SW Industries, Inc. v. Aetna Cas. & Sur. Co.

Citation653 F. Supp. 631
Decision Date28 January 1987
Docket NumberCiv. A. No. 86-0302 P.
CourtU.S. District Court — District of Rhode Island
PartiesSW INDUSTRIES, INC. v. AETNA CASUALTY & SURETY CO., alias: the Employers' Liability Assurance Corporation, Ltd., alias; the Travelers Insurance Company, alias; American Home Assurance Company, alias; Lumbermens Mutual Casualty Company, alias; National Union Fire Insurance Company of Pittsburgh, Pa., alias; John Richard Ludbrooke Youell, in his individual and representative capacity on behalf of certain underwriters and insurance companies.

COPYRIGHT MATERIAL OMITTED

Michael DeFanti, Gerald J. Petros, Hinckley, Allen, Tobin & Silverstein, Providence, R.I., for Lumbermens Mut.

Robert D. Parrillo, Hanson, Curran & Parks, Providence, R.I., for Lloyd's London.

John H. Blish, Blish & Cavanagh, Providence, R.I., for Weavers Companies.

Robert Lovegreen, Gidley, Lovegreen & Sarli, Providence, R.I., for Aetna Cas. & Surety Co.

Hugh L. Moore, Jr., Providence, R.I., for American Home Assur. Co. and National Union Fire Ins. Co. of Pittsburgh, Pa.

Joseph A. Kelly, C. Russell Bengston, Providence, R.I., for Travelers Ins. Co.

MEMORANDUM AND ORDER

PETTINE, Senior District Judge.

The plaintiff in this action, SW Industries, Inc. ("SW"), has filed a series of motions against a number of insurance companies ("the Insurance Companies"), seeking to obtain indemnification for a $3,650,000 tort liability incurred by one of its manufacturing divisions, located in Ohio. Prior to the initiation of these proceedings, one of the Insurance Companies, Lumbermens Mutual Casualty Co. ("Lumbermens"), instituted proceedings in an Ohio federal court, seeking a declaratory judgment that would find Lumbermens not bound to indemnify SW.

Three motions are presently before this Court. First, SW has moved for reconsideration of this Court's Memorandum and Order that denied an earlier motion for preliminary injunctive relief filed by SW, SW Industries v. Aetna Casualty & Surety Co., et. al., 646 F.Supp. 819 (D.R.I.1986). Second, SW has moved for partial summary judgment on the question of the Insurance Companies' obligation to defend SW in the underlying tort litigation. Third, Lumbermens has moved to dismiss or stay the instant proceedings, or in the alternative, to transfer venue to the Northern District of Ohio. For reasons discussed herein, I am granting Lumbermens' motion to stay these proceedings. Further review of SW's motions for reconsideration and for partial summary judgment is therefore also stayed.

Background

The facts and procedural history of this case are described in detail in my Memorandum and Order, supra, denying SW's motion for a preliminary injunction. Briefly, the current insurance litigation is a response to the underlying tort litigation. The tort litigation was initiated by Carl Viock ("Viock"), an employee of SW's manufacturing plant in Sandusky, Ohio known as the Stowe-Woodward Division ("Stowe-Woodward"). Viock sued Stowe-Woodward for extensive lung damage that had been diagnosed as caused by exposure to chemicals at work. Viock's claim alleged that Stowe-Woodward had intentionally exposed him to toxic chemicals. The suit proceeded under an intentional torts exception to Ohio's bar against employee lawsuits upon injuries covered by workers' compensation. The jury found for Viock, and final judgment was entered on June 26, 1984 awarding Viock and his family $1,000,000 in compensatory damages and $2,500,000 in punitive damages. Viock v. Stowe-Woodward Co., No. 44358 (Erie County Ct. of C.P. June 26, 1984). On appeal, the compensatory damages amount was increased by $150,000, bringing the total damages award to $3,650,000. Viock v. Stowe-Woodward Co., No. E-84-27 (Erie County Ct.App. March 14, 1986) Available on WESTLAW, OH-CS database. According to the pleadings, SW has since filed a motion to certify an appeal, which is pending before the Ohio Supreme Court.

The insurance litigation commenced on May 9, 1986, when Lumbermens filed a complaint in the federal district court for the Northern District of Ohio. Asserting diversity of citizenship jurisdiction, 28 U.S.C. section 1332, Lumbermens requested a declaratory judgment holding, among other things, that SW was not entitled to indemnification from Lumbermens for any damages paid to the Viocks. Lumbermens filed an amended complaint on May 30, 1986 adding the other Insurance Companies as defendants and requesting an additional declaratory ruling as to their liabilities to SW.

On May 15, 1986 SW filed a complaint in this Court against the Insurance Companies, asserting diversity of citizenship jurisdiction, 28 U.S.C. section 1332. SW filed an amended complaint on May 21, 1986, seeking two forms of relief: first, a declaratory judgment that the damages awarded to the Viocks are covered under policies issued by the Insurance Companies; and second, damages for the Insurance Companies' alleged bad faith in denying that they are bound to indemnify SW for the Viock damages.

Discussion

Lumbermens urges this Court to dismiss or stay SW's action, or in the alternative, to transfer venue to the Northern District of Ohio for consolidation of this action with Lumbermens' earlier-filed suit against SW. Lumbermens argues that this Court should defer to the first-filed action in Ohio, whereas SW contends that this Court should proceed to trial, both because the choice of venue in such a case should rest with the insurance policyholder and because the preferred venue is the one that can host the more comprehensive action. Both sides contend that their venue preferences are more convenient. I consider each of these arguments in turn.

Lumbermens is correct in asserting that "where two suits involve the same issues, and prosecution of both would entail duplicative litigation and a waste of judicial resources, the first filed suit is generally preferred," Cordell Engineering v. Picker International Inc., 540 F.Supp. 1316, 1318 (D.Mass.1982); see also Small v. Wageman, 291 F.2d 734, 736 (1st Cir. 1961). The preference for the first-filed action is not a per se rule, but rather a policy governed by equitable considerations: "the forum where an action is first filed is given priority over subsequent actions, unless there is `a showing of balance of convenience in favor of the second action,' or there are special circumstances which justify giving priority to the second," Gemco Latinoamerica, Inc. v. Seiko Time Corp., 623 F.Supp. 912, 916 (D.P.R.1985) (citations omitted); see also, Factors Etc., Inc. v. Pro Arts, Inc., 579 F.2d 215, 218 (2d Cir.1978), cert. denied, 440 U.S. 908, 99 S.Ct. 1215, 59 L.Ed.2d 455 (1979); Codex Corp. v. Milgo Electronic Corp., 553 F.2d 735, 737 (1st Cir.), cert. denied, 434 U.S. 860, 98 S.Ct. 185, 54 L.Ed.2d 133 (1977); Columbia Plaza Corp. v. Security National Bank, 525 F.2d 620, 627 (D.C.Cir. 1975).

The applicability of the first-filed rule thus turns on two subsidiary inquiries: whether any special circumstances require deference to the later-filed action; or whether the balance of convenience favors the later-filed action.

A. Special Circumstances

SW contends that two special circumstances require this Court to proceed to trial, in spite of the fact that this action was later-filed. First, SW contends that in insurance litigation, the forum choice of the insured party merits preference over that of the insurer. Second, SW contends that, because its lawsuit includes claims for damages, it merits preference over Lumbermens' Ohio action, which includes only claims for declaratory relief.

In support of its contention that the forum choice of the insured merits preference, SW relies on a quotation from Moore's Federal Practice, which in context reads as follows:

Insurance attorneys often try to make the most of supposed tactical and psychological advantages adhering to this or that type of action or "counter-action" in state or federal forum. But the declaratory action is not intended to be used as a foil for procedural fencing. The choice of forum should not depend upon whether the insured or the insurance company is first to commence suit. The party asserting a right against an insurance company is normally the one having the privilege of choosing the forum. Where, as in the Haworth case, the insurance company is suffering detriment by the failure of the insured-claimant to assert his right in court, then the insurance company may quite properly take the initiative and bring an action to determine its liability.

6A Moore's Federal Practice ¶ 57.19 at 57-207 (citations omitted). The crucial sentence, stating that the insured party "is normally the one having the privilege of choosing the forum," is devoid of citation to any supporting authority. Whether the sentence purports to prescribe a rule of preference or merely to describe what happens in the majority of insurance cases is not clear. Reading the sentence in context, it appears that any solicitude expressed toward the insured party's forum choice derives from a concern to protect insurance consumers against the evils of "procedural fencing." Although the text omits to identify the evils of procedural fencing, logic suggests that they include such burdens as tactical delays and inconvenient fora. Neither of these evils is apparent in Lumbermens' initiation of proceedings in the Northern District of Ohio. As discussed at length in part I, B, infra, the Ohio district is hardly an inconvenient venue for SW. It is the situs of the injury that gave rise to the alleged insurance liability, and it is the location of most witnesses and documents that would be needed in the event that the facts of the injury must be proved. More important, it is the situs of SW's subsidiary, Stowe-Woodward, that incurred the damages giving rise to the current insurance litigation.

In sum, my interpretation and application of the authority cited by SW does not support the view that the first-filed rule must give...

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