
   NOTICE: Under Supreme Court Rule 367 a party has 21 days

   after the filing of the opinion to request a rehearing.

   Also, opinions are subject to modification, correction or

   withdrawal at anytime prior to issuance of the mandate by

   the Clerk of the Court. Therefore, because the following

   slip opinion is being made available prior to the Court's

   final action in this matter, it cannot be considered the

   final decision of the Court. The official copy of the

   following opinion will be published by the Supreme Court's

   Reporter of Decisions in the Official Reports advance

   sheets following final action by the Court.

                                   

        Docket No. 80025--Agenda 16--March 1996.

      ZURICH INSURANCE COMPANY, Appellee, v. BAXTER

 INTERNATIONAL, INC., et al. (Baxter International, Inc.,

                  et al., Appellants).

              Opinion filed June 20, 1996.

                                    

   

        JUSTICE HARRISON delivered the opinion of the court:

        This appeal concerns a declaratory judgment action

   brought in the circuit court of Lake County by Zurich

   Insurance Company to determine its obligations under various

   insurance policies issued to Baxter International, Inc., and

   Baxter Healthcare Corporation (referred to collectively as

   Baxter). The question before us is whether the circuit court

   abused its discretion when it issued an order pursuant to

   section 2--619(a)(3) of the Code of Civil Procedure (735 ILCS

   5/2--619(a)(3) (West 1992)) staying Zurich's lawsuit pending

   the outcome of a second declaratory judgment action involving

   the same issues subsequently filed by Baxter against Zurich

   in the state of California. For the reasons that follow, we

   agree with the appellate court that the stay should not have

   been granted. 275 Ill. App. 3d 30. Subject to certain

   modifications pertaining to the joinder of parties, the

   appellate court's judgment is therefore affirmed.

        The relevant facts are undisputed. Zurich is a Swiss

   corporation whose main administrative offices in the United

   States are located in Illinois. Baxter International, Inc.,

   and Baxter Healthcare Corporation are Delaware corporations

   whose corporate headquarters, including their risk management

   department, are also located in Illinois. According to the

   record, Zurich issued a series of comprehensive general

   liability insurance policies to Baxter covering periods

   between 1978 and 1986. All of these policies were delivered,

   issued, and serviced in Illinois by Illinois brokers and

   underwriters.

        One of Baxter's businesses involves extracting blood

   factor concentrates from plasma for use in treating

   hemophilia. Baxter has been sued by hemophiliacs from

   Illinois and elsewhere who allege that these concentrates

   were contaminated with the human immunodeficiency virus

   (HIV), that the concentrates infected them with the virus,

   and that they suffer or expect to suffer from Acquired Immune

   Deficiency Syndrome (AIDS). Although the parties have not

   cited any evidence indicating the precise number of such

   lawsuits, the jurisdictions in which the suits have been

   filed or how many individual claimants there are, counsel

   represent that Baxter is involved in at least 100 cases

   involving more than 10,000 HIV-infected hemophiliacs. Among

   these are cases that are pending or have been tried in

   Illinois, including a class action on behalf of approximately

   7,500 claimants filed in the United States District Court for

   the Northern District of Illinois.

        In the wake of this litigation, Zurich filed the present

   action to obtain a declaratory judgment that it had no duty

   under the comprehensive general liability insurance policies

   it had issued to Baxter to defend the company against or

   indemnify it for claims pertaining to the HIV-contaminated

   blood factor concentrates. Baxter responded by filing its own

   action in California, where the blood factor concentrates

   were processed, asking for a declaratory judgment that Zurich

   did have a duty under the policies to defend and indemnify

   it. The California action also sought a declaratory judgment

   with respect to the rights and obligations of Baxter's

   numerous excess insurers, but all but one of those excess

   insurers have now been dismissed from the case.

        At the outset of these proceedings Baxter claimed that

   it initiated the separate action in California as a "counter

   punch" to Zurich's lawsuit. Before this court, its position

   is different. The company denies that its motive is to harass

   Zurich or secure some tactical advantage over it. According

   to Baxter, its true purpose is simply to sidestep the HIV-

   infected hemophiliacs who have sued it.

        Here, as in the appellate court, Baxter contends that

   under Illinois law, tort claimants are necessary parties in

   declaratory judgment actions regarding insurance coverage for

   their claims, and they must be joined in order for the

   declaratory judgment proceedings to go forward. Under

   California law, by contrast, they are not necessary parties

   and joinder is not required. Accordingly, Baxter contends

   that suing in California will enable it to resolve its

   insurance coverage dispute with Zurich free from

   participation by the legion tort claimants who are pursuing

   it.

        While Baxter now professes concern with simplifying its

   dispute against Zurich, we note that Zurich's original

   Illinois complaint was actually less complex than the

   complaint filed by Baxter itself in California. Unlike the

   California action, the Illinois litigation did not name any

   of Baxter's excess insurers. The only parties to the

   proceeding were Zurich and Baxter, and Baxter did not assert

   that the case could not proceed in that posture.

        When Baxter subsequently moved to stay or dismiss the

   Illinois action, it did not do so on the grounds that

   Zurich's original complaint was defective and should be

   dismissed for failure to join necessary parties. Instead, it

   invoked section 2--619(a)(3) of the Code of Civil Procedure

   (735 ILCS 5/2--619(a)(3) (West 1992)), which provides that

   a defendant may move for dismissal or other appropriate

   relief on the grounds that "there is another action pending

   between the same parties for the same cause." Baxter also

   argued that the case was premature.

        The idea that there might be a problem with failure to

   join necessary parties did not arise until it was raised by

   the circuit court, sua sponte. Although the court denied

   Baxter's motion to dismiss, the court was concerned that

   Illinois law might require joinder of the underlying tort

   claimants in cases such as this, as Baxter now asserts. The

   court gave the parties the opportunity to brief the issue and

   present arguments at a series of hearings, after which it

   concluded that the underlying tort claimants were necessary

   parties and must be joined before the case could proceed. The

   court further concluded that the joinder problem could not

   be avoided by using class action procedures or by relying on

   the doctrine of representation.

        Rather than dismiss Zurich's complaint outright, the

   circuit court continued the case, giving the company leave

   to file an amended complaint addressing the joinder problem.

   Zurich responded by filing a new complaint that named as

   parties Baxter's excess insurers and the particular

   underlying claimants over whom the Illinois courts could

   assert in personam jurisdiction. In this version of its

   complaint, Zurich dropped its request for a comprehensive

   declaration of its rights and obligations under the Baxter

   insurance policies. Instead, it limited its prayer for relief

   to the circumstances presented by the particular claimants

   it had actually joined as parties.

        Baxter did not deny that this approach resolved the

   circuit court's joinder concerns. Its attack on Zurich's

   action took a new turn. Baxter now filed a new motion to

   dismiss under section 2--619(a)(3) of the Code, arguing that

   the Illinois action should be stayed pending resolution of

   the case in California because, in its amended form, the

   Illinois action was now less "comprehensive" than its

   California counterpart. The circuit court agreed with

   Baxter's argument, and on October 25, 1994, it entered an

   order granting the stay requested by Baxter.

        Several days later, on a motion filed by Zurich, the

   circuit court also made a written finding under Supreme Court

   Rule 308 (155 Ill. 2d R. 308) that its previous orders with

   respect to the issue of joinder involved questions of law as

   to which there is substantial ground for difference of

   opinion and that an immediate appeal may materially advance

   the ultimate termination of the litigation. The particular

   questions of law identified by the circuit court were (1)

   whether the underlying claimants and excess insurers did in

   fact have to be joined as necessary parties for the case to

   proceed, and (2) whether the court correctly refused to allow

   Zurich to use a class action mechanism or to rely on the

   doctrine of representation in lieu of joining the individual

   claimants from the underlying tort actions against Baxter.

        Once the circuit court entered its findings, Zurich

   sought leave to appeal under Supreme Court Rule 308 (155 Ill.

   2d R. 308) from the circuit court's orders concerning the

   issue of joinder. Although the appellate court denied

   Zurich's application, we entered an order in the exercise of

   our supervisory authority requiring the appellate court to

   hear Zurich's Rule 308 appeal on the merits. We subsequently

   clarified that order to make clear that our instructions were

   not meant to bar Baxter from arguing that Zurich had waived

   its right to contest the joinder issues.

        At the same time it was pursuing this Rule 308 appeal,

   Zurich also filed an interlocutory appeal as of right from

   the circuit court's order staying the Illinois declaratory

   judgment action pending resolution of the action in

   California. 155 Ill. 2d R. 307(a)(1). The appellate court

   subsequently consolidated this appeal with Zurich's appeal

   under Rule 308, reversed the circuit court's stay, and

   remanded the cause for trial, holding, inter alia, that

   Zurich had not waived its right to contest the joinder issues

   and that joinder of all of the underlying claimants is not

   necessary in mass-tort litigation such as this. 275 Ill. App.

   3d 30. On Baxter's application, the appellate court granted

   a certificate of importance, and the matter is now before us

   for review under Rule 316 (155 Ill. 2d R. 316).

        Here, as in the appellate court, Baxter continues to

   assert that Zurich has waived its right to contest the

   circuit court's rulings on the issue of joinder. We agree.

   As previously mentioned, the circuit court held that the

   underlying tort claimants were necessary parties, that they

   all had to be joined in order for the case to proceed, and

   that this joinder requirement could not be satisfied by means

   of a class action or through the doctrine of representation.

   Faced with such a ruling, Zurich could have elected to stand

   on its pleadings, taken an involuntary dismissal of its

   action with prejudice pursuant to section 2--615 of the Code

   of Civil Procedure (735 ILCS 5/2--615 (West 1992)), and then

   appealed that judgment. It elected not to do so. Instead, it

   responded to the circuit court's rulings by filing an amended

   pleading.

        Zurich's new pleading was complete in itself, did not

   refer to or adopt allegations in the prior pleadings, and

   sought relief in the specific context of particular claimants

   over whom the Illinois courts could assert in personam

   jurisdiction. There were no class action allegations or

   allegations involving the doctrine of representation, and

   Zurich no longer asserted that it could proceed against

   Baxter alone without joinder of the underlying tort

   claimants. Under these circumstances, Zurich's previous

   pleadings were, in effect, abandoned and withdrawn (Pfaff v.

   Chrysler Corp., 155 Ill. 2d 35, 61 (1992)), and Zurich waived

   any objection to the circuit court's rulings with respect to

   those pleadings (Boatmen's National Bank v. Direct Lines,

   Inc., 167 Ill. 2d 88, 99 (1995)). Because the issues raised

   by Zurich's Rule 308 appeal pertained only to the earlier

   pleadings and were inapplicable to the final version of

   Zurich's complaint, the appellate court therefore erred in

   addressing them on the merits. Accordingly, the appellate

   court's discussion of necessary parties in mass-tort

   litigation cannot stand and is of no precedential value.

        Although we must disavow that portion of the appellate

   court's opinion, we nevertheless agree with its ultimate

   conclusion that the circuit court erred in staying the

   circuit court proceedings pursuant to section 2--619(a)(3)

   of the Code. That provision allows a defendant to move for

   a dismissal or stay whenever there is "another action pending

   between the same parties for the same cause." 735 ILCS 5/2--

   619(a)(3) (West 1992). Although the purpose of the law is to

   avoid duplicative litigation, a circuit court is not

   automatically required to dismiss or stay a proceeding under

   section 2--619(a)(3) even when the "same cause" and "same

   parties" requirements are met. Multiple actions in different

   jurisdictions arising out of the same operative facts may be

   maintained where the circuit court, in a sound exercise of

   its discretion, determines that both actions should proceed.

   Factors a court should consider in deciding whether a stay

   is warranted under section 2--619(a)(3) include comity; the

   prevention of multiplicity, vexation and harassment; the

   likelihood of obtaining complete relief in the foreign

   jurisdiction; and the res judicata effect of a foreign

   judgment in the local forum. Kellerman v. MCI

   Telecommunications Corp., 112 Ill. 2d 428, 447-48 (1986).

        In this case, both Zurich and Baxter have headquarters

   in Illinois. Baxter's risk management department is located

   in Illinois, the disputed insurance policies were negotiated

   and signed in Illinois, and there is no question that

   interpretation of the policies will be governed by Illinois

   law. This is, in every way, an Illinois dispute, and the

   California trial court before which Baxter's action is

   pending has recognized it as such. If the Illinois courts are

   willing to provide a forum, the California trial court will

   gladly yield.

         Although Baxter denies any improper motive, its

   original justification for filing in California, to "counter

   punch" Zurich, seems blatantly retaliatory. It subsequently

   attempted to legitimize its position by focusing on interests

   of the underlying tort claimants. As our previous discussion

   indicated, however, the question of whether those claimants

   should participate in the litigation was raised by the

   circuit court, sua sponte, not by Baxter. When Baxter

   initially responded to Zurich's Illinois action and filed its

   own complaint in California, the underlying claimants played

   no discernible role in its strategy. Baxter did not embrace

   the notion that they might be necessary parties until the

   circuit court's actions indicated that such a position might

   help the company rationalize its decision to file a parallel

   suit in California.

        Even after Baxter began expressing concern for the tort

   claimants, its sincerity was questionable. While the company

   appeared to champion the importance of protecting the tort

   claimants' interests, its attorney asserted at oral argument

   before this court that his client's true reason for suing in

   California was to prevent the claimants from playing any role

   in the litigation. Rather than guarding the claimants, Baxter

   is intent on avoiding them.

        Baxter's strategy is based on the notion that where an

   insurance company brings a declaratory judgment action

   against its insured to determine the company's obligations

   under a liability policy, claimants seeking recovery from the

   insured in the underlying tort actions are not necessary

   parties to the declaratory judgment action under California

   law. According to Baxter, the law in Illinois is different.

   Here, they are necessary parties who must be joined in order

   for the declaratory judgment action to proceed. See M.F.A.

   Mutual Insurance Co. v. Cheek, 66 Ill. 2d 492, 495 (1977);

   but see Zurich Insurance Co. v. Raymark Industries, Inc., 118

   Ill. 2d 23 (1987) (a declaratory judgment defining an

   insurer's duty to defend and indemnify its insured in

   thousands of underlying actions was reviewed on the merits

   by this court even though none of the underlying tort

   claimants had been joined as parties).

        The joinder question was one of the issues raised by

   Zurich's Rule 308 appeal. As we have held, Zurich waived the

   issue when it decided to amend its complaint to seek relief

   in the context of specific litigation involving particular

   litigants over whom the Illinois courts had in personam

   jurisdiction. Without suggesting how we would resolve the

   issue if it were properly before us, we note that even if we

   agreed with Baxter's interpretation of the law, the company's

   argument would be unavailing.

        If Baxter's interpretation is correct, Illinois law

   evinces a recognition that the underlying claimants have a

   substantial interest in how insurance coverage questions are

   resolved. It also reflects a belief that this interest is

   best protected by having the claimants participate directly

   in the litigation between the insurance carrier and the

   insured, rather than by allowing the claimants to sue the

   carrier independently, as is apparently the practice in

   California. Accordingly, if Baxter's construction of the law

   is correct, the fact that the claimants will be excluded from

   the coverage litigation in California is not a reason to

   defer to the California courts. It is a reason to insist that

   the Illinois action be allowed to proceed in the courts of

   Illinois. Litigants such as Baxter should not be permitted

   to invoke section 2--619(a)(3) of the Code as a means for

   evading this state's public policy.

        As noted earlier, Baxter ultimately succeeded in staying

   the Illinois litigation by persuading the circuit court that

   the California action would be more "comprehensive" than the

   action framed by the final amended version of Zurich's

   Illinois complaint. It is difficult to see, however, how the

   California action can be considered more "comprehensive" in

   any meaningful sense of the term. As a matter of due process,

   a judgment can only bind the actual parties to a case or

   those in privity with them. Parklane Hosiery Co. v. Shore,

   439 U.S. 322, 327 n.7, 58 L. Ed. 2d 552, 559 n.7, 99 S. Ct.

   645, 649 n.7 (1979). In its present form, the California

   action has only three parties: Zurich, Baxter, and another

   of Baxter's insurers. By contrast, the Illinois action

   includes not only those three parties, but also more than a

   hundred of Baxter's excess insurers and dozens of claimants

   from the underlying tort actions. In terms of the number of

   litigants affected, a judgment in the Illinois action will

   therefore have a far greater impact than any judgment in the

   California proceeding. To this extent, Baxter's California

   action is actually less comprehensive than Zurich's action

   in Illinois, not more so.

        When Baxter claims that the California action is more

   "comprehensive," it has no concern for any of the other

   litigants. It is interested only in the case's potential for

   resolving its dispute with Zurich. Because Zurich's Illinois

   action now seeks relief in the context of the claims asserted

   by the specific Illinois claimants who have been joined,

   Baxter suggests that its effect must necessarily be more

   restrictive than the California litigation, which refers to

   the AIDS litigation generally. According to Baxter, the

   California case will cover every issue presented by every

   underlying claim, while the Illinois case will necessarily

   be limited to the circumstances of the particular claimants

   who have been joined here. The flaw in this argument is that

   it presumes that the claims of the Illinois claimants are in

   someway distinguishable from the additional claims underlying

   the California case. There is nothing in the record before

   us to substantiate such a contention. As between Zurich and

   Baxter, the issues presented by the two cases are, for all

   practical purposes, identical. Under these circumstances, a

   judgment in the Illinois action would be no less conclusive,

   as between Zurich and Baxter, than a judgment in the

   California proceeding.

        For the foregoing reasons, we believe that there was no

   valid reason for the circuit court to have stayed Zurich's

   action under section 2--619(a)(3) pending outcome of Baxter's

   action in California. Entry of that stay constituted an abuse

   of discretion, and the appellate court was correct when it

   reversed the circuit court's order and remanded the cause to

   the circuit court for further proceedings. The judgment of

   the appellate court, as modified by this opinion, is

   therefore affirmed.

   

                                    Affirmed as modified.

                                                                  

 

                                                                  

        CHIEF JUSTICE BILANDIC took no part in the

   consideratioan or decision of this case.

   

        JUSTICE FREEMAN, specially concurring:

        I fully agree with and join the majority's decision to

   affirm the appellate court's judgment. The appellate court

   correctly determined that the trial court abused its

   discretion by granting a stay of the underlying declaratory

   judgment action in favor of proceedings filed by defendant

   in California. I write only to highlight the salient factors

   that undergird our decision. 

        The record reveals that Baxter filed its declaratory

   judgment action in California against Zurich, its insurer,

   nine days after Zurich filed the instant suit in Illinois.

   The California action sought a declaration that Zurich and

   105 of Baxter's excess insurers had duties to defend and

   indemnify Baxter under certain insurance policies against

   claims of numerous HIV-infected persons. These HIV-infected

   persons were not parties to the California action and, under

   California law, they were not considered necessary parties.

   By the time of this appeal, all, save one, of Baxter's 105

   excess insurers were dismissed as parties from the case. The

   California action was also stayed, pending resolution of the

   instant Illinois action.

        Zurich's third-amended complaint in this action named

   Baxter, Baxter's excess insurers, and those HIV claimants,

   17 in number, over whom Illinois courts could assert personal

   jurisdiction. The third-amended complaint seeks a declaration

   that Zurich and Baxter's excess insurers owe no duties to

   defend and indemnify Baxter under the same policies against

   claims of these 17 persons.

        The trial court, exercising its discretion, stayed the

   instant action pursuant to section 2--619(a)(3), finding the

   California action more "comprehensive." 735 ILCS 5/2--

   619(a)(3) (West 1992). The appellate court vacated the stay,

   which ruling the majority now affirms.

        Section 2--619(a)(3) provides that a defendant may move

   for a dismissal or stay whenever there is "another action

   pending between the same parties for the same cause." 735

   ILCS 5/2--619(a)(3) (West 1992). The provision is designed

   to avoid duplicative litigation and is to be applied to carry

   out that purpose. Kellerman v. MCI Telecommunications Corp.,

   112 Ill. 2d 428, 447 (1986). The "same cause and same parties

   requirements" are apparently threshold considerations to

   granting section 2--619(a)(3) relief. See A.E. Staley

   Manufacturing Co. v. Swift & Co., 84 Ill. 2d 245, 252-54

   (1980); Kellerman, 112 Ill. 2d at 447; see also Perimeter

   Exhibits, Ltd. v. Glenbard Molded Binder, Inc., 122 Ill. App.

   3d 504, 509 (1984) (failure to meet section 619(a)(3) "same

   parties" requirement fatal to request for such relief).

        Nonetheless, even if the dual requirements are met,

   relief under section 2--619(a)(3) is not mandated. The

   court's decision to grant relief or allow multiple actions

   to proceed in different jurisdictions remains a matter of

   discretion. Kellerman, 112 Ill. 2d at 447. The factors a

   court should consider in making that decision include:

   comity; the prevention of multiplicity, vexation, and

   harassment; the likelihood of obtaining complete relief in

   the foreign jurisdiction; and the res judicata effect of a

   foreign judgment in the local forum. Kellerman, 112 Ill. 2d

   at 447-48. 

        The present case presents a situation where at least one

   of the dual threshold requirements for section 2--619(a)(3)

   relief was not met. The Illinois and California actions do

   not involve the same parties. The California action is

   between only Baxter, Zurich and one of Zurich's excess

   insurers; the Illinois action names these parties and also

   includes 17 of the underlying claimants as well as an entire

   group of Baxter's excess insurers. Further, this is not a

   case where the same parties requirement should be relaxed.

   See Catalano v. Aetna Casualty & Surety Co., 105 Ill. App.

   3d 195, 197 (1982) (requirement relaxed where parties in

   close privity); Perimeter Exhibits, Ltd. v. Glenbard Molded

   Binder, Inc., 122 Ill. App. 3d at 508 (requirement relaxed

   where parties in one action are nominal parties or their

   claims are not in issue); People ex rel. Fahner v. Climatemp,

   Inc., 101 Ill. App. 3d 1077, 1084 (1981) (parties are same

   legal entity). This point is demonstrated by the fact that,

   under California law, the unnamed underlying claimants'

   third-party rights to a recovery under the policy could not

   be determined in the California action. Any declaratory

   judgment regarding Zurich's duty to indemnify Baxter for the

   underlying claims would not be res judicata as against those

   claimants. See Shapiro v. Republic Indemnity Co. of America,

   52 Cal. 2d 437, 341 P.2d 289 (1959). In the Illinois action,

   by contrast, Zurich's obligation to fund Baxter's defense and

   payment of these particular claims would be adjudicated. 

        In addition to the failure of this requirement,

   discretionary factors which weigh against granting section

   2--619(a)(3) relief are readily apparent here. The California

   court repeatedly expressed frustration with the fact that our

   circuit court would not assert its jurisdiction over the

   matter. The California court stated, inter alia:

          "This is an Illinois contract, entered in by

             Illinois parties, signed in the state of Illinois

             *** [f]or some reason Illinois courts either don't

             want to, won't, can't, choose not to or whatever.

             For the last year and half they have been deciding

             through the courts whether or not they are [going]

             to go take jurisdiction of this case or not, and

             it really belongs in Illinois.

                                 ***

               [I am b]aby sitting this thing until Illinois

             finally decides they have an interest in the

             case."

   The California action was also stayed, pending resolution of

   the case here in Illinois. Clearly, the California court, for

   the sake of comity, would have been willing to defer to the

   circuit's judgment here. That willingness and the absence of

   the same parties in each suit was indicative that a stay of

   the Illinois action was unnecessary to prevent a multiplicity

   of actions.

         Moreover, it cannot be said that the prior-in-time

   Illinois action was filed to vex or harass Baxter. In

   deciding whether to grant or deny the stay, the trial court

   should have considered whether this factor argued for a stay

   of the Illinois action due to the actions or animus of Zurich

   in bringing the suit. Baxter's motivation in bringing the

   California action is really not critical to the determination

   of whether this Illinois action was properly stayed. The

   majority need not belabor that point. Clearly, however,

   Baxter was attempting to speedily advantage itself by forum

   shopping when it filed in California nine days after Zurich

   filed here.

        Another discretionary factor that should have been

   considered was the likelihood that the Illinois parties would

   have realized some manner of complete relief via the

   California action. Again, clearly, they could not. The

   California action would have adjudicated Baxter's rights

   under its policy with Zurich and under one excess layer

   policy with another insurer. Such judgment would afford no

   relief to Baxter's remaining excess insurers and the 17

   claimants in the Illinois action. Furthermore, any judgment

   between Zurich and Baxter in California would clearly have

   no res judicata effect against the remaining excess insurers

   and 17 claimants named as parties here. 

        In conclusion, the trial court abused its discretion in

   granting a stay of the instant action because a threshold

   requirement for section 2--619(a)(3) relief was not met, the

   two actions did not involve the same parties, and not one

   discretionary factor argued in any way for such relief. 

   

