Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-94-06265/USCOURTS-ca10-94-06265-0/pdf.json

Parties Involved:
Philip H. Runyon
Appellee
St. Paul Fire And Marine Insurance Company
Appellant

Document Text:

Patrick Fisher 

Clerk 

UNITED STATES COURT OF APPEALS 

Office of the Clerk 

Byron White United States Courthouse 

1823 Stout Street 

Denver, co 80257 

May 25, 1995 

TO: ALL RECIPIENTS OF THE CAPTIONED OPINION 

RE: 94-6265, St. Paul Fire v. Runyon 

Filed May 1, 1995 by Judge Brorby 

Please be advised of the following correction to the 

captioned decision: 

Page 6, first full paragraph, the text in the first 

set of parenthesis has been changed. Because this correction 

results in a change of pagination of pages 6 and 7, 

substitute pages are attached. 

Very truly yours, 

Patrick Fisher, 

Clerk ~ 

By: WJ~<-/J~.:__ Barbara Schermerhorn 

Deputy Clerk 

Appellate Case: 94-6265 Document: 01019287647 Date Filed: 05/01/1995 Page: 1 
cannot receive relief through the state court contract proceeding. 

Okla. Stat. tit. 12 § 1651. Although the state court cannot 

issue a declaratory judgment, the contract case will resolve the 

question of insurance coverage under the insurance contract. The 

state court has already determined it has subject matter 

jurisdiction to resolve the question of whether the coworkers' 

lawsuit is covered by the insurance agreement. 

The present case is inapposite to the cases relied upon by 

St. Paul. Horace Mann Ins. Co. v. Johnson, 953 F.2d 575 (lOth 

Cir. 1991) (the Tenth Circuit reversed the district court's 

decision to abstain from entertaining an insurance declaratory 

judgment action in the state of Oklahoma); Allstate Ins. Co. v. 

Brown, 920 F.2d 664 (lOth Cir. 1990) (the pending state court tort 

action cannot satisfactorily resolve the question of insurance 

coverage); National Union Fire Ins. Co. v. Coursey, 28 F.3d 113 

(table) (unpublished order and judgment) (lOth Cir. 1994) (after 

state dismissed underlying state court action, federal district 

court must reconsider declaratory judgment 

there was no longer an alternative remedy) . 

jurisdiction because 

In each of the cases 

St. Paul relied upon, the underlying state action was an action by 

an injured party against the insured. The insurer was not a party 

in any of those underlying actions and in each the state court was 

simply determining tort liability rather than determining coverage 

under the insurance contract. Significantly, Mr. Runyon's 

underlying state action is a contract action between the insured 

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Appellate Case: 94-6265 Document: 01019287647 Date Filed: 05/01/1995 Page: 2 
and the insurer rather than an underlying tort action excluding 

the insurance company. 

Although the federal court is not 

jurisdiction, ARW Exploration, 947 F.2d at 

entertain a declaratory judgment action 

required to refuse 

454, it "should not 

over which it has 

jurisdiction if the same fact-dependent issues are likely to be 

decided in another pending proceeding." Kunkel v. Continental 

Casualty Co., 866 F.2d 1269, 1276 (lOth Cir. 1989). No error is 

revealed in the district court's choice to defer to the state 

court to apply state law and thus refuse jurisdiction. 

The federal district court also refused jurisdiction because 

it perceived St. Paul was using the declaratory judgment action to 

provide an arena for a race to res judicata. 

choose to avoid a declaratory judgment 

A district court may 

action because the 

plaintiff is using the action for procedural fencing. Franklin 

Life, 157 F.2d at 656. St. Paul filed its federal suit one day 

before the date Mr. Runyon promised to file his state court 

contract action against St. Paul. St. Paul knew Mr. Runyon was 

going to file the state contract action; St. Paul knew the date 

Mr. Runyon was going to file the action; and St. Paul waited three 

years before it sought the declaration. Such timing of lawsuits 

may not necessarily be bad faith on the part of the insurance 

company; however, St. Paul is unable to show error in the district 

court's perception that St. Paul was using the declaratory 

judgment action for procedural fencing. This determination by the 

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Appellate Case: 94-6265 Document: 01019287647 Date Filed: 05/01/1995 Page: 3 
PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

ST. PAUL FIRE AND MARINE INSURANCE COMPANY, 

Plaintiff-Appellant, 

v. 

PHILIP H. RUNYON, 

Defendant-Appellee. 

FILED 

Ua.ited States Court or Appca~ 

Tenth Circuit 

MAY 01 i995 

PATRICK FISHER 

Clerk 

No. 94-6265 

ON APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE WESTERN DISTRICT OF OKLAHOMA 

{D.C. No. CIV-94-243-R) 

Glynis C. Edgar {Reggie N. Whitten and Barbara K. Buratti on the 

briefs) of Mills & Whitten, Oklahoma City, Oklahoma, for 

Plaintiff-Appellant. 

Robert N. Naifeh, Jr. (R. Wade Cole with 

Derryberry, Quigley, Parrish, Solomon 

City, Oklahoma, for Defendant-Appellee. 

him on the brief) of 

& Blankenship, Oklahoma 

Before BRORBY, Circuit Judge, MCKAY, Senior Circuit Judge, and 

OWEN,* Senior District Judge. 

BRORBY, Circuit Judge. 

* The Honorable Richard Owen, Senior District Judge for the 

Southern District of New York, sitting by designation. 

Appellate Case: 94-6265 Document: 01019287647 Date Filed: 05/01/1995 Page: 4 
St. Paul Fire and Marine Insurance Company ("St. Paul") 

sought, in federal court, a declaration under the Declaratory 

Judgment Act, 28 U.S.C. § 2201, that it had no obligation to 

defend Philip H. Runyon under the terms of a professional 

liability insurance policy. The district court refused to 

exercise jurisdiction over this action because of the existence of 

a related state court action. St. Paul appeals this decision. 

Our jurisdiction arises under 28 U.S.C. § 1291, and we affirm. 

BACKGROUND 

Mr. Runyon, a nurse anesthetist, held a professional 

liability insurance policy with St. Paul. The policy provided St. 

Paul would defend and indemnify against covered professional 

liability claims. Two coworkers sued Mr. Runyon alleging Mr. 

Runyon abused patients, caused the coworkers' discharges, and 

withheld vital and medically necessary services to patients 

because either they lacked insurance or because of their race. 

Mr. Runyon asked St. Paul to provide a defense for him, but St. 

Paul refused. St. Paul maintained the coworkers' lawsuit did not 

implicate professional liability and, therefore, was not covered 

under the insurance policy. 

After three years of haggling, Mr. Runyon informed St. Paul 

that if it would not assume his defense, he would initiate a suit 

in state court for breach of contract and bad faith by February 

18, 1994. On February 17, 1994, St. Paul filed a diversity action 

for declaratory judgment. As promised, Mr. Runyon proceeded with 

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Appellate Case: 94-6265 Document: 01019287647 Date Filed: 05/01/1995 Page: 5 
his bad faith and breach of contract suit against St. Paul in 

state court the next day.1 

In response to a motion by Mr. Runyon in this case, the 

federal district court abstained from exercising jurisdiction over 

St. Paul's suit for declaratory judgment. The district court 

found (1) all of the issues in this suit will be resolved in the 

pending state court action; {2) St. Paul is using the federal 

action for procedural fencing; and (3) the declaratory judgment 

action is likely to create friction between the federal and state 

courts and may encroach improperly upon the jurisdiction of the 

state court. St. Paul appeals this ruling. 

DISCUSSION 

I 

The federal declaratory judgment statute provides 11 [i]n a 

case of actual controversy within its jurisdiction any court 

of the United States ... may declare the rights and other legal 

relations of any interested party seeking such declaration. 11 28 

U.S.C. § 2201. While this statute vests the federal courts with 

power and competence to issue a declaration of rights, see Public 

Affairs Assocs., Inc. v. Rickover, 369 U.S. 111, 112 (1962) (per 

curiam) , the question of whether this power should be exercised in 

a particular case is vested in the sound discretion of the 

district courts. Id.; see also Sierra Club v. Yeutter, 911 F.2d 

1 The state court judge stayed the state court action until the 

federal declaratory judgment action is resolved. 

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Appellate Case: 94-6265 Document: 01019287647 Date Filed: 05/01/1995 Page: 6 
1405, 1420 n.B (lOth Cir. 1990). Accordingly, our review of a 

district court's decision to abstain from exercising federal 

declaratory judgment jurisdiction is limited to deciding whether 

the district court abused its discretion. See ARW Exploration 

Corp. v. Aguirre, 947 F.2d 450, 453-54 (lOth Cir. 1991) .2 Under 

that standard, we ask only whether the district court made a clear 

error in judgment or exceeded the permissible bounds of choice in 

its decision to abstain from exercising its jurisdiction. See 

McEwen v. City of Norman, 926 F.2d 1539, 1553-54 (lOth Cir. 1991). 

II 

Assuming the district court has subject matter jurisdiction, 

the court should weigh various factors to determine whether or not 

to hear a declaratory judgment action. Such factors may include 

[1] whether a declaratory action would settle the 

controversy; [2] whether it would serve a useful purpose 

in clarifying the legal relations at issue; [3] whether 

the declaratory remedy is being used merely for the 

purpose of "procedural fencing" or "to provide an arena 

for a race to res judicata"; [4] whether use of a 

declaratory action would increase friction between our 

federal and state courts and improperly encroach upon 

state jurisdiction; and [5] whether there is an 

alternative remedy which -is better or more effective. 

2 Because we are bound by the decisions of prior panels of this 

court absent en bane reconsideration or a superseding Supreme 

Court decision, see In re Smith, 10 F.3d 723, 724 (lOth Cir. 

1994), St. Paul's argument that we should apply a de novo standard 

of review is misplaced, notwithstanding the fact that other 

circuits have applied plenary review to such decisions. See State 

Farm Fire & Casualty Co. v. Mhoon, 31 F.3d 979, 983 & n.6 (lOth 

Cir. 1994). While we recognize the Supreme Court recently granted 

certiorari and heard arguments to resolve the circuit split over 

the applicable standard of review, see Wilton v. Seven Falls Co., 

41 F.3d 934 (5th Cir.), cert. granted, 115 S. Ct. 571 (1994), the 

application of a de novo standard of review would not change our 

conclusion in this case. 

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Appellate Case: 94-6265 Document: 01019287647 Date Filed: 05/01/1995 Page: 7 
Mhoon, 31 F.3d at 983. The district court, in this case, refused 

jurisdiction because the same issues were involved in the pending 

state proceedings, and therefore, there existed a more effective 

alternative remedy. 

The parties have a pending state contract action, which 

incorporates the identical issue involved in the declaratory 

judgment action. Mr. Runyon's state breach of contract complaint 

against St. Paul alleges the coworkers' lawsuit is a "covered 

claim" pursuant to the insurance policy. In resolving the 

insurance contract, the state court will necessarily determine 

rights and obligations under the contract. St. Paul is seeking a 

declaration by the federal court that the coworkers' lawsuit is 

not a covered claim. The issue in the federal declaratory 

judgment action is identical to what would be a defense to the 

state court contract action whether Mr. Runyon's insurance 

contract with St. Paul protects him from the coworkers' lawsuit. 

Because the state court will determine, under state contract law, 

whether the tort action is covered by the insurance contract, it 

is not necessary for the federal court to issue a declaration on 

the insurance contract. See Brillhart v. Excess Ins. Co., 316 

u.s. 491, 495 (1942). 

St. Paul argues that by Oklahoma statute courts are 

prohibited from issuing declaratory judgments "concerning 

obligations alleged to arise under policies of insurance covering 

liability or indemnity against liability," and therefore St. Paul 

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Appellate Case: 94-6265 Document: 01019287647 Date Filed: 05/01/1995 Page: 8 
cannot receive relief through the state court contract proceeding. 

Okla. Stat. tit. 12 § 1651. Although the state court cannot 

issue a declaratory judgment, the contract case will resolve the 

question of insurance coverage under the insurance contract. The 

state court has already determined it has subject matter 

jurisdiction to resolve the question of whether the coworkers' 

lawsuit is covered by the insurance agreement. 

The present case is inapposite to the cases relied upon by 

St. Paul. Horace Mann Ins. Co. v. Johnson, 953 F.2d 575 (lOth 

Cir. 1991) (the Tenth Circuit reversed the district court's 

holding that the federal courts were prohibited from entertaining 

insurance declaratory judgment actions in the state of Oklahoma) ; 

Allstate Ins. Co. v. Brown, 920 F.2d 664 (lOth Cir. 1990) (the 

pending state court tort action cannot satisfactorily resolve the 

question of insurance coverage); National Union Fire Ins. Co. v. 

Coursey, 28 F.3d 113 (table) (unpublished order and judgment) 

(lOth Cir. 1994) (after state dismissed underlying state court 

action, federal district court must reconsider declaratory 

judgment jurisdiction because there was no longer an alternative 

remedy). In each of the cases St. Paul relied upon, the 

underlying state action was an action by an injured party against 

the insured. The insurer was not a party in any of those 

underlying actions and in each the state court was simply 

determining tort liability rather than determining coverage under 

the insurance contract. Significantly, Mr. Runyon's underlying 

state action is a contract action between the insured and the 

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Appellate Case: 94-6265 Document: 01019287647 Date Filed: 05/01/1995 Page: 9 
insurer rather than an underlying tort action excluding the 

insurance company. 

Although the federal court is not required to refuse 

jurisdiction, ARW Exploration, 947 F.2d at 454, it "should not 

entertain a declaratory judgment action over which it has 

jurisdiction if the same fact-dependent issues are likely to be 

decided in another pending proceeding." Kunkel v. Continental 

Casualty Co., 866 F.2d 1269, 1276 (lOth Cir. 1989). No error is 

revealed in the district court's choice to defer to the state 

court to apply state law and thus refuse jurisdiction. 

The federal district court also refused jurisdiction because 

it perceived St. Paul was using the declaratory judgment action to 

provide an arena for a race to res judicata. 

choose to avoid a declaratory judgment 

A district court may 

action because the 

plaintiff is using the action for procedural fencing. Franklin 

Life, 157 F.2d at 656. St. Paul filed its federal suit one day 

before the date Mr. Runyon promised to file his state court 

contract action against St. Paul. St. Paul knew Mr. Runyon was 

going to file the state contract action; St. Paul knew the date 

Mr. Runyon was going to file the action; and St. Paul waited three 

years before it sought the declaration. 

may not necessarily be bad faith on the 

Such timing of lawsuits 

part of the insurance 

company; however, St. Paul is unable to show error in the district 

court's perception that St. Paul was ·using the declaratory 

judgment action for procedural fencing. This determination by the 

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Appellate Case: 94-6265 Document: 01019287647 Date Filed: 05/01/1995 Page: 10 
district court was not an abuse of discretion, and procedural 

fencing is another adequate reason for the district court to 

refuse jurisdiction in a declaratory judgment action. 

CONCLUSION 

The district court was practical, given the specific facts of 

this case, in deciding to dismiss St. Paul's declaratory judgment 

action. All of the reasons articulated by the district court for 

its refusal to exercise declaratory judgment jurisdiction are 

proper. The district court did not abuse its discretion. 

AFFIRMED. 

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