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Cypress Insurance Co. v. Specialists

United States District Court, W.D. Pennsylvania

April 28, 2017



          Nora Barry Fischer United States District Judge


         This is a declaratory judgment action brought by Plaintiff-insurer Cypress Insurance Company (“Cypress”) arising from the attempted collection of a default judgment of $975, 000.00 entered in favor of Defendant David K. Barren (“Barren”) and against Defendant-insured Mickens Transportation Specialists, (“Mickens Transportation”) in state court in South Carolina. (Docket No. 1). Presently before the Court is a motion filed by Barren seeking dismissal and/or transfer of this action to the U.S. District Court for the District of South Carolina where a related action is pending. (Docket No. 6, 10). Cypress opposes the motion. (Docket No. 12). Mickens Transportation has not yet formally appeared in this case.[1] After careful consideration of the parties' positions, and for the following reasons, Barren's Motion [6] is granted to the extent that the Court will transfer this matter pursuant to the “first filed rule” or alternatively, under the discretionary transfer statute, 28 U.S.C. § 1404(a).


         By way of background, the underlying state court lawsuit involved a trucking accident that occurred on August 1, 2014 in Saint Matthews, South Carolina, during which a driver employed by Mickens Transportation drove into Barren, who was walking on the grounds of a gas station, causing him substantial injuries. (Docket No. 1 at ¶¶ 7-10). As Mickens Transportation's insurer, Cypress was made aware of the accident and the potential for a claim, hiring a Georgia-based company, Bridgewater, as its investigator. (Id. at ¶ 13). Mickens Transportation was served with the lawsuit but apparently did not timely respond to the state court action. (Id. at ¶¶ 22-27). At a default judgment hearing, a state court in South Carolina awarded $975, 000.00 in damages in favor of Barren and against Mickens Transportation. (Id. at ¶ 30). James Mickens apparently appeared at the hearing without counsel and testified. (Id. at ¶ 29). Thereafter, Barren sought to collect the judgment from Cypress and much litigation has ensued, with one of the central disputes being whether Mickens Transportation and/or Barren notified Cypress of the underlying lawsuit, the default or the default judgment hearing. (Id. at ¶ 47).

         At present, there is litigation surrounding this default judgment in three different courts: (1) the removed case in the United States District Court for the District of South Carolina at Docket Number 5:17-cv-00772 which was filed initially by Barren in state court on February 20, 2017 and where Cypress has counterclaims pending; (2) this federal case filed by Cypress on February 24, 2017, where Cypress has claims pending; and, (3) the underlying state court action where on February 27, 2017, counsel entered an appearance for Mickens Transportation and moved to set aside the default judgment and Cypress also moved to intervene into the proceedings, both of which are pending. All three of these actions taken by Cypress have the same general goal, i.e., to set aside the default judgment and avoid paying the $975, 000.00 default judgment against its insured, Mickens Transportation.

         Notably, Cypress admits that the declaratory judgment claims raised in this case are identical to the counterclaims it has now asserted in federal court in South Carolina. (See Docket No. 12 at 12 “Out of an abundance of caution, Cypress had filed as counterclaims in South Carolina all the claims it first raised in this action (and will file similar counterclaims in response to the amended complaint), although Cypress prefers to have the dispute heard in this Court.”). In both federal cases, Cypress seeks declaratory judgments of: (1) late notice in that Mickens Transportation did not notify it of the underlying state court action to which Mickens Transportation did not timely respond and that resulted in the default judgment; (2) the MCS-90 endorsement requiring that the insurer pay any judgment should not be enforced as to the default judgment obtained in the South Carolina state court matter; and (3) extrinsic fraud in procurement of the judgment by Barren and Mickens Transportation. (Docket No. 1). As noted, it appears that the state court in South Carolina has not yet issued a decision on the motion to set aside the default judgment filed by Mickens Transportation or the motion to intervene filed by Cypress. See David K. Barren v. Mickens Transportation Specialists, Inc., Case No. 2015-CP-0900135, (C.P., Calhoun Cty., S.C.).

         With respect to the present matter, Cypress seeks to invoke the diversity jurisdiction of this Court under 28 U.S.C. § 1332(a)(1) as well as the Court's authority to declare the parties' rights under the Declaratory Judgment Act, 28 U.S.C. § 2201. (Id. at ¶ 1). The parties are diverse as Cypress is a citizen of Nebraska and California; Mickens is a citizen of Georgia; and Barren is a citizen of Pennsylvania. (Id. at ¶¶ 1-3). The matter in controversy exceeds $75, 000.00 because the action seeks to invalidate the state court judgment of $975, 000.00. (Id. at ¶¶ 5, 47).

         Barren filed the pending motion to dismiss/transfer and his brief in support on March 31, 2017. (Docket Nos. 6; 10). Cypress responded by filing its brief in opposition on April 21, 0217. (Docket No. 12). The Court considers the matter fully briefed and ripe for disposition.


         Turning to the applicable legal standards, the determinations of whether to dismiss or transfer a case under the “first filed rule” or to transfer a matter under 28 U.S.C. § 1404(a) are committed to the sound discretion of the trial court. See Chavez v. Dole Food Co., Inc., 836 F.3d 205, 220 (3d Cir. 2016) (district court has discretion to transfer matter under first filed rule); Ogundoju v. Attorney General of U.S., 390 F. App'x. 134, 137 n.2 (3d Cir. 2010) (district court has discretion to transfer matter under 1404(a)). It is this Court's opinion that it is an appropriate exercise of discretion to transfer this case to the District of South Carolina under both legal principles. Id. It will be up to the presiding Judge in South Carolina to determine whether it is appropriate to: stay the federal declaratory judgment claims/counterclaims in favor of the pending state court litigation to set aside the judgment; dismiss the action under Rule 12(b)(6); or decline to exercise jurisdiction over the matter under the Declaratory Judgment Act. The Court briefly turns to its rationale supporting the decision to transfer this duplicative and subsequently filed case to South Carolina.

         It is well-established that courts have broad discretion to manage cases in an effort to avoid wasteful and duplicative litigation. See, e.g., Colorado River Water Cons. Dist. v. United States, 424 U.S. 800, 817 (1976). The recent amendments to Rule 1 of the Federal Rules of Civil Procedure should make clear that the parties share the responsibilities with the Court to “secure the just, speedy, and inexpensive determination of every action and proceeding.” See Fed. R. Civ. P. 1 (eff. Dec. 1, 2015). In this regard, the “first-filed” rule “is a comity-based doctrine stating that when duplicative lawsuits are filed successively in two different federal courts, the court where the action was filed first has priority.” Chavez, 836 F.3d at 210. “A district court applying the first-filed rule has the ability to ‘enjoin the subsequent prosecution of proceedings involving the same parties and the same issues already before another district court.'” Sinclair Cattle Co. Inc., v. Ward, 80 F.Supp.3d 553, 558 (M.D. Pa. 2015) (quoting EEOC v. Univ. of Pennsylvania, 850 F.2d 969, 971 (3d Cir. 1988)). “[I]n the vast majority of cases, a court exercising its discretion under the first-filed rule should stay or transfer a second-filed suit.” Chavez, 836 F.3d at 220.

         Here, there is no dispute that Barren's state court lawsuit which is now pending in the District of South Carolina was the first filed action. (Docket Nos. 10; 12). In addition, Cypress admits that its claims in this lawsuit and its counterclaims in the South Carolina suit are identical and this Court's review of both pleadings confirms same. (See Docket Nos. 1; 12). Despite this admission, Cypress attempts to avoid the application of the doctrine by arguing that the action filed first by Barren which is now pending in South Carolina federal court is an “anticipatory suit” and/or should be precluded based on the alleged inequitable conduct of Barren that form the basis for Cypress' claims in this lawsuit. (Id.). Neither position is persuasive to this Court.

         Relevant here, “a suit is ‘anticipatory' for the purposes of being an exception to the first-to-file rule if the plaintiff in the first-filed action filed suit on receipt of specific, concrete indications that a suit by the [opposing party] was imminent.” Ward, 80 F.Supp.3d at 561 (quoting Pittsburgh Logistics Sys., Inc. v. C.R. England, Inc., 669 F.Supp.2d 613 (W.D. Pa 2009)). But, Barren's declaratory judgment suit was not “anticipatory” in this context because it was filed in response to the attached letter from Cypress' counsel dated January 26, 2017 which made no mention of filing this federal declaratory judgment action. (See Docket No. 12-2). Rather, the substance of the letter advises only that Cypress believed that there was a sufficient basis under the South Carolina Rules of Civil Procedure to set aside the default judgment in state court, provides citations to caselaw in a purportedly analogous situation, and asks that Barren's counsel voluntarily set aside the default judgment. (Id.). If anything, Barren's lawsuit was anticipatory as to the forthcoming motion to set aside the default judgment, which was filed by Mickens Transportation - presumably after being appointed counsel by Cypress - a few days later in South Carolina state court. See Ward, 80 F.Supp.3d at 561. In short, this Court finds nothing inequitable about Barren filing the declaratory judgment suit in the same court where the default judgment was issued and where he expected a motion to set it aside would be lodged. To the contrary, Cypress' filing of this lawsuit against its own insured in a foreign forum with little connection to the parties' disputes - days after ...

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