Bristol-Myers Squibb v. Safety Nat'L Casualty
| Decision Date | 29 March 1999 |
| Docket Number | No. 1:98-CV-1564.,1:98-CV-1564. |
| Parties | BRISTOL-MYERS SQUIBB COMPANY, et al v. SAFETY NATIONAL CASUALTY CORP. |
| Court | U.S. District Court — Eastern District of Texas |
Robert Quentin Keith, Keith & Weber PC, Attorneys At Law, Johnson City, TX, Andrew T. Berry, Thomas W. Ladd, Arnold L. Natali, Jr., McCarter & English, Newark, NJ, for Bristol-Myers Squibb Company, plaintiffs.
Howard Louis Close, Orgain Bell & Tucker LLP, Beaumont, TX, for Safety National Casualty Corporation, defendant.
Pending is plaintiffs' motion to remand. Pursuant to 28 U.S.C. § 636(b), this motion was referred to United States Magistrate Judge Earl S. Hines for conclusions of law and recommendation for disposition. On March 9, 1999, the magistrate judge issued a report recommending that plaintiffs' motion to remand be granted for lack of subject matter jurisdiction.
The court has received and considered the Report and Recommendation of the United States Magistrate Judge, along with the record in this matter. Defendant timely filed objections to this report on March 23, 1999. This requires a de novo review of the specific portions of the report to which objections have been made. See FED.R.CIV.P. 72(b).
In its objections, Safety National Casualty Corporation ("SNC") raises the same arguments considered by the magistrate judge in his Report and Recommendation. SNC has not presented anything beyond perfunctory argument that the magistrate's findings and conclusions of law were incorrect. Independent review indicates that the magistrate judge's findings and legal conclusions are correct. As such, SNC's objection is without merit. Having considered this matter de novo, it is
ORDERED that the magistrate judge's report and recommendation is ADOPTED and defendant's objections are OVERRULED. A separate order will be entered in accordance with the magistrate judge's recommendations.
These actions are referred to the undersigned United States magistrate judge for consideration of pretrial matters. ; . The referral orders direct the magistrate judge to submit reports and recommendations regarding motions for injunctive relief, judgment on pleadings, summary judgment and dismissal.1 They direct the magistrate judge to determine all other pretrial motions.2
Before the court are motions by Bristol-Myers Squibb Company and Medical Engineering Corporation (hereinafter collectively referred to as "BMS") to dismiss, abate or consolidate these two actions and to remand them both to state court. These motions request relief akin to dispositive matters for which the district judge requested reports and recommendations. Therefore, to preserve the district judge's prerogative of deciding whether these actions shall be entertained in federal court or remanded, these motions will be addressed by report and recommendation. See In Re U.S. Healthcare, 159 F.3d 142 (3rd Cir.1998) ()
These cases involve unique facts and several murky, if not novel, questions of federal diversity jurisdiction and removal procedure. The motion to remand turns, first, on whether subject matter jurisdiction is lacking when adverse parties on a counterclaim are not diverse in their citizenship. If jurisdiction exists, the motion then turns on several procedural questions as to (a) whether a party dismissed as a defendant but remaining as a counterclaimant must also consent to removal; (b) whether the "substantial progress doctrine"3 bars removal of a state court action initially filed in 1993, formally dismissed in 1996 under a "standstill agreement," but reinstituted in 1998 by the filing of an amended petition under the same docket number; and, (c) whether an insurer waived the right to remove by issuing a policy containing a "service of suit" clause.
The action bearing docket number 1:98-CV-1564 (hereinafter "Bristol-Myers I") is a suit brought by BMS against its liability insurance carrier, Safety National Casualty Corporation (hereinafter "SNC"), seeking declaratory judgment that SNC has a duty to defend or indemnify BMS for personal injury claims brought by consumers of breast implant products. SNC's liability to BMS has an alleged value of approximately $6 million. (Thirteenth Am.Pet. ¶ 18.)
The action bearing docket number 1:98-CV-1571 () is a suit brought by SNC seeking declaratory judgment as to its rights and obligations under a Standstill Agreement with BMS. (1:98-CV-1571 Compl. at 6-7.); see also infra note 5. Also, SNC, invoking 9 U.S.C. § 3, seeks a stay of all litigation by BMS until arbitration is completed. (Id. at 8.)
On March 19, 1993, Bristol-Myers Squibb Company and Medical Engineering Corporation ("MEC") instituted suit in the 58th Judicial District Court of Jefferson County, Texas. (Cause No. A-0145672, State Court Civil Dockt. Sheet at 1.) Defendants were SNC and many other companies that, like SNC, issued liability insurance policies to BMS.4
BMS alleged that it was a defendant in more than 2,500 personal injury suits brought by consumers who used silicone breast implant products manufactured or marketed by BMS. (Original Pet. ¶ 90.) Further, BMS alleged it purchased liability insurance from defendants who refused to defend BMS in those personal injury suits, and further refused to pay or indemnify BMS for liability that might be imposed in those actions. (Original Pet. ¶¶ 114, 115.) BMS sought declaratory judgment that the breast implant suits were "occurrences" within the meaning of the various insurance policies and that the insurers' failure to defend and indemnify were breaches of their obligations under the insurance contracts. (Original Pet. ¶¶ 104, 107.) BMS also sought monetary damages for all damages, costs and payments they incurred as a result of the breast implant litigation. (Original Pet. ¶ 116.)
Hon. James W. Mehaffy, judge of the 58th judicial district court of Jefferson County, Texas, presided over this multiparty litigation from its inception. Some insurers counterclaimed against BMS. Despite the complexity resulting from the legal issues and sheer multitude of litigants and numerous claims, Judge Mehaffy managed to generate steady progress toward settlements without necessity of a full-scale trial.
BMS and SNC did not settle their disputes but they did reach an interim agreement in contemplation of alternative dispute resolution. After the case was pending before Judge Mehaffy for over two years, BMS and SNC entered a "Standstill Agreement." (Standstill Agreement, Def.'s Mem.Supp.Resp. to Pls' Motion for Remand at Ex. A4.) The July 26, 1995, agreement recounted that various lawsuits involving coverage-related disputes were pending in Texas, New Jersey, Missouri and in another forum identified only as "Index No. 93/1200948." (Id.) It recited that BMS and SNC determined that it was in their mutual interest to hold all coverage-related disputes between and among them in "abeyance," and to "defer and possibly avoid" the need to litigate. (Id.) The contemplated alternative dispute mechanism was arbitration at a later date.5
BMS and SNC thus agreed to dismiss without prejudice their respective and sundry actions pending in various courts. BMS reserved the right to again initiate litigation if SNC attempted to rescind the insurance policies in question, while SNC reserved the right to claim any such dispute to be subject to mandatory arbitration. Finally, both parties agreed to suspend operation of relevant statutes of limitations and similar equitable time-based defenses.
The Standstill Agreement effectively put on hold the dispute between BMS and SNC. Meanwhile, BMS continued to prosecute the Jefferson County, Texas, action against the remaining defendants. As noted earlier, that action then progressed by virtue of numerous settlements.6
By April 1, 1998, BMS settled with all original defendants that issued policies covering "occurrences," except SNC and Employers Insurance of Wausau (hereinafter "Wausau"). Wausau had a counterclaim pending against BMS. Thus, only the BMS claims against Wausau and Wausau's counterclaim were actively pending.
By then, the Jefferson County, Texas action had been pending for over five years. On that date, BMS filed its Thirteenth Amended Petition. Unexpectedly, the amended petition named SNC as a defendant but did not assert any claim against Wausau. Thus, the only defendant mentioned in the amended petition was SNC.7
SNC interpreted Texas law as providing that the amended petition operated as a dismissal of Wausau. Under that view, only BMS and SNC remained. SNC further deduced that, for the first time since the action was initiated, there existed complete diversity of citizenship between the parties.8 Capitalizing on this opportunity, SNC promptly filed in this court a notice of removal pursuant to 28 U.S.C. § 1446(a). The action was removed to this court where it now pends.
On April 30, 1998, less than a week after removal of Bristol-Myers I from the Jefferson County, Texas state court, SNC sued BMS in federal court for the eastern district of Texas, Beaumont division. SNC invokes federal jurisdiction based solely on diversity of citizenship.9 SNC seeks a declaratory judgment of its rights and obligations under the Standstill Agreement....
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