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interpleader action, claiming that it was subject to multiple liability on the same
funds.
The Liquidator moved to dismiss the interpleader action, arguing that
diversity jurisdiction did not exist because the Liquidator (i.e., the
Superintendent) was not a citizen of any state. The court disagreed, and
held that it could exercise diversity jurisdiction over the case. The court held
that the Superintendent was also not eligible for sovereign immunity under
the 11th amendment, as he was not a real party in interest. In making these
rulings, the court was persuaded by the body of case law holding that where
a state insurance officer is a party only because of his status as receiver or
liquidator of an insolvent insurance company, the state is not the real party
in interest. Furthermore, the court determined that abstention was not
appropriate after examining three factors: (1) the case involved federal law;
(2) the interpleader action had little effect upon the state liquidation
proceedings; and (3) no other forum could adequately protect the rights of
all parties. In addition, the law firm representing the insolvent insurer could
intervene as of right because it held an attorneys' fee lien against the
proceeds for judgment in the state court. Finally, the court held that
because the SBA paid out on a guaranty agreement upon the default of a
contractor and became subrogated to the rights of AFFI, it had become the
equitable owner of AFFI's rights against General Railway, and thus could
collect directly.
General Railway Signal Company v. Corcoran, 757 F. Supp. 911 (N.D. Ill. 1991).
In interpreting the Court of Appeals' prior decision regarding abstention, the
trial court determined that it should abstain from exercising jurisdiction over
the case, notwithstanding its own earlier, contrary decision on this topic
[General Railway Signal Company v. Corcoran, 748 F. Supp. 639 (N.D. Ill.
1990) ]. In explaining its ruling, the court pointed to the fact that the case
involved contract issues governed by state law, the fact that the case could
cause disruption of the state liquidation proceedings, and the fact that the
Seventh Circuit had indicated that it believed abstention may be warranted.
General Railway Company v. Corcoran, 807 F. Supp. 1361 (N.D. Ill. 1992).
Upon remand from the Seventh Circuit in General Railway Signal Company v.
Engeleiter, 969 F.2d 519 (7th Cir. 1992), the trial court once again considered
the issue of Burford abstention. Considering the issue de novo, the trial
court determined that Burford abstention was appropriate in the case, as
state liquidation proceedings were pending. Furthermore, the circumstances
of the case had changed since the first time the trial court had considered
the issue of abstention, because one of the claimants, General Railway, had
paid the entire amount of the state court judgment to the Liquidator, and
these assets were now part of the insolvent insurer's estate in the New York
liquidation proceedings. In light of these changed circumstances, the trial
court decided to abstain from exercising jurisdiction in deference to the New
York liquidation proceedings.
Gerling‐Konzern Globale Rueckversicherungs v. Selcke, 1993 U.S. Dist. LEXIS
15316 (N.D. Ill. Oct. 29, 1993). Reinsurers sued the Liquidator of an insolvent
insurance company seeking money allegedly due to them under reinsurance
treaties. The Liquidator brought a motion to dismiss, arguing that: (1) the
court should abstain from exercising jurisdiction due to pending liquidation
proceedings in state court, pursuant to the McCarran‐Ferguson Act and
federal abstention doctrines; (2) lack of subject matter jurisdiction; and (3)
lack of ripeness. The court held that abstention is appropriate in this