June 14,
2024, Plaintiffs filed this lawsuit in state court, then on June 16, 2024, Plaintiffs’
counsel informed Arch that Teresa Walles and Kendall Walles would not submit to the
scheduled EUOs. Doc. No. 4 at 4-5; see generally Doc. No. 1-5.
Arch removed this case on August 5, 2024, see generally Doc. No. 1, and one week
after removal, Arch filed the Motion to Abate on August 12, 2024. Doc. No. 4.
Thereafter, Plaintiffs filed a motion to remand arguing lack of diversity jurisdiction
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(Doc. No. 10) and the Court, having reviewed sua sponte its jurisdiction, entered an
order (Doc. No. 11) identifying jurisdictional deficiencies with Arch’s Notice of
Removal. In light of the jurisdictional issues raised, the Court stayed the responsive
briefing on the Motion to Abate. Doc. Nos. 31 & 32. On December 10, 2024, the
Court issued its memorandum opinion and order finding diversity jurisdiction exists
and, therefore, denying Plaintiffs’ motion to remand. Doc. No. 33. That same day the
Court reset the briefing scheduling for the Motion to Abate. The responsive briefing
was recently completed and the Motion to Abate is ripe for determination.
II.

Applicable Law
A.

Motion to Abate

Sitting in diversity, this Court applies Texas law. See Martin Res. Mgmt. Corp. v.
AXIS Ins. Co., 803 F.3d 766, 768 (5th Cir. 2015). No federal statute or rule expressly
permits motions to “abate”, but federal courts have discretion to entertain such
motions. See HB Park Apts, LLC v. State Auto. Mut. Ins. Co., 2023 WL 186866, at *2
(E.D. Tex. Jan. 13, 2023) (citing PJC Bros., LLC v. S & S Claims Serv., Inc., 267 F.R.D.
199, 200 n.1 (S.D. Tex. 2010)); see also Hub Tex., LLC v. Arch Specialty Ins. Co., Civ.
Action No. 5:21-CV-180-H, 2021 WL 12289166, at *2 (N.D. Tex. Nov. 9,
2021)(Hendrix, J.) (abatement permitted under Texas law).

“[A] federal court’s

decision to abate a case is an exercise in comity towards state law.” Hub Tex., 2021
WL 12289166, at *4.

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“Under Texas law, the general rules of contract interpretation govern a court's
review of an insurance policy.” Martin Res. Mgmt., 803 F.3d at 768. Accordingly, the
court must give the plain language of the insurance policy full effect when the parties’
intent may be determined from the plain language. Delta Seaboard Well Servs., Inc. v.
Am. Int’l Specialty Lines Ins. Co., 602 F.3d 340, 343 (5th Cir. 2010). “A policy is not
ambiguous if ‘the policy language has only one reasonable interpretation.’” Martin Res.
Mgmt., 803 F.3d at 768.
Courts in Texas have consistently held that insurance policy cooperation clauses
and provisions requiring the insured to submit to an examination under oath are valid
conditions precedent. See Hub Tex., 2021 WL 12289166, at *2 (collecting state cases);
Cooper v. Metro. Lloyds Ins. Co. of Tex., Civ. Action No. 3:17-CV-1640-L, 2018 WL
620206, at *3 (N.D. Tex. Jan. 30, 2018)(Ramirez, M.J.) (collecting federal and state
cases). These types of clauses and provisions “are ‘clear and unambiguous’ in entitling
the insurer ‘to have the [conditions precedent] followed and the underlying suit abated
until the completion of [those conditions].’” Cowan v. Sentry Ins. a Mut. Co., Civ. Action
No. 4:17-CV-0437-O-BP, 2017 WL 3394185, at *3 (N.D. Tex. July 19, 2017)(Ray,
M.J.); see HB Park Apts, 2023 WL 186866, at *2 (“In the case of an insurer trying to
enforce a condition precedent . . . a proper remedy is abatement—or a stay of the
proceedings—rather than barring the claim.”) (internal quotations and citation
omitted).

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III.

Analysis
In its Motion to Abate, Arch requests the Court abate this case until the EUOs

of Plaintiff TnT Family’s representatives are completed.

Doc. No. 4 at 8.

Arch

specifically asserts that the Policy contains a valid and enforceable EUO provision that
Plaintiff TnT Family must comply with as a condition precedent to filing suit against
Arch, the requests for EUOs were made prior to Plaintiffs filing this lawsuit, and
Plaintiff TnT Family never submitted its representatives for EUOs; therefore, in
accordance with the well-established case law, the remedy is abatement of this matter.
Id. at 5-9.
Plaintiffs respond that Arch is not entitled to abatement of the case because,
generally, its “conduct is unreasonable, inequitable and Arch has failed to comply with
Section 542.055 et seq. of the Texas Insurance Code and its own policy in not timely
accepting or rejecting the claim and further violated its own insurance policy in failing
to pay the mortgage-holder/lender in accordance with the policy it issued to [Plaintiff]
TNT Family.” Doc. No 36 at 9; see also id. at 14-15. Plaintiffs contend that because
Arch breached its own Policy provisions, it cannot demand Plaintiff TnT Family
perform under the Policy and, moreover, Plaintiff TnT Family is relieved from any
further performance, including submitting to the EUOs. See, e.g., Doc. No. 36 at 1213. Plaintiffs also assert that Arch has no right to EUOs because that request must be
“reasonable” pursuant to the Policy language and, given its conduct and inaction,
Arch’s request cannot be considered reasonable. Plaintiffs also insist that Arch may
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take depositions in this lawsuit and, according to Plaintiffs, Arch fails to explain why
depositions would not be a sufficient substitute for EUOs. See, e.g., id. at 13-14.
Finally, Plaintiffs note that Arch could have, but did not, attend the EUOs conducted
by St. Paul and, even so, Arch has those transcripts “at its disposal.” Id. at 15; see id.
at 11.
In its Reply, Arch argues that Plaintiffs are essentially asking the Court to make
factual determinations regarding the reasonableness and/or timeliness of Arch’s
investigation, which is a merits determination and not appropriate at this stage. Doc.
No. 38 at 2-3. Arch maintains that these Policy provisions are valid and enforceable
conditions precedent, that Plaintiffs did not comply with Arch’s pre-suit EUO requests
prior to filing suit, and, therefore, abatement is appropriate. See, e.g., id.at 4. Arch
emphasizes that it is entitled to conduct its own investigation, which includes EUOs,
that is separate and apart from that of St. Paul (which independently insured only
Plaintiff TnT Gaming), and courts have repeatedly found that depositions are not
appropriate substitutes for EUOs when the request is made before suit is filed. Id.at 58.
The Court agrees with Arch. The Arch Policy provides, in relevant part, the
following with respect to a loss:
4. Examination—“You” must submit to examination under oath in
matters connected with the loss as often as “we” reasonably request
and give “us” sworn statements of the answers. If more than one
person is examined, “we” have the right to examine and receive
statements separately and not in the presence of others. . . .
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9. Cooperation—“You” must cooperate with “us” in performing all
acts required by the Commercial Output Program coverages.
Doc. No. 5-2 at 63-64.
The Policy further explains that, in addition to the other Policy terms, certain
conditions apply, including, as relevant here, the following:
12. Suit Against Us—No one may bring a legal action against “us”
under this coverage unless:
a.
all of the “terms” of the Commercial Output Program
coverages have been complied with; and
b.
the suit has been brought within two years after “you”
first have knowledge of the loss.
Id. at 68-69.
It is well-established that these “Suits Against Us” provisions, EUO provisions,
and cooperation clauses are valid. See HB Park Apts, 2023 WL 186866, at *3; Cowan,
2017 WL 3394185, at *3 (clauses that provide the insurer is entitled to have the
condition precedent followed prior to the insured filing suit are “clear and
unambiguous”). “To be a ‘condition precedent,’ the contract must provide that the
event ‘must happen or be performed before a right can accrue to enforce an obligation.’”
HB Park Apts, 2023 WL 186866, at *2. When an insurer seeks to enforce a condition
precedent that the insured failed to comply with, the appropriate remedy is to abate or
stay the matter. Id. at *3. “Courts have consistently held that when an (1) insurance
policy contains an EUO provision, (2) the policy conditions the insured’s right to file
a lawsuit on compliance with the terms of the policy, and (3) the insurer makes a

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request for an EUO prior to the commencement of the suit, the action should be
abated.” Id. (collecting cases).
On this record, Arch has shown that the clear and unambiguous language of the
Policy requires Plaintiff TnT Family to submit to EUOs when requested by Arch and
to fully cooperate with Arch before suit may be filed, that these provisions are valid
under Texas law, that Arch made multiple requests to Plaintiff TnT Family for EUOs
months before Plaintiffs filed this suit, and that Plaintiff TnT Family wholly failed to
comply with these conditions precedent. See id. (the party seeking abatement bears the
burden of proof). On this showing, the Court in its discretion grants Arch’s Motion
to Abate. See id. at *4 (“[T]he Cour elects to exercise its discretion to abate this case,
just as countless other district courts in Texas have done in similar situations.”)
(collecting cases).
Plaintiffs do not dispute that the Policy contains these clear and unambiguous
provisions requiring Plaintiff TnT Family to submit to EUOs on Arch’s request and to
fully cooperate before Plaintiff TnT Family can file suit against Arch. Plaintiffs further
do not dispute that Plaintiff TnT Family did not submit its representatives for EUOs
as requested by Arch beginning in November 2023, more than six months prior to filing
this lawsuit in state court in June 2024. Plaintiffs assert instead that Arch is not
entitled to abatement. However, Plaintiffs’ arguments on this point are not persuasive
nor are they supported by legal authority to disregard the clear and unambiguous Policy
language. See e.g., HB Park Apts, 2023 WL 186866, at *4 (observing that federal courts
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have consistently rejected the argument that depositions are a substitute for EUOs)
(collecting cases); Hub Tex., 2021 WL 12289166, at *5 (the court rejected the insured’s
argument that continuing damage or harm to the property necessitated filing suit
without submitting to the requested EUO, emphasizing that this does not “change the
Policy’s text or the fact that [the plaintiff] failed to comply with it.”); see also Doc. No.
36 at 7 (Plaintiffs’ timeline entry for April 5, 2024); Doc. No. 36-5 (April 5, 2024,
email from Arch’s attorney to Plaintiffs’ counsel that St. Paul does not agree to joint
EUOs).
The Court finds that (1) the Policy includes provisions that clearly and
unambiguously require Plaintiff TnT Family Entertainment, Inc. (“TnT Family”) to
submit its representatives to an examination under oath (“EUO”) on Arch’s request, to
fully cooperate with Arch, and to comply with all policy terms as conditions precedent
to filing suit against Arch; (2) these policy provisions are valid under Texas law; and
(3) Arch made its requests for EUOs prior to Plaintiffs filing this lawsuit. The Court
further finds that Plaintiffs do not submit any valid reason for why Plaintiff TnT Family
should be excused from complying with these provisions. Therefore, the Court, in its
discretion, concludes that abatement of this case is appropriate, “accords with the
longstanding practice of Texas’s state courts and thus advances the interests of comity
that undergird this Court’s exercise of diversity jurisdiction.” Hub Tex., 2021 WL
12289166, at *4.

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III.

Conclusion
Because Arch met its burden of proof in moving for abatement, the Court grants

Arch’s Opposed Motion to Abate Pending Examinations Under Oath (Doc. No. 4).
The Court hereby ABATES this case. Plaintiff TnT Family SHALL submit its
representatives for EUOs as requested by Arch pursuant to the Policy.
Plaintiffs and Arch are DIRECTED to file a joint status report by May 19,
2025, informing the Court whether the EUOs of Plaintiff TnT Family’s representatives
have been completed.
SO ORDERED.
Signed March 11th, 2025.
____________________________________
ED KINKEADE
UNITED STATES DISTRICT JUDGE

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