Filed: July 15, 1996

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 95-1038

(CA-94-505)

The Centennial Life Insurance Company,

Plaintiff - Appellant,

versus

Barbara Poston; Victor Poston,

Defendants - Appellees.

ORDER

The Court amends its corrected opinion filed June 20, 1996, as

follows:

On page 3, first full paragraph, line 17 -- the citation to

Mitcheson v. Harris is corrected to read "955 F.2d 235."

For the Court - By Direction

/s/ Bert M. Montague

Clerk
PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

THE CENTENNIAL LIFE INSURANCE

COMPANY,

Plaintiff-Appellant,

No. 95-1038

v.

BARBARA POSTON; VICTOR POSTON,

Defendants-Appellees.

Appeal from the United States District Court

for the Southern District of West Virginia, at Huntington.

Robert J. Staker, Senior District Judge.

(CA-94-505)

Argued: April 4, 1996

Decided: June 20, 1996

Before WILKINSON, Chief Judge, ERVIN, Circuit Judge, and

BUTZNER, Senior Circuit Judge.

_________________________________________________________________

Affirmed by published opinion. Judge Ervin wrote the opinion, in

which Chief Judge Wilkinson and Senior Judge Butzner joined.

_________________________________________________________________

COUNSEL

ARGUED: Eric Wayne Iskra, SPILMAN, THOMAS & BATTLE,

Charleston, West Virginia, for Appellant. John Frederick Cyrus,

GARDNER & CYRUS, Huntington, West Virginia, for Appellees.

ON BRIEF: Charles L. Woody, Neva G. Lusk, SPILMAN,

THOMAS & BATTLE, Charleston, West Virginia, for Appellant.
David M. Pancake, LEVY, TRAUTWEIN & PANCAKE, Huntington, West Virginia, for Appellees.

_________________________________________________________________

CORRECTED OPINION

ERVIN, Circuit Judge:

The district court dismissed Centennial Life Insurance Company's

declaratory judgment action. Because a pending state action will

resolve the issue raised in the federal action, along with a number

of

issues not raised here, we believe that the district court did not

abuse

its discretion. Therefore, we affirm the decision below.

I.

Soon after Centennial Life Insurance Company issued a health

insurance policy to Victor and Barbara Poston, it began to suspect

that

the insurance application contained material misrepresentations. A

hospital requested that Centennial authorize a liver transplant for

Victor Poston, and two days later the insurer rescinded the policy.

The

Postons objected to the notice of rescission.

On June 22, 1994, Centennial brought this diversity action in the

district court, seeking a declaration that the insurance policy was

void

based on the Postons' fraudulent misrepresentations. On August 12,

1994, Barbara Poston initiated a state court action seeking

enforcement of the policy and damages, and asserting separate and alternative claims against the insurance agent. On the same day, Poston

moved to dismiss the federal action.

The district court found that the issues involved in Centennial's

declaratory judgment action could be resolved as efficiently in

state

court as in federal court, and had in fact been raised in the state

proceeding. The court thus concluded that "it should decline

jurisdiction

over this action in deference to the state court action."

II.

The Federal Declaratory Judgment Act provides that district courts

"may declare the rights and other legal relations of any interested
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party seeking such declaration whether or not further relief is or

could

be sought." 28 U.S.C.A. § 2201(a). This power has consistently been

considered discretionary. See, e.g., Brillhart v. Excess Ins. Co.,

316

U.S. 491, 494 (1942); Wilton v. Seven Falls Co., 132 L. Ed. 2d 214,

225 (1995); Aetna Cas. & Sur. Co. v. Quarles, 92 F.2d 321, 324 (4th

Cir. 1937).

The Fourth Circuit has explained that a declaratory judgment

action is appropriate "when the judgment will serve a useful

purpose

in clarifying and settling the legal relations in issue, and...

when it

will terminate and afford relief from the uncertainty, insecurity,

and

controversy giving rise to the proceeding." Quarles, 92 F.2d at 325

(quoting Edwin M. Borchard, Declaratory Judgments 107-09 (1934)).

It should not be used "to try a controversy by piecemeal, or to try

particular issues without settling the entire controversy, or to

interfere

with an action which has already been instituted." Quarles, 92 F.2d

at 325. The Supreme Court explained that, when a related state proceeding is underway, a court considering a declaratory judgment

action should specifically consider whether the controversy "can

better be settled in the proceeding pending in the state court."

Brillhart, 316 U.S. at 495. This consideration should be guided by a number of

factors, including the nature and scope of the state proceeding and

"whether the claims of all parties in interest can satisfactorily

be adjudicated in that proceeding . . . ." Id.; see also Mitcheson v.

Harris, 955

F.2d 235 (4th Cir. 1992).

Guided by these general principles--as well as "the same considerations of federalism, efficiency, and comity that traditionally

inform

a federal court's discretionary decision whether to abstain from

exercising jurisdiction over state-law claims in the face of parallel

litigation in the state courts"--the Fourth Circuit has set forth a

number of

specific factors for district courts to consider. Nautilus Ins. Co.

v.

Winchester Homes, Inc., 15 F.3d 371, 376 (4th Cir. 1994). These

include:

(i) the strength of the state's interest in having the issues

raised in the federal declaratory action decided in the state
courts; (ii) whether the issues raised in the federal action

can

more efficiently be resolved in the court in which the state

action is pending; [ ] (iii) whether permitting the federal

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action to go forward would result in unnecessary "entanglement" between the federal and state court systems, because

of the presence of "overlapping issues of fact or law"[; and

(iv)] whether the declaratory judgment action is being used

merely as a device for "procedural fencing"--that is, "to

provide another forum in a race for res judicata" or "to

achiev[e] a federal hearing in a case otherwise not removable."

Id. at 377.

Last year the Supreme Court addressed the standards under which

a district court's decision to stay1 a declaratory judgment action

should be made and reviewed on appeal. Wilton v. Seven Falls Co.,

132 L. Ed. 2d 214 (1995). The Court clearly reaffirmed Brillhart v.

Excess Ins. Co., 316 U.S. 491 (1942), which it described in terms

similarly descriptive of the case before us: "An insurer, anticipating

a

coercive suit, sought a declaration in federal court of

nonliability on

an insurance policy." 132 L. Ed. 2d at 220. In Brillhart, the

district

court dismissed the action because of ongoing state litigation. The

Wilton Court understood Brillhart to stand for the proposition

that, "at

least where another suit involving the same parties and presenting

opportunities for ventilation of the same state law issues is

pending

in state court, a district court might be indulging in `gratuitous

interference,' if it permitted the federal declaratory action to

proceed." Id.

at 221 (citation omitted). The Court concluded that district courts

in

fact possess rather wide discretion in making these decisions:

Consistent with the nonobligatory nature of the remedy, a

district court is authorized, in the sound exercise of its

discretion, to stay or to dismiss an action seeking a declaratory

_________________________________________________________________

1 The Court minimized the distinction between a district court's

staying

of the action and an outright dismissal, because even when the

federal

action is stayed, a state court judgment ultimately would have

preclusive

effect. 132 L. Ed. 2d at 221. The Court also noted, however, that

"where

the basis for declining to proceed is the pendency of a state

proceeding,
a stay will often be the preferable course, insofar as it assures

that the

federal action can proceed without risk of a time bar if the state

case, for

any reason, fails to resolve the matter in controversy." Id. at 224

n.2.

4
judgment before trial or after all arguments have drawn to

a close. In the declaratory judgment context, the normal

principle that federal courts should adjudicate claims within

their jurisdiction yields to considerations of practicality

and

wise judicial administration.

Id. at 224. To whatever extent our previous decisions have implied

further constraints on district court discretion, see, e.g., Nautilus, 15

F.3d at 375, those decisions must give way to the clear teachings

of

Wilton.

The Wilton Court further explained that a district court's decision

to stay a declaratory judgment action is reviewed for abuse of

discretion, finding that the Declaratory Judgment Act is best effectuated

if

district courts are "vest[ed] with discretion in the first

instance,

because facts bearing on the usefulness of the declaratory judgment

remedy, and the fitness of the case for resolution, are peculiarly

within their grasp." 132 L. Ed. 2d at 225.

III.

Applying these principles2 to the present case, we cannot find that

the district court abused its discretion in dismissing without

prejudice

Centennial Life's declaratory judgment action. Several of the

factors

we have endorsed for aid in making such decisions lead to no

obvious

conclusion. For instance, although only state law is at issue, the

relevant state law is not problematic or difficult to apply, which

weakens

somewhat the state's interest in having these issues decided in

state

court. Also, although the federal action was filed first, we

decline to

place undue significance on the race to the courthouse door,

particularly in this instance where Centennial had constructive notice of

the

Postons' intent to sue, and Barbara Poston's state filing was

understandably delayed by her husband's death.

_________________________________________________________________

2 Because our recent decisions in Nautilus Ins. Co. v. Winchester

Homes, Inc., 15 F.3d 371, 375 (4th Cir. 1994), and Continental Cas.
Co.

v. Fuscardo, 35 F.3d 963, 965 (4th Cir. 1994), reviewed district

courts'

decisions to decline jurisdiction to hear a declaratory judgment

under a

de novo standard, we will not discuss those cases in detail here.

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One factor, however, is particularly salient here: the state court

action contains a defendant and a number of issues not present in

the

federal action. The Postons have asserted claims against Centennial

insurance agent Jack Gottlieb, based on his representations about

the

insurance policy and an alleged negligent failure to procure the

insurance requested. Thus, although issuance of a declaratory judgment

would settle part of the controversy between the Postons and

Centennial Life, it certainly would not settle the entire matter. The

state litigation, on the other hand, could resolve all issues, and we note

that

significant discovery has already been undertaken in that action.

Concern for efficiency and judicial economy clearly support the

district

court's decision.

Finding no abuse of discretion in the decision of the district

court,

we affirm.

AFFIRMED

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