Opinion

Dempster v. Lamorak Insurance Company

Court
District Court, E.D. Louisiana
Filed
Jul 13, 2021
Cited by
0 cases
Authority
More cited than 22.3%

The opinion

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

CALLEN DEMPSTER, ET AL. CIVIL ACTION

VERSUS CASE NO. 20-95

LAMORAK INSURANCE CO., ET AL. SECTION: “G” (1)

ORDER AND REASONS

In this litigation, Plaintiffs Tanna Faye Dempster, Steven Louis Dempster, Janet Dempster

Martinez, Marla Dempster Loupe, Callen Dempster Jr., Annette Dempster Glad, and Barnett

Dempster (collectively, “Plaintiffs”)1 allege that Callen L. Dempster (“Mr. Dempster”) was

exposed to asbestos and asbestos-containing products that were designed, manufactured, sold,

and/or supplied by a number of Defendant companies while Mr. Dempster was employed by

Defendant Huntington Ingalls Incorporated (f/k/a Northrop Grumman Shipbuilding, Inc., f/k/a

Northrop Grumman Ship Systems, Inc., f/k/a Avondale Industries, Inc., and f/k/a Avondale

Shipyards, Inc.) (“Avondale”).2 Pending before the Court is a “Motion to Enforce Stay and Notice

of Liquidation and Statutory Stay” filed by Defendant Lamorak Insurance Company

1 On August 6, 2020, Tanna Faye Dempster, Steven Louis Dempster, Janet Dempster Martinez, Marla

Dempster Loupe, Callen Louis Dempster, Jr., Annette Ruth Dempster Glad, and Barnett Lynn Dempster were

substituted as plaintiffs for Louise Ella Simon Dempster. Rec. Doc. 239.

2 See Rec. Doc. 1-2; Rec. Doc. 1-8. In particular, Plaintiffs bring claims against Lamorak Insurance

Company, Huntington Ingalls Inc., Albert Bossier, Jr., J. Melton Garrett, Eagle, Inc., Bayer Cropscience, Inc., Foster-

Wheeler LLC, General Electric Co., Hopeman Brothers, Inc., McCarty Corporation, Taylor-Seidenbach, Inc., CBS

Corporation, Uniroyal, Inc., International Paper Company, Houston General Insurance Company, Berkshire Hathaway

Specialty Insurance Company, Northwest Insurance Company, United Stated Fidelity and Guaranty Company, Fist

State Insurance Company, The American Insurance Company, Louisiana Insurance Guaranty Association, and the

Traveler’s Indemnity Company. Rec Doc. 1-8 at 2–3.

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(“Lamorak”).3 Considering the motion, the memoranda in support and opposition, the record, and

the applicable law, the Court stays and administratively closes the instant action and sets a status

conference for September 15, 2021.

I. Background

In this litigation, Plaintiffs allege that Mr. Dempster was employed by Avondale from 1962

to 1994.4 During that time, Plaintiffs aver that Mr. Dempster was exposed to asbestos and

asbestos-containing products in various locations and work sites, resulting in Mr. Dempster

breathing in asbestos fibers and later developing asbestos-related cancer.5 Plaintiffs assert strict

liability and negligence claims against various Defendants.6

Mr. Dempster filed a “Petition for Damages” in the Civil District Court for the Parish of

Orleans, State of Louisiana, on March 14, 2018.7 Defendants Huntington Ingalls Incorporated and

Albert Bossier, Jr. (the “Avondale Interests”), J. Melton Garret, and Lamorak Insurance Company

removed the case to the United States District Court for the Eastern District of Louisiana for the

first time on June 21, 2018.8 On January 7, 2019, this Court remanded the case to the Civil District

Court for the Parish of Orleans.9

Mr. Dempster passed away on November 24, 2018, and a First Supplemental and

3 Rec. Doc. 310.

4 Rec. Doc. 1-2 at 5.

5 Id.

6 Id. at 7–8.

7 Rec. Doc. 1-2.

8 Case No. 18-6158, Rec. Doc. 1 at 2.

9 Case No. 18-6158, Rec. Doc. 89.

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Amending Petition for Damages was filed in state court substituting Mr. Dempster’s heirs as

Plaintiffs on January 17, 2019.10 Trial was scheduled to begin before the state trial court on

January 13, 2020.11 However, on January 9, 2020, Avondale removed the case to the United States

District Court for the Eastern District of Louisiana for a second time.12 On January 28, 2020, the

Court denied the motion to remand, finding that this case was properly removed to this Court under

the federal officer removal statute.13

On May 5, 2021, Lamorak filed the instant “Motion to Enforce Stay and Notice of

Liquidation and Statutory Stay.”14 The Avondale Interests adopted the motion to stay.15 On May

25, 2021, Plaintiffs filed an opposition.16 On May 27, 2021, with leave of Court, Lamorak filed a

reply brief in further support of the motion to stay.17

II. Parties’ Arguments

A. Lamorak’s Arguments in Support of the Motion to Stay

In the instant motion, Lamorak requests a stay of the instant case and a continuance of the

October 25, 2021 trial date.18 Lamorak raises three arguments in favor of a stay. First, Lamorak

10 Rec. Doc. 1-8.

11 Rec. Doc. 1-12.

12 Rec. Doc. 1.

13 Rec. Doc. 17.

14 Rec. Doc. 310.

15 Rec. Doc. 314.

16 Rec. Doc. 317.

17 Rec. Doc. 320.

18 Rec. Doc. 310-2 at 7.

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asserts that it has been declared insolvent and placed into liquidation.19 Specifically, Lamorak

avers that Bedivere Insurance Company (“Bedivere”), a foreign insurance company that includes

by merger Lamorak, was declared insolvent and placed into liquidation on March 11, 2021 by

Judge Brobson in the Commonwealth Court of Pennsylvania.20 Lamorak points to the Liquidation

Order issued by the Commonwealth Court of Pennsylvania, which states:

All above-enumerated actions currently pending against Bedivere in the courts of

the Commonwealth of Pennsylvania or elsewhere are hereby stayed; relief sought

in these actions shall be pursued by filing a proof of claim against the estate of

Bedivere pursuant to Section 538 of Article V, 40 P.S. § 221.38.21

Lamorak now urges the Court to enforce the permanent stay of claims against Lamorak instituted

by the Commonwealth Court of Pennsylvania.22

Second, Lamorak argues that under Louisiana Revised Statute § 22:2068 (“La. R.S.

22:2068”), claims against Lamorak and any party Lamorak is obligated to defend are subject to an

automatic statutory stay of claims.23 Lamorak contends that it is an “insolvent insurer” under the

terms of Louisiana Revised Statute § 22:2055(7), the Louisiana Insurance Guaranty Association

Law.24 Therefore, Lamorak asserts that the Louisiana Insurance Guaranty Association (“LIGA”)

“has all rights, duties and obligations of the insolvent insurer, herein Bedivere Insurance

Company/Lamorak, as if the insurer had not become insolvent, including the obligation to defend

19 Id. at 1.

20 Id.

21 Id. at 2.

22 Id.

23 Id.

24 Id. at 3.

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the insured(s).”25 Lamorak claims that as an insolvent insurer, La. R.S. 22:2068 mandates a stay

of claims against Lamorak and any party it is obliged to defend, including the Avondale Interests,

Eagle, Inc., and McCarty Corporation, for a period of six months or until September 11, 2021.26

Third, and finally, Lamorak argues that this Court “has inherent authority to stay

proceedings to control the disposition of the causes on its docket with economy of time and effort

for itself, for counsel, and for litigants.”27 Lamorak contends that a “stay of all proceedings is

justified under the court’s inherent authority.”28

The Avondale Interests adopted the arguments set forth in the motion to stay.29

B. Plaintiffs’ Arguments in Opposition to the Motion to Stay

Plaintiffs contend that a stay of this matter is not warranted given that deadlines for

discovery and the filing of dispositive motions has passed and therefore, “there is no risk of

discovery occurring without LIGA being able to participate.”30

Plaintiffs further claim that La. R.S. 22:2068 does not apply to this case because it is a state

procedural law.31 Even if the Louisiana statute is applied, however, Plaintiffs argue that it should

apply only to stay claims against Lamorak, not the entire matter.32 Plaintiffs contend that in the

25 Id.

26 Id. at 2–7.

27 Id. at 7 (internal quotation marks omitted).

28 Id.

29 Rec. Doc. 314.

30 Rec. Doc. 317 at 4.

31 Id.

32 Id. at 7.

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event a stay is issued until September 11, 2021, it should not affect the October 25, 2021 trial date

in this matter.33

C. Lamorak’s Arguments in Further Support of the Motion to Stay

In reply, Lamorak reasserts its argument that a stay of Plaintiffs’ claims against Lamorak

is “clearly necessary and authorized by law.”34 In addition to a stay, Lamorak argues that this

Court should continue the October 25, 2021 trial date in this matter.35 Lamorak claims that

because the proposed stay would expire a little more than a month prior to trial, it “is in the interests

of justice” to continue the trial to “protect the rights of the parties affected by the insolvency of

Lamorak.”36

Lamorak further argues that LIGA does not simply “step[] into the shoes” of Lamorak, but

instead has “additional limitations and defenses” that Lamorak did not have.37 Lamorak contends

that La. R.S. 22:2068 is “not merely a procedural stay” but instead “provides substantive rights to

insureds who are adversely affected by the insolvency of their insurer.”38 Lamorak claims that the

automatic stay under La. R.S. 22:2068 “prevents claims proceeding for a short period of time

against insureds who will be prejudiced by not having insurance to pay for the defense of the suit”

and also “provides the time necessary for LIGA to evaluate its obligations.”39

33 Id. at 2.

34 Rec. Doc. 320 at 1.

35 Id.

36 Id.

37 Id. at 2–3.

38 Id. at 3.

39 Id. at 4.

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III. Legal Standard for a Motion to Stay

In Landis v. North American Co., the Supreme Court recognized that “the 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.”40

The Supreme Court noted that “how this can best be done calls for the exercise of judgment, which

must weigh competing interests and maintain an even balance.”41 Therefore, a district court has

“discretionary power to stay proceedings before it in the control of its docket and in the interests

of justice.”42 Furthermore, a district court may exercise this discretionary power sua sponte.43

IV. Analysis

Lamorak moves the Court to stay all proceedings in the instant matter due to Lamorak

being declared insolvent and placed into liquidation by the Commonwealth Court of Pennsylvania

on March 11, 2021.44 Lamorak provides three bases to stay this matter, urging this Court to (1)

enforce the permanent stay of claims against it initiated by the Commonwealth Court of

Pennsylvania; (2) enforce the automatic statutory six-month stay of claims against it and any party

it is obligated to defend as set forth by La. R.S. 22:2068; and (3) use its inherent authority to stay

proceedings for judicial economy and allow LIGA time to determine its obligations in this

40 299 U.S. 248, 254 (1936).

41 Id. at 254–55.

42 McKnight v. Blanchard, 667 F.2d 477, 479 (5th Cir. 1982).

43 See Begum v. Miner, 213 F.3d 639, at *1 n.1 (citing Murphy v. Uncle Ben’s, Inc., 168 F.3d 734, 737 n. 1

(5th Cir.1999) (“we have held that the district court may sua sponte stay a suit as a form of abstention.”).

44 Rec. Doc. 310-2 at 1–2.

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matter.45 Lamorak also seeks to continue the October 25, 2021 trial date.46 The Avondale Interests

represent that they are insureds of Lamorak and therefore adopt the arguments set forth by

Lamorak in the instant motion to stay.47

The Court will stay all proceedings against Lamorak pursuant to the liquation order of the

Commonwealth Court of Pennsylvania. As the Court recently noted in a similar case,48 Fifth

Circuit precedent holds that “insolvent insurers are subject to the comprehensive oversight of state

administrative agencies and courts” and “[f]ederal law consigns to the states the primary

responsibility for regulating the insurance industry.”49 Accordingly, the Fifth Circuit in Clark v.

Fitzgibbons held that “allowing a creditor or claimant to proceed against an insolvent insurer in

federal court while a state insolvency proceeding is pending would usurp [the state’s] control over

the liquidation proceeding by allowing [the claimant] to preempt others in the distribution of [the

insurance company’s] assets.”50 The Fifth Circuit, relying on the full faith and credit clause of the

United States Constitution, explained that “a federal court judgment against [an Arizona insolvent

insurer] inevitably would destabilize Arizona’s efforts to manage [the] insolvency.”51

45 Id. La. R.S. 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 the court from the date the insolvency is determined to permit proper defense by the association of all pending

causes of action.

46 Rec. Doc. 310-2 at 7.

47 Rec. Doc. 314.

48 Gooding v. Liberty Mutual Ins., et al., No. 20-1133, 2021 WL 2002463, at *1 (E.D. La. May 19, 2021)

(Brown, C.J.).

49 Clark v. Fitzgibbons, 105 F.3d 1049, 1051 (5th Cir. 1997) (citing the McCarran–Ferguson Act).

50 Id. (internal citation and quotation omitted)

51 Id. at 1053.

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Similarly, in Anshutz v. J. Ray McDermott Co., Inc., an insurer was placed under a “Final

Order of Liquidation” by the Circuit Court of Cook County, Illinois while an appeal against it was

pending in federal court.52 The Fifth Circuit stayed the appeal, holding that “[a]n orderly

liquidation requires that this Court not interfere with the order of the Circuit Court of Cook

County” and explaining that “[r]ecognition 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.”53 Thus, in light of

Fifth Circuit precedent admonishing courts to avoid interfering with state administrative processes

involving insolvent insurers, the Court will stay the claims pending against Lamorak.54

The Court will also exercise its inherent authority to stay this matter as to all other

defendants. There is no question that a district court has inherent power to “control the disposition

of the causes on its docket with economy of time and effort for itself, for counsel, and for

litigants,”55 and that this authority includes the district court’s wide discretion to grant a stay in a

pending matter.56 When “the interests of justice seem[] to require such action,” a court may

exercise its discretion to stay civil proceedings.57 In determining whether to grant a stay, courts

52 Anshutz v. J. Ray McDermott Co., 642 F.2d 94, 95 (5th Cir. 1981).

53 Id.

54 See also Olin Corp. v. Lamorak Ins. Co., No. 84-1968 (JSR), 2021 WL 982426 (S.D.N.Y. Mar. 15, 2021)

(staying an action in which Lamorak is a defendant in light of the Commonwealth Court of Pennsylvania’s Liquidation

Order in part under the “principles of comity.”).

55 Landis, 299 U.S. at 254.

56 In re Ramu Corp., 903 F.2d 312, 318 (5th Cir. 1990).

57 United States v. Kordel, 397 U.S. 1, 12 n.27 (1970); see also, Mayo v. Tri-Bell Indus., 787 F.2d 1007,

1012 (5th Cir. 1986).

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consider the following factors as set out in Landis v. North American Co.: “(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.”58 Applying the Landis

factors here, the Court finds a stay is warranted.

Under the first factor, as noted above, because Lamorak, the moving party, was declared

insolvent in liquidation proceedings, “a stay is required so as not to interfere with its orderly

liquidation.”59 Moreover, Lamorak is obliged to defend the Avondale Interests, Eagle, Inc., and

McCarty Corporation. Staying claims against Lamorak but proceeding against Lamorak’s insureds

would be highly prejudicial to such insured parties. Furthermore, “absent a stay, LIGA would not

have sufficient time to investigate the claims against Lamorak, now that LIGA stands in Lamorak’s

shoes as to those claims.”60 Given that the Court should “take into account the hardships these

litigants and LIGA would experience were litigation to proceed before LIGA had the opportunity

to prepare a defense” in weighing a stay,61 the Court finds that the first Landis factor favors a stay.

Under the second Landis factor, Plaintiffs do not make any arguments regarding the

prejudice they may face if the case is stayed. Regardless, even if there is a level of prejudice to

Plaintiffs, the third Landis factor again weighs in favor of granting a stay. Proceeding with this

case against parties other than Lamorak would frustrate judicial economy. Plaintiffs’ claims

58 Cortez v. Lamorak Ins. Co., No. 20-2389, 2021 WL 2018073, at *4 (E.D. La. May 20, 2021) (Vance, J.)

(quoting Maples v. Donzinger, No. 13-223, 2014 WL 688965, at *2 (E.D. La. Feb. 21, 2014)) (internal quotation

marks omitted).

59 Id.

60 Id.

61 Id.

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against the non-Lamorak parties in this action all arise from the same transaction or occurrence,

namely Mr. Dempster’s alleged asbestos exposure while working for Avondale from 1962 to 1994.

Consequently, all claims involve common questions of fact and law. A stay against only Lamorak

would result in litigation “proceed[ing] in a haphazard and inefficient manner.”62 Accordingly,

considering the three Landis factors, the Court finds that a stay against all parties is necessary.

Finally, Lamorak requests a continuance of the October 25, 2021 trial date in this matter.

In opposition, Plaintiffs correctly note that all discovery and motions deadlines have passed, and

the case is ready for trial. Therefore, it would be premature to continue the trial date in this matter

at this time. Accordingly, the Court will schedule a status conference for September 15, 2021 to

discuss the status of the case.

V. Conclusion

For the foregoing reasons,

IT IS HEREBY ORDERED that the “Motion to Enforce Stay and Notice of Liquidation

and Statutory Stay”63 filed by Defendant Lamorak Insurance Company is GRANTED.

IT IS FURTHER ORDERED that the above-captioned action is STAYED AND

ADMINISTRATIVELY CLOSED.

62 Id.

63 Rec. Doc. 310.

11

IT IS FURTHER ORDERED that a status conference is set for September 15, 2021 at

3:00 PM.

NEW ORLEANS, LOUISIANA, this ‘13thay of July, 2021.

\ereette. slut

CHIEF JUDGE

UNITED STATES DISTRICT COURT

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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.

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