Claim preclusion; Colorado River Water Conservation Dist v United States; The “same transaction or occurrence”; The equitable exception in Restatement (Second) of Judgments § 26(1)(f); Whether the McCarran-Ferguson Act reverse preempts the federal diversity jurisdiction statute (28 USC § 1332) or precluded the court’s appellate jurisdiction under § 1292(b); Abstention under Burford v Sun Oil Co; The Rules Decision Act; 28 USC § 1652; Erie RR Co v Tompkins

In this interlocutory appeal, the court held that claim preclusion barred this lawsuit where there was a state-court final judgment as to the same issues. It also held for the first time that the McCarran-Ferguson Act does not reverse preempt the federal diversity jurisdiction statute or preclude the court’s appellate jurisdiction under § 1292(b). Plaintiff-insured (William Powell Company (WPC)) sued defendant-OneBeacon in both state and federal court over excess insurance policies and the duty to defend and indemnify. OneBeacon moved to have the federal action dismissed, arguing claim preclusion based on a final judgment in state court. The district court ruled that claim preclusion probably applied, but it declined to dismiss the case because the cases had progressed in tandem for years, and the court thought it would be unjust to bar WPC’s claim. On appeal, the court first held that the McCarran-Ferguson Act (which provides that federal law cannot impair state laws regulating insurance) does not reverse-preempt § 1332, and that it had jurisdiction to hear the appeal, concluding among other things that jurisdiction would not interfere with OneBeacon’s liquidation process in Pennsylvania. It also declined to exercise Burford abstention, and held that the Rules Decision Act and the Erie doctrine did not compel it to adhere to the Pennsylvania stay. It then moved to the merits and held that under Ohio law, the state-court judgment satisfied the elements of claim preclusion. Further, it found that none of the exceptions in § 26 of the Restatement, including the one cited by the district court, § 26(1)(f), applied. Reversed and remanded.