MAY 2012 BAD FAITH CASES: COURT REJECTS BURFORD ABSENTION AS BASIS FOR REMAND IN LIGHT OF CLAIMS SEEKING MONEY DAMAGES (Philadelphia Federal)

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In Borough of Catasauqua v. Darwin Nat’l Assur. Co., the Eastern District of Pennsylvania court addressed an insured borough’s motion to remand, motion for declaratory judgment of rights under its policy, and allegations of bad faith against its carrier. The case stems from underlying copyright infringement litigation between an engineering firm and its builder who were involved in construction on the insured borough’s property. After the plaintiff engineering firm in that case named the insured borough as a necessary party under Federal Rule of Civil Procedure 19, the borough sought a defense from its carrier.

After the carrier refused, the insured sought a declaration of its rights under its policy and alleged bad faith claims against the carrier. The insured also sought to remand the proceedings, which the carrier had removed to federal court. The borough’s argument for remand was that Burford Abstention was appropriate – under such a theory federal courts will remand if a case “involves difficult questions of state law impacting on the state’s public policy.” While the doctrine itself is beyond the scope of this blog, it is worth noting that the court rejected the insured’s argument that a Pennsylvania state court should hear the insured’s bad faith claim under such a theory.

However, the court declined to remand the action based upon the type of relief sought. It ruled that even if Burford Abstention may otherwise be proper, the case would not be remanded because the insured sought money damages rather than equitable relief, which is the only proper scenario for the Burford remand.

Date of Decision: March 29, 2012

Borough of Catasauqua v. Darwin Nat’l Assur. Co., No. 11-cv-03855, 2012 U.S. Dist. LEXIS 46232, U.S. District Court for the Eastern District of P.A. (E.D. Pa. Mar. 29, 2012) (Gardner, J.)

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