Liberty Mutual Fire Insurance Company et al v. Lumber Liquidators, Inc. et al

Filing 81

MEMORANDUM OPINION AND ORDER: granting 23 Motion to Intervene; granting 25 Motion to Intervene; granting 29 Motion to Intervene; granting 35 Motion to Intervene; denying 71 Motion to Dismiss; The Motions to Intervene are GRANTED. Howev er, litigation on the intervening insurers' claims with respect to excess coverage is stayed pending resolution of Plaintiffs' original claims regarding primary coverage. Further, judgment is GRANTED in favor of Plaintiffs for Count Three of the Complaint pursuant to Defendant's Stipulation, and Defendant's Motion to Dismiss is DENIED. Signed by District Judge Raymond A. Jackson on 2/9/2016. (bgra)

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF VIRGINIA

FEB - 9 2016

Newport News Division
LIBERTY MUTUAL FIRE

INSURANCE COMPANY, cl al.,

Plaintiff,
v.

CIVIL ACTION NO. 4:15cv34

LUMBER LIQUIDATORS, INC. et al.,
Defendants.
MEMORANDUM OPINION AND ORDER

Before the Court are Motions to Intervene by four insurance companies providing

policies in excess of the current Plaintiffs" policies, Lumber Liquidators, Inc.'s ("Defendant's")
Stipulation to Entry of Judgment in Plaintiffs' Favor for Count Three, and Defendant's Motion to
Dismiss Amended Complaint on abstention grounds. ECF Nos. 23. 25. 29. 35. 70. 71. For the
reasons stated below. I recommend that the Motions to Intervene be GRANTED, Defendant's

Stipulation be GRANTED, and Defendant's Motion to Dismiss be DENIED.
I. FACTUAL AND PROCEDURAL HISTORY

On April 22. 2015. Liberty Mutual Lire Insurance Company. Liberty Insurance

Corporation, Employers Insurance Company of Wausau, Wausau Business Insurance Company,
and Wausau Underwriters Insurance Company (collectively ••Plaintiffs") filed their three-count

Complaint seeking declaratory judgment that their policies do not obligate them to defend or
indemnify Defendant (Counts One and Two, respectively) and requesting reformation of the
Wausau Business Insurance Company policy (Count Three). Pis.' Compl. 7-9, ECF No. 1. To

date, 99 other complaints ("Underlying Lawsuits") have been filed against Defendant based upon
their sales of flooring containing excess amounts of formaldehyde. These cases have been
1

consolidated in a multidistrict litigation proceeding in this District before the Honorable Anthony
J. Trenga. Defs.' Revised Mem. in Supp. of Mot. to Dismiss 3, ECF No. 60.

On April 27,2015, Defendant filed a four-count complaint in the Circuit Court for Dane

County, Wisconsin ("Wisconsin Complaint"). Defs.' Revised Mem. in Supp. of Mot. to Dismiss
4, ECF No. 60. In that suit, Defendant named the Plaintiffs and four other insurers - American

Guarantee & Liability Insurance Company, Continental Casualty Company, Federal Insurance

Company, and St. Paul Fire & Marine Insurance Company (collectively "Intervening Insurers").
Id. These four insurers have filed Motions to Intervene in this federal suit. ECF Nos. 23,25, 29.
35.

In the Wisconsin Complaint, Defendant alleges that the Plaintiff Insurers breached the

terms of the general liability insurance policies they issued to Defendant by refusing to defend

Defendant against the underlying lawsuits consolidated in this District. Dels.' Revised Mem. in

Supp. of Mot. to Dismiss 4. The Wisconsin Complaint also requests a declaratory judgment that
the Plaintiff Insurers and the four other insurers who seek to intervene in the instant federal suit

are obligated to defend and indemnify Defendant. Id. Finally, the Wisconsin Complaint alleges
breach of contract and bad faith claims and requests compensatory and punitive damages. Id. at
5.

On May 22,2015, Defendant filed a Motion to Dismiss requesting dismissal of the
reformation claim in Count Three of Plaintiffs' Complaint and requesting that the Court abstain

from hearing the matter because of the parallel action Defendant filed in Wisconsin state court.
ECF Nos. 18,19. On September 4, 2015, the Court granted in part and denied in part
Defendant's Motion to Dismiss. ECF No. 62. In its Order the Court dismissed Plaintiffs'

reformation claim without prejudice, granted Plaintiffs leave to amend their Complaint, and
declined to abstain from hearing the matter. Id.

On September 15, 2015, Plaintiffs filed their Amended Complaint. ECF No. 67. On
October 2, 2015, Defendant filed a Stipulation to entry ofjudgment in the Plaintiffs' favor on the

reformation claim in Count Three of the Amended Complaint.1 ECF No. 70. On this same date,
Defendant also filed a Motion to Dismiss Plaintiffs' Amended Complaint again requesting that

the Court abstain from hearing this matter because of the parallel Wisconsin state court action.
ECF Nos. 71, 72. On October 15, 2015, the Wisconsin state coun held a hearing on the insurers'

Motion to Dismiss in which the court deferred its decision pending a decision in this federal
case. Pis." Opp. to Mot. to Dismiss 7, ECF No. 74.
II. STANDARD OF REVIEW
A. Motions to Intervene

Pursuant to Rule 24 of the Federal Rules of Civil Procedure, the Court must permit a

party to intervene as a matter of right or may allowa party to intervene permissively. Fed. R.
Civ. P. 24. The United States Court of Appeals for the Fourth Circuit ("Fourth Circuit") has

held, "[L]iberal intervention is desirable to dispose of as much of the controversy involving as
many apparently concerned persons as is compatible with efficiency and due process." Feller v.
Brock, 802 F.2d 722, 729 (4th Cir. 1986) (internal quotations omitted).
Pursuant to Federal Rule of Civil Procedure 24(a), the Court must permit a party to
intervene on timely motion as a matter of right who:

(1) is given unconditional right to intervene by federal statute; or (2) claims an interest
relating to the property or transaction that is the subject of the action, and is so situated
that disposing of the action may as a practical matter impairor impede the movant's
ability to protect its interest, unless existing parties adequately represent that interest.

1The Court accepts this stipulation and will enter judgment in favor of Plaintiffs on Count Three.
3

Fed. R. Civ. P. 24(a). Intervention as a matter of right is warranted if the party seeking

intervention can demonstrate: 1) a timely request; 2) an interest in the subject matter of the
action; 3) that disposition of the action without its presence would impair its ability to protect its
interests; and 4) its interests are not adequately represented by the existing parties to the action.
Houston Gen. Ins. Co. v. Moore, 193 F.3d 838, 839 (4th Cir. 1999); Teague v.Bakker, 931 F.2d

259,260-61 (4th Cir. 1991). A party seeking to intervene must meet all of these tests for

intervention to be appropriate as a matter of right under Rule 24(a). Com. ofVa. v. Westinghouse
Elec. Corp., 542 F.2d 214, 216 (4th Cir. 1976). Further, a district court is "entitled to the full

range of reasonable discretion" to determine whether the requirements of intervention as a matter

of right have been met. Id. (quoting Rios v. Enter. Ass 'n Steamfitlers Local U. fi 638 of U.S., 520
F.2d 352, 355 (2d Cir. 1975)).

Federal Rule of Civil Procedure 24(b) provides that a party may be permitted to intervene

on timely motion that "(A) is given a conditional right to intervene by federal statute; or (B) has
a claim or defense that shares with the main action a common question of law or fact." Fed. R.

Civ. P. 24(b); Cooper Techs., Co. v. Dudas, 247 F.R.D. 510, 515 (E.D. Va. 2007). The decision
to grant or deny a permissive motion to intervene lies within the sound discretion of the trial
court. Hill v. W. Elec. Co., 672 F.2d 381, 385-86 (4th Cir. 1982). However, the court must

consider whether the intervention will "unduly delay or prejudice the adjudication of the rights of

the original parties." Allen v. Cty. Sch. Bd. ofPrince Edward Cty., 28 F.R.D. 358, 363 (E.D. Va.
1961).
B. Abstention Doctrines and the Declaratory Judgment Act

As a general rule, federal courts have a "virtually unflagging obligation ... to exercise

the jurisdiction given them." Colo. River Water Conservation Dist. v. United States, 424 U.S.

800, 817 (1976). This obligation applies even when there are parallel state court proceedings. In
McLaughlin, the court noted it is well-established that "[djespite what may appear to result in a

duplication ofjudicial resources ... 'the pendency of an action in the state [system] is no bar to
proceedings concerning the same matter in the Federal court having jurisdiction.'" McLaughlin
v. United Va. Bank, 955 F.2d 930, 934 (4th Cir. 1992) (quoting McClellan v. Carland, 217 U.S.
268,282(1910)).

In determining whether abstention is appropriate, the threshold question is whether the
action is parallel. Chase Brexton HealthServs., Inc., v. Maryland, 4] 1 F.3d 457,463 (4th Cir.

2005). Suits are considered parallel when "substantially the same parties litigate substantially
the same issues in different forums." Id. at 464 (quoting New Beckley Mining Corp. v. Int7
Union, UMWA, 946 F.2d 1072, 1073 (4th Cir. 1991)). Moreover, the Fourth Circuit has "strictly

construed the requirementof parallel federal and state suits, requiring that the parties involved be
almost identical." Great Am. Ins.Co. v. Gross, 468 F.3d 199, 208 (4th Cir. 2006). If the suit is

parallel, a court must determine which of two discretionary standards identified by the Supreme
Court of the United States ("Supreme Court") it should apply: Brillhart/Wilton or Colorado
River.

1. The BrillhartAVilton & Colorado River Standards

As recently clarified by the decision of the Fourth Circuit in vonRosenherg v. Lawrence,

the discretionary standard a court must apply depends on the nature of the claims in the
complaint. vonRosenberg v. Lawrence, 781 F.3d 731, 735 (4th Cir. 2015).

If the sole relief sought in the complaint is a declaratory judgment brought under the

Declaratory Judgment Act,2 a court should apply Brillhart/Wilton, which "naturally flows from
the broad discretion afforded courts to entertain actions and award declaratory relief under the

Declaratory Judgment Act." Id.; see also Brillhart v. Excess Ins. Co. ofAm., 316 U.S. 491, 494

(1942) (stating that a district court is "under no compulsion" to exercise the jurisdiction afforded
it under the Declaratory Judgment Act); Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995)

("[A] district court is authorized, in the sound exercise of its discretion, to stay or to dismiss an
action seeking a declaratory judgment.").

If, on the other hand, the complaint is comprised of mixed claims - i.e., claims seeking

both declaratory and nondeclaratory relief- a court must apply Colorado River. vonRosenberg,
781 F.3d at 735. In so holding, the Fourth Circuit adopted the approach of the Second, Fifth, and
Tenth Circuits.3 The broad discretion of the Brillhart/Wilton standard is absent from the

Colorado River standard, which applies to "causes of action over which a federal court generally

must exercisejurisdiction—namely, claims for nondeclaratory relief." vonRosenberg, 781 F.3d
at 735. Additionally, "[fjor those claims, '[o]nly the clearest ofjustifications will warrant
dismissal' in favor of concurrent state court proceedings." Id. (quoting Colo. River Water

Consen'ation Dist. v. UnitedStales, 424 U.S. 800, 819 (1976)). When applying Colorado River,
courts may abstain only in "exceptional" circumstances. Id. at 732.

2The Declaratory Judgment Act states, "In a case of actual controversy within itsjurisdiction ... any coun
of the United States ... may declare the rights and other legal relations of any interested party seeking such
declaration
" 28 U.S.C. § 2201(a) (emphasis added).

3Across the United States Courts of Appeals, there isa "fractured landscape of decisions" taking a variety
of approaches to applying the Brilihari/Wilton and Colorado River standards to mixed complaints. See
Perelman v. Perelman, 688 F. Supp. 2d 367, 374-76 (E.D. Penn. 2010).

III. DISCUSSION
A. Motions to Intervene

i. Intervening Insurers' Arguments

The four parties seeking to intervene as plaintiffs are excess insurers of the current

Plaintiffs' policy agreements with Defendant. Mot. to Intervene 2, ECF 23. The intervening
insurers' policies immediately attach to the current Plaintiffs' policies as excess coverage. Mot.
to Intervene 5, ECF No. 25-2. All of the intervening insurers are diverse from the Defendant and

the alleged amount in controversy for each party seeking to intervene is greater than $75,000,
therefore diversity would not be destroyed by their intervention. Mot. to Intervene 2, ECF23.

The intervening insurers assert that intervention as a matter of right should be granted

because they have an interest in disputing excess coverage for the same claims at issue in this
action. Id. at 4. They argue that denying their request to intervene in this suit could result in
inconsistent rulings, and they may be forced to retry or collaterally attack issues decided in this

action through a later action. Id. at 7. Further, the parties seeking to intervene contend that their
interests are not adequately represented by the current Plaintiffs because they are separate

insurance companies and issued separate policies that may raise different issues. Id.
Specifically, American Guarantee & Liability Insurance Company ("AGLIC") seeks to pursue a
reformation claim, a unique issue between AGLIC and the Defendant. Mot. to Intervene 5, ECF
No. 25-2. Moreover, they assert that their motions were timely filed only a month after this suit

commenced and no party will be prejudiced by their intervention since this suit is still in the
initial pleadings phase and discovery has not yet commenced. Mot. to Intervene 8, ECF 23.
Alternatively, the intervening insurers argue that if intervention as a matter of right is not

granted, permissive intervention should be granted because they share a common question of law

and fact in seeking a declaration that they do not have to indemnify the Defendant with respect to
the same underlying claims based on language in their respective policies similar to the current
Plaintiffs' policies. Id. at 9. They assert that intervention will promote efficiency and consistent
resolution of the matter. Id. Further, the intervening insurers indicate that the current Plaintiffs

have advised that they have no objection to intervention in this action by these excess insurers.
Mot. to Intervene 5, ECF No. 30.

Moreover, the intervening insurers contend that the Court should not abstain because
Wisconsin has no interest in this matter, the policies at issue were delivered in Virginia,

Defendant is headquartered in this District, the documents and witnesses are in this District, and
the underlying actions are pending in this District, thereby making this District the superior
forum. Reply in Supp. of Mot. to Intervene 6, ECF No. 48. Additionally, the intervening

insurers allege that Virginia law applies pursuant to both Virginia and Wisconsin choice of law
rules. Id. at 7. Furthermore, they allege that the Wisconsin suit is not more advanced than this
federal suit because there has been a request for judicial substitution, so no presidingjudge was

assigned to the Wisconsin case at the time intervening insurers filed their Reply in Support of
Intervention in this matter. Reply in Supp. of Mot. to Intervene 4, ECF No. 50. They further
assert that abstention is not warranted because AGLIC seeks to assert a reformation claim,

adding a non-declaratory claim that implicates the Colorado River standard requiring
"exceptional" circumstances for the Court to abstain. Reply in Supp. of Mot. to Intervene 2,
ECF No. 48. They also argue that abstention would not be warranted under the Brillhart/Wilton
standard either. Reply in Supp. of Mot. to Intervene 6-7, ECF No. 49.

ii. Defendant's Arguments In Opposition to Intervention

In its Opposition to the Motions to Intervene, Defendant argues that the Court should
dismiss the federal action in favor of the pending action in Wisconsin state court, and as a result
there will be no action in which to intervene. Opp. to Mot. to Intervene 1, ECF No. 42.

Defendant reiterates its arguments in favor of abstention including that Wisconsin is where all
but one of the current Plaintiff Insurers are domiciled; the Wisconsin action is more

comprehensive because all of the claims and parties, including those seeking to intervene here,
are involved; this action contains overlapping issues of fact and law that would entangle the two

court systems; and this action is the product of forum-shopping by the Plaintiffs. Id. at 4-5.
Defendant further argues that the intervening insurers do not meet the standard for
intervention as a matter of right because they cannot show that their interests might be impaired
or that their interests will not be adequately represented by the insurers that are already parties to

this suit with the same financial objectives in disputing coverage. Id. at 2. Defendant also

asserts that the intervening insurers lack a protectable interest because they are not in privity with
the current Plaintiffs, therefore merely economic interests and not substantive legal rights are
implicated. Id. at 11-12, 15.

Defendant argues that the intervening insurers would expand the issues in this federal suit
because different policy agreements are involved. Id. at 13-14. Moreover, Defendant asserts
that the intervening insurers could protect their interests in the Wisconsin state action, or they
could file an amicus brief in this action advocating their positions. Id. at 14, 18 n. 11.
Furthermore, Defendant argues that the Court should deny permissive intervention because of

the overlap with the Wisconsin action and the potential delay in resolution of this matter by
increasing the parties and claims involved. Id. at 19-20.

iii. The Court's Finding on Intervention

The intervening insurers have met the requirements for intervention as a matter of right.
They have demonstrated an interest in this suit as excess insurers for the current Plaintiffs'

policies for the same claims that are the subject of this action. Resolution of the current action as
is will immediately impact the excess insurers by triggering excess coverage obligations if the
Court finds the current Plaintiffs owe primary coverage to Defendant. The Fourth Circuit has held

that "a party need not prove that he would be bound in a resjudicata sense by anyjudgment" but
"fw]here...the disposition of a case would, as a practical matter, impair the applicant's ability to
protect his interest in the transaction, intervention may be allowed under Rule 24(a)." Spring Constr.
Co. v. Harris, 614 F.2d 374, 377 (4th Cir. 1980). If not permitted to intervene, their ability to

protect their interests would be impaired because they would be forced to attempt to re-litigate
issues from this action regarding primary insurance coverage in a separate action.
The Fourth Circuit relies on the Supreme Court's determination that the applicant's
burden to demonstrate a lack of adequate representation "should be treated as minimal." Teague
v. Bakker, 931 F.2d 259, 262 (4th Cir. 1991) (citing Trbovich v. United Mine Workers, 404 U.S.

528, 538 n.10 (1972)). The intervening insurers' interests are not adequately represented

because they issued separate policies and the primary insurers have distinguishable interests.
Further, the Fourth Circuit has held that in determining timeliness of a Rule 24 motion, "a

reviewing court should look at how far the suit has progressed, the prejudice which delay
might cause other parties, and the reason for the tardiness in moving to intervene." Gould v.
Alleco, Inc.. 883 F.2d 281, 286 (4th Cir. 1989); see also Scardellelti v. Debarr, 265 F.3d 195,

203 (4th Cir. 2001) (findinga motion to intervene timely if filed before the initial pleadings

phase). Therefore, the intervening insurers' timely filed Motions to Intervene should be granted
because this case has not surpassed the initial pleadings phase and no party will be prejudiced.
10

Even if not warranted as a matter of right, the Court has broad discretion to allow

permissive intervention where, as here, the parties seeking to intervene assert claims with a
common question of fact or law in connection with the main action. A common question of fact
or law is presented here with respect to coverage by multiple insurers for the same underlying
claims. Courts within the Fourth Circuit have allowed excess insurers to intervene in similar

cases. See Nautilus Ins. Co. v. Strongwell Corp., 2014 WL 2645503, at *2 (W.D. Va. 2014);
Felman Prod, Inc. v. Indus. Risk Insurers, No. CIV.A. 3:09-0481, 2009 WL 5064058, at *2

(S.D.W. Va. Dec. 16, 2009). Moreover, the original parties here will not be prejudiced by the
intervention because this case is still in the initial pleadings phase, and the current Plaintiffs do
not object to the intervention.

The Defendant challenges the Motions to Intervene by asserting that abstention is
warranted in favor of the Wisconsin state suit so there should be no federal case to intervene in,

and the parties seeking to intervene do not meet the requirements for intervention. However, the
nexus between the underlying claims and the multiple insurance policies is irrefutable, especially

given that the Defendant has named the parties seeking to intervene in the parallel Wisconsin suit
alleging they owe coverage for the underlying claims at issue in this suit. Furthermore, the
Fourth Circuit favors liberal intervention, which these circumstances warrant to prevent

inconsistent rulings and efficiently resolve the claims.
However, an intervenor must generally "take the case as he finds it." Newport News

Shipbuilding & Drydock Co. v. Peninsula Shipbuilders' Ass'n., 646 F.2d 117, 122 (4th Cir.
1981). Intervention may be subject to conditions based on the particular case. Id. ("Even

intervention of right may properly be made conditional by the exigencies of the particular
case."); Stringfellow v. Concerned Neighbors in Action, 480 U.S. 370, 378 (1987) ("[Intervenor]

was given access to discovery information and was permitted to participate to the extent not
duplicative of other parties. We therefore refuse to find that the grant of permissive intervention,

even though subject to conditions, should be treated as a complete denial of the right to

participate."); Nautilus, 2014 WL 2645503, at *3 (The Court found that Defendant was not
required to respond to the intervening excess insurer's complaint "because [intervenor] has no

current duty to defend Strongwell under the excess policies and 'may never have a duty to
defend'...the court will stay any further litigation pertaining to [intervenor]'s obligations pending
further development in the underlying action.").

Here the intervening insurers seek to file separate complaints requesting declaratory

judgments regarding their excess coverage obligations and one intervenor seeks to assert a
reformation claim. As noted above, the Court has granted a stipulation in favor of the current

Plaintiffs regarding their reformation claim, which leaves only declaratory claims in the original
matter. Accordingly, to prevent unnecessary delay since issues ofexcess coverage, if any,
cannot be resolved until the underlying issue of primary coverage is resolved, litigation involving

the claims intervening insurers seek to assert regarding their excess coverage obligations will be

stayed pending resolution ofthe underlying primary insurance claims. However, intervening
insurers may participate in limited discovery to the extent it pertains to the primary coverage
claims. If the primary insurance claims are resolved against Plaintiffs, the Court will then
decide whether intervening insurers will be allowed to litigate the excess claims in this Court or
return to conclude the litigation commenced in Wisconsin state court.
B. Motion to Dismiss Amended Complaint

The Court previously found the federal suit and Wisconsin state suit to be parallel but
declined to abstain because Plaintiffs' Complaint included a reformation claim that the Court

construed as non-declaratory and requiring application of Colorado River, which permits courts
12

to abstain only in "exceptional" circumstances. The Court accepts Defendant's stipulation to
entry ofjudgment in Plaintiffs' favor for Count Three, thereby removing a reformation claim
from the suit. Plaintiffs argue that the reformation claim asserted against Defendant by the

intervening insurer AGLIC again requires application of Colorado River. However, the Court

has stayed litigation with respect to the intervening insurers' claims involving excess insurance

coverage until resolution of the underlying claim of primary insurance coverage. Therefore, the
claims before the Court are all declaratory, warranting application of the Brillhart/Wilton

standard for determining whether the Court will abstain in this matter.
The Brillhart/Wilton standard affords the Court broad discretion in determining whether

to abstain in a matter. vonRosenberg v. Lawrence, 781 F.3d 731, 735 (4th Cir. 2015). In

conducting the Brillhart/Wilton analysis, this Court must consider:
1) whether the state has a strong interest in having the issues decided in its courts;

2) whether the state courtcould resolve the issues more efficiently than the federal court;
3) whether the presence of overlapping issues of fact or law might create unnecessary
entanglement between the state and federal court; and

4) whether the federal action is mere procedural fencing in the sense that the action is
merely the product of forum shopping.
Great Am. Ins. Co. v. Gross, 468 F.3d 199,211 (4th Cir. 2006).

1. Whether the state has a strong interest in having the issues decided in its courts
Defendant asserts that Wisconsin has an interest deciding the liability of their resident

companies since several of the Plaintifflnsurers were incorporated in Wisconsin and availed
themselves of the advantages of Wisconsin's laws. Mot. to Dismiss Am. Compl. 17, ECF No.

72. Defendant also argues that because the dispute solely involves state law, the Court should

13

abstain. Reply in Supp. of Mot. to Dismiss Am. Compl. 4, 6, ECF No. 75. Defendant does not,
however, indicate which state law should apply.
In response, Plaintifflnsurers contend that none of the parties have principal places of
business in Wisconsin, no witnesses or documents are located in Wisconsin, and none of the

relevant conduct occurred in Wisconsin. Pis.' Opp. to Mot. to Dismiss Am. Compl. 2, 15, ECF

No. 74. Plaintiffs also argue that Virginia law applies pursuant to choice of law rules because

the policies were delivered in Virginia, which Plaintiffs assert this Court is better situated than
the Wisconsin state court to apply. Id. at 14-16.
The Fourth Circuit has found that discretion to abstain "may be exercised only when the

questions of state law involved are difficult, complex, or unsettled." Great Am. Ins. Co., 468
F.3d at 211. In finding that the district court abused its discretion in abstaining, the Fourth
Circuit further noted that "the questions of state law raised in the federal action are not difficult

or problematic; instead, they involve the routine application of settled principles of insurance law
to particular disputed facts." Id. Similarly, here the matter before this Court involves the routine
application of state insurance law and does not implicate state interests "sufficiently compelling
to weigh against the exercise of federal jurisdiction." Id. This Court concludes that this matter
has no significant ties to Wisconsin given that Wisconsin is minimally connected to the parties
and claims at issue. On the other hand, the presence of witnesses and documents relevant to this

matter in this District and the underlying claims Defendant seeks coverage for being litigated in
this District favors federal jurisdiction and weighs against abstention.

14

2. Whether the state court could resolve the issues more efficiently than the federal
court

Defendant argues that the Wisconsin state court can resolve the dispute more efficiently

because the Wisconsin action embraces all the claims and parties interested as well as additional

parties and claims. Mot. to Dismiss Am. Compl. 18-19, ECF No. 72. Defendant also asserts that
the Wisconsin suit has progressed further than the federal suit because initial discovery requests
have been served in the Wisconsin suit while the federal suit is still in the initial pleadings phase.
Id. at 19.

Plaintiffs argue that this Court will resolve the issues more efficiently because it has more

experience applying the applicable Virginia law than the Wisconsin state court. Pis.' Opp. to
Mot. to Dismiss Am. Compl. 20, ECF No. 74. Plaintiffs also note that the underlying suits for

which Defendant seeks coverage were consolidated in this District pursuant to the Defendant's

request in which the Defendant stated, "[t]he Eastern District of Virginia is thus unrivaled based
on convenience and docket conditions." Id. at 21. Further, Plaintiffs assert that the Wisconsin

suit is not more developed because the intervening insurers withdrew their claims in the
Wisconsin suit, no responses to discovery have been served in that suit, and on October 15,2015
the Wisconsin court held a hearing on the insurers' Motion to Dismiss that action in which it
deferred its decision until this Court rules on the pending Motion to Dismiss in this suit. Id. at 7,
21.

The Court must consider "whether the questions in controversy between the parties to the
federal suit... can better be settled in the proceeding pending in the state court." Brillhart v.
Excess Ins. Co. ofAm., 316 U.S. 491, 495 (1942). This requires inquiry into "the scope of the

pending state court proceeding " including such matters as "whether the claims of all parties in

15

interest [to the federal proceeding] can satisfactorily be adjudicated in that proceeding, whether
necessary parties have been joined, [and] whether such parties are amenable to process in that

proceeding." Id. The Court finds the federal suit to be as comprehensive as the Wisconsin suit
given that the Motions to Intervene have been granted adding the same parties and issues to this

matter as in the Wisconsin suit. The Wisconsin suit has not progressed substantially more than
the federal suit, and the Wisconsin court has stayed the state action. Furthermore, both parties
acknowledge that the evidence and witnesses are located in this District. Therefore, nothing
indicates that the Wisconsin Court could resolve the issues more efficiently, and this factor does
not weigh in favor of abstention.
3. Whether the presence of overlapping issues of fact or law might create
unnecessary entanglement between the state and federal court

Defendant alleges that if the Court declines to abstain unnecessary entanglement with the
Wisconsin suit will result because both courts will be interpreting the same issues. Mot. to
Dismiss Am. Compl. 19-20. Plaintiffs counter that any overlap in issues were created by

Defendant filing the action in Wisconsin after this federal suit was filed. Pis.' Opp. to Mot. to
Dismiss Am. Compl. 22. Plaintiffs further assert that the overlap alone does not warrant
abstention, and the overlap should be resolved by Wisconsin staying its proceedings based on
Wisconsin statutes and case law permitting a dismissal or stay of a Wisconsin state court action
in favor of pending federal case. Id. at 23-24.

Although the suits are parallel, the Wisconsin state court has stayed its action thereby
ceasing entanglement until this Court's decision on whether it will abstain. The Court is not

persuaded that the federal action must be stayed in order to prevent unnecessary entanglement.
As noted above, '"the pendency of an action in the state [system] is no bar to proceedings

16

concerning the same matter in the Federal court having jurisdiction.'" McLaughlin v. United Va.
Bank, 955 F.2d 930, 934 (4th Cir. 1992) (quoting McClellan v. Garland, 217 U.S. 268, 282
(1910)). This is true even if the result is a "duplication ofjudicial resources." Id. Therefore,
this factor does not weigh in favor of abstention.
4. Whether the federal action is mere procedural fencing in the sense that the action
is merely the product of forum shopping

Defendant asserts that Plaintiffs filed this anticipatory federal suit to prevent Defendant

from filing a coercive action in its choice of forum and to obtain a federal hearing through

"procedural fencing" in a suit otherwise not removable. Mot. to Dismiss Am. Compl. 20-23.
Plaintiffs assert that Defendant has engaged in procedural fencing by filing suit in Wisconsin
where there are minimal connections to this matter after Plaintiffs filed this federal suit. Pis.'

Opp. to Mot. to Dismiss Am. Compl. 22-27, ECF No. 74.
The Court finds that this suit is not the product of forum shopping. This suit was filed

prior to the state action, and this is the District where Defendant is headquartered, witnesses and
evidence are located, and the underlying suits for which coverage is sought are being litigated.

In similar circumstances, the Fourth Circuit has found no indication of procedural fencing where
an insurer "filed [an] action to resolve questions that are traditionally resolved in declaratory

judgment actions, and it did so under standard diversity jurisdiction." Kapiloff, 155 F.3d 488,
494 (4th Cir. 1998) (The Fourth Circuit further noted, "While United Capitol may have guessed

that the Kapiloffs would eventually file a suit of their own, it could not have known that the
Kapiloffs would necessarily name nondiverse parties to that suit, making their state suit

unremovable. Without more, we cannot say that United Capitol's action is an instance of forum-

shopping instead of a reasonable assertion of its rights under the declaratory judgment statute and

17

diversity jurisdiction."). Therefore, there is no indication that this suit was filed in an attempt at
forum shopping.

This Court's analysis of the four Brillhart/Wilton factors favor federal jurisdiction.

Accordingly, Defendant's motion to dismiss or stay these proceedings is DENIED.
IV. CONCLUSION

For the reasons stated, the Motions to Intervene are GRANTED. 1lowever. litigation on

the intervening insurers' claims with respect to excess coverage is stayed pending resolution of

Plaintiffs' original claims regarding primary coverage. Further, judgment is GRANTED in
favor of Plaintiffs for Count 'fhree of the Complaint pursuant to Defendant's Stipulation, and
Defendant's Motion to Dismiss is DENIED.

The Clerk is DIRECTED to send a copy of this Memorandum Order to counsel for the
Parties.
IT IS SO ORDERED.

Norfolk. Virginia
February f, 2016

Raymond A. Jackson

United states District Judge