Reported / Citable
Background
Barbara J. Houser, acting as trustee of the Boy Scouts of America Settlement Trust, sued 83 insurers that allegedly issued liability policies covering BSA or its local councils. The trust was created under BSA’s Chapter 11 reorganization plan to assume liability for abuse claims and received rights under BSA’s and the local councils’ insurance policies. The trustee asserted claims including declaratory judgment, breach of contract, bad faith, and violations of the Texas Insurance Code.
National Surety Corporation, Interstate Fire & Casualty Company, Fireman’s Fund Insurance Company, and Allianz Global Risks US Insurance Company sought dismissal under forum non conveniens or dismissal or a stay under Colorado River abstention. They argued that the dispute should proceed in an earlier-filed Illinois state-court action.
The Court’s Holding
The court denied the motion. On forum non conveniens, it held that the moving insurers had not shown that the Illinois court was an available alternative forum because they failed to establish that all parties could come within its jurisdiction. Although 83 insurers were named in the federal action, only 21 insurers were parties to the Illinois case, and only 12 of those were also defendants in the federal case.
The court further concluded that the private- and public-interest factors would not favor dismissal even if Illinois were an available and adequate forum. Evidence was likely located in Texas, where BSA had maintained its headquarters for nearly 50 years; Texas law was likely to govern many issues; and the insurers had not demonstrated greater congestion in the Texas federal court or an unfair burden on Texas jurors.
Colorado River abstention was also unwarranted because the federal and Illinois proceedings were not parallel. Beyond involving substantially different groups of insurers, the Illinois case concerned coverage for abuse claims involving one alleged perpetrator over nine years, while the federal case concerned coverage for tens of thousands of claims spanning decades. Because the cases did not involve the same parties and issues, the court did not reach the abstention factors.
Key Takeaways
- A party seeking forum non conveniens dismissal must show that the entire case and all parties can come within the alternative forum’s jurisdiction.
- An earlier-filed state action involving only a fraction of the parties and a much narrower set of claims is not necessarily parallel litigation for Colorado River purposes.
- The balance remained heavily in favor of exercising federal jurisdiction over the settlement trust’s broad insurance-coverage dispute.
Why It Matters
The ruling keeps the BSA Settlement Trust’s wide-ranging coverage action in the Northern District of Texas rather than diverting it to a substantially narrower Illinois proceeding. It also illustrates the demanding standards for both forum non conveniens dismissal in favor of a domestic state court and Colorado River abstention.