Opinion ID: 714797
Heading Depth: 2
Heading Rank: 1

Heading: Abstention on the Maryland Set-Off Issue

Text: 36 At the outset, we note our rejection of the appellate position of the Maryland Plaintiffs that the Trial Courts did not in fact abstain from deciding an issue but merely granted them the relief they had sought by simply deciding that Maryland law applies. The question presented to the Trial Courts was not whether Maryland law would apply to Maryland cases but was rather which of the various Maryland contribution and set-off rules should be used. The Settlement Agreement itself specifically required the Trial Courts to choose the appropriate set-off rules that should be developed with respect to Manville or the Trust in connection with claims arising under Maryland law. (Settlement Agreement at 9.) The Maryland Plaintiffs argued below that since Maryland generally provides that, in the absence of a contrary agreement by the plaintiff, judgments against nonsettling parties are to be reduced only by the amount of consideration in fact paid for the release, the Trial Courts should order that Maryland be treated as a pro tanto state. The Codefendant Manufacturers and the Manville Distributors argued that since Maryland also permits pro rata releases and it had been the Trust's practice to receive pro rata releases, Maryland should be treated as a pro rata state. The Trial Courts recognized this dispute in their Amended Memorandum: 37 The Plaintiff Class and Maryland Plaintiffs believe that Codefendants and Distributors should bear any shortfall between Manville's pro rata share and what plaintiffs in fact receive from the Trust. The Codefendants and the Distributors assert that, under Maryland law, the plaintiffs would bear the full burden. 38 Findley III, 878 F.Supp. at 550-51. 39 In dealing with the issue, the Trial Courts stated that their decision to leave the issue for resolution by the Maryland courts was an act of [p]rudence, id. at 556, motivated by deference to state courts on state-law questions, id. at 481. We conclude that by refusing to resolve the disagreement as to which Maryland principles should be applied in the context of the Settlement and the TDP, the Trial Courts abstained from deciding the issue left unresolved by the Settlement. 40 We also conclude that abstention was inappropriate. The abstention doctrine comprises four extraordinary and narrow exception[s] to a federal court's duty to exercise jurisdiction. Colorado River Water Conservation District v. United States, 424 U.S. 800, 813, 96 S.Ct. 1236, 1244, 47 L.Ed.2d 483 (1976) (Colorado River ) (internal quotation marks omitted); see also Bethphage Lutheran Service, Inc. v. Weicker, 965 F.2d 1239, 1242 & n. 2 (2d Cir.1992). Except in actions for declaratory judgment, in which a court has broader discretion to abstain, see generally Wilton v. Seven Falls Co., --- U.S. ----, ----, 115 S.Ct. 2137, 2144, 132 L.Ed.2d 214 (1995), a district court's decision to abstain is appropriate only in order (1) to avoid a federal constitutional issue where that issue may be mooted or altered by a state-court ruling on the state-law question, see Railroad Commission of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941); or (2) to avoid hindrance of such state functions as criminal prosecutions or the collection of state taxes, see Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971); or (3) to conserve federal judicial resources in those exceptional circumstances where there is concurrent state-court litigation whose resolution could result in comprehensive disposition of litigation, Colorado River, 424 U.S. at 813, 817, 96 S.Ct. at 1244, 1246 (internal quotation marks omitted); or (4) to defer to state resolution of difficult state-law questions that involve local regulation and administration or important matters of local public policy, see, e.g., Kaiser Steel Corp. v. W.S. Ranch Co., 391 U.S. 593, 88 S.Ct. 1753, 20 L.Ed.2d 835 (1968) (per curiam); Louisiana Power & Light Co. v. City of Thibodaux, 360 U.S. 25, 79 S.Ct. 1070, 3 L.Ed.2d 1058 (1959); Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943). But for these excepted areas, the federal courts have a virtually unflagging obligation ... to exercise the jurisdiction given them. Colorado River, 424 U.S. at 817, 96 S.Ct. at 1246. 41 Although the standard of review of a district court's decision to abstain is often described as an abuse-of-discretion standard, see, e.g., Bethphage Lutheran Service, Inc. v. Weicker, 965 F.2d at 1244, we have noted that in the abstention area that standard of review is somewhat rigorous, id. Because we are considering an exception to a court's normal duty to adjudicate a controversy properly before it, the district court's  'discretion must be exercised within the narrow and specific limits prescribed by the particular abstention doctrine involved.... Thus, ... there is little or no discretion to abstain in a case which does not meet traditional abstention requirements.'  Id. at 1244-45 (quoting Mobil Oil Corp. v. City of Long Beach, 772 F.2d 534, 540 (9th Cir.1985) (inner internal quotation marks omitted)). The underlying legal questions ... are subject to plenary review. Sheerbonnet, Ltd. v. American Express Bank Ltd., 17 F.3d 46, 48 (2d Cir.), cert. denied, --- U.S. ----, 115 S.Ct. 67, 130 L.Ed.2d 23 (1994). 42 In the present case, the only potentially applicable abstention category was the fourth listed above, commonly referred to as Burford abstention, as to which a federal district court may properly decline to decide difficult questions of state law bearing on substantial public policy matters whose importance transcends the result in any particular case. For example, in Burford v. Sun Oil Co., the Supreme Court ruled that abstention was appropriate because federal review of an order of the Texas Railroad Commission would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial state concern, to wit, the conservation of oil and gas in Texas. See 319 U.S. at 327, 63 S.Ct. at 1104. In Louisiana Power & Light Co. v. City of Thibodaux, the Supreme Court affirmed the decision of the district court to stay federal proceedings to allow Louisiana's highest court an opportunity to rule on a disputed question as to the meaning of a state statute governing the state's power of eminent domain. The Court reasoned that such a stay was warranted by the special and peculiar nature of eminent domain proceedings. 360 U.S. at 28, 79 S.Ct. at 1072. Abstention in that case avoid[ed] the hazards of serious disruption by federal courts of state government or needless friction between state and federal authorities that could arise when a federal court decided issues that normally turn on legislation with much local variation interpreted in local settings. Id. Similarly, in Kaiser Steel Corp. v. W.S. Ranch Co., the Court held that [s]ound judicial administration require[d] abstention where a state-law water-use issue was of vital concern to the state, and a declaratory judgment action was pending in state court. 391 U.S. at 594, 88 S.Ct. at 1754. See also Corcoran v. Ardra Insurance Co., 842 F.2d 31, 37 (2d Cir.1988) (abstention appropriate where there is a novel question implicating a state's complex administrative and judicial system for regulating and liquidating domestic insurance companies). 43 We cannot see a valid ground for Burford abstention in the present case, for we have been pointed to no area of state regulation or local public policy whose importance would transcend that of any given asbestos-related settlement. States commonly have a policy interest in seeing both that all claimants are fully compensated for injuries caused them by tortfeasors and that all tortfeasors bear their fair share of the expense of satisfying those claims. The Trial Courts did not suggest that any special policy or state regulatory system would be affected by their resolution as to which of Maryland's set-off rules should be applied in connection with this Settlement. They cited only the fact that state law is unclear where achievement of the ideal resolution is prevented by one tortfeasor's bankruptcy. Nonetheless, where the state law whose interpretation in such common matters is unclear, difficulty of decision is an insufficient ground for federal abstention. As the Supreme Court observed in Meredith v. Winter Haven, 320 U.S. 228, 64 S.Ct. 7, 88 L.Ed. 9 (1943), 44 diversity jurisdiction was not conferred for the benefit of the federal courts or to serve their convenience. Its purpose was generally to afford to suitors an opportunity in such cases, at their option, to assert their rights in the federal rather than in the state courts. In the absence of some recognized public policy or defined principle guiding the exercise of the jurisdiction conferred ... it has from the first been deemed to be the duty of the federal courts, if their jurisdiction is properly invoked, to decide questions of state law whenever necessary to the rendition of a judgment. 45 Id. at 234, 64 S.Ct. at 10. If mere difficulty of decision is not a ground for abstention where the district court's subject matter jurisdiction is based solely on diversity of citizenship, far less can it be a ground for abstention where, as here, jurisdiction is also based on the bankruptcy laws. 46 Where none of the abstention exceptions is applicable, if the highest court of the state has yet to rule on a controlling question of state law, or if the application of state law is uncertain, it is the task of the federal court to carefully ... predict how the highest court of the forum state would resolve the uncertainty. Bensmiller v. E.I. DuPont de Nemours & Co., 47 F.3d 79, 82 (2d Cir.1995) (internal quotation marks omitted); see also Travelers Insurance Co. v. 633 Third Associates, 14 F.3d 114, 119 (2d Cir.1994); Calvin Klein, Ltd. v. Trylon Trucking Corp., 892 F.2d 191, 195 (2d Cir.1989). The district court faced with unclear state law is required to determine what it believes [the] state's highest court would find if the issue were before it, Plummer v. Lederle Laboratories, 819 F.2d 349, 355 (2d Cir.) cert. denied, 484 U.S. 898, 108 S.Ct. 232, 98 L.Ed.2d 191 (1987), and to apply that determination to the facts of the federal proceeding. 47 In sum, a district court may not properly abstain merely because the state-law question is difficult or the answer is uncertain. We conclude that the Trial Courts abused their discretion in abstaining from deciding how Maryland set-off principles are to be applied in the context of the present Settlement. We therefore remand to the district courts for a determination of that issue. 48 In remanding, while we express no ultimate opinion as to the proper resolution of how Maryland's statutory scheme should be applied to the claims against the Trust, we are constrained to note our disagreement with the Manville Distributors' contention that Maryland law would clearly require a pro rata release where a plaintiff settles with a joint tortfeasor that is unable to pay its full share of contribution. Under the Maryland Uniform Contribution Among Tort-Feasors Act, Md.Ann.Code art. 50, §§ 16-24 (1957) (Uniform Act), a nonsettling joint tortfeasor is entitled to contribution from a settling joint tortfeasor when the nonsettling party has paid more than its pro rata share of the judgment. See id. § 17. However, the statute also provides that unless a release given by an injured party upon settlement with one joint tortfeasor provides for a reduction in an amount greater than the consideration paid, the release reduces the claim against the other tort-feasors in the amount of the consideration paid for the release. Id. § 19 (emphasis added). While the Manville Distributors are thus correct that the primary purpose [of the Uniform Act] was to create a right of contribution among joint tortfeasors, which did not exist at common law, Collier v. Eagle-Picher Industries, Inc., 86 Md.App. 38, 56, 585 A.2d 256, 265 (Ct.Spec.App.), cert. denied, 323 Md. 33, 591 A.2d 249 (1991) (internal quotation marks omitted), the plain language of the statute provides only for a pro tanto reduction in liability in the absence of an express agreement to the contrary. Whether and to what extent in Maryland cases it is the plaintiff or the defendant who will be required to bear the shortfall due to the Trust's limited assets is unclear but must be resolved by the Trial Courts on remand.