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Federal Insurance Co. v. Ameritas Life Insurance Corp.

United States District Court, D. Nebraska

October 21, 2019

FEDERAL INSURANCE COMPANY, Plaintiff,
v.
AMERITAS LIFE INSURANCE CORP., AMERITAS INVESTMENT CORP., UNION CENTRAL LIFE INSURANCE COMPANY, and AMERITAS HOLDING COMPANY, Defendants.

          MEMORANDUM AND ORDER

          RICHARD G. KOPF SENIOR UNITED STATES DISTRICT JUDGE.

         Three separate lawsuits provide the context for understanding this dispute:

         (1) This declaratory judgment action, filed on April 16, 2019, requesting this court to declare that Plaintiff's bond does not cover Defendants' litigation and settlement costs in third-party litigation;

         (2) A lawsuit filed by most of the above-captioned Defendants against the above-captioned Plaintiff and two other insurers in Ohio on June 10, 2019, requesting declaratory and monetary relief for the insurers' refusal to cover litigation and settlement costs in the same third-party litigation involved in Lawsuit (1); and

         (3) A 2016 lawsuit brought by the above-captioned Ameritas Defendants against the above-captioned Plaintiff in which Judge Gerrard of this court construed the same bond language at issue in Lawsuits (1) and (2). Ameritas Life Ins. Corp. v. Federal Ins. Co., Case No. 4:16CV3006, Filing 108 at CM/ECF p. 10 (D. Neb. Oct. 25, 2017) ("Ameritas I").

         I. BACKGROUND

         Plaintiff Federal Insurance Company ("Federal") filed this action against the Defendants ("Ameritas") on April 16, 2019, seeking a declaratory judgment that a financial institution bond Federal issued to Ameritas does not cover amounts Ameritas incurred to defend and settle a third-party liability arising from the Ponzi scheme executed by one of Ameritas's former general agents, Dee Allen Randall ("Randall"). Pending before the court is Ameritas's Motion to Dismiss, or in the Alternative, Stay This Action, which asks this court to either (1) exercise its "discretionary authority" under the Federal Declaratory Judgment Act, 28 U.S.C. § 2201(a), [1] to decline to exercise jurisdiction over this action, or (2) stay this action pending resolution of "the more complete, all-encompassing action filed by the primary Defendants-who are the natural plaintiffs in this insurance dispute-in state court in Ohio." (Filing 11.)

         The Ohio lawsuit Ameritas references in its Motion was filed by Ameritas against Federal and two of its other insurers-Twin City Fire Insurance Company ("Twin City") and Arch Insurance Company ("Arch")-for denying coverage for the millions of dollars it paid to litigate and settle various lawsuits stemming from former agent Randall's Ponzi scheme. That action was filed in Ohio state court on June 10, 2019, and was removed to the United States District Court for the Southern District of Ohio on July 12, 2019. (Filing 28, Ex. 3.)

         In support of its Motion to Dismiss or Stay, Ameritas argues that while it and Federal were corresponding by letter and telephone about Federal's refusal to cover Ameritas's loss, Federal suddenly, and without prior notice to Ameritas, filed a "preemptive" declaratory judgment action in this court in an attempt to benefit from Judge Gerrard's decision in Ameritas I. That decision held that Federal did not breach the parties' agreement when it denied coverage under a bond it issued to Ameritas in which Federal agreed to indemnify Ameritas for "[l]oss resulting directly from dishonest acts ... of any Employee," which is the same language at issue in the case now before the court. Ameritas Life Ins. Corp. v. Federal Ins. Co., Case No. 4;I6CV3OO6, Filing 108 (D. Neb. Oct. 25, 2017).[2] Ameritas counters that the issues in Federal's declaratory judgment action should be resolved as part of the later-filed Ohio case because "the Ohio Lawsuit is a complete, comprehensive action, brought by the 'natural plaintiffs'-the Ameritas Parties-and involving all parties necessary to resolving this coverage dispute and obtaining complete relief." (Filing 12 at CM/ECF pp. 8-9.)

         In response to Ameritas's Motion to Dismiss or Stay, Federal has filed a Cross Motion to Enjoin Ameritas's Second Filed Action in Ohio (Filing 26), which urges this court to enjoin Ameritas from pursuing the action now pending in the United States District Court for the Southern District of Ohio. Federal argues that Ameritas engaged in "obvious forum shopping" because it filed a "reactive action in Ohio ... in hopes that an Ohio court will ignore Nebraska precedent and Judge Gerrard's decision, and grant it a second bite at the apple." (Filing 26 at CM/ECF p. 2; Filing 35 at CM/ECF p. 2.) Federal encourages this court to apply the "first-to-file" rule, which provides that "where two courts have concurrent jurisdiction, the first court in which jurisdiction attaches has priority to consider the case." Orthmann v. Apple River Campground, Inc., 765 F.2d 119, 121 (8th Cir. 1985).

         II. FACTS RELEVANT TO PARTIES' ARGUMENTS

         A. The Accused Former General Agent

         The former general agent at the root of the Nebraska and Ohio lawsuits is Dee Allen Randall, who sold life insurance products in Utah and served as a general agent for Defendant Union Central Life Insurance Company ("Union") from 2000 to 2011 when Union was operating out of Ohio. (Filing 1 ¶ 19.) Randall ran a Ponzi scheme in which money from new investors was used to pay earlier investors to make it appear that his businesses were profitable. Randall was alleged to have taken approximately $65 million from 700 investors. (Filing 1 ¶ 20.) Union terminated Randall as an agent effective October 12, 2011, which is the date Randall's companies entered into Chapter 11 bankruptcy.

         B.Union Central Life ...


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