Opinion
No. 03-4174-SAC
March 4, 2004
MEMORANDUM AND ORDER
This case comes before the court on the motions of defendants Jim L. Nungesser, Carolyn L. Nungesser, and Josh M. Bryant to dismiss or stay the case, and on the motion of EMCASCO Insurance Company for a restraining order.
Facts
Josh Bryant, while driving a car insured by EMCASCO, collided with a motorcycle driven by Jim Nungesser on July 8, 2002. As a result of the accident, Mr. Nungesser allegedly sustained serious bodily injury. He filed a personal injury suit against Mr. Bryant on January 6, 2003, in state court, which case has not yet been tried. Prior to the date the state court action was filed, Mr. Nungesser had allegedly orally agreed to settle his claims against Mr. Bryant for $300,000, the limits of EMCASCO's policy, but no settlement was achieved.
Nungesser v. Bryant, Case No. 03 CV 00049, in the Eighteenth Judicial District, Sedgwick County, Kansas, hereinafter referred to as the "state court case."
Thereafter, on a date not reflected in the record before this court, state court defendant Bryant added EMCASCO to the state court case as a third-party defendant, alleging breaches of fiduciary duty in EMCASCO's handling of settlement negotiations with Mr. Nungesser. EMCASCO filed an answer and counterclaim on or about July 10, 2003. An amended third-party petition against EMCASCO was filed on or about August 11, 2003, and within a few weeks EMCASCO filed a motion to dismiss all claims against it. On the very day the district court judge denied EMCASCO's motion to dismiss, EMCASCO filed this statutory interpleader case in federal court.
Wesley Medical Center, L.L.C., who had provided health care services to Mr. Nungesser as a result of the accident, was also named as a third-party defendant. Mr. Bryant alleged, among other matters, that Wesley improperly filed then refused to timely release its hospital lien, abused process, and impaired settlement negotiations between Mr. Nungesser and Mr. Bryant.
EMCASCO contends that "the state court proceedings are essentially at a standstill." Dk. 50, at 7.
Named as defendants in this case are the following parties: Dairyland Insurance Company, a property insurer of the motorcycle driven by Mr. Nungesser at the time of the accident; Coventry Health Care of Kansas, Inc., Mr. Nungesser's health insurance company; Jim L. Nungesser, the driver of the motorcycle; Carolyn Lynn Nungesser, the wife of the motorcycle driver; and Josh Bryant, the driver of the car involved in the accident.
Motion to dismiss or stay
Defendants' motion to dismiss or stay this case alleges that the court lacks subject matter jurisdiction over the action pursuant to 28 U.S.C. § 1335 for various reasons. EMCASCO counters that this court's jurisdiction is based not only upon the interpleader statute, but also upon diversity jurisdiction, as pled in the complaint, and that no basis for a stay has been shown. In reply, defendants concede they overlooked the complaint's recitation of diversity jurisdiction, and do not challenge the court's subject matter on that basis. Because EMCASCO is a citizen of Iowa, Dairyland is a citizen of Wisconsin, and all other defendants are citizens of Kansas, and the amount in controversy exceeds $75,000, the court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332.
Although the court has numerous questions regarding this court's jurisdiction pursuant to 28 U.S.C. § 1335, the court finds it unnecessary to address them, given its diversity jurisdiction. The controlling issue facing the court is whether this action, regardless of the court's basis for subject matter jurisdiction, should be stayed pending resolution of the issues in the state court case.
These include whether the amount EMCASCO paid into court is sufficient, whether the adverse parties are diverse, and whether equitable considerations preclude this interpleader action.
EMCASCO's complaint seeks specific performance of an alleged oral settlement agreement between it and Mr. Nungesser. EMCASCO's briefs state its primary goal of securing a determination by this court regarding the validity and enforceability of the alleged oral settlement agreement prior to any determination in state court of that or other issues.
In support of their motions for a stay, defendants rely on the Rooker-Feldman and Colorado River doctrines. Defendants first allege that EMCASCO is attempting to use this federal forum as appellate review of the state court's decision that the case against EMCASCO should not be dismissed, warranting application of the Rooker-Feldman doctrine.
. . . the Rooker-Feldman doctrine precludes a party who has lost a case in state court "from seeking what in substance would be appellate review" in federal district court. Kenmen Eng'g v. City of Union, 314 F.3d 468, 473 (10th Cir. 2002) (quotations omitted). "This prohibition extends to all state-court decisions — final or otherwise," id. at 475, and covers not only claims actually decided by the state court but issues inextricably intertwined with such claims. Id. Further, "it is not necessary that the federal court action formally seek to invalidate the state judgment; it is enough if the federal action would in substance defeat or negate a state judgment, for example, if the federal claim succeeds only to the extent that the state court wrongly decided the issue before it." Mandel v. Town of Orleans, 326 F.3d 267, 271 (1st Cir. 2003) (quotation omitted) (holding Rooker-Feldman barred federal action attacking state custody decision on ground that presiding judge violated law); Ballinger v. Culotta, 322 F.3d 546, 549 (8th Cir. 2003) (holding Rooker-Feldman barred federal claim asserting child abuse to undermine state custody order).
Atkinson-Bird v. State of Utah, Division of Child and Family Services, 2004 WL 267754, *1 (10th Cir. Feb. 13, 2004).
The court has reviewed the state court case motion to dismiss and response thereto. EMCASCO's motion to dismiss made only two contentions: 1) that Bryant could not pursue a tort claim against an auto liability insurer in Kansas; and 2) that Bryant could not bring an action against EMCASCO before Bryant's liability had been reduced to a judgment or settled. (Dk. 23, Exh. E.). These issues, which were necessarily resolved by the state court's order denying dismissal, will not necessarily be revisited in this diversity action which seeks specific performance of an alleged oral settlement contract. Accordingly, dismissal based upon the Rooker-Feldman doctrine is not warranted.
The Colorado River doctrine is broader than the Rooker-Feldman doctrine, in recognizing that judicial economy may warrant deferral of a federal suit when pending state litigation will resolve the issues presented in the federal case. The doctrine "springs from the desire for judicial economy, rather than upon constitutional concerns about federal-state comity. Scott v. Home Choice, Inc. 252 F. Supp.2d 1129, 1133-34 (D. Kan. 2003). Pursuant to the Colorado River doctrine, the factors to be considered in determining whether a federal court proceeding should be stayed pending resolution of a parallel state court proceeding are:
(1) [W]hether either court assumed jurisdiction over property; (2) whether the federal forum is inconvenient to the parties; (3) the avoidance of piecemeal litigation; (4) the order in which the courts obtained jurisdiction; (5) which forum's substantive law governs the merits of the litigation; and (6) the adequacy of the state forum to protect the rights of the parties.Joseph Stowers Painting, Inc. v. A. Zahner Co., No. Civ. A. 99-2391-KHV, 2000 WL 210219, at *1 (D. Kan. Feb. 4, 2000) ( citing Colorado River Water Conservation District v. United States, 424 U.S. 800, 819 (1976)). These factors are not a "mechanical check list," and "no single factor is dispositive," but they are to be "carefully balanced," recognizing that such balancing is "heavily weighted in favor of the exercise of jurisdiction." Jones v. Great Southern Life Ins. Co., 232 F.3d 901, 2000 WL 1375309, *3 (10th Cir. 2000), citing Rienhardt v. Kelly, 164 F.3d 1296 (10th Cir. 1999); Allen v. Board of Educ., 68 F.3d 401 (10th Cir. 1995); Fox v. Maulding, 16 F.3d 1079 (10th Cir. 1994).
This doctrine "may only be used when `the clearest of justifications . . . warrant[s] dismissal.'" Rienhardt v. Kelly, 164 F.3d 1296, 1303 (10th Cir. 1999) (quoting Colorado River, 424 U.S. at 817-19). Nonetheless, whether to stay a case in deference to a parallel state court proceeding rests within the discretion of the federal district court. Jones v. Great Southern Life Ins. Co., 232 F.3d 901, 2000 WL 1375309, *4 (10th Cir. Sept. 25, 2000).
The court first examines whether this case and the state court case are sufficiently parallel. Exact identity of parties and issues is not required. United States v. City of Las Cruces, 289 F.3d 1170, 1182 (10th Cir. 2002). Rather, state and federal proceedings are sufficiently parallel if "substantially the same parties litigate substantially the same issues." Fox, 16 F.3d at 1081. Plaintiffs cannot avoid application of the Colorado River doctrine and destroy the parallel nature of the cases by simply adding related defendants and /or related claims to the federal suit. Waddell Reed Financial, Inc. v. Torchmark Corp., 180 F. Supp.2d 1235, 1240 (D. Kan. 2001).
Here, the cases lack exact identity of parties. In the state court case, plaintiff Jim Nungesser sued defendant Josh Bryant, who in turn sued EMCASCO and Wesley Medical Center, L.L.C. In this case, EMCASCO sued Jim Nungesser and Josh Bryant, as well as new parties Carolyn Nungesser, Dairyland Ins. Co. and Coventry Health Care of Kansas. The primary if not sole issue raised in this federal case, i.e., the validity and enforceability of the alleged oral settlement agreement, will necessarily be raised in EMCASCO's defense of Bryant's third-party petition in state court, but other issues are presented in the state court case which need not be addressed in this case. Despite the lack of exact identity of parties and issues, the court believes that the cases are sufficiently similar to warrant a finding that a parallel state court proceeding exists.
The court thus examines the Colorado River factors. The first factor in the Colorado River analysis cuts slightly against a stay, as this court has assumed jurisdiction over property to the extent of the $300,000 EMCASCO paid into court. Nonetheless, EMCASCO's payment into court is not essential to the court's subject matter jurisdiction, which the court bases upon the diversity of the parties rather than upon § 1335. Nor is the amount paid into court the full amount in dispute. Defendants do not allege that the federal forum is inconvenient to the parties, thus the second factor is neutral.
The state court case unquestionably obtained jurisdiction before this court did, as its case was ongoing against defendant Bryant for approximately eight months and against EMCASCO for several months before this suit was filed. The timing of the filing of this case is remarkable. The court is concerned by the unrefuted allegation that EMCASCO filed this action approximately six hours after the state court denied its motion to dismiss all Bryant's claims against it. The close temporal proximity of these two actions, coupled with EMCASCO's failure to show that the two were merely coincidental, raises the specter of forum shopping. The court's review of the record confirms that the check for $300,000 which accompanied the filing of the complaint was issued on September 4, 2003, over a week before the state court judge denied EMCASCO's motion to dismiss on September 12, 2003. Yet EMCASCO chose to await the adverse outcome of the state court's ruling before filing this case, and does not contend that it would have filed this case regardless of the outcome of its motion to dismiss in state court.
The remaining factors favor a stay as well. The substantive law of the state of Kansas will govern this suit, regardless of the forum, and the state forum is not alleged to be inadequate to protect the rights of any parties in this case. Because EMCASCO's claims in this case will necessarily be raised in the state court case in response to Bryant's third-party petition, the proceedings in this case would merely duplicate those currently before the state court. The court desires to avoid piecemeal litigation. The factors, on balance, clearly warrant a stay of the case.
Motion for restraining order
EMCASCO has filed a motion for an order pursuant to 28 U.S.C. § 2361 "restraining all defendants from instituting or prosecuting any proceeding in any [jurisdiction] affecting the subject matter of this interpleader action."
The cited statute, 28 U.S.C.A. § 2361, provides in pertinent part:
In any civil action of interpleader or in the nature of interpleader under section 1335 of this title, a district court may issue its process for all claimants and enter its order restraining them from instituting or prosecuting any proceeding in any State or United States court affecting the property, instrument or obligation involved in the interpleader action until further order of the court.
EMCASCO states its desire for the court to stay the third-party claim in state court against it, forcing defendant Bryant to either bring his claim in these proceedings, or await the judgment of this court before proceeding further in state court. Dk. 40, at 1-2.
Even assuming the propriety of interpleader jurisdiction, EMCASCO's request for an injunction against proceedings affecting the "subject matter" of this action in the nature of interpleader is much broader than the injunction permitted by the statute, which relates to proceedings affecting the "property" involved in the interpleader action.
Additionally, EMCASCO has not alleged that it is faced with the possibility of double liability on the insurance proceeds. Savage v. First Nat. Bank Trust Co. of Tulsa, 413 F. Supp. 447, 453 (N.D. Okla. 1976) (dismissing interpleader action where the plaintiff bank was not faced with double liability or the possibility of vexatious litigation). EMCASCO does claim vexatious litigation, but its complaints in this regard focus upon the alleged contentiousness of opposing counsel, rather than upon potential problems posed by multiple lawsuits. The factors which usually justify injunctive relief in cases in the nature of interpleader are absent here.
For these reasons, in addition to those discussed above which led the court to find that a stay of this action is appropriate, the requested injunction shall be denied.
IT IS THEREFORE ORDERED that defendants' motions to dismiss or in the alternative, to stay (Dk. 22 30) are granted in part and denied in part, and that plaintiff's motion for a restraining order (Dk. 4) is denied.
IT IS FURTHER ORDERED that all proceedings in this case are stayed until final judgment is entered in the parallel state court case.