BENITA Y. PEARSON, District Judge.
Before the Court is the Motion to Dismiss For Failure to State a Claim and/or Motion to Stay (
This case involves a dispute between Karam and Travelers, as to who is entitled to the settlement proceeds from a settlement reached in a case that was before the Lucas County Court of Common Pleas. The facts of that case follows:
Travelers insured an apartment complex owned by Karam at the Hunter's Ridge Apartment Complex located at 3470 Gibralter Heights, Toledo, Ohio. At some point during the late evening of July 4, 2008 or the early morning of July 5, 2008, a fire began at the Hunter's Ridge Apartments, causing significant damage to the property and compromising several buildings. The total damages to Karam exceeded $12 million dollars. At the time of the fire, Karam's Hunter's Ridge Apartment Complex was insured by Travelers. Consequently, Travelers paid Karam $8,879,824.20 for the losses sustained from the fire.
When the fire occurred, a third party security company, Infinite Security Solutions, LLC ("Infinite"), was employed by Karam to provide security at the Hunter's Ridge Apartment Complex. After an investigation was completed, it was discovered that, on the night of the fire, the Infinite Security Guard working at the Hunter's Ridge Apartment Complex knew that residents were discharging illegal fireworks on site, and took no actions to report, prevent, or stop the residents from discharging these fireworks. According to Karam, this failure to act by the Infinite Security Guard was a direct and proximate result of the fire and destruction of the property.
Thereafter, two lawsuits were filed in the Lucas County (Ohio) Court of Common Pleas (The Travelers Indemnity Company, as Subrogee of Toledo Properties, LLC, v. Infinite Security Solutions, LLC, Case No: CI-2009-04627 and Infinite Security Solutions,
On May 18, 2011, after extensive pretrial discovery and motion practice, the parties in the State court action participated in a mediation, attempting to settle their differences. Though the parties were unable to settle the case, on May 18, 2011, the parties resolved most (but not all) of the issues between Infinite, Travelers and Karam at a State court ordered settlement conference held on May 19, 2011. A settlement agreement was reached between the parties, which included the terms that Infinite agreed to pay $850,000 in exchange for a release of all claims by Travelers and Karam. Infinite also agreed to dismiss its claim against Karam in exchange for a $25,000.00 settlement which Travelers agreed was to be paid from the $850,000 settlement proceeds. This provision left $825,000 to satisfy the claims asserted by Travelers as well as the un-reimbursed losses sustained by Karam. Unfortunately, the terms of the settlement did not identify whom was entitled to receive the settlement proceeds, Karam or Travelers.
On May 23, 2011, two business days after the May 19, 2011 settlement conference, the State court entered a Judgment Entry dismissing the underlying cases without prejudice "with the parties reserving the right to file an entry of dismissal within thirty (30) days of this order."
On June 14, 2011, before the State Court was given an opportunity to address the remaining outstanding issue between the parties, Karam filed a complaint against Travelers in this Court asserting diversity jurisdiction and three causes of action premised upon Karam's assertion that it has priority over the $825,000 in settlement proceeds.
Nearly one week later, on June 20, 2011, in State court, Travelers filed a motion to set aside the State court's judgment entry and to have that court address the outstanding issue relating to the priority/apportionment of the settlement proceeds.
On July 6, 2011, Karam filed the instant to motion to dismiss or stay the action based upon the status of the pending State court action.
In the instant motion, Travelers raises following arguments to encourage the Court should either dismiss or stay the current action:
First, Travelers contends that the Court should abstain from hearing the case based on the Colorado River doctrine.
Colorado River abstention involves a two-part analysis. First, there must be a determination whether the concurrent state and federal actions are parallel.
Applying the above test to this case, Travelers contends that its motion should be granted given that the instant matter and the State court action are parallel proceedings, and an analysis the eight Colorado River factors all weigh in favor of abstention.
Travelers also argues that this case should be dismissed on the grounds that Infinite is a "necessary and indispensable party" to this action under
Additionally, Travelers argues that the instant action should be dismissed because the Court lacks subject matter jurisdiction. In support of this argument, Travelers relies principally upon
Lastly, Travelers argues that the Court should minimally exercise its authority to stay the case in light of the ongoing nature of the State Court action and the current motion pending before the State Court on this very issue.
Karam vehemently objects to each argument propounded by Travelers.
An analysis of the Colorado River factors bode, strongly, in favor of abstaining from ruling, if at all, until after that State court matter has been resolved with finality, in order to avoid the dreaded duplicative and piecemeal litigation that will be unnecessarily costly and not assuredly productive or final.
Infinite's absence is palpable. Its addition, however, will eliminate the Court's diversity jurisdiction. Before this case proceeds in federal court, Karam will have to show cause why Rule 19 does not require dismissal for failure to join an indispensable party.
Lastly, in the interest of procedural fairness and judicial finality, this case must eventually be brought to a close. That finality is not to be achieved while litigants are dueling the same battle in two different courts.
For the reasons given above, Traveler's motion to dismiss or, in the alternative, to stay,
IT IS SO ORDERED.