## In the



# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it
N o. 09

- 2019 E NVI S I ON H EAL THC ARE , I NC ., Plai nt i f f

-Appe l l ant, v. P RE FERRE D O NE I NSURANCE C OMPAN Y, D efend a nt-A pp ellee.

Appeal from the United States District Court fo r the N o rthernDi stricto f Illino is, Eas tern Div isi on. No . 09 CV 00078

—Jo hn F. G rady, Judge .
A RG UE D J AN UA RY 13, 2010

— D ECI DE D M AY 12, 2010

Befo re B AUER, M A NI ON, a nd T INDER, C ircu it Judges. M A NI ON, C ircu it Ju dge. A fterbeing deni ed cov er age f orsubst anti alm edi calexpenses , B ra dle y Rom ersued Prefer re dO ne Insurance Com pany i n M i nnesot a s tat e cour t cl ai m i ng i t i m proper l y r esc in d ed hi s insurance pol i cy. The di spute dre w in other parti es and bre d fur th ers ui ts : Pr efer r edOn e fi l ed a th i r d- par tyc o m pl aint f o r ind em n ifica tio n ag ain st E n vis ion H ea lth c ar e, Inc ., in the M i nnesot a ca se and days l ate r En vi si on s ued2 N o. 09

- 2019 Prefer re dO ne i n an I l l i noi s federa l co urt, s ee king a decl ar ati on that i t has no du ty to i nd em ni fy Pr eferre dO ne. The dis tr i ct c ourtexer ci sed i ts disc re ti on un der the Wi l t on/ B rillh a rtabs tenti on doct ri ne and d ism i sse d the federa l case . Envi si on a pp eal s. B ecause the thi rd- partypro ceedi ngs in M i nnesot a a re p ar all elto the federa l cas e an d i t w as no t an a bu se of discretion for the d istri ct cou rt t o ab s t a i n fr o m h e a r i n gth e d e c l a r a t o r y a c t i o n, w e a ffi r m.

I. E n vis ion H ea lth c ar e, Inc . (“E n vis ion ”) is a w h ole sa le i nsuranc e br oke r; i t work s with heal th i nsurance com pan ies to m ar ketthei r products. I n that capaci ty, i t a l so re c ru its , tra in s, a n d o ve rs ee s re ta il age n ts w h o s olic it cus t o mer s . I n 2 0 0 6 , En v i s i o n e nt e r e d int o a Ge nera l A ge n t A gr ee m en t (“ G A A ”) w ith P r e f e r r ed O n e, a M in n es ot a-b as ed i n su ra n c e c om p an y, to m ar ke t a n d se ll i ts pol i ci es. One ofEnvi si on’ s a gents , Edw ar d Th om as, sol d a Pre f er re dO n e h ealth i nsurance pol i cy to Bradle y Rom er . So m e ti m e l ate r, Rom er had tw o knee op er ati o ns . The fi r sti n May 20 07, was c o m pl et ed wi th o ut i nci den t. B u t a fterthe seco nd i n Se ptem ber20 07, Romerc o nt r a c t e d a s t a phi nfe c t i o n a nd wa s h o s pi t a l i zed f o r o ve r a wee k

. T he c osto fthe s ec o nd o per at i o n a nd the s ubs eque nts ta y e xc ee ded o ne hun dr ed th o us an d dol l ar s. T h e b u l k o fthi s e xpense w as att ributed to tr eat
m en t o fthe s ta ph i nfec ti o n. A fterr ecei vi ng the hos pit albi l l, Pre fer re dO ne be gan l oo ki ng a l i ttl e deeperi nto Rom er ’ s pol i cy appli cati on and disco ver ed th at he had f ai l ed to di scl ose a pre-N o. 09

- 2019 3

ex i st i ngc o ndi ti o n. And o n tha t ba si s, Pr efer r edOn e rescind ed the p oli cy an d refused to pay f or Rom er’s seco nd o perat i on and subse quent sta y. Rom erthen sued Prefe rr edO ne i n M i nnesot a s tat e co urt f orbr each o f contr act. I n the com pla i nt, he c l ai m s that in th e a pp l i catio n int er vie w w ith T h om as h e t r u th fu lly an sw er ed all ofthe appli cati on q u esti ons and rel i ed on Thom as to a c c u r a t e l y c o mp l e t e th e f o r m. C i t i n g th e G AA , P r e fe r r e d O n e fi l e d a th i r d

- p a r t y c o mpl ainti n the M in ne so ta a ct i o n a g ains t Env i si o n a nd Thom as f ori nd em ni fi cati on fro m any re su l ti ng j ud gmen ti ts uff e r s . T wo da y s l a t e r, Env i s i o n fi l e d a decl ar ato ryact i on a gai nst Pr efer re dO ne i n the U ni ted St ate s D istr i ct Cour t f orthe N or ther n Dis tr i ct o fI l l i noi s, seeking a d eclaration that i t ha s no du ty to in d e m nify Preferred O ne u n d e r the G A A
. Th e cru x of En vision’s ar gum ent i s that the GA A was execute d i n 20 06 betw ee n P re fer re d O n e a n d w h at it ca lls “o ld ” E n vis ion . In M ay 2007, ano therco m p an y, J
. K
. A cquis i ti ons, acqui re d ma n y o fth e a s s e t s o f“ o l d ” E n v i s i o n, i n c l u d i n gth e n a me “Envis i on H eal thcar e” and the r i ght t o col l ect com m i ssions ow ed by Preferred O ne . Th e E nv isi on H ealthc are that en tered i nto the 2 006 GA A , “o l d” Envisi on, was d i s s o l v e d a n d “ n e w ” E n v i s i o n b e g a n c o l l e c t i n gc o mm i ss i o ns fr o m Pr efer r edOn e wi th o utthe b ur deno fthe i nde m ni f i ca ti o n c l au se . Nat ur al l y , Pr ef er r edOn e disputes thes e cl ai m s. Af t e r En v i s i o n fi l e d s ui ti n fe de r a l c o ur t, it fi l e d a m oti on to d i sm i ss the thi rd- partyco m pla i nt i n the M i nnesot a ca se. A m on g otherthi ngs, i t a rgued that the M i nne-4 N o. 09

- 2019 sot a ca se w as du pli cati ve of the federa l case . I n i ts w or ds, th ey“ i nv o l ve [ ] the e xa cts ame l eg ali ss ue ” and i n the in te re st of ju d icia l ec on om y t h e t h ird -p ar ty su it s h ou ld be s tay ed pend i ng the o utcom e of t h e federa l cas e. That m oti on was denie d, and the M i nnesot a ca se m ove d f o r wa r d. Pre ferred O ne then m oved to dism iss the d eclaratory ac ti o n i n fede r alc our t f o r l ac ko fpe r so na l j ur i sdi ct i o n. T he district cou rt recogn ized that the tw o cases are pa r a l l e l a c t i o ns b e c a us e the y i nv o l v e the s a me parti es and prese nt the sa m e le gali ssue: wh etherEnvi si on o wes Pr ef er r edOn e a dut y t o i nde m ni fy . The r efo r e, the cour t e xerci sed i ts disc re ti on a n d di sm i sse d the ca se und er the Wilto n/B rillh a rtab st en tio n d oc tr in e. Wi l t on v. Se ve n F al l s Co. , 515 U .S. 27 7 (1 99 5); Bri l l har tv. Exces s Ins . Co. o f A m. , 31 6 U.S
. 49 1 ( 1942 )
. On app eal, E n vis i on a rgues th at th e d ist ric t c ou rt e r r ed in it s d ec isio n, an d in su p p or t itcla im s t h at th e t w o p ro c ee d in gs are n otp ar alle l.

II. B e f o r e a d d r e s s i n gt he me r i t s o fth i s a p p e a l, we consi der the appropr i ate st andard ofrev i ew . The part i es ar gue tha t our re vi ew o fthe dist ri ct c ourt ’ s a pp l i cati on ofthe Wilto n/ B r i llh a rtabs tenti on doct ri ne i s de no vo. T h e y a r e c o r r e c t, i n p a r t
. O u r c a s es ar e c l e a r th a twe re vie w th e u n d er lyin g leg al q u es tio n s d e n ov o. R .R . Street & Co
. , In c . v . Vu l c a n M a t e r i a l s Co. , 5 69 F. 3d 711, 71 4 ( 7th Cir
. 20 09)
. I nd eed, o ur r evi ew o fl ega l questi ons i s a l w ays ple nary . But the dist ri ct c ourt ’ s deci si on o fwh ethe r to abs tain u nd er Wilto n/B rillh a rti s a different m atter.N o. 09

- 2019 5

So m e of ou r p ost- Wi l t on c as es ha ve re vi ewed bo th the 1 a ppl i c a bi l i t y ofth e doc t r i ne an d t he di s t r i c tco ur t ’ s de c i s i onde n o v o . See, e . g. , N ew ell O p era ting C o. v . In t’l U n ion of U n ited A u to., Ae r o s p a c e & Ag r i c . Imp l eme ntWo r k e r s o f Am. , 532 F. 3d 583, 591 (7 th C ir . 20 0 8 ); N
. S hor e G as C o. v. Sal omon Inc. , 152 F. 3d 642, 647 (7 th C ir . 19 9 8 ); M at t erof VM S Sec. Li t ig. , 1 03 F. 3d 1317, 1327 ( 7th Ci r. 19 96 )
. How eve r, as the s e c as es c onfl i c twith the S u p r e me C o u r t ’ s h o l di n g i n Wi l t on , the y are i n err or and are he reb y ov erru led

. B eca u se ou r d ecision o v e rru les these ca ses, we ha ve c i rc ul at ed i tt o the ful l c our tas r equi re d by our Circui t Rule 40( e)
. N o j ud ge in regular act ive s ervic e voted to hear the cas e en banc. As th e S u p r e me C o u r t n o t e d i n Wi l t on “a d istri ct cou rt i s a uthor i zed, i n the sound exer ci se ofi ts disc re ti on, to sta y o r to dism iss an act i on s eek i ng a decl ar ato ryj ud gm ent. ” 515 U.S
. at28 8. A nd we re vi ew thatdeci si on “fo r ab u se of d isc re tio n .” Id. at28 9- 90. 1

III
. “U nd erwh at i s know n as the Wilto n/B rillh a rtabs te nti on doctr i ne, dist ri ct c ourt s pos ses s s i gni fi cant disc re ti on to dism i ss orst ay cl ai m s s eek i ng dec l ar ato ryr el i ef, ev en though they have s ubj ect m att erj uri sdic ti on o versuch cl ai m s. ” R. R. St r e e t& Co. , 56 9 F
. 3d a t 713. Thi s di scr eti on a r i s e s fr o m t he De c l a r a t o r y J ud g men tAc t, 2 8 U. S
. C. §§ 2201

- 2202 i tse l f, w h ich pro vi des thatdi str i ct c ourt s
“ m ay dec l ar e th e r i g ht s an d o th erl eg alrel at i o ns o fa ny i nt e r e s t e d p a r t y s e e k i n gs u c h d e c l a r a t i o n . ” 2 8 U
. S
. C. § 22 01 ( a)
. The di sc r et i o na r y na tu r e o f th e Act l ed th e6 N o. 09

- 2019 S upr eme Co ur t to ho l d i n B ri ll h art a nd Wi l t on that di st r i ctc o ur ts ha ve s ubs ta nt i aldi sc r et i o n i n de cid in g whethe r t o de cl ar e th e ri gh ts ofl i ti g an ts a nd may, i n the sound exer ci se ofthei r disc re ti on, st ay ordi sm i ss an acti on s eek i ng a declar at ory j ud gm ent in f avo r ofan on go in g s ta t e c ou rtca se . Se eBr i l l har tv. Exces s Ins . Co. of A m. , 31 6 U .S. 49 1, 49 4-9 5 (19 42 ); Wi l t on , 51 5 U.S
. at28 8 (noting “a district cou rt i s a u th orized, i n th e sou nd exerci se ofi ts disc re ti on, to sta y o r to dism i ss an act i on seeking a dec laratory j ud gm en t”). As the S upr eme Co ur t ex pl aine d i n B rillh a rt, t h er e is no s et cri ter i a f orwh en a cour t s hould e x er ci se i ts discre t i o n t o ab s t a i n. 3 1 6 U. S
. a t4 9 5 ( “ W e do n o tn ow att em pt a c om prehensi ve enum er ati on o fwh at i n other ca se s m ayb e r ev ea l ed as relev an t f ac to r s g o ve r ni ngthe ex er c ise of a D i st ric t C ou rt ’s d isc re tio n .”). B u t t h e c las sic exam ple o fwh en abs tenti on is p ro per occur s where, as i t i s here , sol el y decl ar ato ry re l i ef i s sought an d para l l el st at e p ro c ee d in gs are on go in g. Vu lcan M ater ials , 56 9 F
. 3d at 715. That doe s no t m ean th at abst enti on i s l i m i ted to p ar alle l p ro c ee d in gs . N ationw ide Ins
. v. Za valis , 52 F. 3d 689, 69 2 ( 7th Ci r. 19 95)
. But as the S up re m e Cour t has m ade cl ear, the Wilto n/B r i l lha rtab s t e nt i o n do c t r i ne a ppropri ate l y a pp l i es i n a di ver si ty case wh er e a decl ar ato r y j u d g me n ti s s o u g h ta n d a p a r a l l e l s t a t e p r o c e e d i ng als o e x ist s. Wi l t on , 515 U .S. at 2 83 ; P r ovi de ntTr ade s m e ns Bk. & Tr
. Co. v. Pat ters on , 3 90 U. S
. 1 02 , 1 26 ( 19 68 ) ( no ting “w e reaffirm our p rior hold ing th at a fede ral d istri ct cou rt shoul d, i n the exer cise o fdi scr eti on, decl i ne to exer ci se j uri sdic ti on o vera dive rs i ty acti on r ai si ng i ssues o f sta te l aw w h en those sam e i ssues ar e be i ng pre sente d con tem p oran eou sly to state cou rts”).N o. 09

- 2019 7 The qu est i on then beco m es w hetherthe M i nnesot a case i s p arall el to th e federa l case . Tw o acti o n s are par al l elwhens ub stan ti al l y the s ame pa r ti es a r e co ntem pora neousl y l i ti gat i ng subs ta nti al l y the sa m e i ssues in tw o for a. St a- Rit eIndu s ., In c. v. A ll s t at eIns . Co. , 96 F. 3d 28 1, 28 7 (7 th C ir. 19 96 ); see also Int e rs t at eM at e r i al Corp. v. City of Chi cago , 8 47 F. 2d 12 85 , 1 28 8 ( 7th Ci r . 1 98 8) ( no ting
“ [ a ] s u i ti s ‘ p a r a l l e l ’ w h e n s u b s t a n t i a l l y th e s a me p ar tie s a re co n te m p or an eo u sly litiga t i n g s u b st an tia lly th e sam e issues in an oth er for um ” (qu otat io n om itted ))
. H er e, the thi rd- partysui t in M i nnesot a i nv olve s th e sam e par ti es a s th e fede r alc as e: Env i si o n a nd P re fer re d O n e. A n d th e s am e p re c ise lega l qu es tio n w ill be a ns we r e d in b o th s ui t s : wh e the r En v i s i o n o w es Pr efer r edOn e a d ut y t o i nde m ni fy i t f o ra ny l o ss i nc u rre d in t h e R o m er su it. T h u s, th e t w o s u its are p ar all e l

. T he f a c ttha tthe p a r t i e s a r e p a r to fa thi r dpa r t y s ui t, r a the r tha n a n o r i g i na l a c t i o n i n M i nne sot a, d oe s n o t a ffec t t h e a n aly sis of w h et h er th ey are p ar alle l. SeeTruSer v C orp. v. Flegles, Inc. , 419 F.3d 584 , 592 (7th C ir. 2005 ) (noting th e inq u ir y i s focuse d on “w he th er there i s a subst anti all i kel i hood thatthe [ sta te c ou rt] l i ti gati on wil l di spose o fal l c laim s p re sente d i n the federa l case ” (qu otation om itted ))
. T h u s, th e d ist ric t c ou rtp ro p er ly c on c lu d ed th at t h is case i s o ne tha t the Wil ton/ B ri ll hart abst enti on m ay be appli ed to

. A nd we fi nd thatthe d ist ri ct c ourtdi d not ab us e i ts di sc r et i o n i n abs ta ining f r o m r ea ch i ngthe m er i ts ofE n visi on’ s s uitand needl ess l y inter fer i ng with th e o n go in g M in n es ot a s ta te c o u rtp ro c ee d in gs . B rillh a rt, 31 6 U .S. at 4 95 (“G ra tu ito u s in te rfe re n c e w i t h th e o rd er ly8 N o. 09

- 2019 and com prehensi ve dispos i ti on o fa sta te cou rt l i ti gat i on shoul d be a voi ded

. ”)
. A ccor dingl y, we A FFIRM th e j ud gm ent o fthe dist ri ct c ourt
.

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