985 F.3d 579
8th Cir.2021Background
- Parker Law Firm and Timothy Parker represented Eureka Woodworks, which assigned certain BP oil-spill claim proceeds to PS Finance under a contract that required repayment from settlement/judgment proceeds and contained an AAA arbitration clause (Richmond County, NY).
- Appellants received two interim payments from the BP claims facility in 2012, transferred one check and proceeds of the other to Eureka, and did not pay PS Finance; they contend the interim payments were not ‘‘judgment, verdict or settlement’’ proceeds.
- PS Finance sued in New York seeking the interim payments; the New York trial court sua sponte concluded the dispute is subject to the arbitration clause, dismissed the action for lack of jurisdiction, and directed arbitration; appellants unsuccessfully sought to vacate and appealed that order in state court.
- Parker and the Law Firm then sued PS Finance and their insurer Travelers in Arkansas state court for declaratory relief, breach of contract, and a duty-to-defend; the case was removed to federal court.
- The district court dismissed the claims against PS Finance under the Rooker–Feldman doctrine (a federal court cannot review state-court orders compelling arbitration) and dismissed the claims against Travelers for failure to plead any possible coverage or duty to defend under either business personal property or commercial general liability coverages.
- The Eighth Circuit affirmed: Rooker–Feldman barred federal review of the NY order compelling arbitration, and Travelers had no duty to defend because (1) transfers were not a "direct physical loss" of money and in any event fell under the voluntary-parting exclusion, and (2) there was no "occurrence" (accident) to trigger CGL coverage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rooker–Feldman bars federal review of the NY court’s order compelling arbitration | Parker: NY order is not a final merits judgment and federal court can hear parallel claims asserting no obligation to PS Finance | PS Finance: Federal courts lack jurisdiction to review state-court rulings; Rooker–Feldman precludes appellate review in district court | Held: Rooker–Feldman bars review; plaintiffs effectively seek to overturn the NY order compelling arbitration, so dismissal affirmed |
| Whether Travelers had a duty to defend under Business Personal Property coverage (direct physical loss of money) | Parker: Alleged loss of money when funds/checks transferred to Eureka is a covered "direct physical loss" | Travelers: No physical loss occurred; money was knowingly transferred; even if loss, voluntary-parting exclusion applies | Held: No direct physical loss; transfer is not covered and exclusion applies; no duty to defend |
| Whether Travelers had a duty to defend under Commercial General Liability (property damage from an "occurrence") | Parker: Transfer caused loss of use of tangible property; unintended consequences of transfer constitute an "occurrence" | Travelers: No "accident" or occurrence—transfer was intentional and foreseeable, so no coverage | Held: No occurrence; intentional transfer (even if negligent) was foreseeable and not an "accident," so no duty to defend |
Key Cases Cited
- Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923) (federal district courts lack jurisdiction to review state-court judgments)
- District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983) (limits on federal-court review of state-court adjudications)
- Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 (2005) (definition and scope of Rooker–Feldman)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
- Pieper v. Am. Arbitration Ass’n, 336 F.3d 458 (6th Cir. 2003) (Rooker–Feldman applies to orders compelling arbitration)
- Brown & Root, Inc. v. Breckenridge, 211 F.3d 194 (4th Cir. 2000) (federal courts cannot review state-court orders that effectively decide arbitrability)
- Keene Corp. v. Cass, 908 F.2d 293 (8th Cir. 1990) (Rooker–Feldman can apply to nonfinal state-court judgments)
- Phila. Indem. Ins. Co. v. Austin, 383 S.W.3d 815 (Ark. 2011) (insurance-policy language construed in plain, ordinary sense; ambiguities construed for insured)
- Cont’l Ins. Co. v. Hodges, 534 S.W.2d 764 (Ark. 1976) (definition of "accident" for insurance coverage)
- Lexicon, Inc. v. ACE Am. Ins. Co., 634 F.3d 423 (8th Cir. 2011) (analysis of "occurrence" and accidental results of intentional acts)