Travelers Insurance Company, Certain London Market Insurance Companies and Certain Underwriters at Lloyds v. J. Ray McDermott, Inc.

In The Court of Appeals Ninth District of Texas at Beaumont ____________________ NO. 09-05-110 CV ____________________ TRAVELERS INSURANCE COMPANY, CERTAIN LONDON MARKET INSURANCE COMPANIES and CERTAIN UNDERWRITERS AT LLOYDS, Appellants V. J. RAY MCDERMOTT, INC., Appellee On Appeal from the 58th District Court Jefferson County, Texas Trial Cause No. A-168,572 MEMORANDUM OPINION This is an accelerated interlocutory appeal of a temporary anti-suit injunction. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(4) (Vernon Supp. 2005). The issue we are asked to examine is the propriety of the issuance of the injunctive relief to third-party plaintiff, J. Ray McDermott, Inc. ("McDermott"), in an attempt to stop a parallel lawsuit filed in Louisiana by third-party defendant, Certain London Market Insurance Companies and Certain Underwriters at Lloyds ("London Underwriters"), against McDermott, Travelers Insurance Company ("Travelers"), and Insurance Company of North America ("INA"). Because the record before us contains neither very special circumstances nor the potential for an irreparable miscarriage of justice, we reverse the trial court's order and dissolve the temporary anti-suit injunction. In 2002, McDermott was sued by a large number of former employees as part of a multi-party toxic tort suit. The suit, brought as a maritime action under the Jones Act, (1) was styled Doug Benoit, et al. v. J. Ray McDermott, Inc., et al. After being sued by the Benoit plaintiffs, McDermott filed a third-party declaratory judgment action in the 58th District Court in Jefferson County, Texas, against its insurers London Underwriters, Travelers, and INA, on June 16, 2004. This action sought a judicial declaration of McDermott's rights as well as of the obligations of its insurers for payment of the claims made by the Benoit plaintiffs. It is not disputed that sometime in July of 2004, McDermott settled with the Benoit plaintiffs. On July 19, 2004, Travelers filed a motion to transfer venue and an answer subject to said motion in the Texas declaratory judgment suit. On August 23, 2004, London Underwriters filed its answer in the Texas suit raising a number of defensive issues including a claim of lack of personal jurisdiction by the trial court over London Underwriters and that "Texas is an inconvenient and inappropriate forum for McDermott's claims." On the same day, London Underwriters filed a petition for declaratory judgment in the 23rd District Court, Assumption Parish, Louisiana, against McDermott, Travelers, and INA. On September 17, 2004, London Underwriters filed in the Texas district court a motion to dismiss McDermott's declaratory judgment suit, and in the alternative, requested a stay from the trial court because Texas was an improper and inconvenient forum. In support of its improper/inconvenient forum claim, London Underwriters' motion included the following: Multiple factors support a finding that Texas is neither a convenient forum nor one in which all or a substantial part of the acts giving rise to McDermott's Third-Party Complaint took place: •McDermott has never been incorporated in Texas and has never had its principal place of business in Texas. •Because McDermott's principle places of business are in Louisiana, none of the insurance policies at issue were negotiated, executed or delivered in Texas. •The law of Louisiana likely will apply to the policies. •Witnesses and documents relevant to the insurance policies are located mostly in Louisiana and most, if not all, are outside of Texas. •This action involves issues of alleged insurance coverage for claims against McDermott arising out of the claims brought against McDermott by former and/or current employees. These claims have their origins in Louisiana, with an overwhelming majority of these plaintiffs being residents of Louisiana. None of the Plaintiffs reside in Texas. •McDermott has settled and paid the plaintiffs' claims, so there is no question regarding whether the plaintiffs will be compensated for their injuries; the remaining dispute between McDermott and [London Underwriters] is purely a contractual dispute. •A more convenient forum exists for this action. Contemporaneous with their appearance in this lawsuit, [London Underwriters] filed a more comprehensive action in state court in Assumption Parish, Louisiana, where McDermott's corporate headquarters is located, naming McDermott and all other insurance parties to this case as defendants. Louisiana's discovery and trial rules would allow this action to be litigated expeditiously and fairly.[ (2)] The record does not indicate whether this motion was ever considered or ruled upon by the trial court. On October 25, 2004, McDermott filed a "declinatory exception of lis pendens" with the Assumption Parish district court seeking a stay in the Louisiana proceedings until the Texas suit was concluded. On December 8, 2004, the Louisiana district court agreed with McDermott and ordered a stay in the Louisiana proceedings. Thereafter, on January 3, 2005, the Louisiana district court entered a judgment staying the London Underwriters' suit until the conclusion of the litigation in Benoit v. McDermott that was still pending in the 58th District Court in Jefferson County, Texas. London Underwriters, Travelers, and INA filed motions for new trial in the Louisiana suit. Additionally, both London Underwriters and INA filed instruments demonstrating an intent to appeal the stay issued by the Louisiana district court. Thereafter, on January 5, 2005, McDermott filed a motion to confirm the application of Texas law to his declaratory judgment action in the Texas cause. On January 10, 2005, McDermott filed a verified application for temporary injunction with the Texas district court. The insurers filed various objections and motions in opposition to McDermott's anti-suit injunction request. The trial court entertained argument from counsel regarding the anti-suit injunction on January 28, 2005, February 7, 2005, and February 23, 2005. The trial court ultimately issued its anti-suit injunction on February 24, 2005. It is from the granting of this injunctive relief that the instant appeal is prosecuted by London Underwriters and Travelers. The issues raised by London Underwriters and Travelers in their separate briefs are essentially identical as they both point to an abuse of discretion by the trial court in issuing the anti-suit injunction. The trial court's order was directed to London Underwriters, Travelers, and INA. The injunction issued, in the words of the trial court, "to give efficacy to the service-of-suit provisions in the policies at issue." A temporary injunction is an extraordinary remedy and does not issue as a matter of right. Walling v. Metcalfe, 863 S.W.2d 56, 57 (Tex. 1993). The question before the trial court is whether the applicant is entitled to preserve the status quo pending trial on the merits. Id. at 58. The decision to grant or deny temporary injunctive relief lies in the sound discretion of the trial court, the court's decision being subject to reversal only for a clear abuse of that discretion. Id. The test for abuse of discretion is whether the trial court acted without reference to any guiding rules or principles and reached "'a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law.'" Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992) (quoting Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex. 1985). This standard, however, has different applications in different circumstances. Id. With respect to resolution of fact issues or matters committed to the trial court's discretion, the reviewing court may not substitute its judgment for that of the trial court. Id. On the other hand, review of a trial court's determination of the legal principles controlling its ruling is much less deferential. A trial court has no 'discretion' in determining what the law is or applying the law to the facts. Thus, a clear failure by the trial court to analyze or apply the law correctly will constitute an abuse of discretion . . . . Id. at 840 (citing Joachim v. Chambers, 815 S.W.2d 234, 240 (Tex. 1991). This abuse of discretion standard is also applicable to a review of the issuance of an anti-suit injunction. See Christensen v. Integrity Ins. Co., 719 S.W.2d 161, 163 (Tex. 1986). While Texas courts generally have the authority to enjoin parties from filing or pursuing lawsuits in other states or countries, the principle of comity requires that courts exercise this equitable power sparingly and only in very special circumstances. See Golden Rule Ins. Co. v. Harper, 925 S.W.2d 649, 651 (Tex. 1996); Christensen, 719 S.W.2d at 163; Gannon v. Payne, 706 S.W.2d 304, 306 (Tex. 1986). Comity has been described as a doctrine grounded in cooperation and mutuality. See K.D.F. v. Rex, 878 S.W.2d 589, 593 (Tex. 1994). It is similar to full faith and credit in that it provides a framework for courts of one jurisdiction to recognize the actions of another, but is distinguished in that judicial comity involves a courteous willingness, as opposed to a Constitutional imperative, among sister states to function adhesively and harmoniously when drawn into legal disputes of common source. 3 Roy W. McDonald & Elaine A. Grafton Carlson, Texas Civil Practice §11:122 (2d ed. 2000). Because the several states comprising the United States are, in many respects, separate and distinct legal sovereignties, no state "can demand that its laws have effect beyond the limits of its sovereignty." Gannon, 706 S.W.2d at 306. However, under the doctrine of comity, Texas will recognize the laws of other states with the expectation that those states will extend Texas the same consideration. See K.D.F., 878 S.W.2d at 593-94 (citing Gannon, 706 S.W.2d at 306). "There are no precise guidelines for judging the propriety of an anti-suit injunction; the circumstances of each situation must be carefully examined to determine whether the injunction is necessary to prevent an irreparable miscarriage of justice." See AVCO Corp. v. Interstate Southwest, Ltd., 145 S.W.3d 257, 262 (Tex. App.--Houston [14th Dist.] 2004, no pet.) (citing Gannon, 706 S.W.2d at 307). The Texas Supreme Court has recognized four situations in which anti-suit injunctions are appropriate: 1) to address a threat to the court's jurisdiction; 2) to prevent the evasion of important public policy; 3) to prevent a multiplicity of suits; or 4) to protect a party from vexatious or harassing litigation. See Golden Rule, 925 S.W.2d at 651 (citing Gannon, 706 S.W.2d at 307). However, a party seeking an anti-suit injunction must establish that "a clear equity demands" it, and must demonstrate that "very special circumstances" exist . Id. (citing Christensen, 719 S.W.2d at 163). Thus injunctive relief is necessary "to prevent an irreparable miscarriage of justice." Id. at 652 (quoting Gannon, 706 S.W.2d at 307). With the recent exception of Gonzalez v. Reliant Energy, Inc., (3) which involved only Texas courts and the violation of a mandatory venue statute, the Texas Supreme Court's three most recent opinions on the propriety of issuing anti-suit injunctions in jurisdictions outside of Texas have found an abuse of discretion by the issuing court in violation of the principle of comity. See Golden Rule, 925 S.W.2d at 651-52; Christensen, 719 S.W.2d at 162; Gannon, 706 S.W.2d at 308. Taking these three cases together, the settled holding is that only in extraordinary circumstances amounting to an irreparable miscarriage of justice would an anti-suit injunction be proper. In Gannon, the risk of inconsistent judgments did not justify the anti-suit injunction, with the Court noting that "[o]rdinarily parallel actions should be allowed to proceed simultaneously." Gannon, 706 S.W.2d at 306, 307. Ultimately, the Court stated, "there should be only one judgment recognized in both forums." Id. at 307. The Court in Christensen again permitted parallel lawsuits to proceed simultaneously in Texas and in California. Christensen, 719 S.W.2d at 164. "A single parallel proceeding in a foreign forum, however, does not constitute a multiplicity nor does it, in itself create clear equity justifying an anti-suit injunction." Id. at 163. In Golden Rule, the Court, building on its decisions in Gannon and Christensen, agreed that neither "added inconvenience" nor "expense" will justify an injunction as both are common to and largely inevitable (4) where dual proceedings are taking place simultaneously and are, therefore, not "very special circumstances." Golden Rule, 925 S.W.2d at 651 (quoting Christensen, 719 S.W.2d at 163). Additionally, "mirror image" suits are also insufficient reason to ignore the strong principle of comity and issue an anti-suit injunction. Id. The fact that judicial resources of both trial and appellate courts may be wasted is also not sufficient reason for issuing such injunctive relief. Id. (quoting Golden Rule I, 905 S.W.2d at 808). The Court concluded by strongly re-affirming the doctrine of comity among sovereigns, stating: "[I]f the principle of comity is to have any application, a single parallel proceeding . . . cannot justify issuing an anti-suit injunction." Gannon, 706 S.W.2d at 307. Such a suit must be allowed to proceed absent some other circumstances which render an injunction necessary "to prevent an irreparable miscarriage of justice." Id. Merely because the suits present identical issues does not make their proceeding an "irreparable miscarriage of justice." Id. at 651-52. In the instant case, McDermott recognizes the requirements of Golden Rule and its pedigree must be met in order to sustain the anti-suit injunction entered in its favor. The record before us indicates the Louisiana action is a single parallel suit filed by London Underwriters in the state where McDermott has its primary place of business. The fact that the Louisiana suit may involve "mirror image" issues or claims or raise the possibility of an inconsistent judgment will not support the trial court's anti-suit injunction. Golden Rule, 925 S.W.2d at 652 (quoting Gannon, 706 S.W.2d at 307). Furthermore, we disagree that the presence of a service-of-suit clause in some of the insurance contracts at issue requires the injunctive relief sought so that the insurers will not evade important public policy of Texas. For this position, McDermott, and apparently the trial court, relies on two cases: London Market Insurers v. American Home Assurance Co., 95 S.W.3d 702 (Tex. App.--Corpus Christi 2003, no pet.), and American International Specialty Lines Insurance Co. v. Triton Energy Ltd., 52 S.W.3d 337 (Tex. App.--Dallas 2001, pet. dism'd w.o.j.). In each case, the appellate courts upheld anti-suit injunctions, finding in both very special circumstances from the fact that the insurers in question breached their respective service-of-suit clauses by filing parallel actions in other jurisdictions. See London Mkt., 95 S.W.3d at 709-10; Triton Energy, 52 S.W.3d at 343. We find that upholding and applying the principle of comity supercedes any putative public policy interest in upholding or giving "efficacy" to service-of-suit clauses under the particular facts and circumstances of the instant case. The record before us indicates that the Louisiana district court extended comity to Texas and McDermott's litigation pending in the Texas district court. Because comity is grounded in cooperation and mutuality, Texas courts should extend comity to another state so long as that state extends comity to Texas or other states under similar circumstances. See K.D.F., 878 S.W.2d at 594. Because the Louisiana district court stayed all proceedings in Louisiana until the conclusion of the McDermott's Texas action, there is nothing in the record to indicate that Louisiana may be considered anything but a "cooperative jurisdiction." See id. at 595. The power to enjoin foreign suits should be used "sparingly, and only in very special circumstances." Golden Rule, 925 S.W.2d at 651 (quoting Christensen, 719 S.W.2d at 163). "'[O]nly in the most compelling circumstance does a court have discretion to issue an anti-suit injunction.'" Gannon, 706 S.W.2d at 306 (quoting Laker Airways Limited v. Sabena, Belgian World Airlines, 731 F.2d 909, 926, 927 (D.C. Cir. 1984)). The record before us provides no such compelling circumstances nor any facts indicating a possible irreparable miscarriage of justice was looming on the horizon. Therefore, under the Golden Rule, Christensen, and Gannon decisions, we find the trial court has abused its discretion in issuing the anti-suit injunction under the totality of the circumstances present in the record before us. See Christensen, 719 S.W.2d at 163-64; Gannon, 706 S.W.2d at 306. We sustain the first appellate issues presented by London Underwriters and by Travelers. Accordingly, the remaining appellate issues need not be addressed. The trial court's amended temporary injunction order is reversed, and the injunction is dissolved. REVERSED AND RENDERED. __________________________________ CHARLES KREGER Justice Submitted on July 14, 2005 Opinion Delivered April 13, 2006 Before McKeithen, C.J., Gaultney and Kreger, JJ. 1. 46 U.S.C.A. app. § 688 (2005). 2. We express no opinion as to the veracity of these allegations. We reproduce them here only to point out that McDermott and the trial court were made aware early in the Texas declaratory action that the insurers were challenging Texas as the proper forum in which to proceed. 3. 159 S.W.3d 615, 621-22 (Tex. 2005). 4. Golden Rule, 925 S.W.2d at 651 (quoting Golden Rule Ins. Co. v. Harper, 905 S.W.2d 804, 811 (Tex. App.--Houston [14th Dist.] 1995) (Edelman, J., dissenting)) (Golden Rule I).