The opinion of the court was delivered by: MORTON DENLOW, Magistrate Judge
MEMORANDUM OPINION AND ORDER
This case comes before this Court on a motion by Frontier
Insurance Co. ("Frontier" or "Defendant") to stay this proceeding
in favor of a New York state court insurance rehabilitation
proceeding that is adjudicating all claims including a claim
from Mountain Funding, Inc. ("Plaintiff") against Defendant.
See In the Matter of the Rehabilitation of Frontier Ins. Co.,
No. 1357/03 (N.Y. Sup. Ct. order dated May 10, 2004). For the
reasons set forth below, Defendant's motion to stay is granted.
The facts of this case have been recited in great detail in
Judge Ronald A. Guzman's opinion in Mountain Funding, Inc. v.
Frontier Insurance Co., No. 01 C 2785, 2003 U.S. Dist. LEXIS
11274 (N.D. Ill. June 30, 2003). Therefore, what follows are the
facts materially pertinent to a decision on Defendant's motion to
stay proceedings, which is now before the Court. A. PROCEEDINGS BEFORE JUDGE GUZMAN
On November 29, 2000, Plaintiff filed this lawsuit in the
Superior Court of New Jersey as a result of Defendant's alleged
failure to pay on a surety bond issued by Defendant. Defendant
then removed this case to federal district court in New Jersey.
Subsequently, the case was transferred to the Northern District
of Illinois and assigned to Judge Guzman.
On August 25, 2001, the Superintendent of Insurance for the
State of New York filed a rehabilitation proceeding against
Defendant in the Supreme Court of New York. In the Matter of the
Application of Gregory V. Serio, No. 405090/01 (N.Y. Sup. Ct.
order dated Oct. 10, 2001). The New York rehabilitation court
entered an order enjoining and restraining any person from
commencing or prosecuting lawsuits or proceedings against
Defendant for 180 days. Pursuant to that order, Defendant moved
Judge Guzman to stay these proceedings, which he did on November
13, 2001. Six months later, Judge Guzman accepted briefs and
heard oral arguments on the issue of continuing the stay
indefinitely, which he declined to do; on May 15, 2002, Judge
Guzman lifted the Stay of Proceedings and permitted discovery to
Defendant then filed a motion to reconsider the May 15, 2002
order lifting the Stay of Proceedings. Defendant argued that the
district court should abstain from this action because New York's
rehabilitation court is the proper court to handle Plaintiff's
underlying surety bond dispute because the court stands in a
"special relationship" with the facts and issues involved in the
case. However, on June 30, 2003, Judge Guzman denied the motion to reconsider. Mountain Funding, Inc., No. 01 C 2785, 2003 U.S.
Dist. LEXIS 11274, at *15 (N.D. Ill. June 30, 2003). Judge Guzman
explained that abstention is the exception to the norm in federal
court and that Defendant failed to establish that the New York
rehabilitation court stands in a "special relationship" with the
facts and issues involved in this case. Id. at *14. Judge
Guzman further noted that "there is an absence of information
concerning the nature of the [New York rehabilitation]
proceedings, what types of claims are being litigated, and a
schedule for the completion of rehabilitation." Id. The parties
then consented to have this case tried before this Court pursuant
to 28 U.S.C. § 636(c)(1). The case then proceeded to the verge of
trial before Defendant brought this motion for a stay, claiming
that the concerns raised by Judge Guzman now have been addressed
and resolved by an order entered by the New York rehabilitation
B. NEW YORK REHABILITATION PROCEEDINGS
On May 10, 2004, the New York rehabilitation court entered a
formal order approving an interim procedure for judicial review
of the rehabilitation proceedings for adjudication of claims. In
the Matter of the Rehabilitation of Frontier Ins. Co., No.
1357/03 (N.Y. Sup. Ct. order dated May 10, 2004). The purpose of
the rehabilitation proceedings is to facilitate judicial review
of Frontier's claimants, to expedite the resolution of such
claims, to prevent the unnecessary expenditure of assets, and to
provide a fair, equitable, and unified procedure for all
claimants of Frontier. See Def. Mot. to Stay, Ex. B1, at 6.
"The procedure will enable the Rehabilitator to dispose of surety
claims, which would not be covered by the majority of Guaranty Associations, and other claims as the Court deems
appropriate . . . while offering due process to all claimants who
object to his recommendations." Def. Mot. to Stay, Ex. B2, at 2.
The rehabilitator will examine each claimant's claim and make a
determination regarding that claim, which will act as a
recommendation to the claimant. Id. The rehabilitator then must
serve the claimant a "Notice of Determination" for each claim,
which advises the claimant of the recommendation amount. Id.
The claimant may object to the amount by serving a written
objection upon the rehabilitator within sixty days. Id. The
rehabilitator must contact the claimant and attempt to resolve
any objection. Id. at 3. In the event the objection is not
resolved, the matter is referred to a court-appointed referee who
hears the claimant's objection and reports on its validity. Id.
Upon the issuance of the referee's report, either the claimant or
the rehabilitator may petition the court for an order confirming
the report. Id. In the event that no objection is received, the
rehabilitator shall make an ex parte motion no earlier than
seventy-five days after the date of the Notice of Determination
for an order approving and confirming the adjudications of the
As a result of the new information detailed in the May 10, 2004
order, Defendant filed the present Motion to Stay Proceedings
under the principles of abstention, arguing that this Court now
has enough information to conclude that the New York
rehabilitation court is in a special relationship of technical
oversight or concentrated review of Plaintiff's claims. II. LEGAL STANDARD
Abstention principles can be raised and revisited at any time
during a proceeding. Prop. & Cas. Ins. Ltd. v. Cent. Nat'l Ins.
Co. of Omaha, 936 F.2d 319, 321 (7th Cir. 1991). There are three
accepted abstention doctrines that can be applied depending on
the underlying facts of the federal case at issue. See Colorado
River Conservation Dist. v. United States, 424 U.S. 800 (1976);
Younger v. Harris, 401 U.S. 37 (1971); Burford v. Sun Oil
Co., 319 U.S. 315 (1943). The principles espoused by the United
States Supreme Court in Burford v. Sun Oil provide the
analytical framework within which to decide whether abstention in
favor of the state rehabilitation proceedings is appropriate in
In Burford, the Supreme Court determined that a federal
court's abstention is appropriate when judicial review in the
designated state forum is "expeditious and adequate," in order to
avoid review in the federal courts that could cause "delay,
misunderstanding of local law and federal conflict with state
policy." 319 U.S. at 327-34. Additionally, the Supreme Court held
that federal courts could give rise to "intolerable confusion"
that a specialized state forum seeks to avoid. Id.
Subsequently, the Seventh Circuit has interpreted Burford to
hold that abstention is appropriate in two circumstances. Prop.
& Cas. Ins. Ltd., 936 F.2d at 322. First, courts should abstain
from deciding "difficult questions of state law bearing on policy
problems of substantial public import whose importance transcends
the result in the present case." Id. Second, courts should
abstain from deciding cases where the review would be ...