United States District Court, Northern District of Illinois, E.D
November 22, 1985
BYER MUSEUM OF THE ARTS, STEPHEN BYER & ASSOCIATES, STEPHEN B. BYER, AND BARBARA L. BYER, PLAINTIFFS,
THE NORTH RIVER INSURANCE COMPANY, DEFENDANT.
The opinion of the court was delivered by: Holderman, District Judge:
MEMORANDUM OPINION AND ORDER
This case is before the Court on defendant's motion to
dismiss, or in the alternative, stay this action in light of
a nearly identical state action pending between the parties in
the Circuit Court of Cook County.
This case concerns an insurance policy issued by The North
River Insurance Company ("defendant") to the Byer Museum of
the Arts and Stephen Byer & Associates ("plaintiffs") insuring
a building and its contents. The insured building is located
in Evanston, Illinois and is occupied by plaintiffs: the Byer
Museum and Stephen Byer & Associates.
On December 31, 1984, approximately three months after the
insurance policy was issued, a fire occurred at the building
causing extensive damage. In March and April of 1985 the
plaintiffs submitted their claims to the defendant for the
damage caused by the December fire. The defendant asserted
that the claims were grossly inflated and, therefore, sought
to have the policy declared null and void due to the
plaintiffs' fraud. Plaintiffs asserted that the claim was
proper and objected to the delay in payment.
Their differences defined, the parties began some elaborate
strategic posturing within the state and federal judicial
systems. On May 31, 1985, defendant filed suit in federal
court seeking a declaratory judgment annulling its liability
under the policy. Five days later, defendant voluntarily
dismissed the federal action pursuant to Fed.R.Civ.P. Rule
41(a)(1)(i), and on the same day refiled the complaint for
declaratory judgment in the Circuit Court of Cook County,
Illinois under docket number 85 CH 5589 ("state action").
Nearly one month later, plaintiffs decided to file their own
action in federal court based on the very same insurance
policy and involving the same factual questions and parties.
The plaintiffs' present federal action seeks the full amount
claimed under the policy, attorneys' fees, statutory penalties
under Ill.Rev.Stat. ch. 73 § 767, compensatory
damages and punitive damages.*fn1 Federal jurisdiction was
based on diversity of citizenship under 28 U.S.C. § 1332.
Having lost the race to the courthouse, the plaintiffs would
like to start another race; a race to judgment between this
Court and the Illinois state court. To prevent such a race to
judgment and to conserve scarce legal and judicial resources,
the defendant has moved to dismiss or stay the federal action
based on alternative grounds, namely: § 2-619(a)(3) of the
Illinois Code of Civil Procedure; and the Colorado River
doctrine which allows federal courts to dismiss or stay federal
actions in deference to concurrent state proceedings. For the
following reasons defendant's motion to dismiss is granted.
Because jurisdiction in the present litigation is premised
on diversity of citizenship, Illinois state law is applicable
under the well established principles of Erie R.R. Co. v.
Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938);
Guarantee Trust Co. of N.Y. v. New York, 326 U.S. 99, 65 S.Ct.
1464, 89 L.Ed. 2079 (1945); and Byrd v. Blue Ridge Elec. Coop.,
Inc., 356 U.S. 525, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958).
Directly in issue is whether the Erie doctrine requires the
application of an Illinois statutory provision which allows the
dismissal of a cause of action involving the same cause and
same parties as another pending action.
Section 2-619(a)(3), Ill.Rev.Stat. ch. 110, provides:
Defendant may, within the time for pleading, file
a motion for dismissal of the action or for other
appropriate relief upon any of the following
(3) That there is another action pending between
the same parties for the same cause.*fn2
The Illinois Supreme Court has interpreted "same cause" to
mean that "actions are `for the same cause,' when relief is
requested on substantially the same set of facts."
Skolnick v. Martin, 32 Ill.2d 55
, 203 N.E.2d 428
denied, 381 U.S. 926
, 85 S.Ct. 1562
, 14 L.Ed.2d 684 (1965).
Though it is clear that the state and federal actions fall
within the parameters of § 2-619(a)(3), plaintiffs contend that
this statutory provision is merely a procedural device for use
by the Illinois state courts and has no applicability to
federal courts exercising diversity jurisdiction. This argument
is contrary to the overwhelming weight of judicial decisions
determining the applicability of § 2-619(a)(3) to federal
courts sitting in diversity. Simenc v. Holiday Inns, Inc., No.
83 C 5618, slip op. (N.D.Ill. Feb. 10, 1984) (Judge Moran);
Brite Industries v. Anderson, No. 81 C 5593, slip op. (N.D.Ill.
March 25, 1982) (Judge Kocoras); Holmes v. Chicago Transit
Authority, 505 F. Supp. 877 (N.D.Ill. 1981) (Judge Leighton);
v. Quill Corp., No. 81 C 3489, slip op. (N.D.Ill. Nov. 2, 1981)
(Judge Decker); Repp v. F.E.L. Publications, Ltd., No. 80 C
3335, slip op. (N.D.Ill. Oct. 8, 1980) (Judge Leighton);
Holston v. The Rockford Surgical Service, No. 80 C 173, slip
op. (N.D.Ill. Sept. 22, 1980) (Judge Shadur); General
Investment Funds Real Estate Holding Company v. Exchange
National Bank of Chicago, No. 79 C 1286, slip op. (N.D.Ill.
April 14, 1980) (Judge Aspen); Kaiser v. Raymond Bolzan, Inc.,
No. 77 C 4122, slip op. (N.D.Ill. Dec. 4, 1978) (Judge
Kirkland); Klondike Helicopters, Ltd. v. Fairchild Hiller
Corp., 334 F. Supp. 890 (N.D.Ill. 1971) (Judge McGarr); Seaboard
Finance Company v. Davis, 276 F. Supp. 507 (N.D.Ill. 1967)
(Judge Will). See also Simmons v. Pulmosan Safety Equip Corp.,
471 F. Supp. 999 (S.D.Ala. 1979) (applying Alabama's version of
§ 2-619(a)(3) to federal courts).
Judge Will's opinion in Seaboard, supra, 276 F. Supp. 507, is
considered the definitive work regarding the relationship
between § 2-619(a)(3) and federal courts exercising diversity
jurisdiction. Seaboard carefully analyzed the history and
development of the Erie doctrine and concluded that Erie and
its progeny require a federal court to consider several factors
in determining whether state law applies. The factors are:
(1) whether the variance between the state and
local rule is such that it will affect the
outcome of the litigation; (2) whether the
variance is of a nature that it would encourage
forum shopping; and (3) whether there is some
countervailing federal consideration which would
justify the variance. Where a substantial
variance exists, the court must balance the first
two factors against the third. Only if the
countervailing considerations outweigh the
possibilities of divergent administration of the
laws and forum shopping, should the federal rule
276 F. Supp. at 515. Weighing these factors, the court held
that § 2-619(a)(3) must be applied by federal courts exercising
The Seventh Circuit has implicitly approved
Seaboard's analysis. In Commonwealth Edison v. Gulf Oil Corp.,
541 F.2d 1263, 1271-72 (7th Cir. 1976) the Court distinguished
Seaboard's § 2-619(a)(3) analysis on the basis that Seaboard
was premised on diversity jurisdiction whereas jurisdiction in
Commonwealth Edison was based on a federal question under the
Federal Arbitration Act, thereby relieving the district court
of the obligation to consider state law.
The Seventh Circuit has had only one other occasion to
consider the application of § 2-619(a)(3) to federal courts. In
Bio-Analytical Services, Inc. v. Edgewater Hospital,
565 F.2d 450, 450 n. 6 (7th Cir.), cert. denied, 439 U.S. 820, 99 S.Ct.
84, 58 L.Ed.2d 111 (1978) the court determined that the
defendant had waived any right to raise a § 2-619(a)(3) motion
to dismiss because of its failure to raise the motion in the
district court and, therefore, held it was unnecessary to
express any views as to the applicability of § 2-619(a)(3).
Despite the apparent authority of § 2-619(a)(3) to dismiss
this case, plaintiffs argue that § 2-619(a)(3) cannot be
applied because the provision conflicts with the "virtually
unflagging obligation of the federal courts to exercise the
jurisdiction given them." Colorado River Water Conservation
District v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236,
1246, 47 L.Ed.2d 483 (1976). The Court disagrees with
plaintiffs' contention. The two provisions are not in conflict,
but are rather complementary avenues for dismissal. The
Colorado River doctrine, in fact, provides the evaluative
framework that should be used in conjunction with Judge Will's
Seaboard analysis in determining whether dismissal is proper
under § 2-619(a)(3).
Colorado-River represents an affirmation and expansion of the
traditional federal court abstention doctrine.*fn3 In Colorado
River the Supreme Court recognized that federal courts could
dismiss federal actions in deference to parallel state
proceedings when the two courts were exercising concurrent
jurisdiction, even though none of the traditional abstention
categories were satisfied. Dismissals under this new doctrine
are premised on "considerations of [w]ise judicial
administration, giving regard to conservation of judicial
resources and comprehensive disposition of litigation." Id., at
817, 96 S.Ct. at 1246. Courts have been instructed to consider
a variety of factors in determining when such federal deference
should be exercised. The relevant considerations include: the
federal interest in proceeding with the litigation; whether
state or federal law provides the rule of decision on the
merits; the avoidance of piecemeal litigation; the vexatious or
reactive nature of either the state or federal action; the
inconvenience of the federal forum; and the order in which
jurisdiction was obtained by the concurrent forums. Id., at
818-19, 96 S.Ct. at 1246-47; Moses v. Cone Memorial Hospital v.
Mercury Const., 460 U.S. 1, 103 S.Ct. 927, 938 n. 20, 941-42,
74 L.Ed.2d 765 (1983); Micro Software Computer Systems v. Ontel
Corp., 686 F.2d 531, 537 (7th Cir. 1982). It is important to
note that these factors encompass Judge Will's considerations
in Seaboard, supra, when he made the initial determination that
§ 2-619(a)(3) applied to the federal courts. This Court
believes that all of these factors have applicability to a §
2-619(a)(3) determination. Each of these factors will be
1. FEDERAL INTEREST IN THE LITIGATION.
Plaintiffs' complaint does not present an important federal
interest. This action's presence in federal court hinges only
on the diverse citizenship of the parties. Although federal
courts have been admonished not to treat diversity litigants
as second-class litigants,*fn4 neither should the federal
courts allow litigants to waste precious judicial resources
and subvert the fundamental principles of federal
The traditional purpose of diversity jurisdiction,
protecting out-of-state litigants from prejudicial treatment,
is not present in this case. As citizens of Illinois, the
plaintiffs (state court defendants) are undeserving of the
protections afforded by diversity jurisdiction. The Circuit
Court of Cook County is quite capable of acting impartially
towards each of the federal plaintiffs. Moreover, the Court
believes that the plaintiffs have circumvented Congress'
express desire to keep litigants, such as the plaintiffs, out
of federal court. Congress, in enacting the removal provision,
28 U.S.C. § 1441(b), specifically provided that actions cannot
be removed from state to federal court if the state defendants
are citizens of the state in which the state litigation is
brought. That is exactly the position plaintiffs are in.
Because plaintiffs have been foreclosed by Congress from
removing this action and because the traditional justification
for diversity jurisdiction is not present, the Court holds
that there is no substantial federal interest served by
proceeding with this case.
2. APPLICATION OF FEDERAL VERSUS STATE LAW.
The Supreme Court in its most recent opinion interpreting
the Colorado River doctrine held that the presence of
exclusively state-law issues may counsel in favor of deferring
a federal action to a parallel
state proceeding. Moses v. Cone, supra, 103 S.Ct. at 942. In
this dispute both the state and federal litigants seek to
determine the validity of a single insurance policy; a
determination which requires the application of state-law
principles. Neither party has asserted that any federal laws
are in issue. Because this Court is compelled to apply Illinois
substantiave law in its determination on the merits of this
case, the Court must consider this factor as weighing in favor
3. AVOIDANCE OF PIECEMEAL LITIGATION.
The ongoing state action between the parties will determine
the validity of the insurance policy. Plaintiffs' federal
action seeks a de novo determination of validity and, assuming
the plaintiffs prevail, a finding that the failure to pay was
vexatious and unreasonable, thereby entitling plaintiffs to an
Illinois statutory penalty (Ill.Rev.Stat. ch. 73 § 767) and
common law compensatory and punitive damages.
Plaintiffs'"counterclaim" for damages cannot justify this
court in duplicating the trial process that is already
underway in the state action. To do so "would be a grand waste
of efforts by both courts and parties in litigating the same
issues regarding the same [insurance policy] in two forums."
Microsoftware, supra, 686 F.2d at 538. There is no indication
that the Circuit Court of Cook County is incapable of
thoroughly and fairly litigating all the issues presented in
both the original state court action and plaintiffs' later
filed federal action.
To have this Court make a separate determination as to the
validity of the insurance policy will only result in an
undesirable race to judgment. As the Seventh Circuit has held:
Since the first court to decide the dispute will
bind the other, the maintenance of an extra
action will have a perceptible effect upon
proceedings in the original action if the parties
there attempt to accelerate or stall the
proceedings in order to influence which court
finishes first. The result would be quite similar
to forum shopping, and is just as unseemly.
Microsoftware, 686 F.2d at 538. Moreover, if this Court were to
stay the federal litigation pending the state court's validity
determination and then exercise federal jurisdiction to decide
plaintiffs' damages claim we would be promoting, not avoiding,
4. VEXATIOUS OR REACTIVE LITIGATION.
Plaintiffs' federal complaint is nothing more than a
tactical maneuver responding to the jurisdictional
machinations of the defendant. As plaintiffs themselves point
out, the only reason the federal court is of interest is the
fact that some of the federal judges in the Northern District
of Illinois have allowed recovery for both the statutory
penalty under Ill.Rev.Stat. ch. 73 § 767 and common law
remedies for vexatious and unreasonable failure to pay
insurance claims. The First District of Illinois, in which the
Circuit Court of Cook County sits, has held that recovery under
Ill.Rev. Stat. ch. 73 § 767 precludes recovery for common law
We condone neither of the parties conduct; however we will
not allow the plaintiffs to wield the federal forum as its
pawn in their strategic maneuvering with the defendant.
Plaintiffs' rights can be defined and protected in the state
court action. There is no reason for this Court to reward
plaintiffs with an additional opportunity to litigate the same
issues that are being determined in the state action. The
presence of a parallel federal action can only impede a speedy
and fair determination in the state court proceeding.
5. INCONVENIENCE OF THE FEDERAL FORUM.
Less than five blocks separate the respective courthouses of
the Circuit Court of Cook County and the Federal District
Court in Chicago, so it cannot be said that either forum is
more or less convenient than the other. This is the only
factor that does not counsel in favor of dismissal.
6. ORDER OF FILING.
Although the Seventh Circuit has held that the order of the
filing has little significance by itself,*fn6 it is
nevertheless a factor the Supreme Court has instructed courts
to consider. It may well be that this factor is analogous to
the forum non conveniens principle of giving considerable
weight to the original plaintiff's choice of forum. Gulf Oil
Corp. v. Gilbert, 330 U.S. 501, 67 S.Ct. 839, 91 L.Ed. 1055
(1947). Whatever the importance of this factor, and we assume
it is minimal, it nonetheless weighs in favor of dismissing the
Given the plethora of district court opinions applying §
2-619(a)(3) to diversity actions and given the ambiguous, but
apparently supportive position of the Seventh Circuit, this
Court finds Seaboard's analysis compelling and believes §
2-619(a)(3) must be applied to this action. Moreover, in
applying the later developed Colorado River factors to our §
2-619(a)(3) dismissal determination, we conclude that dismissal
is appropriate. Judicial interests in conserving scarce
resources and insuring the proper exercise of federal
jurisdiction will be served best by allowing the Circuit Court
of Cook County to decide this state issue unimpeded by the
presence of a parallel federal proceeding.
For the reasons set forth herein, defendant's motion to
dismiss is GRANTED.