Schexnayder v. Avondale Industries, Inc.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

DENIS SCHEXNAYDER, JR. CIVIL ACTION

VERSUS NO: 20-775

HUNTINGTON INGALLS INC. ET AL. SECTION: “H”

ORDER

Before the Court is Defendants Albert Bossier, Jr. and Huntington

Ingalls Inc.’s Notice of and Motion to Enforce Statutory Stay (Doc. 201). For

the following reasons, the Motion is GRANTED.

BACKGROUND

In this action, Plaintiff Denis Schexnayder, Jr. brings claims against

multiple defendants arising out of his alleged asbestos exposure. On April 5,

2021, this Court received notice that one of the named defendants, Lamorak

Insurance Company (“Lamorak”), had been placed into liquidation by the

Pennsylvania Insurance Commissioner and that a Pennsylvania court had

issued a stay as to all claims against Lamorak.1 This Court thereafter issued

an Order staying all proceedings against Lamorak.2

Now before the Court is Defendants Albert Bossier, Jr. and Huntington

Ingalls Inc.’s (collectively “the Avondale Interests”) Notice of and Motion to

1 See Doc. 137-1. The Pennsylvania state court declared Bedivere Insurance Company

insolvent. See Doc. 201-3 at 1. As Lamorak was merged with and into Bedevire, the

Pennsylvania state court’s Order of Liquidation applied equally to Lamorak. See id. at 8.

2 Doc. 137.

Enforce Statutory Stay.3 In the Motion, the Avondale Interests assert that they

are insureds of Lamorak and that, in accordance with Louisiana law,

Lamorak’s insolvency dictates the staying of all proceedings in this matter—

not just those against Lamorak. Plaintiff opposes the Motion.

LAW AND ANALYSIS

In their Motion, the Avondale Interests argue that this matter should be

stayed in accordance with the Louisiana Insurance Guaranty Association Law

(“LIGAL”).4 The purpose of LIGAL, in relevant part, “is to provide for the

payment of covered claims under certain insurance policies with a minimum

delay and a minimum financial loss to claimants or policyholders due to the

insolvency of an insurer.”5 In conformity with this purpose, LIGAL creates the

Louisiana Insurance Guaranty Association (“LIGA”)—“a nonprofit,

unincorporated creation of state law, designed to reinsure the obligations of

insolvent insurers doing business in Louisiana.”6 “Under the provisions of

[LIGAL], when a claim is made against an insolvent insurer, LIGA steps into

the shoes of the insolvent insurer.”7 To allow LIGA “adequate opportunity to

review claims against the failed insurance company and enter a timely

defense,”8 Louisiana Revised Statute § 22:2068(A) provides:

All proceedings in which the insolvent insurer is a party or is

obligated to defend a party in any court in this state shall be stayed

for six months and such additional time as may be determined by

3 Since the filing of this Motion, Plaintiff has voluntarily dismissed his claims against Albert

Bossier, Jr. See Doc. 211.

4 LA. REV. STAT. § 22:051, et seq.

5 LA. REV. STAT. § 22:2052.

6 Sifers v. Gen. Marine Catering Co., 892 F.2d 386, 388 (5th Cir.), opinion modified on

reh’g, 897 F.2d 1288 (5th Cir. 1990).

7 Morris v. E. Baton Rouge Par. Sch. Bd., 826 So. 2d 46, 51 (La. App. 1 Cir. 2002).

8 Webb v. Blaylock, 590 So. 2d 643, 645 (La. App. 3 Cir. 1991), writ denied, 591 So. 2d 700

(La. 1992). See JAMES NORFLEET v. CBS CORPORATION., ET AL., No. CV 21-759, 2021

WL 2457141, at *2 (E.D. La. June 16, 2021).

the court from the date the insolvency is determined to permit

proper defense by the association of all pending causes of action.

Here, the Avondale Interests argue that, in accordance with Louisiana Revised

Statute § 22:2068(A), this matter should be stayed for at least six months from

the date of Lamorak’s insolvency, or until September 11, 2021, because an

insolvent insurer—Lamorak—is both a party in this action and obligated to

defend parties in this action—the Avondale Interests. In response, Plaintiff

argues that, because § 22:2068(A) is procedural and not substantive, this Court

is not bound to apply the statute in its application of the Erie doctrine.9

As a preliminary matter, the Court notes that many other sections of the

Eastern District of Louisiana have already analyzed the effect that Lamorak’s

insolvency should have upon their respective proceedings.10 Of these cases, this

Court finds the analyses in Gooding v. Liberty Mutual Insurance Company and

Cortez v. Lamorak Insurance Co. particularly noteworthy.11 In both Gooding

and Cortez, the court declined to directly address whether it was bound by

Louisiana Revised Statute § 22:2068(A) and instead looked to the purpose of

the statute while exercising its inherent discretion to stay all proceedings in

the case.12 Finding these cases instructive, this Court too now invokes its

9 See Erie R. Co. v. Tompkins, 304 U.S. 64 (1938). “Under the Erie doctrine, federal courts

sitting in diversity apply state substantive law and federal procedural law.” Gasperini v. Ctr.

for Humans., Inc., 518 U.S. 415, 427 (1996).

10 See Doc. 182, Broussard v. Huntington Ingalls, Inc. et al., No. 2:20-cv-00836-MVL-MBN

(E.D. La. 5/25/21) (Lemmon, J) (granting stay); Doc. 68, Waguespack v. Avondale Industries,

et al., No. 2:20-cv-01986-JCZ-DPC (Zainey, J) (granting stay); Gooding v. Liberty Mut. Ins.

Co., No. CV 20-1133, 2021 WL 2002463 (E.D. La. May 19, 2021) (Brown, J) (granting stay);

Cortez v. Lamorak Ins. Co., No. CV 20-2389, 2021 WL 2018073 (E.D. La. May 20, 2021)

(Vance, J) (granting stay).

11 See Gooding, 2021 WL 2002463 (Brown, J) (granting Lamorak’s Motion to Stay and denying

Plaintiff’s Motion to Sever Claims Against Lamorak); Cortez, 2021 WL 2018073, at *3–4

(Vance, J) (grating Lamorak’s Motion to Stay and invoking the court’s “inherent power to

stay a proceeding” to stay the matter as to all parties).

12 See id.

discretionary authority to stay cases and finds that a brief stay of all claims is

proper.

“[T]he power to stay proceedings is incidental to the power inherent in

every court to control the disposition of the causes on its docket with economy

of time and effort for itself, for counsel, and for litigants.”13 However, a court’s

discretion to stay proceedings is “not ‘unbounded.’”14 Rather, the Supreme

Court in Landis v. North American Co. has instructed courts to “weigh

competing interests and maintain an even balance.”15 In accordance with

Landis, courts within the Eastern District of Louisiana have considered the

following factors: “(1) any hardship imposed on the moving party by proceeding

with the action, (2) any prejudice to the non-moving party if the stay is granted,

and (3) the interests of judicial economy.”16

Here, the Court finds that the balance of factors weigh in favor of

granting the requested six-month stay. First, in considering the hardship to

the moving parties, the Court notes that Lamorak was providing defense to the

Avondale Interests and other defendants in this matter.17 As the pretrial

conference and trial in this matter are currently set for August 12, 2021 and

September 13, 2021, respectively, the Court finds that declining the requested

stay would prejudice LIGA and the Lamorak-insured parties in their ability to

13 Landis v. N. Am. Co., 299 U.S. 248, 254 (1936).

14 In re Beebe, 56 F.3d 1384 (5th Cir. 1995) (quoting Wedgeworth v. Fibreboard Corp., 706

F.2d 541, 545 (5th Cir. 1983)).

15 Id. at 254–55.

16 See Cortez v. Lamorak Ins. Co., No. CV 20-2389, 2021 WL 2018073, at *1 (E.D. La. May

20, 2021) (citing Maples v. Donzinger, No. 13-223, 2014 WL 688965, at *2 (E.D. La. Feb. 21,

2014); Strong ex rel. Tidewater, Inc. v. Taylor, No. 11-392, 2013 WL 81889, at *2 (E.D. La.

Mar. 5, 2013); Collins v. Angiodynamics, Inc., No. 13-5431, 2013 WL 5781708, at *2 (E.D. La.

Oct. 15, 2013)).

17 These “other defendants” are the McCarty Corporation (“McCarty”) and Eagle, Inc.

(“Eagle”). McCarty and Eagle have filed a separate Motion to Enforce Stay in this matter on

the same grounds. The McCarty and Eagle Motion, however, is not yet under submission. See

Doc. 210.

adequately and timely prepare their defenses. As to the second factor, Plaintiff

argues that he would be prejudiced in “how long he will have to await justice.”18

Although Plaintiff’s concern is legitimate, the Court does not find the proposed

stay unduly burdensome—particularly in light of the number of parties in this

matter impacted by Lamork’s insolvency. As to the third factor, the Court finds

that staying the matter as to some, but not all, of the defendants would result

in duplicative work for both the parties and the Court.19 Accordingly, it is in

the interest of judicial efficiency to stay all proceedings in this case.

In sum, this Court finds that the Avondale Interests have sufficiently

demonstrated the need for a brief stay in this matter. Moreover, the Court finds

that such a stay is in line with Fifth Circuit precedent cautioning courts from

interfering in state law regulatory schemes governing insurance companies

and related insolvencies.20

CONCLUSION

For the foregoing reasons, Defendants’ Motion is GRANTED.

IT IS FURTHER ORDERED that this matter is hereby STAYED

AND ADMINISTRATIVELY CLOSED until September 12, 2021.

IT IS FURTHER ORDERED that a telephone status conference is

SET for September 16, 2021 at 1:00 p.m.

18 Doc. 20-775.

19 See Gooding, 2021 WL 2002463, at *6 (declining to sever claims against Lamorak as doing

so would run the risk of inconsistent jury verdicts and increased cost).

20 See Clark v. Fitzgibbons, 105 F.3d 1049, 1052 (5th Cir. 1997) (“Federal law consigns to the

states the primary responsibility for regulating the insurance industry.”); Anshutz v. J. Ray

McDermott Co., 642 F.2d 94, 95 (5th Cir. 1981) (“Recognition by this Court of the effectuation

of the liquidation of this insurance company by the State of Illinois is in accordance with

federal policy which directs that the control over the insurance business remain in the hands

of the states.”).

New Orleans, Louisiana this 30th day of June, 2021.

TRICHE 44

UNITED STATES DISTRICT JUDGE