Court Opinion

ID: 4025788
Source: CourtListenerOpinion
Date Created: 2016-08-17 15:05:59.411663+00
Date Added: 2024-06-11T14:46:14.741596
License: Public Domain

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.