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General Reinsurance Corp. v. Ciba-Geigy Corp.

decided: July 28, 1988.

GENERAL REINSURANCE CORP. AND NORTH STAR REINSURANCE CORP., APPELLANTS,
v.
CIBA-GEIGY CORP., APPELLEE



Appeal from an order entered in the Southern District of New York, Edmund L. Palmieri, Judge, staying a declaratory judgment action on abstention grounds in deference to a pending state action. Held, (1) an order staying federal action in deference to parallel proceeding is appealable; (2) order staying action was not an abuse of discretion where there was a risk of piecemeal litigation, federal litigation had not proceeded very far, state law supplied rule of decision, and state court proceeding will adequately protect rights of party seeking to invoke federal jurisdiction. Judgment affirmed.

Oakes, Meskill, and Pierce, Circuit Judges.

Author: Oakes

OAKES, Circuit Judge:

Two insurance companies appeal an order of the United States District Court for the Southern District of New York, Edmund L. Palmieri, Judge, staying a declaratory judgment action on abstention grounds in deference to a pending state action. Appellants argue that the order was an abuse of the district court's discretion. We disagree and accordingly affirm.

BACKGROUND

CIBA-Geigy Corp. ("CIBA-Geigy") was formed by the merger of CIBA Corp. ("CIBA") into Geigy Chemical Corp. ("Geigy"). CIBA was a Delaware corporation with headquarters in Summit, New Jersey, and major manufacturing facilities in Summit and Toms River, New Jersey. Geigy was a New York corporation with headquarters in Westchester County, New York, and major operations at Toms River, New Jersey.

CIBA-Geigy's annually revised insurance program consists of a primary policy that provides a certain amount of coverage and several layers of excess coverage. Each excess layer provides coverage when the coverage provided by the primary carrier and by excess carriers on lower layers has been exhausted. General Reinsurance Corp. ("General Re") and North Star Corp. ("North Star") were excess insurance carriers for CIBA and Geigy in most years between 1959 and 1971. The notice provisions in all of the contracts issued by General Re to CIBA and Geigy are substantially the same, stating, "THE REINSURED [CIBA or Geigy] shall immediately advise the Reinsurer [General Re] of any claims which appear likely to result in liability under this Certificate." The notice provisions of the North Star policies issued to CIBA and Geigy state, "The Company [CIBA or Geigy] will advise the Reinsurer [North Star] promptly and fully of any claim or any subsequent developments pertaining thereto which may, in its opinion, involve this reinsurance."

On November 28, 1987, General Re and North Star filed suit in the United States District Court for the Southern District of New York seeking declaratory judgment of their contractual rights with respect to the notification and cooperation provisions of excess liability insurance policies issued to CIBA and Geigy (hereinafter the "New York action"). Appellants alleged that CIBA-Geigy had breached the insurance contracts by failing to give adequate notice of certain environmental claims against it and that, as a result, General Re and North Star were absolved of all liability under the policies.

CIBA-Geigy answered the complaint on December 14, 1987, and served very limited discovery requests consisting of a request for identification of witnesses and a limited request for documents. General Re and North Star also served a document request and a notice of deposition.

On December 17, 1987, CIBA-Geigy filed suit in New Jersey Superior Court against two primary general liability carriers, seeking a declaratory judgment as to each insurer's coverage obligations and duties of defense and indemnity with respect to the environmental claims lodged against it. CIBA-Geigy Corp. v. Liberty Mut. Ins. Co., No. L.-97515-87 (N.J. Super. Ct. Law Div.) (filed Dec. 17, 1987) (hereinafter "New Jersey action"). Five days later, CIBA-Geigy added a third primary insurer and its 135 excess liability insurers including General Re and North Star. The claims involve more than seventy sites including the five CIBA and fourteen Geigy sites as to which CIBA-Geigy claims General Re and North Star are responsible. Over a dozen of the seventy sites are in New Jersey, and no site insured by General Re or North Star is in New York.

On January 20, 1988, two of CIBA-Geigy's primary carriers removed the New Jersey action to federal court. On April 20, 1988, the district court remanded. CIBA-Geigy Corp. v. Liberty Mut. Ins. Co., Civ. No. 88-405 (D. N.J. Apr. 20, 1988).

On December 31, 1987, CIBA-Geigy filed a motion to dismiss or stay the New York action pending final resolution of the New Jersey action. Pursuant to a stipulation between the parties, no further discovery has taken place in the New York action since that time. Anticipating "the prospect of two identical cases being litigated simultaneously before this Court and the New Jersey state court," the district court expressed its concern for "piecemeal litigation." Finding "no issues of federal law," the court concluded that "It[] he pending New Jersey lawsuit appears to be the appropriate means to resolve all of the relevant issues here" and stayed the action. Expressly modeling the stay on the one fashioned in Calvert Fire Insurance Co. v. American Mutual Reinsurance Co., 459 F. Supp. 859, 862 (N.D. Ill. 1978), aff'd, 600 F.2d 1228 (7th Cir. 1979), the court stated: "The stay is not final, and will be vacated if--but only if--it is demonstrated by either litigant that avoidance of unfair prejudice so requires."

Discussion

As a preliminary matter, we must decide whether the district court's order is appealable under 28 U.S.C. ยง 1291 (1982) as a final decision or as a collateral order. An order staying an action is final when its sole purpose and effect are the surrender of jurisdiction to a state court. Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 10, 74 L. Ed. 2d 765, 103 S. Ct. 927 & n. 11 (1983). Although the language of the order suggests it is formally subject to revision, that language merely expressed the court's general authority to reassert jurisdiction when it deems it necessary to do so. Moses H. Cone, 460 U.S. at 12-13. We consider the order appealable because it was "made with the expectation that [the stay] will be the final word on the subject addressed." Id. at 12-13 n. 14, quoted in Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 108 S. Ct. 1133, 1137, 99 L. Ed. 2d 296 (1988). "The practical effect of [the] order was entirely the same [as dismissal] for present purposes, and the order [is] appealable." Moses H. Cone, 460 U.S. at 13. It is worth noting that even before the ...


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