Enough parties at the party

bookNational Casualty sued its insured in federal court for a declaratory judgment that there was no coverage.  The insured sued National Casualty and the insured’s insurance brokers in state court for misleading it about coverage.  The district court found that those additional parties were indispensable for the federal action (and would destroy diversity if joined), and abstained under Colorado River from proceeding further.  Reminding “that it is not necessary for all joint tortfeasors to be named as defendants in a single lawsuit,” the Fifth Circuit reversed as to the joinder analysis, and also as to abstention, noting in particular that “the federal action has proceeded to summary judgment . . . [and] the state court action has involved little more than an original petition, answers, and a stay of proceedings.”  National Casualty Co. v. Gonzalez, No. 15-10478 (Feb. 4, 2016, unpublished).

Wait awhile, just not forever.

godotThe district court abstained under the “primary jurisdiction” doctrine in deference to a FERC proceeding.  On the threshold question of appellate jurisdiction, the Court concluded that Hines v. D’Artois, 531 F.2d 726 (5th Cir. 1976) was still good law, and allowed it to consider an otherwise-interlocutory appeal: “[T]he district court’s order resulted in Occidental being ‘effectively out of court’ and therefore functioned as a final decision.”  On the merits, the Court remanded with instructions to not stay the court case indefinitely, but to instead stay for 180 days and assess the status then.  Occidental Chem. Corp. v. Louisiana Public Service Comm’n, No. 15-30100 (Jan. 4, 2016).

Race to courthouse; arbitration wins

The plaintiffs in AFLAC v. Biles sued in state court, alleging that AFLAC paid death benefits to the wrong person, and that the signature on the policy application was forged.  No. 12-60235 (April 30, 2013).  AFLAC moved to compel arbitration in the state court case and simultaneously filed a new federal action to compel arbitration. The state court judge denied AFLAC’s motion without prejudice to refiling after discovery on the issue of the signatures’ validity.  In the meantime, the federal court granted AFLAC’s summary judgment motion and compelled arbitration after hearing expert testimony from both sides on the forgery issue.  The Fifth Circuit affirmed, finding that Colorado River abstention in favor of the state case was not required, and that the order compelling arbitration was allowed by the Anti-Injunction Act because it was “necessary to protect or effectuate [the federal] order compelling arbitration.”  The Court also found no abuse of discretion in the denial of the respondents’ FRCP 56(e) motion, since it sought testimony that would only be relevant if the witness admitted outright to forgery.

Abstention and “All Writs” issues in preliminary injunction case

Plaintiffs obtained a preliminary injunction against enforcement of a school voucher program, alleging it violated a desegregation consent decree.  Moore v. Tangipahoa Parish School Board, No. 12-31218 (Jan. 14, 2013, unpublished).  The Fifth Circuit found an abuse of discretion in denying a stay pending appeal.  One reason was Pullman abstention, which arises “when an unsettled area of state law . . . would render a decision on the federal issue unnecessary,” and where the Court said the defendant had a “a strong likelihood of establishing” it in light of pending state litigation about the constitutionality of the law under state law.  Another was jurisdiction under the All Writs Act, where the Court said the plaintiffs’ evidence of harm was “based merely on general financial information and speculation.”  A dissent further discussed Pullman abstention and advocated outright dismissal of the case.  The opinion appears to have been unpublished because of its expedited procedural posture, and a later panel will fully address the merits on a conventional briefing schedule.  Id. at 4 n.1

Colorado River abstention 101

Overlapping state and federal cases about the rights to settlement proceeds led the district court to abstain under the Colorado River doctrine in Saucier v. Aviva Life & Annuity Co., No. 11-60503 (Nov. 16, 2012).  The Fifth Circuit reversed, finding no “exceptional circumstances” warranting abstention.  In reviewing each of the relevant factors, the Court distinguished “duplicative litigation” — which does not warrant absention — from “piecemeal” litigation in which a state court case has more relevant parties than a federal one.  Id. at 7-8.  The Court also reminded that “how much progress has been made” is more important in comparing the status of parallel cases than their respective filing dates.  Id. at 8.

Jurisdictional and limitations/waiver challenges rejected, fraud verdict affirmed

In Illinois Central Railroad Co. v. Guy, the Court reviewed a jury verdict that two lawyers had improperly induced a railroad into settling asbestos exposure claims.  No. 10-61006 (May 29, 2012).  The Court rejected jurisdictional challenges that were based on the Rooker-Feldman and Burford doctrines, finding sufficient distance between the facts of the case and the underlying state court proceedings.  Op. at 14, 16.  The Court also found sufficient evidence of affirmative acts of concealment, and due diligence by the railroad, to toll limitations, Op. at 20, although a dissent argued otherwise.  Op. at 27  (“I would reverse because doing nothing is not due diligence.”).  The Court rejected a waiver defense, distinguishing the defendants’ cases as arising when a fraud plaintiff accepted a benefit after it knew or should have known of fraudulent inducement.   Op. at 25.