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TASKER v. FARMERS NEW CENTURY INSURANCE

June 3, 2005.

JOHN TASKER, Plaintiff
v.
FARMERS NEW CENTURY INSURANCE, MARYLAND CASUALTY COMPANY, and ZURICH PERSONAL INSURANCE, Defendants.



The opinion of the court was delivered by: JAMES MUNLEY, District Judge

MEMORANDUM

Presently before the Court for disposition is a motion to stay filed by Defendants Farmers New Century Insurance, Maryland Casualty Company and Zurich Personal Insurance (collectively "Defendants"). This matter has been fully briefed and is ripe for disposition. For the following reasons, we will deny the motion.

Background

  Plaintiff John Tasker ("Plaintiff") filed the instant suit alleging that Defendants breached an insurance contract and acted in bad faith under 42 PA. CONS. STAT. ANN. § 8371 ("§ 8371") in processing Plaintiff's claims for insurance benefits. Plaintiff asserts that he suffered numerous injuries as a result of an accident on October 24, 2001. At the time of the accident, he was covered by Defendants' insurance policy. Plaintiff alleges that thirty-four separate actions by Defendants' were in bad faith under § 8371. In one of these thirty-four instances, Plaintiff alleges they acted in bad faith by filing a petition in state court to vacate an arbitration award. During the claims process, an arbitration panel had awarded Plaintiff $850,000 against Defendants, but they filed a petition to vacate this award, arguing that one arbitrator was biased. The Court of Common Pleas subsequently denied the petition to vacate. Defendants thereafter appealed that decision to the Superior Court of the Commonwealth of Pennsylvania. This appeal is currently pending. In the instant petition, the defendants argue that we should stay this case pending the resolution of the appeal.

  Discussion

  As a result of the appeal, the parties to the instant suit are engaged in simultaneous litigation in both state and federal court. In the federal case, Plaintiff seeks recovery for Defendants' bad faith actions in processing his claim, as well as for breach of contract. In state court, Defendants have a currently pending appeal of a decision to deny their petition to vacate Plaintiff's arbitration award. Defendants argue that this situation merits that we stay this case pursuant to the Colorado River doctrine, the Rooker-Feldman doctrine, and Bailey v. Ness, 733 F.2d 279 (3d Cir. 1984). We will address each argument separately.

  Colorado River

  In Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976), the Supreme Court announced that a district court may abstain from exercising its jurisdiction where the parties before the district court also are engaged in a parallel state court proceeding based on an analysis of certain enumerated factors. The Colorado River factors include: "(1) whether the state court assumed in rem jurisdiction over property; (2) the inconvenience of the federal forum; (3) the desirability of avoiding piecemeal litigation; and (4) the order in which jurisdiction was obtained by the concurrent forums." Ryan, 115 F.3d at 196 (citing Colorado River, 424 U.S. at 818). The Colorado River Court found that the most important factor was the presence of a "clear federal policy evinced by the legislature" counseling against piecemeal litigation in the type of case before the federal court. 424 U.S. at 819. Absent such a policy, "[g]enerally as between state and federal courts, the rule is that `the pendency of an action in the state court is no bar to proceedings concerning the same matter in the Federal court having jurisdiction.'" Id. at 817 (quoting McClellan v. Carland, 217 U.S. 268, 282 (1910))

  Thus, the Colorado River doctrine is an exception to "[t]he general rule regarding simultaneous litigation of similar issues in both state and federal courts . . . that both actions may proceed until one has come to judgment, at which point that judgment may create a res judicata or collateral estoppel effect on the other action." Spring City Corp. v. American Buildings Co., 193 F.3d 165, 172 (3d Cir. 1999) (citing University of Maryland v. Peat Marwick Main & Co., 923 F.2d 265, 275-76 (3d Cir. 1991)). "It is axiomatic that federal courts have a `virtually unflagging obligation . . . to exercise the jurisdiction given them' by Congress." Ryan v. Johnson, 115 F.3d 193, 195 (3d Cir. 1997) (citing Colorado River, 424 U.S. at 817). The Colorado River doctrine is a narrow exception that applies solely under "exceptional circumstances." Colorado River, 424 U.S. at 813.

  As a threshold matter, we find that the Colorado River doctrine does not apply in the instant case because the pending appeal is not a parallel proceeding. The sole issue in state court is the viability of Defendants' challenge of the arbitration award. A proceeding is parallel if it involves the same parties and "substantially identical" claims, raising "nearly identical allegations and issues." Trent v. Dial Med. of Fla., Inc., 33 F.3d 217, 223 (3d Cir. 1994) (overruled in part on other grounds). The issue of the arbitration challenge is not a substantial part of any issue in the case sub judice. The issues in this case are whether Defendants' conduct in processing Plaintiff's insurance claim constituted bad faith under 42 PA. CONS. STAT. ANN. § 8371 and whether Defendants breached the insurance contract. The Superior Court is not faced with either of these issues. Defendants' decision to challenge the arbitration award is merely one of thirty-four specific instances that Plaintiff alleges constituted bad faith.

  Thus, regardless of the Superior Court's resolution of Defendants' challenge to the arbitration award, the substantive issue of whether the remaining thirty-three allegations amount to bad faith will remain before this Court and require adjudication. The "decision to invoke Colorado River necessarily contemplates that the federal court will have nothing further to do in resolving any substantive part of the [federal] case, whether it stays or dismisses." Marcus v. Township of Abington, 38 F.3d 1367, 1371 (3d Cir. 1994) (quoting Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 28 (1983)). Following the resolution of the state court proceeding this Court will still need to address the substantive issues in this case because the state court proceedings are not parallel within the meaning of the Colorado River doctrine. The state court proceedings involve one factual allegation of the many in this case. This case involves different claims, with different standards, and different allegations from the state court proceedings. The resolution of the state court proceedings will resolve none of the claims presently before this Court. Thus, we hold that the currently pending state court proceedings are not parallel and therefore the Colorado River doctrine does not warrant abstention.*fn1

  Rooker-Feldman Doctrine

  Defendants argue in the alternative that we should either stay or dismiss this case under the Rooker-Feldman doctrine because we lack jurisdiction to review the decisions of state trial courts. Defendants reason that our resolution of the bad faith issue necessarily will function as an appeal of the state trial court's determination that Defendants' arbitration challenge lacks merit. We find this argument specious.

  The Supreme Court recently addressed the Rooker-Feldman doctrine in Exxon Mobil Corp. v. Saudi Basic Industries Corp., 125 S. Ct. 1517 (2005). There, the Court analyzed the only two cases wherein it has applied the doctrine, Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923) and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983), and stated:
The Rooker-Feldman doctrine, we hold today, is confined to cases of the kind from which the doctrine acquired its name: cases brought by state-court losers complaining of injuries cause by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments. Rooker-Feldman does not otherwise override or supplant ...

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