the dispute because federal intervention would interfere with ongoing probate proceedings in state court. Id. at 83. The First Circuit disagreed, explaining that because
life insurance policies must be paid directly to the designated beneficiary rather than distributed through the probate estate, a federal declaration concerning such proceeds in no way interferes with the work of the probate court. By asserting that the money should be paid to the estate so that the administratrix may determine who receives it, appellant begs the threshold question of the estate's entitlement.
In its October 1, 1990, opinion, the Court likened the present situation to that in Equitable, explaining that the primary issue in the case was whether the SBA is entitled to collect its portion of the fund directly from General Railway or whether the SBA must pursue its claim in the liquidation proceeding once the fund has been distributed to the Superintendent. General Railway, 748 F. Supp. at 647; see also General Railway, 921 F.2d at 709.
However, as explained above, it is no longer possible for the claimants to collect their portions of the fund directly from General Railway, at least not in this interpleader action. Because the underlying judgment has been paid to the Superintendent, what was once the interpled fund is now an asset of AFFI's estate. The estate's initial entitlement to the fund is no longer at issue. Rather, the relevant issues now relate solely to the validity, the amount, and the alleged priority status of the claims of the SBA and Antonow & Fink to assets of the estate. That was not the situation in the Equitable case. If the proceeds of the insurance policy had actually been paid to the administratrix of the estate and then the policy beneficiary advanced a competing claim, it is likely that the court in Equitable would have abstained in deference to the probate proceeding. That is the situation in which we presently find ourselves. Although the SBA and Antonow & Fink advanced their claims when General Railway still had constructive possession of the fund, those claims now are against the assets of AFFI's estate. Thus, the Equitable decision no longer would support a refusal to abstain in these circumstances.
For the foregoing reasons, therefore, the Court concludes that, in its present posture, the instant case would substantially interfere with the New York liquidation proceeding.
2. Federal versus state law.
The fact that the disputed funds are now assets of AFFI's estate also affects the Court's earlier conclusion that federal, rather than state, issues predominate. See General Railway, 748 F. Supp. at 646. When the Court initially considered the abstention question, the primary issue was not how AFFI's assets would be distributed, but instead was "whether the portion of the judgment claimed by the SBA may be considered an asset of AFFI in the first place." Id. As explained above, that is no longer an issue in this case because the fund is now clearly an asset of the estate, and both the SBA and Antonow & Fink essentially are making claims against that asset. Given these changed circumstances, the Court now must agree with the Court of Appeals that "this case involves questions of contract interpretation which are governed by state law." General Railway, 921 F.2d at 709.
The primary federal question remaining here involves the SBA's claim to a priority status pursuant to 31 U.S.C. § 3713. The Court finds that the SBA's reliance upon the federal priority statute is insufficient to overcome New York's interest in regulating the liquidation of a domestic insurance company. Any other rule would permit the federal government or any of its agencies to file a federal action against an insolvent insurer merely to assert its priority under 31 U.S.C. § 3713. The Court cannot imagine that Congress intended that the federal priority statute would permit the federal government to opt out of state liquidation proceedings in this way. The result advanced by the SBA would be contrary to the policies expressed in the McCarran-Ferguson Act, 15 U.S.C. § 1012(b). Cf. Fabe v. United States Department of Treasury, 939 F.2d 341 (6th Cir. 1991) (Ohio statute setting priorities in insurance liquidation proceedings not preempted by federal priority statute), cert. granted, 112 S. Ct. 1934 (1992). The Superintendent is perfectly capable of analyzing the SBA's claim in relation to the provisions of the federal priority statute. Review of the Superintendent's treatment of that claim is available in the New York state courts and ultimately in the United States Supreme Court. See Levy, 635 F.2d at 964. Accordingly, the Court now must agree with the Superintendent that he should receive the first opportunity to consider the validity and alleged priority positions of the claims of the SBA and Antonow & Fink.
3. Protecting the rights of all parties.
The final factor to be considered is whether the state liquidation proceeding can adequately protect the rights of all parties to this litigation. The SBA originally maintained that it could not, and the Court expressed in its October 1, 1990, opinion its uncertainty on this question. See General Railway, 748 F. Supp. at 645-46. Given what has transpired since the Court's October 1, 1990, opinion, both the SBA and Antonow & Fink renew the argument that the state proceeding clearly cannot protect their interests because the Superintendent has been slow to act on their claims.
It is of great concern to the Court that the Superintendent seemingly took no action on the claims of either the SBA or Antonow & Fink until it became advantageous to its position in this litigation to acknowledge the existence of those claims and to recommend the allowance of a portion of Antonow & Fink's claim. The fortuitous timing of the Superintendent's actions undercuts the integrity and consistency of the state proceeding, suggesting that the Court may be required to exercise its jurisdiction in order to protect the rights of all claimants. The Superintendent explains his delay by stating that neither the SBA nor Antonow & Fink submitted complete claim information and that he therefore was required to request additional information before acknowledging their claims. (Supp. Aff. of Hugh L. Hamilton P 5.) Because these requests for additional information have not been submitted for its review, the Court can offer no opinion on the Superintendent's explanation. Moreover, because no party has submitted information on the way in which other claims to the estate have been handled, the Court cannot determine whether the response time on these particular claims is unique, or whether it simply is representative of the way in which all claims to the estate have been handled. The Court would emphasize again, however, its concern that the Superintendent fulfill his responsibilities under the New York insurance law as expeditiously as possible, without regard to outside influences such as the possible effects of his actions on pending litigation.
Despite the Court's concerns, however, in light of the lack of evidence to suggest that the claims at issue here were treated differently from any other claims to AFFI's estate, the Court cannot conclude that the delay in acknowledging or adjudicating the validity of the claims would justify the Court's intervention in the liquidation process. See Hartford Casualty, 913 F.2d at 427 (delay in realizing on claim not a reason to interfere with state rehabilitation proceeding); Mondrus, 775 F. Supp. at 1158 (same). The Court has determined that the Superintendent should be afforded the initial opportunity to consider the validity and priority position of the claims at issue here. The New York statutory procedure, which provides for appeals of the Superintendent's decisions, should adequately protect the rights of all claimants. For all of these reasons, therefore, the Court has concluded that it must abstain.
As the Court explained in its January 25, 1991, opinion, once it has determined to abstain, it may "'choose either to dismiss the case outright or stay the federal proceeding so as to preserve the court's ability to resolve any federal law issues which are not addressed by the state court.'" General Railway, 757 F. Supp. at 914 (quoting General Railway, 921 F.2d at 710). As explained supra, at n.8, there would be no point in retaining jurisdiction in these circumstances. "If federal issues arise which are not resolved by the state court, a new action may be brought." Id. at 914-15.
Having considered the issue of abstention de novo in light of circumstances as they presently exist, the Court has determined to abstain in deference to the New York liquidation proceeding. Accordingly, this case is dismissed without prejudice.
ILANA DIAMOND ROVNER
UNITED STATES CIRCUIT JUDGE,
SITTING BY DESIGNATION AS
UNITED STATES DISTRICT JUDGE
DATED: December 2, 1992