Reliance Ins. Co. v. Six Star, Inc.

• Decision Date: 10 August 2001
• Docket Number: No. 01 Civ.2165(LTS)(FM).,01 Civ.2165(LTS)(FM).
• Citation: 155 F.Supp.2d 49
• Parties: RELIANCE INSURANCE COMPANY as Successor-in-interest by Merger with Reliance National Indemnity Company, Plaintiff, v. SIX STAR, INC., Great American Land, Inc., and Holler Imports of Winter Park, Inc. d/b/a Holler Honda, Defendants.
• Court: U.S. District Court — Southern District of New York

155 F.Supp.2d 49

RELIANCE INSURANCE COMPANY as Successor-in-interest by Merger with Reliance National Indemnity Company, Plaintiff, v. SIX STAR, INC., Great American Land, Inc., and Holler Imports of Winter Park, Inc. d/b/a Holler Honda, Defendants.

No. 01 Civ.2165(LTS)(FM).

United States District Court, S.D. New York.

August 10, 2001.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Law Offices of Charles Platto, PLC, by Charles Platto, Norwich, Vermont, for plaintiff.

Greenberg Taurig, LLP, by R. Paul Roecker, Scott D. Greenspan, New York City, Orlando, Florida, for defendants.

OPINION

SWAIN, District Judge.

Reliance Insurance Company ("Plaintiff" or "Reliance") seeks a declaratory judgment against Six Star, Inc., Great American Land, Inc., and Holler Imports of Winter Park, Inc. (Collectively "Six Star" or "Defendants") concerning the respective obligations of Reliance and Six Star under a certain insurance policy. Defendants filed a motion to dismiss or transfer the action to the United States District Court for the Middle District of Florida, where an identical action filed by Six Star against Reliance is currently pending. For reasons set forth below, Defendants' motion is denied.

FACTUAL BACKGROUND

Except where indicated, the following facts are uncontested. Reliance provided insurance to Six Star from September 15, 1998 to September 15, 2001. Joint Preliminary Pre-Trial Statement, at 3. The insurance policy from Reliance (the "Policy") provided coverage for claims arising from "expenses, including related legal defense expenses, incurred in connection with the investigation, removal, disposal, treatment or neutralization of POLLUTION CONDITIONS on, at, under or emanating from" insured locations. Joint Preliminary Pre-Trial Statement, at 4.

The Policy contains a "Known Condition(s)" exclusion, which provides that coverage does not apply to expenses:

arising from POLLUTION CONDITIONS existing prior to the inception of this Policy, and reported to any officer, director, partner or other employee responsible for environmental affairs of the NAMED INSURED, unless all of the material facts relating to the POLLUTION CONDITIONS were disclosed to the Company in materials prior to the inception of this Policy.

Id. The Policy also contains a forum selection clause, reading as follows:

JURISDICTION AND VENUE

It is agreed that in the event of the failure of the Company to pay any amount claimed to be due hereunder, the Company and the INSURED will submit to the jurisdiction of the State of New York and will comply with all the requirements necessary to give such court jurisdiction. In the event of direct or indirect conflict between the laws of the State of New York and the laws of the State of Florida, the laws of the State of Florida would apply.

Exh. A to Complaint.

On November 5, 1999, Six Star notified Reliance of a claim for coverage under the Policy based upon the clean-up of contamination at the Florida site of an underground storage tank. Joint Preliminary Pre-Trial Statement, at 6. Reliance contends that review of the documents obtained by its third party claims administrator, ECS Claims Administrator, Inc. ("ECS"), showed that, before the Policy inception date, the Orange County Environmental Protection Division ("OCEPD") had required Defendants to monitor activities at the removal site. Complaint, ¶ 15. Reliance also asserts that it learned that OCEPD had asked Six Star to submit additional groundwater samples on March 25, 1997. Id. Reliance argues that none of this was disclosed to Reliance, and that Six Star's Property Manager had informed ECS at the time of a risk control survey performed in connection with the issuance of the Policy that the underground storage tank removal and remediation had been completed. Id., ¶¶ 15-16.

On October 19, 2000, Reliance denied coverage of Six Star's claim on the basis that the underground storage tank contamination was a "Known Condition" that had not been disclosed to Reliance before the inception of the Policy. Joint Preliminary Pretrial Statement, at 6. By a letter dated January 5, 2001, Six Star renewed its claim, and ECS conducted a further investigation. See Exhibit D to Plaintiff's Reply Memorandum. On March 7, 2001, the parties met at the site in Florida to discuss the claim. Affidavit of R. Paul Roecker, sworn to July 11, 2001. On March 13, 2001, Six Star's counsel left a message for Reliance's attorney, indicating that Six Star would transmit its demand on March 14, 2001. Id. Six Star transmitted its letter with its settlement demand on March 14, 2001. Id. On March 14, 2001, Reliance filed the instant complaint. On March 15, 2001, Six Star filed a complaint in the Middle District of Florida seeking a declaratory judgment and also asserting claims for breach of contract and misrepresentation.¹

DISCUSSION

Because cases raising identical issues have been filed in this Court and in the United States District Court for the Middle District of Florida, this Court must first consider which court has authority to determine where the issues will be adjudicated, before reaching Defendants' motion to transfer or dismiss.

The First-Filed Rule

When two actions involving the same parties and issues are pending concurrently, courts in the Second Circuit follow the "`first-filed' rule whereby the court which first has possession of the action decides it." 800-Flowers, Inc. v. Intercontinental Florist, Inc., 860 F.Supp. 128, 131 (S.D.N.Y.1994); see also Fort Howard Paper Co. v. William D. Witter, Inc., 787 F.2d 784, 790 (2d Cir.1986); Semmes Motors, Inc. v. Ford Motor Co., 429 F.2d 1197, 1202 (2d Cir.1970); William Gluckin & Co. v. International Playtex Corp., 407 F.2d 177, 178 (2d Cir.1969). "`[W]here there are two competing lawsuits, the first suit should have priority, absent the showing of balance of convenience ... or ... special circumstances ... giving priority to the second.'" Adam v. Jacobs, 950 F.2d 89, 91 (2d Cir.1991) (quoting First City National Bank and Trust Co. v. Simmons, 878 F.2d 76, 79 (2d Cir.1989)). The first-filed rule seeks to advance judicial economy, protect a plaintiff's choice of forum and avoid duplicative litigation. First City National Bank and Trust, 878 F.2d at 80; Comedy Partners v. Street Players Holding Corp., 34 F.Supp.2d 194, 195 (S.D.N.Y.1999). It also protects parties from the considerable expense and potential for inconsistent judgments that duplicate litigation entails. Comedy Partners, 34 F.Supp.2d at 195-96. It is well established that the balancing of convenience "should be left to the sound discretion of the district courts." William Gluckin, 407 F.2d at 178.

The first-filed rule is not to be applied mechanically, but is intended to aid judicial administration by acting "as a `presumption' that may be rebutted by proof of the desirability of proceeding in the forum of the second-filed action." Hanson PLC v. Metro Goldwyn-Mayer Inc., 932 F.Supp. 104, 106 (S.D.N.Y.1996) (citations omitted). "Generally, there is a strong presumption in favor of the forum of the first-filed suit." 800-Flowers, Inc. v. Intercontinental Florist, Inc., 860 F.Supp. at 131. The party opposing application of the first-filed doctrine has the burden to show that special circumstances justify an exception. Citigroup, Inc., v. City Holding Company, 97 F.Supp.2d 549, 555-556 (S.D.N.Y.2000); 800 Flowers,, 860 F.Supp. at 132 (citations omitted).²

Special circumstances justifying an exception to the rule exist where the first suit constitutes an "improper anticipatory filing" or was motivated solely by forum shopping. Citigroup, Inc., v. City Holding Company, 97 F.Supp.2d at 556 (citing Toy Biz, Inc. v. Centuri Corp., 990 F.Supp. 328, 332 (S.D.N.Y.1998) and Ontel Products, Inc. v. Project Strategies Corp., 899 F.Supp. 1144, 1150 (S.D.N.Y.1995)). "An improper anticipatory filing is `one made under the apparent threat of a presumed adversary filing the mirror image of that suit' in another court." Citigroup, 97 F.Supp.2d at 557 (citations omitted). "[H]owever, the mere fact that an action is brought as one for a declaratory judgment `does not necessarily [mean that it] constitute[s] an anticipatory filing for purposes of an exception to the first-filed rule.'" Ontel Products, Inc. v. Project Strategies Corp., 899 F.Supp. at 1150 (citations omitted).

Special Circumstances

Defendants argue that Plaintiff's suit is an improper anticipatory filing, asserting that Plaintiff's commencement of litigation in this Court was motivated by forum shopping and the circumstances leading to the filing reflect improper conduct by Plaintiff. In support of their argument, Defendants have proffered a chronology of communications exchanged between the parties prior to the commencement of this suit. The chronology reflects communications concerning Plaintiff's denial of coverage of Six Star's claim, notification that Reliance would reconsider Six Star's claim, an on-site meeting to discuss coverage issues and Six Star's second demand for coverage. There is no suggestion in this chronology, however, that Plaintiff filed suit in response to a direct threat of litigation. See 800-Flowers, at 132 (no special circumstances creating an exception to the first-filed rule where there was no showing of a direct threat of litigation). Nor does the chronology reflect that Defendants indicated to Plaintiff a firm intention to commence an action and that Plaintiff raced to this Court in anticipation of such filing by Defendants. See Chicago Insurance Co. v. Holzer, No. 00 Civ. 1062, 2000 WL 777907, *3 (S.D.N.Y June 16, 2000) (citing J. Lyons & Co. v. Republic of Tea, Inc., 892 F.Supp. 486, 491 (S.D.N.Y.1995)) (anticipatory conduct not found because defendants did not show a firm intention to sue). Moreover, the parties had continuous conversations regarding Six Star's claim for almost five months, from October 2000, when Plaintiff rejected Defendants' claim for the...