United States Court of Appeals FOR THE EIGHTH CIRCUIT

___________ No. 97-1797

___________ The Prudential Insurance Company * of America, * * Appellant, * * v. * * John Doe, Individually and as parent * and guardian ad litem for Jane Doe, * a minor, * * Appellee. *

___________ Appeals from the United States District Court for the No. 97-1955 Eastern District of Missouri.

___________ The Prudential Insurance Company * of America, * * Appellee, * * v. * * John Doe, Individually and as parent * and guardian ad litem for Jane Doe, * a minor, * * Appellant. *Fictitious names for the defendants. 1 -2- ___________ Submitted: January 13, 1998

Filed: April 6, 1997

___________ Before RICHARD S. ARNOLD, Chief Judge, BRIGHT and WOLLMAN, Circui t Judges.

___________ WOLLMAN, Circuit Judge. The Prudential Insurance Company of America (Prudential) appeals the district court’s order dismissing Count II of its second amended complaint . John Doe and Jane Doe a ppeal the district court’s grant of summary judgment on Count I of tha t 1 complaint. We reverse the district court’s dismiss al of Count II and remand for further proceedings; we affirm the order granting summary judgment on Count I.

I.

John Doe is an attorney who resides in St. Louis, Missouri, and is a partner in a Belleville, Illinois, law firm. In 1993, Doe’s firm contracted with Prud ential for group insurance, which included managed medical coverage. The contract includes a choice of law provision that design ated Illinois law as the law governing the contract, as well
as a prov ision that limits benefits to 30 days for hospital inpatient stays for “mental , psychoneurotic and personality disorders, alcoholism and drug abuse.”

In Apri l 1994, Doe claimed benefits for Jane Doe, his minor daughter, fo r hospitalization for recurrent major affective disorder. Prudential, relying on the-3-

limitation, denied hospital inpatient be nefits for care and treatment of Jane Doe beyond 30 days. Doe sought review of the denial through Prudential’s Southwest Grou p Operations Regional Appeal C ommittee, which upheld the original denial of the claim.
Upo n transmittal of the committee’s decision in June of 1994, Prudentia l immediately filed this action in the United States District Court for the Eastern District of Missou ri pursuant to the Employee Retirement Income Security Act (ERISA), 2 9 U.S.C. § 1332(a)(3), and the Decl aratory Judgment Act, 28 U.S.C. § 2201. Prudential sought a declaratory judgment regarding the benefits, if any, due the Does under th e plan. The district court initially dismissed the complaint for lack of subject matte r jurisdiction. We reversed the dismissal and remanded the matter to the district court. See The Prudential Ins. Co. of America v. Doe , 76 F.3d 206 (8th Cir. 1996).

Mean while, in March of 1995, the Does filed an action against Prudential i n Illi nois state court alleging invasion of privacy, intentional infliction of emotiona l distre ss, negligent infliction of emotional distress, defamation, and violation of th e Illinois Mental Health and Developmental Disabilities Confidentiality Act, 740 Ill

. Comp. Stat. 110/1 et seq. Prudential then filed a second amended and supplementa l complaint setting forth a sec ond count, which alleged that (1) all of the claims asserted by the D oes in the Illinois action were preempted by ERISA; (2) all of the claim s asserted by the Does in th e Illinois action were mandatory counterclaims in the federal action; (3 ) the filing of the federal action in a federal district court by Prudential wa s absolutely privileged and could not give rise to any state law liability; and (4) the Illinois Mental Health and Developmental Disabilities Confidentiality Act ha s no extraterritorial effect and the filing the federal action in a federal court in Missouri did not violate the act.
Prudential moved for summary judgment on both counts. The Does alternatively moved to dismiss, abstain, stay, or transfer both counts. As indicated above, the28 U.S.C. § 2283 provides: “A court of the United States may not grant a n 2 injunctionto stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in a id of its jurisdiction, or to protect or effectuate its judgments.” -4- dist rict court granted Prudential’s motion for summary judgment on Count I and th e Does’ motion to dismiss Count II.

II.

We deal firs t with Prudential’s appeal from the dismissal of Count II. Citin g Texas Employers’ Ins. Ass’n v. Jackson , 862 F.2d 491 (5th Cir. 1988) (en banc), the district court held that the declaratory judgment sought by Prudential in Count II would have the effect of enjoining the further p rosecution of the Illinois action and would thus violate the Anti-Injunction Act, 28 U.S.C. § 2283. This is a question of law that we 2 review de novo. See Camberos v. Branstad , 73 F.3d 174, 176 (8th Cir. 1995).

In Jackson , a workman filed a suit in state court after being injured during th e course of employment covered by the Longshore and Harbor Workers’ Compensation Act (LHWCA). 862 F.2d at 493. See generally33 U.S .C. §§ 901-950. The workman filed the suit against his employer’s L HWCA insurer, alleging fraud and bad faith. See Jackson , 862 F.2d at 493. Nearly one year later, the insurer sought declaratory relief in federal court, seeking inter alia , a declarat ory judgment that the LHWCA preempted the wo rkman’s state law claims. See id. at 495-96. The Fifth Circuit held that th e insurer’s declaratoryrelief was barred by the Anti-Injunction Act, reasoning that since an injunction would be barred by the Anti-Injunction Act, the issuance of a declaratory judgment that would have essentially the same effect as an injunction is similarly barred. See id. at 506.

We conclude that the rationale of Jackson does not foreclose Prudential’ s declaratory judgment action. First, in contrast to the situation in Jackson , it is-5-

significant

that Prudential, the declaratory plaintiff in this action, was the first litigan t to file suit. The Fifth Circu it recognized this significance in Royal Ins. Co. of America
v. Quinn-L C apital Corp. , 3 F.3d 877, 886 (5th Cir. 1993). After concluding tha t Jackson represented a novel type of abstention, the Quinn-L court noted that “in some
cases the dat e on which the state court suit was filed can make a difference in th e application of th e abstention doctrine.” Id. at 886. The court concluded that a federal court need not absta

in from proceeding with a declaratory judgment action “where the fe deral suit is filed substantially prior to any state suits, significant proceedings hav e taken place in the federal suit, and the federal suit has neither the purpose nor the effect of overturning a previous state court ruling.” Id. We believe that the present case falls squarely within the class of actions just described. Indeed, had the district court no t dismissed the case for want of jurisdiction, the merits of Count I might well have been decided before the filing of the Illinois action.
Second, the Supreme Court’s decision in Wilton v. Seven Falls Co. , 115 S. Ct. 2137 (1995), vests the distr ict courts with broad discretion in deciding whether to hear a dec laratory judgment action. In Wilton , the Supreme Court confronted the question whethe r the “exceptional circumstances” test expressed in Colorado River Wate r Conservation Dist. v. United States , 424 U.S. 800, 818-820 (1976), an d Moses H. Cone Mem’l Hosp. v. Mercury Const. Corp. , 460 U.S. 1, 14 (198 3), is applicable to a district court’s decision to stay or dismiss a Declaratory Judgment A ct suit during the pendency of a parallel state court proceeding. The Court , rejecting the exceptional circumstances standard and invoking the discretionary standard set fo rth in Brillhart v. Excess Ins. Co. of A merica , 316 U.S. 491 (1942), held that “district courts possess discretion i n determining whether and when to entertain an action under the Declaratory Judgment Act, even when the su it otherwise satisfies subject matter jurisdictional prerequisites.” Wilton , 115 S. Ct. at 2140.

We conclu de that it was within the district court’s discretion to proceed to hear and adjudicate Prudential’s action. There remains Prudential’s argument that-6-

abstent ionby the district court would constitute an abuse of discretion in this case i n light of th e abstention criteria set forth in Federated Rural Elec. Ins. Corp v. Arkansas Elec. Coop. Inc. , 48 F.3d 294, 297 (8th Cir. 1995). Federa ted Rural Elec. was decided prior to Wilton , however, and applied the exceptional circumstances test of Colorado River and Moses H. Cone , a test that Wilton makes clear does not contr ol in declaratory judgmen t actions. “Distinct features of the Declaratory Judgment Act, we believe , justify a standard vesting distri ct courts with greater discretion in declaratory judgment actions than that permitted under the ‘exceptional circumstances’ test of Colorado River and Moses H. Cone .” Wilton , 115 S. Ct. at 2142. Thus, Wiltonrequires application of the Brillhart

factors to the abstention question in this case. See Wilton , 115 S. Ct. at 2142 (“[n]o subsequent ca se, in our view, has called into question the application of the Brillhart

standard to the Brillhart

facts.”); Gover

nment Employees Ins. Co. v. Dizol , 133 F.3d 1220, 1225 (9th Cir. 1998) (en banc) (“[t]he Brillhart factors remain th e philosophic touchstone for the district court.”); Youell v. Exxon Corp. , 74 F.3d 373 , 375 (2nd Cir. 1996) (per curiam).

Accordin gly, on remand the district court should examine the “scope of th e pend ing state court proceeding” and consider “whether the claims of all parties i n interest can satisfactorily be adjudicated in that proceeding, whether necessary parties have been joined, whether such parties are amenable to process in t hat proceeding, etc.” Brillhart , 316 U.S. at 495.

III.
Turning to the Does’ cross-appeal, we first address their argument that t he district
cour t lacked subject matter jurisdiction to consider Prudential’s allegations. Se e Bannister v. Sorenson

103 F.3d 632, 636 (8th Cir. 1996). The typ es of actions that may be brou ght under ERISA, as well as the parties who may bring them, are carefull y defined in 29 U.S.C. § 1132(a). Relevant portions provide a “participant, beneficiary, or fiduciary” with “appropriate equitable relief” to enforce provisions of the terms of-7-

the plan. Id. at § 1132(a)(3)(B)(ii). The Does argue that Pru dential is not a “fiduciary,” as defined by ERISA, and therefore cannot bring this declara tory judgment action under its auspices.

ERI SA defines a fiduciary as one who either “exercises any discretionar y authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, . . . or . . . has any discretionary aut

hority or discretionary responsibility in the administration of such plan.” Id. at § 1002 (21)(A). The Does contend that our interpretation of the fiduciary definition in Kerns v. Benefit Trust Life Ins. Co. , 992 F.2d 214 (8th Cir . 1993), warrants a fi nding that Prudential is not a fiduciary. We disagree. Unlike the insurer in Kerns , who “did not

hing more than perform its normal contractual claims handling function,” Prude ntial’s obligations and involvement in handling the Does’ claims includ e substantial discretion. Id. at 216. It is undisputed that Prudential alone interpreted the language of the plan and reviewed and decided the Does’ claim a t every level, including
a final i nternal appeal to Prudential’s Southwest Group Operations Regional Appea l Co mmittee. As we noted in Kerns , Department of Labor regulations view insurers as fiduciari es when they retain discretion to review denied claims. See id. (citing 2 9 C. F.R. § 2560.503-1(g)). Prudential is thus a fiduciary as defined by ERISA, and the district court had subject matter jurisdiction to consider this action.

The Does next argue that the district court abused its discretion when i t
en tertainedPrudential’s declaratory judgment action under Count I. Again, Brillhar t provides the analytical framework for determining the propriety of granting declaratory relief. 316 U.S. at 495. Under Brillhart , we must examine the scope of the Illinoi s action and consider whether abstention would prejudice the Does’ ability to adjudicate their claims, join parties, an d serve process on parties and witnesses. See id. Initially, the federal character of Count I supports denial of abstention under Brillhart . Likewise, the limit ed scope of the Illinois action warrants federal consideration of Prudential’ s ERISA-based claims. We find it significant that the Does have made no claims for-8-

ERISA benefits in the Illinois action, while in t his action Prudential seeks interpretation of J ane Doe’s employee benefit welfare plan under ERISA. Moreover, we conclud e that th e Does will not be prejudiced by this action. Although they argue tha t Prudential’s filing was an improper us e of the declaratory judgment to seek a favorable forum, a number of legitimate justifications support the district court’s decision.

We are min dful of the general proposition that declaratory judgments are not to be used defensively to deny a prospective plaintiff’s choi ce of forums. See Anghoff, 58 F.3d at 1270; BASF Corp. v. Symington , 50 F.3d 555, 558 (8th Cir. 1995); Dizol , 133 F.3d at 122 5. But labeling Prudential’s actions as forum shopping would be engaging in s peculation. Insurers commonly use declaratory judgment actions to determin e
co verage questions, while simultaneously avoiding exposure to substantial bad faith damages. SeeGrace M. Giesel, The Expanded Discretion o f Lower Courts to Regulate Access t o the Federal Courts after Wilton v. Seven Falls Co.: Declaratory Judgmen t Actions and Implications Far Beyond , 33 H OUS

. L. R EV

. 393, 401-02 & n.32 (1996)

. Pr udential was justified in seeking declaratory relief in the only forum in which Jan e Doe was subj ect to personal jurisdiction. Furthermore, the Does’ failure to assert any claim for bene fits in the Illinois action gives the lie to their assertion that they wer e denied their choice of forum. Accordingly, we conclude that the district court properly exercised its discretion when it decided to proceed with Count I.

The Does contend that the district court erred when it granted Prudentia l
summar y judgment on the merits of its claim under Count I. We review the distric t
co urt’s decision de novo, applying the same standard as the district court, affirming if the facts , viewed in the light most favorable to the nonmoving party, show no genuine issues of material fact and that the moving party is entitled to judgment as a matter of law. See Johnston v. Warren County Fair Ass’n, Inc. , 110 F.3d 36, 38 (8th Cir. 1997). Among the errors alleged, the Does contend that the district c ourt reviewed Prudential’s denial of benefits for abuse of discretion, rather than de novo, as required unde r Firestone Tire and Rubber Co. v. Bruch , 489 U.S. 101, 115 (1989). Because we-9-

conclude that the district court’s decision was correct under either standard, we need not consider this argument.

The D oes’ principal assignment of error lies in the district court’s decision t o apply Eighth Circuit precedent to the issue of benefit denial, rather than Illinois common law as agreed in the benefit plan contract. They argue that the plan’s choice of la w provisions require us to apply the reasoning of Phillips v. Lincoln Nat. Life Ins. Co. , 978 F.2d 302 (7 th Cir. 1992). The Phillips court, adopting the Illinois state law rule o f contract interpretation contra preferentem , held that ERISA employee benefit pla n language that lim

ited coverage for “mental illness” should be construed in favor of the insured. Se e id. at 311. Prudential argues that our decision in Brewer v. Lincoln Nat. Life Ins. C o. , 921 F.2d 150 (8th Cir 1990), controls and that our holding in Brewe r supports the district court’s grant of summary judgment. We agree.
Although the Does characterize the Phillips decision as a controlling statement of Illinois common law, it is really a statement of ERISA federal common law for the Seventh Circuit. Brewer

states the law applicable in the Eighth Circuit and holds “that [the contra preferentem ] rule of const ruction violates the provisions of ERISA and thus cannot be used to interpret the plan’s terms.” Id. The choice of law provision in th e
con tract does not alter the outcome here, for parties may not contract to choose stat e law as the governing l aw of an ERISA-governed benefit plan. Although choice of law provisio ns may be relevant in a diversity action, we are required to apply federa l common law when deciding federal questions. See Robbins v. Iowa Road B uilders Co. , 828 F .2d 1348, 1352-53 (8th Cir. 1987); see also Erie v. Tompkins , 304 U.S. 64, 7 8 (1 938). In light of the broad preemptive scope of ERISA, see Ingersoll-Rand Co. v

. McClendon , 4 98 U.S. 133, 138-39 (1990); Brewer , 921 F.2d at 153, the question o f coverage for Jane Doe’s treatment is clearly one of federal law.

In Br ewer , we held that the term “mental illness” should be considered from a layperson’s reading and is therefore not ambiguous and that the plaintiff’s affective-10-

mood disorder, regardless of the cause, was what a layperson could consider a “mental ill ness.” 921 F.2d at 153-54. So also here, Prudential’s limitation of coverage fo r “mental, psychoneurotic and personality disorders” is unambiguous and is applicabl e to the treatment of Jane Doe’s major affective disorder.
The order dismissing Count II is reversed, and the case is remanded to the district court for further proceedings on that portion of Prudential’s complaint. The orde r granting summary judgment in favor of Prudential on Count I is affirmed.
A true copy.

Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.