Travelers Property Casualty Company of America, and St. Paul Fire & Marine Insurance Company v. Flexsteel Industries, Inc., and Sentry Insurance Mutual Company Continental Casualty Company National Union Fire Insurance Co. of Pittsburgh, Pa Illinois National Insurance Company Hartford Fire Insurance Company American Guarantee and Liability Insurance Company United States Fire Insurance Company Great American Insurance Company Fireman's Fund Insurance Company Kemper Insurance Company Twin City Fire Insurance Company And Federal Insurance Company ( 2016 )

IN THE COURT OF APPEALS OF IOWA
No. 15-0103
Filed August 17, 2016
TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, and ST.
PAUL FIRE & MARINE INSURANCE COMPANY,
Plaintiffs-Appellants,
vs.
FLEXSTEEL INDUSTRIES, INC.,
Defendant-Appellee,
and
SENTRY INSURANCE MUTUAL COMPANY; CONTINENTAL CASUALTY
COMPANY; NATIONAL UNION FIRE INSURANCE CO. OF PITTSBURGH, PA;
ILLINOIS NATIONAL INSURANCE COMPANY; HARTFORD FIRE
INSURANCE COMPANY; AMERICAN GUARANTEE AND LIABILITY
INSURANCE COMPANY; UNITED STATES FIRE INSURANCE COMPANY;
GREAT AMERICAN INSURANCE COMPANY; FIREMAN’S FUND
INSURANCE COMPANY; KEMPER INSURANCE COMPANY; TWIN CITY
FIRE INSURANCE COMPANY; and FEDERAL INSURANCE COMPANY,
Defendants.
________________________________________________________________
Appeal from the Iowa District Court for Dubuque County, Michael J.
Shubatt, Judge.
An insurer appeals the district court’s grant of an insured’s motion to
dismiss declaratory judgment actions involving the interpretation of certain
insurance exclusions. AFFIRMED.
Robert V.P. Waterman Jr. and Abbey C. Furlong of Lane & Waterman,
L.L.P., Davenport, for appellants.
Les V. Reddick, Todd L. Stevenson, and Joseph P. Kane of Kane, Norby
& Reddick, P.C., Dubuque, for appellee.
Considered by Danilson, C.J., and Vogel and Potterfield, JJ.
2
VOGEL, Judge.
Travelers Property Casualty Company of America and St. Paul Fire &
Marine Insurance Company (Travelers) appeal the dismissal of their declaratory
judgment actions against Flexsteel Industries, Inc. Travelers asserts the district
court is permitted to revisit the choice-of-law ruling, which was previously
adjudicated in the first appeal, when new facts call for a different conclusion and
the district court abused its discretion in dismissing the actions. We affirm the
district court.
I. Background Facts and Proceedings.
This is the second time this case has been before this court. See
Travelers Prop. Cas. Co. of Am. v. Flexsteel Indus., Inc., No 12-2014, 2014 WL
1234248 (Iowa Ct. App. Mar. 26, 2014). The underlying facts of the case were
sufficiently laid out in our previous opinion:
Chair manufacturer Flexsteel Industries, Inc., which
maintains its headquarters in Dubuque, Iowa, was sued in Indiana
state court by individuals claiming to have been exposed to
chemicals released from two of its Indiana plants. Flexsteel carried
primary and excess liability insurance issued by a number of
insurance companies. Two of those companies, Travelers Property
Casualty Company of America and St. Paul Fire & Marine
Insurance Company, sued Flexsteel in Iowa, seeking a declaration
that pollution exclusion provisions eliminated coverage, including
any duty to defend or indemnify Flexsteel in connection with the
Indiana lawsuit. Other insurers entered the Iowa lawsuit and, in
time, sought the same relief as Travelers and St. Paul.
Meanwhile, Flexsteel filed a third-party insurance coverage
complaint in the Indiana action. The company also moved to
dismiss or stay the Iowa action pending resolution of the Indiana
litigation. Travelers and St. Paul, in turn, moved for summary
judgment in the Iowa action. They asserted that, under Iowa law,
the pollution exclusion barred coverage.
The Iowa district court denied Flexsteel’s motion to dismiss
or stay and granted Travelers’s and St. Paul’s motion for summary
judgment. Applying Iowa law, the court concluded Travelers and
3
St. Paul did not have a duty to defend Flexsteel in the Indiana
litigation.
The remaining insurers in the Iowa litigation filed their own
motions for summary judgment. Additionally, Travelers and St.
Paul filed a second declaratory judgment action in Iowa state court
to resolve coverage obligations in a separate environmental lawsuit
filed against Flexsteel in Indiana federal court. Flexsteel again
moved to dismiss or stay this action, and Travelers and St. Paul
again moved for summary judgment. The Iowa district court denied
the motion to dismiss or stay and granted the insurers’ summary
judgment motions in both suits. Invoking its reasoning in the first
summary judgment ruling, the court concluded “Iowa law applies to
all of the policies at issue and . . . the pollution exclusion provisions
have full force and effect.”[1]
Id. at *1.
In that appeal, this court affirmed the district court’s denial of Flexsteel’s
motion to dismiss based on comity grounds but reversed the district court’s grant
of summary judgment to Travelers after we concluded Indiana law, rather than
Iowa law, should apply to the insurance coverage dispute. We remanded the
case for further proceedings.
While the previous appeal was pending, the Indiana actions addressing
the same coverage disputes filed by Flexsteel were stayed. But upon the
issuance of procedendo following our previous appeal decision, the Indiana
courts lifted the stay and moved forward with the litigation in that state, asserting
1
As we noted in the previous appeal decision, at the heart of these various filings is the
question of which state’s law controls the interpretation of the pollution exclusion in the
insurance policies. Flexsteel, 2014 WL 1234248, at *3.
Iowa law holds that pollution exclusions like the ones contained in
Flexsteel’s policies unambiguously bar coverage for bodily injury or
property damage resulting from the release of pollutants. Indiana law, in
contrast, holds that language similar to the language contained in these
policies is ambiguous and is construed against the insurer and in favor of
coverage. Understandably, then, the insurers want Iowa law to apply,
while Flexsteel would prefer the application of Indiana law on the
coverage issue.
Id. (internal citations omitted).
4
it agreed with our court’s decision that Indiana law applied to the coverage
dispute.2
Upon remand, Flexsteel renewed its motion to dismiss in light of this
court’s choice-of-law ruling. Travelers resisted the motion to dismiss, and the
other insurers involved in the case joined in that resistance. Travelers also sent
Flexsteel requests for admission, which sought to develop more facts regarding
the choice-of-law issue, and in response, Flexsteel sought a protective order.
After a hearing, the district court granted Flexsteel’s motion to dismiss and ruled
the motion for a protective order was moot in light of the dismissal. Travelers
now appeals.3
II. Scope and Standard of Review.
Our review of the district court’s dismissal of an action based on comity
grounds is for an abuse of discretion. First Midwest Corp. v. Corp. Fin. Assocs.,
663 N.W.2d 888, 890 (Iowa 2003). Reversal may be warranted where the
discretionary action “is capriciously exercised or abused.” Id. at 891 (citation
omitted).
2
In between the district court’s summary judgment decision and our court’s opinion
reversing the district court’s summary judgment decision, Travelers, and the other
involved insurers, moved to dismiss or stay the Indiana actions based on principles of
comity and judicial efficiency because Travelers’s actions in Iowa was filed first,
approximately five days before Flexsteel filed its first action in Indiana. The Indiana
courts denied the motions to dismiss based on comity, concluding Travelers never
conveyed its coverage decision to Flexsteel prior to filing the Iowa declaratory judgment
actions and it only filed the first action in Iowa in the hopes of securing a more favorable
forum knowing its policy exclusion would likely not be honored in Indiana. In addition,
the Indiana court expressed its doubt that Iowa law would govern the coverage dispute,
noting, without deciding, that an Indiana court would be very likely to apply Indiana law
to the dispute.
3
Despite the fact the other insurance carriers involved in this case joined Travelers’s
resistance to Flexsteel’s motion to dismiss, there is no indication in the notice of appeal
or in the briefing that any of the other insurance carriers join Travelers in this appeal.
Thus, the dismissal order stands final as against these other insurance carriers.
5
III. Motion to Dismiss—Comity.
The doctrine of comity permits, but does not require, a court to stay or
dismiss a pending case where the same parties and the same subject matter is
pending in a court in another state. Id. at 890. As we stated in Flexsteel, 2014
WL 1234248, at *1, the relevant factors when ruling on such a motion are:
comity, the desirability of avoiding a multiplicity of forums, whether
the foreign litigation is at an advanced or preliminary stage, the
likelihood of obtaining complete relief in the foreign jurisdiction, and
the possibility that a judgment entered in the foreign jurisdiction will
give rise to collateral estoppel or will render the matter before the
court res judicata. Where a prior foreign action involves the same
parties and the same issues and is pending before a court capable
of doing prompt and complete justice, the court’s discretion may be
freely exercised in favor of a stay. First Midwest[, 663 N.W.2d at
891].
See also 1 Am. Jur. 2d Actions § 69 (2016).
Flexsteel filed the same motion to dismiss or stay the Iowa actions in
2011, and this motion was the subject of the first appeal. The motion requested
the Iowa action be stayed or dismissed without prejudice pending the resolution
of the Indiana actions. The district court denied the first motion, concluding the
first-filed status of the Iowa coverage actions carried with it “heavy weight” and
the other factors favored the Iowa actions as well. On appeal, we affirmed the
district court’s denial of the motion, noting the abuse of discretion standard and
the fact that the district court considered and applied all of the relevant factors
involved. See Flexsteel, 2014 WL 1234248, at *2 (finding the district court did
not rely exclusively on the “first-filed” status but instead went on to consider and
apply the other factors to reach its conclusion).
6
After our appeal was final, Flexsteel refiled the motion to dismiss,
attaching the original 2011 motion and asking that the actions be stayed or
dismissed for all the reasons stated in the new motion and in the 2011 motion.
Flexsteel noted several changes that had taken place since the first motion was
denied. Among those changes, our appeal decision had declared, based on the
summary judgment record, that Indiana law applied to the coverage question
because Indiana had the most significant relationship under the Restatement
(Second) Conflict of Laws’s applicable provisions. See id. at *6, *8. Flexsteel
claimed there was no longer a legitimate purpose for the Iowa courts to entertain
arguments related to Indiana law when the courts of Indiana would be deciding
the same issues involving the same parties in the separately filed actions. The
Indiana lawsuits, which had been stayed pending the outcome of the first appeal,
were moving forward with discovery. The Iowa actions were still, as the district
court called it, “in [their] infancy” because despite the past three years of litigation
Flexsteel had yet to file an answer. In addition, Flexsteel claimed dismissal of
the Iowa actions would avoid multiplicity of forums and all issues could be
resolved in Indiana, which meant there was no longer any need for the litigation
to remain in Iowa.
Travelers resisted the motion to dismiss, noting our court had already
affirmed the district court’s earlier denial of the motion to dismiss or stay the Iowa
actions. Travelers maintained Flexsteel did not offer any new or valid basis for
the court to deviate from its prior rulings. It noted the Iowa district court was
perfectly capable of applying Indiana law to the actions, if it were ultimately
determined Indiana law would apply. Travelers noted its intention to file
7
additional or renewed motions for summary judgment in Iowa upon the
completion of discovery. It asserted the proceedings in Iowa were far from over,
despite this court’s prior ruling, and the parties would likely find themselves again
before an Iowa appellate court before the coverage issue was finally resolved.
Finally, it asserted the Indiana actions were also in their infancy as there was no
substantial progress in that forum and the stay was still in place, pending a
hearing, after Travelers objected to the court’s decision to lift the stay.
While a hearing was pending on the motion to dismiss or stay the Iowa
actions, Travelers sent Flexsteel requests for admission seeking Flexsteel to
admit it maintained manufacturing and retail locations in other states around the
country. The information about Flexsteel’s operations throughout the United
States was obtained from Flexsteel’s annual reports filed with the Securities and
Exchange Commission. Travelers sought this discovery in an effort to file a
second summary judgment motion on the issue of choice of law because our
court had determined Indiana law applied based on the record in the first
summary judgment proceeding.4
In response to this discovery request, Flexsteel filed a motion for a
protective order, asserting it should be exempted from answering the discovery
because the issue of choice of law had already been finally adjudicated by this
4
Our court determined in the first appeal, based on an affidavit from Flexsteel, that the
company only had one location in Iowa and ten locations in Indiana, with no other
business locations identified. See Flexsteel, 2014 WL 1234248, at *5 (“According to the
summary judgment record, [Flexsteel’s] business operation was located at fixed plants
throughout one state—Indiana—and at one site in another state—Iowa. Accordingly,
[this] would suggest that the insured risk is principally located in a single state:
Indiana.”). However, we note in the district court’s summary judgment decision, the
district court found Flexsteel does business nationwide and the insurance policy
coverage territory included the entire United States and other specified locations.
8
court’s first opinion. Flexsteel asserted based on the doctrines of law of the case
and issue preclusion Travelers’s discovery requests were irrelevant.
A hearing on the motion to dismiss and the motion for a protective order
was conducted on October 16, 2014, where the court heard arguments from both
parties. Travelers noted its opposition to both motions by asserting the law-of-
the-case doctrine did not preclude the court from reaching a conclusion different
from this court’s decision on the choice-of-law question if new facts were
introduced that materially affected the issue. Thus, it was Travelers’s argument
that Flexsteel should be obligated to answer the discovery and that it intended,
with those answers, to file a second motion for summary judgment on the choice-
of-law issue because these new facts would alter the choice-of-law decision,
thereby justifying the case proceeding in Iowa. Following the hearing, Travelers
filed a written opposition to the motion for a protective order.
The district court granted the motion to dismiss and concluded, as a result,
the motion for a protective order was moot. In granting the motion to dismiss, the
district court noted it was capable of applying Indiana law, but the litigation was
further along in the Indiana courts and it was time for the litigation to move
forward in one location.
On appeal from that ruling, Travelers asserts the district court abused its
discretion in dismissing the actions because it had the erroneous belief that it
lacked the discretion to revisit the choice-of-law issue. It also claims that the
court’s belief that “[t]he landscape of the litigation ha[d] significantly changed”
was incorrect. While we agree with Travelers’s legal proposition that the choice-
of-law issue can, under certain circumstances, be revisited without offending the
9
law-of-the-case doctrine, we do not conclude the court abused its discretion in
dismissing the Iowa actions.5
A. Law of the Case. The law-of-the-case doctrine provides, “the legal
principles announced and the views expressed by a reviewing court in an
opinion, right or wrong, are binding throughout further progress of the case.” Lee
v. State, 874 N.W.2d 631, 646 (Iowa 2016). “The doctrine is based on a public
policy against reopening matters which have already been decided.” Bahl v. City
of Asbury, 725 N.W.2d 317, 321 (Iowa 2006). Issues decided on appeal cannot,
generally, be reheard, reconsidered, or relitigated; the appellate decision is final
as to all issues decided; and the trial court is obligated to follow that decision. Id.However, the doctrine has limitations and exceptions, one of which is “if the facts
before the court upon the second trial are materially different from those
appearing upon the first.” State v. Grosvenor, 402 N.W.2d 402, 405 (Iowa 1987);
see also United Fire & Cas. Co. v. Iowa Dist. Ct., 612 N.W.2d 101, 103 (Iowa
2000) (noting the exceptions to the doctrine include a legislative change in the
law, a clarification in controlling judicial decisions, and a different presentation of
facts on retrial or other proceeding following remand). This exception only
applies “where the right to a new trial or similar further proceeding survives an
appeal.” United Fire & Cas., 612 N.W.2d at 104 (noting the parties could not
relitigate an insurance policy exclusion upon remand because the issue of the
5
Flexsteel asserts Travelers did not preserve error on its choice-of-law argument
because the argument was not contained in Travelers’s written resistance to the motion
to dismiss. Upon our review of the record, including the transcript of the hearing, we
determined the issue was presented to the district court and it was implicitly ruled on
when the court granted the motion to dismiss. See Lamasters v. State, 821 N.W.2d 856,
864 (Iowa 2012) (“If the court’s ruling indicates that the court considered the issue and
necessarily ruled on it, even if the court’s reasoning is ‘incomplete or sparse,’ the issue
has been preserved.” (citation omitted)).
10
policy exclusion was “placed . . . squarely before the trial court” and “[t]here was
no further issue to be litigated on remand”).
We disagree with Travelers that the district court’s belief that it could not
revisit the choice-of-law issue following our remand led the district court to abuse
its discretion in dismissing the actions. In support of its appellate argument,
Travelers points to a footnote in the district court’s ruling, which stated:
The insurers continue to take issue with the Court of Appeals
ruling, arguing that the case was not decided on a full and fair
record. The Court of Appeals decided the case on the record
before it and denied rehearing. The Supreme Court denied further
review. The District Court’s sole responsibility is to proceed in
accordance with those decisions, which are clear and
unambiguous. Accordingly, the insurers’ argument as to whether
the appellate decision was proper is immaterial.
Travelers claims the reference the court made to its “sole responsibility” to
proceed in accordance with the clear and unambiguous appellate court decision,
shows the district court thought it did not have a choice except to apply Indiana
law to the controversy. While the choice-of-law issue had been decided in
Flexsteel, 2014 WL 1234248, at *6, *8, that decision was not controlling as to the
question of whether to dismiss the case based on comity principles in favor of the
Indiana actions. The district court did not dismiss the case in favor of Indiana
because it could not apply Indiana law. To the contrary, the district court
specifically found it was fully capable of applying Indiana law to the facts of the
case. The district court, in the context of the motion to dismiss, was not asked to
rule whether it had the ability to revisit the choice-of-law question; it was asked to
dismiss the case on comity grounds, and choice of law is not a factor in the
comity analysis. See First Midwest, 663 N.W.2d at 891. So the next question is
11
whether the court abused its discretion in considering and applying the comity
factors.
B. District Court’s Discretion. A review of the district court’s ruling
shows it carefully considered each of the factors that are to be analyzed when a
court exercises its discretion on comity grounds. The district court noted:
The landscape of this litigation has changed significantly
since November of 2011, when the Court ruled on the first motion
to dismiss. At that time, both the Iowa and Indiana litigations were
relatively new, and it had not been decided whether Iowa or Indiana
law would govern the dispute. The Court gave heavy weight to the
fact that the insurers had chosen their forum and filed their action
before Flexsteel raised the issue in the Indiana litigation. Several
years have passed, and the Indiana litigation is no longer in its
infancy, whereas the Iowa litigation is. Accordingly, at this stage
the Court is inclined to give less weight to the order of filing and
more weight to the goal of avoiding a multiplicity of forums and the
procedural confusion and inefficiency resulting therefrom.
The Court of Appeals has determined that Indiana law shall
govern this dispute. In reaching this decision, the Court of Appeals
determined that the dispute had a more significant connection with
the State of Indiana than it did with the State of Iowa. While this
Court is capable of applying Indiana law, the Court of Appeals
ruling on this point is another indication that the dispute more
properly belongs in an Indiana Court, especially after taking into
account the factors enumerated above.
In the end analysis, this litigation has been churning in the
Courts of Indiana and Iowa for more than three years. During that
time, the parties have had to litigate in both states, incurring
significant expense along the way without any certainty as to where
or how the dispute would be resolved. The dispute now has more
significant connections to the State of Indiana, where the litigation
is further along than it is here, and the factors on which the Court
based its earlier rulings no longer carry the weight they once did. It
is time for this dispute to move forward in a single forum, and it is
appropriate that it move forward in the State of Indiana.
The district court was cognizant of the multiplicity of forums the parties
had already had to endure over the previous three years, forcing the parties to
incur significant expense and uncertainty. In the district court’s assessment, the
12
need for efficiency in the litigation and the avoidance of procedural confusion
now outweighed the first-filed factor, which it had previously accorded heavy
weight. The court noted that by the time of the second motion to dismiss in Iowa,
the Indiana actions had moved into the discovery phase, while the Iowa actions
were still in their “infancy.” Finally, it concluded Indiana had a more significant
connection to the dispute.
Like a panel of this court in Flexsteel, 2014 WL 1234248, at *3, we discern
no abuse of discretion in the district court’s ruling on the motion to dismiss on
comity grounds.6 To the extent Travelers wishes to revisit the choice-of-law
issue in light of the new facts it sought to develop upon remand, this matter can
be addressed in the Indiana courts. In the event Iowa law is held to apply at that
point, Indiana courts are fully capable of applying such law, just as Iowa is
capable of applying Indiana law.
6
We note, consistent with Flexsteel’s request for relief in the 2011 motion to dismiss,
this dismissal was without prejudice. See Hammond v. Fla. Fin. Corp., 695 N.W.2d 1, 8
(Iowa 2005) (noting a dismissal with prejudice is a means of declaring there has been an
adjudication of the merits of the case); see also Am. Econ. Ins. Co. v. Felts, 759 N.E.2d
649, 661 (Ind. Ct. App. 2001) (“Inasmuch as dismissal based on comity is not a
determination on the merits, we conclude that the dismissal should have been without
prejudice.”); Exxon Research & Eng’g Co. v. Indus. Risk Insurers, 775 A.2d 601, 619
(N.J. Super. Ct. App. Div. 2001) (“[T]he dismissal of the complaint predicated on the
application of comity was not an adjudication on the merits.”).
13
IV. Conclusion.
Because we conclude the district court did not abuse its discretion in
dismissing the Iowa actions on comity grounds, we affirm.
AFFIRMED.