Anti-Suit Injunction Must be Carefully Drafted

Seeking the Same Remedy Against the Same Parties in a Different Jurisdiction is Improper

In St. Paul Fire And Marine Insurance Company v. Amerisourcebergen Drug Corporation, and Bellco Drug Corporation v. ACE American Insurance Company and ACE Property And Casualty Insurance Company, No. 21-0036, Supreme Court of Appeals of West Virginia (November 15, 2021) insurers sought to reverse an order of a West Virginia Trial court enjoining them from pursuing a suit in California.

An anti-suit injunction is an order barring parties to an action in this state from instituting or prosecuting substantially similar litigation in another state. Whether the foreign state action is substantially similar involves assessing (1) the similarity of the parties; (2) the similarity of the issues; and (3) the capacity of the action in this state to dispose of the foreign state action. An anti-suit injunction is appropriate when equity compels the circuit court:

  1. to address a threat to the court’s jurisdiction;
  2. to prevent the evasion of an important public policy;
  3. to prevent a multiplicity of suits that result in delay, inconvenience, expense, inconsistency, or will be a “race to judgment”; or
  4. to protect a party from vexatious, inequitable or harassing litigation.

OPINION

Over the last two decades, the United States has experienced an epidemic of overdose deaths involving prescription and illicit opioid medications. Governments, businesses and individuals have sued the pharmaceutical distributors that sold prescription opioid medicines and “seek to recover billions in governmental and economic costs allegedly incurred in providing a wide array of public services in response to the influx of opioids into their communities.

The circuit court entered an “anti-suit injunction” prohibiting the insurance companies sued in West Virginia from pursuing parallel litigation against the distributor in California.

Factual and Procedural Background

Plaintiff AmerisourceBergen Drug Corporation (“ABDC”) is a wholesale distributor of prescription opioid medication in West Virginia and across the United States. This case derives from ABDC’s efforts to establish that these prescription opioid lawsuits, nationwide and in West Virginia, are covered under primary, umbrella, and excess commercial general liability policies purchased by ABDC (or its predecessors or affiliates).

ABDC’s insurance coverage lawsuit specifically sought a declaratory judgment from the circuit court construing primary, umbrella and excess comprehensive general liability policies issued by defendant St. Paul Fire & Marine Insurance Company (“St. Paul”) and by defendants Ace American Insurance Company and Ace Property and Casualty Insurance Company (“Ace American”).

After three years of discovery St. Paul filed a competing insurance coverage action in California state court against ABDC and its corporate subsidiaries and affiliates. St. Paul’s California complaint alleged that St. Paul issued various insurance policies to ABDC, but sought a declaratory judgment that St. Paul had no duty to defend or indemnify ABDC in any opioid lawsuit filed against ABDC nationwide. Alternatively, St. Paul’s complaint named as defendants seventy insurance companies (including companies such as ACE American) “who, on information and belief, issued insurance policies to [ABDC] Affiliates covering periods between 1995 and 2018[.]” The complaint asked the California court to issue a declaratory judgment that, if St. Paul had some obligation to provide coverage for any opioid lawsuit, established the scope and amount of coverage required to be provided by each insurance company to ABDC.

On November 19, 2020, ABDC filed a motion with the West Virginia circuit court seeking an “anti-suit injunction.”  After months of supplemental briefing, the circuit court entered an order denying St. Paul’s motion for summary judgment.

In an order dated January 7, 2021, the circuit court granted ABDC’s motion for an anti-suit injunction and prevented all of the parties from pursuing collateral insurance litigation involving ABDC, in California or elsewhere.

Discussion

St. Paul and Ace American contend that the circuit court erred in issuing an anti-suit injunction precluding the prosecution of the California action. When, however, the parties before the circuit court initiate parallel litigation in another court a circuit court may enjoin a party from pursuing a parallel case in the courts of another state. An anti-suit injunction applies only to the parties before the circuit court, not to the other court or other judge presiding over the parallel case.

The injunction is directed, not to the court, but to the litigant parties, and in no manner denies the jurisdiction of the legal tribunal.

Comity compels a court to act cautiously and with restraint. Stated broadly, when considering whether to issue an anti-suit injunction, the principle of comity requires that courts exercise the power to enjoin foreign suits sparingly and only in very special circumstances where a clear equity is presented requiring the interposition of the court to prevent manifest wrong and an irreparable miscarriage of justice. Comity is a principle under which the courts of one state give effect to the laws of another state not as a rule of law, but rather out of deference or respect.

State courts have granted anti-suit injunctions after identifying equitable concerns about interference with the court’s jurisdiction, duplicative suits, and vexatious litigation. An anti-suit injunction is an order barring parties to an action in this state from instituting or prosecuting substantially similar litigation in another state.

The record shows that, in the three-and-a-half year course of discovery, ABDC informed St. Paul of 165 specific opioid-related lawsuits in West Virginia for which ABDC sought defense or indemnity costs from St. Paul. The Supreme Court found the circuit court’s conclusion that St. Paul instituted competing, parallel litigation in California was correct because both the West Virginia action and the California action involve, not merely similar parties, but identical parties. Every single one of the plaintiffs and defendants in the West Virginia action are parties in the California action.

The circuit court found its ability to successfully resolve the West Virginia suit was threatened by St. Paul’s California action.  The circuit court fairly concluded that St. Paul’s parallel suit in California was filed for improper purposes, namely forum shopping and the disruption of the orderly resolution of the West Virginia suit.

The anti-suit injunction order enjoins all parties to the West Virginia action from instituting or prosecuting any legal proceeding concerning ABDC’s insurance coverage.  Our concern is that ABDC’s West Virginia complaint is limited in scope and seeks a declaratory judgment concerning only sixteen insurance policies issued by five insurance companies. As ABDC’s complaint is cast, it asks the circuit court for a judgment regarding whether those sixteen policies provide coverage for the growing number of West Virginia-based opioid lawsuits. The circuit court was within its rights to protect its jurisdiction to resolve the dispute as presented by ABDC.

However, as it is written, the circuit court’s order impairs the parties’ ability to litigate, against each other or with third parties, over policies separate from the sixteen policies identified by ABDC. Therefore, the Supreme Court concluded that the circuit court’s order was overbroad and, as currently drafted, constituted an abuse of the court’s discretion. The order must therefore be reversed, and the case remanded for reconsideration.

Although the circuit court clearly had the authority to enter an anti-suit injunction. The circuit court’s decision to enter an injunction was affirmed. The Supreme Court reversed the circuit court’s January 7, 2021, order, and remanded the case for clarification of the order or such other proceedings as are necessary.

ZALMA OPINION

Insurance disputes over a multiplicity of lawsuits against an insured in multiple jurisdictions raises serious problems for the courts where the suits are brought. West Virginia’s courts spent a great deal of time and trouble to resolve the suits before it and obviously became concerned when a party tried to go to another forum to receive a “better” result against the same parties. The injunction was proper but it needs to be more carefully drafted to be fair to the parties.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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