Opinion
No. 04 Civ. 4195 (RCC).
March 1, 2005
MEMORANDUM ORDER
This is a breach of contract action stemming from Defendant New England Insurance Co.'s ("Defendant" or "New England") decision to deny coverage of an insurance claim submitted by Plaintiff Huntington Hospital ("Plaintiff," "Huntington Hospital," or "Hospital"). Defendant moves to stay or dismiss the action without prejudice until a state court action brought by Plaintiff is resolved. Alternatively, Defendant moves to dismiss for failure to join necessary and indispensable parties pursuant to Rule 19 of the Federal Rules of Civil Procedure. The Court has carefully reviewed the parties' submissions and has considered their oral arguments. For the reasons explained, Defendant's motion is denied.
I. Background
In November 1985 the Seddio family commenced a personal injury action against Huntington Hospital. The Hospital had a primary liability insurance policy with Health Underwriters Mutual ("HUM"), which retained defense counsel from the firm Hirsh, Britt Mose to defend the Hospital in the Seddio action. The HUM policy contained an indemnity limit of $1 million. Complaint ¶ 12. The Hospital also had an umbrella liability insurance policy with Defendant New England with an indemnity limit of $10 million for any one occurrence. Id. ¶ 10.
On April 14, 2000, a jury awarded Elizabeth Seddio over $9 million in damages. Id. ¶ 13. To resolve the Seddio judgment, HUM agreed to pay $1 million. Id. ¶ 18. The Hospital notified New England of this claim on April 27, 2000. On May 25, 2000, New England denied the claim on the grounds that it received late notice of it. Ultimately, to settle the Seddio matter, Huntington Hospital contributed $2,425,000 of its own money. Id. ¶ 19.
On February 13, 2004, Huntington Hospital filed its verified amended complaint against the Hirsh, Britt Mose firm, its members, and HUM in New York Supreme Court, Suffolk County. See Huntington Hospital v. Mose, 03/26402 Verified Amended Complaint at Adams Aff. Ex. 1. In the state action, Huntington Hospital seeks $2,500,000 for each of its legal malpractice, breach of contract, and bad faith claims. Id. Subsequently, on June 1, 2004, Huntington Hospital also filed suit against New England in this Court, alleging one claim of breach of contract and seeking $2,500,000. See generally Complaint.
Defendant New England now moves for dismissal. First, it claims this Court should abstain from exercising jurisdiction over this case while the state court case is pending. Alternatively, New England argues that Hirsh, Britt Mose and HUM are necessary and indispensable parties that must be joined in this suit, and that once joined, they will destroy this Court's diversity jurisdiction since they are both New York entities.
II. Discussion
A. Abstention
Defendant argues that pursuant to the principles set forth inColorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976), this Court should dismiss or stay this action while the state court action is pending to avoid piecemeal litigation. In Colorado River, the Supreme Court stated that:
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."Id. at 814 (quoting County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 188-89 (1959)). The Court in Colorado River outlined three categories in which abstention is appropriate: (1) in cases "presenting a federal constitutional issue which might be mooted or presented in a different posture by a state court determination of pertinent state law," id., at 814, (2) in cases presenting "difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case" at bar, id., and (3) in cases in which "federal jurisdiction has been invoked for the purpose of restraining state criminal proceedings," id. at 816.
Where, as here, none of the aforementioned categories applies, there is a fourth category of principles "governing the contemporaneous exercise of concurrent jurisdictions" that would also support abstention in "exceptional" circumstances. Id. at 817. These factors have been described as:
(1) the convenience or inconvenience of the forum; (2) whether piecemeal litigation can be avoided; (3) the order in which jurisdiction was obtained; (4) the source of law for decision; (5) whether the state court can adequately protect the rights of the party seeking federal jurisdiction; and (6) the court first asserting jurisdiction in an in rem action.Alliance of Am. Insurers v. Cuomo, 854 F.2d 591, 602-03 (2d Cir. 1988). It is these factors that Defendant argues weigh in favor of this Court's abstention.
The application of the Colorado River factors depends, however, on an initial finding that the federal and state proceedings are concurrent or parallel. See, e.g., Quackenbush v. Allstate, 517 U.S. 706, 717 (1996); Woodford v. Community Action Agency of Greene County, Inc., 239 F.3d 517, 521 (2d Cir. 2001); Dittmer v. County of Suffolk, 146 F.3d 113, 118 (2d Cir. 1998). "Federal and state proceedings are `concurrent' or `parallel' for purposes of abstention when the . . . proceedings are essentially the same; that is, there is an identity of parties, and the issues and relief sought are the same." Woodford, 239 F. 3d at 521 (quoting Nat'l Union Fire Ins. Co. of Pittsburgh v. Karp, 108 F.3d 17, 22 (2d Cir. 1997)).
Here, the only identity in parties is that Huntington Hospital is the plaintiff in both actions. New England does not have any association or relationship with state defendants HUM or Hirsh, Britt Mose such that the defendants in these federal and state actions can be considered identical. Similarly, the Hospital's theories for relief in each case are distinct. The action before this Court is a breach of insurance contract claim. The state court claims, while concerning the same underlying allegations of medical malpractice, arise from an alleged breach of a completely separate insurance contract between Huntington and HUM, see Huntington Hosp. v. Mose, Verified Amended Complaint ¶¶ 26-53, and legal malpractice during Hirsh, Britt Mose's representation of Huntington in the Seddio matter, see id. at ¶¶ 11-25. Accordingly, the Court finds that the state and federal actions are not parallel and concurrent and that application of theColorado River abstention factors is not appropriate. See Alliance Am. Insurers, 854 F.2d at 603 ("While there may be some overlap of subject matter, it is not sufficient to make these actions concurrent. Such differences in parties and issues are strong factors against invoking exceptional circumstances as the basis for dismissal") (citing Bethlehem Contracting Co. v. Lehrer/McGovern, Inc., 800 F.2d 325, 328 (2d Cir. 1986)).
B. Necessary Parties
New England argues that HUM and Hirsh, Britt Mose are necessary parties pursuant to Federal Rule of Civil Procedure 19(a) because it assumes that Huntington will argue that in failing to provide timely notice to New England regarding the Seddio claim it was relying on HUM and Hirsh, Britt Mose. New England contends that once the Court finds HUM and Hirsh, Britt Mose are necessary, this case should be dismissed since they have not been joined and if they were joined they would destroy complete diversity among the parties. See Fed.R.Civ.P. 19(b) (instructing the court to determine if the non-joinder of a necessary party should result in dismissal).
Rule 19(a) provides that a party shall be joined if:
(1) in the person's absence complete relief cannot be accorded among those already parties, or (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may (i) as a practical matter impair or impede the person's ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of the claimed interest.
Fed.R.Civ.P. 19(a). Here, Plaintiff's breach of contract claim in this Court stems from its $10 million umbrella liability insurance policy with Defendant, not its separate primary policy with HUM. It is seeking repayment of the $2,500,000 it paid to satisfy its settlement with the Seddio family. If judgment is entered against Defendant in this action, Plaintiff will be afforded complete relief. See Arkright-Boston Manufacturers Mutual Ins. Co. v. City of New York, 762 F.2d 205, 209 (2d Cir. 1985) ("[T]he term complete relief refers only to relief as between persons already parties, and not as between a party and the absent person whose joinder is sought."); see also Conntech Dev. Co. v. Univ. of Conn. Educ. Props. Inc., 102 F.3d 677, 682 (2d Cir. 1996) "[A] non-party to a commercial contract ordinarily is not a necessary party to an adjudication of rights under the contract."). Likewise, Defendant has not explained how, and the Court cannot find that, HUM and Hirsch, Britt Mose have a protected interest in this action. Id. Accordingly, since the Court finds HUM and Hirsh, Britt Mose are not necessary parties, they are not indispensable and their non-joinder does not create grounds for dismissal.
In reaching this conclusion, the Court does not find Defendant's reliance on Continental Casualty Co. v. Taco Bell Corp., 127 F. Supp. 2d 864 (W.D. Mich. 2001), persuasive. InTaco Bell, the insured held consecutive insurance policies with two separate primary providers. Id. at 869. The court concluded both insurance companies had to be joined to avoid contradictory findings regarding which insurance provider was responsible for coverage. Id. at 869-70. There is no similar possibility here, where there is no dispute that both HUM's primary liability and New England's umbrella liability policy applied during the occurrences giving rise to the Seddio claim.
III. Conclusion
For the reasons explained above, Defendant's motion to dismiss is denied. The parties are to appear for a status conference in this case on April 1, 2005 at 9:30 a.m.