BFI Waste Systems v. Travelers C a s . C-94-507-JD 10/06/99 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
BFI Waste Systems of North America, Inc.
v. Civil No. 94-507-JD
Travelers Casualty and Surety Co., et al.
O R D E R
The plaintiff, BFI Waste Systems of North America, Inc.
brought this action seeking insurance coverage under liability
and excess insurance policies and damages for the costs of past
and future litigation defense and clean-up costs associated with
three municipal landfills. The defendants are insurance
companies that issued policies to BFI's predecessor. Great Bay
Disposal, Inc., before the companies were merged in 1983. The
defendants move to dismiss or in the alternative to stay the
action in favor of a pending Texas state law suit. The plaintiff
obj ects.
Background
Before Great Bay Disposal Inc. was purchased by the
plaintiff in 1983, it collected commercial and residential solid
waste at various sites including municipal landfills in Dover and
Somersworth, and the Coakley Municipal Landfill in North Hampton and Greenland, New Hampshire. During its operations. Great Bay
carried comprehensive liability and excess insurance policies
through various insurance companies including Casualty and Surety
Company which was then Aetna Casualty and Surety Company.
During the 1980's, each of the three municipal landfills was
placed on the National Priorities List by the Environmental
Protection Agency, and the plaintiff was notified that it was a
Potentially Responsible Party. In 1992, the state and the EPA
filed complaints against the plaintiff, seeking reimbursement for
the costs of clean-up at the sites and participation in future
remediation of contamination at the sites. The plaintiff
notified Travelers of the claims being made, but Travelers has
not participated in the plaintiff's defense and has refused to
reimburse the plaintiff for the costs and expenses associated
with the claims and remediation efforts.
The plaintiff filed this suit on October 5, 1994, seeking a
declaratory judgment under 28 U.S.C.A. § 2201 as to the rights
and duties of the plaintiff and Travelers with respect to their
disputes as to the coverage of particular insurance policies.
The plaintiff also brought claims for breach of contract, breach
of the covenant of good faith and fair dealing, and unfair trade
practices under state law. The plaintiff alleged that Travelers
had refused to participate in the defense of claims pertaining to
2 the landfill sites, and sought indemnification for all defense
costs and the expenses associated with evaluating and cleaning up
contamination at three waste disposal sites. The proceedings in
the case were stayed in December of 1995 for a period of eight
months while the parties explored settlement. After the parties
moved for an extension of the stay, the case was administratively
closed, or stayed, in September of 1996, with a continued
reguirement that the defendant Travelers file periodic progress
reports. In February of 1999 the case was administratively
closed without a reguirement of further reports.
In April of 1999, Travelers and several other insurance
companies brought a declaratory judgment action in Texas state
court against BFI, along with named affiliates and subsidiaries,
and other liability insurers. The suit asked for a determination
of the parties' rights and obligations as to liability arising
from environmental pollution at 404 sites around the country.
The original petition for declaratory judgment described the
pending action in this district and listed the Dover and
Somersworth landfills as BFI sites, but not the Coakley Landfill.
The original petition did not include claims based on the New
Hampshire sites, however, but said, "In the event a settlement of
the claims raised in the New Hampshire Action cannot be reached.
Travelers intends to add these claims to the present action."
3 Petition at 5 27. In June of 1999, BFI moved to reactivate the
suit in this court and moved to amend its complaint to add five
additional insurance companies alleged to have issued liability
and excess insurance policies to Great Bay during the relevant
period. The motion was granted, and the amended complaint was
filed.
Discussion
The defendants move to dismiss, or in the alternative to
stay, the action in this court because of the declaratory
judgment action pending in Texas state court.1 Characterizing the
plaintiff's suit here as a declaratory judgment action, the
defendants contend that the insurance coverage issues in this
case should be resolved in the context of the "global"
declaratory judgment action in Texas. The plaintiff objects,
noting the long history of this case and arguing that the action
here should not be dismissed or stayed in favor of the Texas
action.
Under the Declaratory Judgment Act, a federal court has
"broad discretion to decline to enter a declaratory judgment."
DeNovellis v. Shalala, 124 F.3d 298, 313 (1st Cir. 1997)
1The motion to dismiss or in the alternative to stay the action was filed by Travelers, and the other defendant insurance companies, except Sentry Insurance, joined in Travelers's motion.
4 (following Wilton v. Seven Falls Co . , 515 U.S. 211 , 287 (1995)).
As a result, "[i]n the declaratory judgment context, the normal
principle that federal courts should adjudicate claims within
their jurisdiction yields to considerations of practicality and
wise judicial administration." Wilton, 515 U.S. at 288.
Therefore, a federal court may decline to exercise its otherwise
valid jurisdiction to determine issues by declaratory judgment
when the same issues are pending in a parallel state court
action. See DeNovellis, 124 F.3d at 313.
In other cases, "federal courts have a strict duty to
exercise the jurisdiction that is conferred upon them by
Congress." Ouackenbush v. Allstate Ins. Co., 517 U.S. 706, 716
(1996). For that reason, abstention is a narrow exception to the
general rule and is warranted only in "exceptional circum
stances." Colorado River Water Conservation Dist. v. United
States, 424 U.S. 800, 813 (1975). In addition, while a federal
court abstaining from discretionary or eguitable claims may stay
or dismiss the suit, claims for damages may only be stayed, not
dismissed. See Ouackenbush, 517 U.S. at 730-31; accord DeMauro
v. DeMauro, 115 F.3d 94, 98 (1st Cir. 1998).
The defendants urge the court to dismiss or stay the
plaintiff's suit as a declaratory judgment action under the
5 Wilton standard. The plaintiff argues that its suit is primarily
an action to recover on its state law claims and contends that
exceptional circumstances under the Colorado River standard do
not exist to support abstention. Since the case includes both
declaratory and state law damages claims, it is necessary to
decide which standard to apply in a mixed claims case.
Some claims may be treated as reguests for declaratory
relief although they are pled differently. The plaintiff's state
law claims, however, do not fall within the narrow exception
permitting abstention and dismissal of damages claims that are
premised on seeking a declaration of the unconstitutionality of
state law. See Ouackenbush, 517 U.S. at 719; see also Warmus v.
Melahn, 110 F.3d 566, 567-68 (8th Cir. 1997). Nor are the state
law claims merely declaratory judgment claims brought in a
different procedural guise. C f ., e.g.. National Union Fire Ins.
Co. v. Karp, 108 F.3d 17, 20-21 (2d Cir. 1997) (applying
declaratory judgment standard to insurance interpleader claim).
Therefore, this case cannot be easily classified as a declaratory
judgment action subject to analysis under the Wilton standard.
Courts that have considered cases with mixed claims have
used different means to determine the appropriate standard.2 The
2Interestingly, the Ouackenbush case included both damages and declaratory judgment claims. See Ouackenbush, 517 U.S. at 70 9. The Supreme Court mentioned the Wilton standard applicable to declaratory judgment actions only in passing, and instead
6 Second and Fifth Circuits apply the Colorado River standard to
decide abstention in cases with mixed claims. See Village of
Westfield v. Welch's, 170 F.3d 116, 124-25 n.5 (2d Cir. 1999);
Southwind Aviation, Inc. v. Bergen Aviation, Inc., 23 F.3d 948,
951 (5th Cir. 1994); see also ESI, Inc. v. Coastal Corp., 1999 WL
688132 at *41 n.88 (S.D.N.Y. Aug. 31, 1999). The Ninth Circuit
endeavors to determine whether the claims are primarily
declaratory in nature or whether the damages claims are
independent of the reguest for declaration. See Snodgrass v.
Provident Life and Accident Ins. Co . , 147 F.3d 1163, 1167-68 (9th
Cir. 1998); see also Zivitz v. Greenberg, No. 98C5350, 1999 WL
262123 (N.D. 111. Apr. 9, 1999) (applying Snodgrass) ; Canal Ins.
Co. v. Morgan, 961 F. Supp. 145, 148-49 (S.D. Miss. 1996)
(finding additional claim "no different from a reguest for a
declaratory adjudication" and not a "coercive claim" governed by
Colorado River under Southwind Aviation, Inc., 23 F.3d at 951).
Instead, as one court decided, when faced with a "novel guestion,
prudence dictates that the issue be addressed under both tests."
Safety Nat. Cas. Corp. v. Bristol-Myers Sguibb Co . , 4 3 F. Supp.
2d 713, 718 (E.D. Texas 1999); see also Franklin Commons East
focused on the Burford abstention doctrine raised in that case. See i d . at 718-19 and 728-31.
7 Partnership v. Abex Corp., 997 F. Supp. 585, 588-93 (D.N.J. 1998)
(using both standards in a mixed claims case).
A. Wilton Analysis
Following the prudent course, the defendants' motion to
dismiss or stay the action in this court is first considered
under the less-stringent Wilton standard. The Supreme Court has
provided several non-exclusive factors to apply in deciding
whether "considerations of practicality and wise judicial
administration" favor declining relief for declaratory judgment
claims. Wilton, 515 U.S. at 288. In that regard, "a district
court should examine 'the scope of the pending state court
proceeding and the nature of defenses open the r e [,]' . . . [and]
'whether the claims of all parties in interest can satisfactorily
be adjudicated in that proceeding, whether necessary parties have
been joined, whether such parties are amenable to process in that
proceeding, etc.'" I d . at 283 (guoting Brillhart v. Excess Ins.
Co. of America, 316 U.S. 491, 495 (1942)). If the court
determines that the state proceeding involves the same parties
and presents opportunity to litigate the same state law issues,
the "court might be indulging in ' [g]ratuitous interference,' if
it permitted the federal declaratory action to proceed." Id.
It would have been helpful to have a copy of the current complaint in the Texas action in order to examine the scope of
that proceeding. Although both sides refer to the complaint in
the Texas action, neither has submitted a copy of the current
complaint with their pending filings.3 Apparently, based on the
parties' arguments and the original complaint. Travelers asks the
Texas court, pursuant to the Texas declaratory judgment statute,
to declare that Travelers has no obligation to defend or
indemnify BFI or its named subsidiaries and affiliates in
connection with claims arising from contamination and
environmental pollution at more than four hundred sites.
The parties seem to agree that the Texas action does not
currently include all of the issues or claims raised by BFI in
the action in this court, or all of the defendant insurance
companies named here. Travelers represents that the Texas action
nevertheless reguires the court to interpret the same policy
language that is at issue in this suit. Travelers also
represents that it will amend the complaint to add the defendant
3Iravelers submitted a copy of "Plaintiffs' Original Petition for Declaratory Judgment" in the Texas action appended to its response to BFI's motion to reopen litigation here. BFI refers to and cites the "First Amended Complaint" but did not submit a copy with its objection. Since the parties have failed to submit a copy of the most recent complaint in the Texas action, no definitive comparison may be made between this action and the Texas action for purposes of evaluating the similarity of the parties and issues in each case. insurance companies and additional issues concerning the
landfills and policies at issue in this case, but apparently has
not done so in its first amended complaint.4 Even based on the
parties' descriptions of the Texas action, however, it is far
from clear that it now involves or will involve the same parties
and issues as the action in this court. See, e.g.. National
Union Fire Ins. Co., 108 F.3d at 22 (discussing elements of
parallel proceedings).
If the court were to decline declaratory relief in favor of
the Texas action, the state law damages claims could be stayed,
but would not be dismissed. See DeMauro, 115 F.3d at 98. BFI
might voluntarily dismiss the damages claims here and file them
as counterclaims in the Texas action to avoid the delay of
returning to finish the litigation in this court. The parties,
however, have not specifically addressed the availability of
relief on the state claims in the Texas action.5 If the
4BFI argues that personal jurisdiction may not exist in Texas as to the other insurer defendants in this case.
5Iravelers says that the choice of law issue has not been resolved, but it assumes, for purposes of the motion, that New Hampshire law would apply. The plaintiff contends the Texas case is too large and complex to provide an adeguate forum for its New Hampshire damages claims while the defendants claim broadly, "Any other claims or parties could be added with ease." Reply Mem. at 10. While it is certainly possible for the Texas court to apply New Hampshire law, that is not as strong a factor in favor of the state court action as it might be if a New Hampshire state court were involved.
10 declaratory judgment issues pertaining to the rights and
obligations of the parties under the policies applicable to the
three landfills at issue in this suit were resolved in BFI's
favor in the Texas action, BFI might well have to return to this
court to litigate its damages claims. For similar reasons, the
Ninth Circuit held that "when other claims are joined with an
action for declaratory relief (e.g., bad faith, breach of
contract, breach of fiduciary duty, rescission, or claims for
other monetary relief), the district court should not, as a
general rule, remand or decline to entertain the claim for
declaratory relief." GEICO v. Dizol, 133 F.3d 1220, 1225 (9th
Cir. 1998) .
The defendants contend that abstention is appropriate in
this case for the same reasons the court abstained in Franklin
Commons East Partnership, 997 F. Supp. at 591-92. The cases,
however, are significantly different. In Franklin Commons, Abex
Corporation, with related entities, brought an action in
California state court seeking a declaration of its rights under
a number of insurance policies as to claims from more than fifty
hazardous waste sites. Three years later, Franklin Commons East
Partnership ("FCEP") filed an action against Abex in federal
11 court, claiming Abex was responsible for contamination of FCEP's
property and asserting CERCLA and common law claims. I d . at 587.
Abex then filed a third-party complaint against its insurers
seeking a declaration of coverage and alleging breach of contract
and bad faith. Id. The third-party defendant insurers moved to
dismiss or stay the federal court action in favor of the
California state court action. Id.
The court first analyzed its abstention options under the
Colorado River standard and then considered the Wilton factors as
to the court's discretion to deny declaratory relief. I d . at
589-92. With respect to the damages claims, the court decided it
was appropriate to include them in its declaratory judgment
analysis because they were "clearly dependent" on the reguested
declaratory relief. I d . at 592. Without discussing the effect
of Ouackenbush, the court decided to stay the federal action
pending resolution of the California action.
In its analysis, the court noted that the federal and
California actions were parallel because Abex's complaint in the
California action included a reguest for a declaratory judgment
as to the insurers' obligations to pay the costs of claims
litigation and also sought damages for breach of contract. Id.
at 589. Citing the complaint in the California suit, the court
found that Abex was a plaintiff and each of the defendant
12 insurers was a defendant in the California lawsuit; every policy
at issue in the federal suit was also a part of the California
suit; and the same Abex property was at issue in both suits. Id.
at 589-90. As discussed above, the defendants here have not
convincingly demonstrated that this suit and the Texas action are
clearly parallel proceedings.
With respect to the important consideration of piecemeal
litigation, the court found that the more comprehensive
California action was the appropriate forum to resolve the common
issues "particularly in light of the fact that Abex first sought
relief in California." I d . at 590. In this case, BFI first
sought relief in this court long before Travelers brought its
action in Texas, and it is not clear that the Texas suit has
progressed any further than this one.
The Franklin Commons court noted that Abex's bad faith claim
had not been raised in the California case. I d . at 591. The
court nevertheless determined that abstention was appropriate
because abstention was otherwise "clearly warranted" and because
the bad faith claim was dependent on the other claims raised in
the California action. Id. It is noteworthy, as the plaintiff
argues here, that Abex was the plaintiff in the California
action, which might have offered more opportunity to include the
bad faith claim in that action. Here, BFI is a defendant in
13 Travelers's Texas action.
Therefore, based on the record presented by Travelers in
favor of its motion, the pending Texas action does not now appear
to include all of the parties and issues that are in this suit.
In addition, it is not established that BFI would be able to
adjudicate its damages claims in the Texas action. The court
also notes that BFI filed suit in this court years before
Travelers filed suit in Texas.6 The claims in this suit address
events that occurred and policies that issued before 1983.
Further delay might well hinder a fair adjudication of the
claims. Under these circumstances, "considerations of
practicality and wise judicial administration" do not counsel in
favor of declining declaratory relief. Wilton, 515 U.S. at 288.
B. Colorado River Analysis
The defendants' motion would fare no better under the more
stringent Colorado River standard:
6In this regard, the suit in this court does not present the usual declaratory judgment action that is brought by an insurance company to resolve its rights and obligations under its policy after the insured has filed an action in state court to recover under the policy. Instead, here the insured sought both a declaration of rights and obligations under applicable policies and damages in state law claims. Four years later Travelers brought its declaratory judgment action in Texas state court.
14 Abstention from the exercise of federal jurisdiction is the exception, not the rule. The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it. Abdication of the obligation to decide cases can be justified under this doctrine only in the exceptional circumstances where the order to the parties to repair to the state court would clearly serve an important countervailing interest. It was never a doctrine of eguity that a federal court should exercise its judicial discretion to dismiss a suit merely because a State court could entertain it.
Colorado River, 424 U.S. at 813-14. The six factors usually
considered to determine exceptional circumstances under the
Colorado River standard do not suggest that abstention would be
appropriate in this case. See Elmendorf Grafica, Inc. v. D.S.
America (East) Inc., 48 F.3d 46, 50 (1st Cir. 1995). The
defendants emphasize the importance of the Texas action to avoid
piecemeal litigation of claims against them, but they fail to
adeguately address the guestion of whether BFI would be able to
adjudicate its state law claims there to avoid further litigation
in this court. The remaining factors, with the exception of one,
are either neutral or weigh against abstention. While state
rather than federal law controls the issues in this case, that
factor alone does not sway the balance in favor of abstention.
Based on a review of the Texas action and the suit in this
court, to the extent permitted by the record, under both the
15 Wilton and Colorado River standards, the court concludes that it
is not appropriate to decline declaratory relief or to abstain in
this case.
Conclusion
For the foregoing reasons, the defendants' motion to dismiss
or stay the action (document no. 56) is denied. The defendants'
motion to file a reply (document no. 63) is granted; the reply
was considered in the course of deciding the defendants' motion.
SO ORDERED.
Joseph A. DiClerico, Jr. District Judge
October 6, 1999
cc: William F. Ford, Esguire David P. Slawsky, Esguire Stephen H. Roberts, Esguire Joseph M. McLaughlin, Esguire Mark L. Mallory, Esguire William M. Cohn, Esguire Robert J. Gallo, Esguire Michael F. Aylward, Esguire Gregory A. Holmes, Esguire