Byer Museum of Arts v. North River Ins. Co.

• Decision Date: 22 November 1985
• Docket Number: No. 85 C 6055.,85 C 6055.
• Citation: Byer Museum of Arts v. North River Ins. Co., 622 F.Supp. 1381 (N.D. Ill. 1985)
• Court: U.S. District Court — Northern District of Illinois
• Parties: BYER MUSEUM OF the ARTS, Stephen Byer & Associates, Stephen B. Byer, and Barbara L. Byer, Plaintiffs, v. The NORTH RIVER INSURANCE COMPANY, Defendant.

622 F. Supp. 1381

BYER MUSEUM OF the ARTS, Stephen Byer & Associates, Stephen B. Byer, and Barbara L. Byer, Plaintiffs, v. The NORTH RIVER INSURANCE COMPANY, Defendant.

No. 85 C 6055.

United States District Court, N.D. Illinois, E.D.

November 22, 1985.

Nicholas D. Chabraja, Linda Listrom, Daniel R. Warren, Jenner & Block, Chicago, Ill., for plaintiffs.

James T. Crotty, Scott W. Hoyne, James S. Stickles, Jr., Timothy J. Nalepka, Crotty & Hoyne, Chicago, Ill., for defendant.

MEMORANDUM OPINION AND ORDER

HOLDERMAN, District Judge:

This case is before the Court on defendant's motion to dismiss, or in the alternative, stay this action in light of a nearly identical state action pending between the parties in the Circuit Court of Cook County.

BACKGROUND

This case concerns an insurance policy issued by The North River Insurance Company ("defendant") to the Byer Museum of the Arts and Stephen Byer & Associates ("plaintiffs") insuring a building and its contents. The insured building is located in Evanston, Illinois and is occupied by plaintiffs: the Byer Museum and Stephen Byer & Associates.

On December 31, 1984, approximately three months after the insurance policy was issued, a fire occurred at the building causing extensive damage. In March and April of 1985 the plaintiffs submitted their claims to the defendant for the damage caused by the December fire. The defendant asserted that the claims were grossly inflated and, therefore, sought to have the policy declared null and void due to the plaintiffs' fraud. Plaintiffs asserted that the claim was proper and objected to the delay in payment.

Their differences defined, the parties began some elaborate strategic posturing within the state and federal judicial systems. On May 31, 1985, defendant filed suit in federal court seeking a declaratory judgment annulling its liability under the policy. Five days later, defendant voluntarily dismissed the federal action pursuant to Fed.R.Civ.P. Rule 41(a)(1)(i), and on the same day refiled the complaint for declaratory judgment in the Circuit Court of Cook County, Illinois under docket number 85 CH 5589 ("state action"). Nearly one month later, plaintiffs decided to file their own action in federal court based on the very same insurance policy and involving the same factual questions and parties. The plaintiffs' present federal action seeks the full amount claimed under the policy, attorneys' fees, statutory penalties under Ill.Rev.Stat. ch. 73 § 767, compensatory damages and punitive damages.¹ Federal jurisdiction was based on diversity of citizenship under 28 U.S.C. § 1332.

DISCUSSION

Having lost the race to the courthouse, the plaintiffs would like to start another race; a race to judgment between this Court and the Illinois state court. To prevent such a race to judgment and to conserve scarce legal and judicial resources, the defendant has moved to dismiss or stay the federal action based on alternative grounds, namely: § 2-619(a)(3) of the Illinois Code of Civil Procedure; and the Colorado River doctrine which allows federal courts to dismiss or stay federal actions in deference to concurrent state proceedings. For the following reasons defendant's motion to dismiss is granted.

Because jurisdiction in the present litigation is premised on diversity of citizenship, Illinois state law is applicable under the well established principles of Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Guarantee Trust Co. of N.Y. v. New York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945); and Byrd v. Blue Ridge Elec. Coop., Inc., 356 U.S. 525, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958). Directly in issue is whether the Erie doctrine requires the application of an Illinois statutory provision which allows the dismissal of a cause of action involving the same cause and same parties as another pending action.

Section 2-619(a)(3), Ill.Rev.Stat. ch. 110, provides:

Defendant may, within the time for pleading, file a motion for dismissal of the action or for other appropriate relief upon any of the following grounds.

* * * * * *

(3) That there is another action pending between the same parties for the same cause.²

The Illinois Supreme Court has interpreted "same cause" to mean that "actions are `for the same cause,' when relief is requested on substantially the same set of facts." Skolnick v. Martin, 32 Ill.2d 55, 203 N.E.2d 428 (1964), cert. denied, 381 U.S. 926, 85 S.Ct. 1562, 14 L.Ed.2d 684 (1965).

Though it is clear that the state and federal actions fall within the parameters of § 2-619(a)(3), plaintiffs contend that this statutory provision is merely a procedural device for use by the Illinois state courts and has no applicability to federal courts exercising diversity jurisdiction. This argument is contrary to the overwhelming weight of judicial decisions determining the applicability of § 2-619(a)(3) to federal courts sitting in diversity. Simenc v. Holiday Inns, Inc., No. 83 C 5618, slip op. (N.D.Ill. Feb. 10, 1984) (Judge Moran); Brite Industries v. Anderson, No. 81 C 5593, slip op. (N.D.Ill. March 25, 1982) (Judge Kocoras); Holmes v. Chicago Transit Authority, 505 F.Supp. 877 (N.D.Ill. 1981) (Judge Leighton); Carpets International v. Quill Corp., No. 81 C 3489, slip op. (N.D.Ill. Nov. 2, 1981) (Judge Decker); Repp v. F.E.L. Publications, Ltd., No. 80 C 3335, slip op. (N.D.Ill. Oct. 8, 1980) (Judge Leighton); Holston v. The Rockford Surgical Service, No. 80 C 173, slip op. (N.D.Ill. Sept. 22, 1980) (Judge Shadur); General Investment Funds Real Estate Holding Company v. Exchange National Bank of Chicago, No. 79 C 1286, slip op. (N.D.Ill. April 14, 1980) (Judge Aspen); Kaiser v. Raymond Bolzan, Inc., No. 77 C 4122, slip op. (N.D.Ill. Dec. 4, 1978) (Judge Kirkland); Klondike Helicopters, Ltd. v. Fairchild Hiller Corp., 334 F.Supp. 890 (N.D.Ill.1971) (Judge McGarr); Seaboard Finance Company v. Davis, 276 F.Supp. 507 (N.D.Ill.1967) (Judge Will). See also Simmons v. Pulmosan Safety Equip Corp., 471 F.Supp. 999 (S.D.Ala.1979) (applying Alabama's version of § 2-619(a)(3) to federal courts).

Judge Will's opinion in Seaboard, supra, 276 F.Supp. 507, is considered the definitive work regarding the relationship between § 2-619(a)(3) and federal courts exercising diversity jurisdiction. Seaboard carefully analyzed the history and development of the Erie doctrine and concluded that Erie and its progeny require a federal court to consider several factors in determining whether state law applies. The factors are:

(1) whether the variance between the state and local rule is such that it will affect the outcome of the litigation; (2) whether the variance is of a nature that it would encourage forum shopping; and (3) whether there is some countervailing federal consideration which would justify the variance. Where a substantial variance exists, the court must balance the first two factors against the third. Only if the countervailing considerations outweigh the possibilities of divergent administration of the laws and forum shopping, should the federal rule be applied.

276 F.Supp. at 515. Weighing these factors, the court held that § 2-619(a)(3) must be applied by federal courts exercising diversity jurisdiction.

The Seventh Circuit has implicitly approved Seaboard's analysis. In Commonwealth Edison v. Gulf Oil Corp., 541 F.2d 1263, 1271-72 (7th Cir.1976) the Court distinguished Seaboard's § 2-619(a)(3) analysis on the basis that Seaboard was premised on diversity jurisdiction whereas jurisdiction in Commonwealth Edison was based on a federal question under the Federal Arbitration Act, thereby relieving the district court of the obligation to consider state law.

The Seventh Circuit has had only one other occasion to consider the application of § 2-619(a)(3) to federal courts. In Bio-Analytical Services, Inc. v. Edgewater Hospital, 565 F.2d 450, 450 n. 6 (7th Cir.), cert. denied, 439 U.S. 820, 99 S.Ct. 84, 58 L.Ed.2d 111 (1978) the court determined that the defendant had waived any right to raise a § 2-619(a)(3) motion to dismiss because of its failure to raise the motion in the district court and, therefore, held it was unnecessary to express any views as to the applicability of § 2-619(a)(3).

Despite the apparent authority of § 2-619(a)(3) to dismiss this case, plaintiffs argue that § 2-619(a)(3) cannot be applied because the provision conflicts with the "virtually unflagging obligation of the federal courts to exercise the jurisdiction given them." Colorado River Water Conservation District v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 1246, 47 L.Ed.2d 483 (1976). The Court disagrees with plaintiffs' contention. The two provisions are not in conflict, but are rather complementary avenues for dismissal. The Colorado River doctrine, in fact, provides the evaluative framework that should be used in conjunction with Judge Will's Seaboard analysis in determining whether dismissal is proper under § 2-619(a)(3).

Colorado-River represents an affirmation and expansion of the traditional federal court abstention doctrine.³ In Colorado River the Supreme Court recognized that federal courts could dismiss federal actions in deference to parallel state proceedings when the two courts were exercising concurrent jurisdiction, even though none of the traditional abstention categories were satisfied. Dismissals under this new doctrine are premised on "considerations of wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation." Id., at 817, 96 S.Ct. at 1246. Courts have been instructed to consider a variety of factors in determining when such federal deference should be exercised. The relevant considerations include: the federal interest in proceeding with the litigation; whether state or federal law provides the rule of decision on the merits; the avoidance of piecemeal litigation; the vexatious or reactive nature of either the state or federal...