NOT FOR PUBLICATION 

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

NATIONAL UNION FIRE INSURANCE

CO. OF PITTSBURGH, et al. 

Plaintiffs,

v.

K. HOVNANIAN ENTERPRISES, INC. 

et al.

Defendants.

Civil Action No. 3:10-cv-6258 (PGS)

MEMORANDUM & ORDER

This matter comes before the Court upon the motion of Defendants K. Hovnanian

Enterprises, Inc., Hovnanian Enterprises, and K. Hovnanian Port Imperial Urban Renewal, Inc.

(collectively, “Defendants”) to either dismiss or stay this case. Additionally, with leave, the Port

Imperial Condominium Association, Inc. (the “PICA”) and the Port Imperial Property Owners

Association (the “PIPOA”) filed a brief amici curiae in support of Defendants’ motion as well as

a motion to intervene in the within matter. Plaintiffs National Union Fire Insurance Company of

Pittsburgh, Pa., and AIU Insurance Company oppose Defendants’ motion. Having considered

the parties’ submissions and heard oral arguments, this Court renders the following decision.

I. BACKGROUND

This action involves an insurance coverage dispute related to three underlying actions that

are currently pending in the Superior Court of New Jersey, Law Division, Hudson County: (1)

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Port Imperial Condo. Ass’n, Inc. v. K. Hovnanian Port Imperial Urban Renewal, Inc., et al. (“the

PICA action”); (2) Port Imperial Property Owners Ass’n, Inc. v. K. Hovnanian Enters., Inc. et al.

(“the PIPOA action”); and (3) Patel v. Port Imperial Condo. Ass’n, Inc., et al. (“the Patel

action”) (collectively the “state actions”). The state actions each involve allegations of 1

construction defects against Defendants as the developer and contractor for Port Imperial, a

residential condominium development.

During the pendency of the state actions, Plaintiffs, both of whom issued insurance

policies to Defendants, filed a complaint with this Court on December 2, 2010 seeking a

declaratory judgment from this Court that they are not liable under the insurance policy to cover

certain monetary damages that are the result of alleged construction defects by the defendants or

the subcontractors that defendants hired for the project. Plaintiffs assert that federal subjectmatter jurisdiction exists in this case based upon the parties’ diversity of citizenship pursuant to

28 U.S.C. § 1332, and are seeking declaratory relief pursuant to the federal Declaratory Judgment

Act. 28 U.S.C. § 2201. On February 11, 2011, Defendants filed a motion to dismiss in lieu of an

answer, arguing that Plaintiffs had failed to join one of the insurers who is an indispensable party

whose joinder would destroy diversity jurisdiction. The Hon. Garrett E. Brown, Jr. denied that

motion and the Defendants filed its answer, affirmative defenses, and counterclaims. 

The Defendants filed the present motion to dismiss or stay this action in favor of allowing

all issues to be resolved in the underlying state actions. Port Imperial Condominium Association,

Inc. (“PICA”) and the Port Imperial Property Owners Association, Inc. (“PIPOA”) were granted

leave to file an amici curiae brief in support of Defendants’ motion. Simultaneous with the

The Patel Action is now consolidated with the PICA action. 1

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filing of this motion in May 2011, Defendants also filed a complaint in New Jersey Superior

Court, Middlesex County for a declaratory judgment that there is coverage under the Plaintiffs’

policies if defendants are held liable in the underlying state action. 

II. DISCUSSION

Defendants argue that this Court has discretion to decline exercise of its jurisdiction over

Plaintiff’s declaratory judgment action pursuant to the federal Declaratory Judgment Act. 28

U.S.C. § 2201. Generally, a district court has discretion to exercise its jurisdiction in a

declaratory judgment action when there is another case presented in state court on the same

issues, involving the same parties and not governed by an issue of federal law. Brillhart v.

Excess Ins. Co. Of America, 316 U.S. 491, 494 (1942). In deciding whether to stay or dismiss an

action, a district court should first determine the scope of the state court proceedings, the nature

of available defenses, whether the claims of all parties can be adjudicated in state court, and if all

necessary parties have been joined and agree to jurisdiction in state court. Id. at 495. This

standard established in Brillhart was later reaffirmed in Wilton v. Seven Falls Company, 515 U.S.

277, 287 (1995) where the Court held that “the Declaratory Judgment Act is ‘an enabling Act,

which confers a discretion on the courts rather than an absolute right upon the litigant,” and the

district court should “yield to considerations of practicality and wise judicial administration.” Id.

at 283. 

 In cases like the present matter where the complaint does not raise a federal question, but

does raise a question of state law that state courts are fully able and prepared to resolve, the Court

should follow a “general policy of restraint” to promote judicial efficiency and avoid duplicative

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litigation. State Auto Ins. Cos. v. Summy, 234 F.3d 131, 134 (3d Cir. 2000). 

Applying the aforementioned standard to the present matter, the Court concludes that

sound discretion demands abstention and dismissal of this action for the following reasons: The

declaratory judgment involves an issue of state insurance law, two of the state actions have been

pending since 2006 and 2008, the declaratory relief Plaintiffs seek will have a substantial effect

on the underlying state actions of which PIPOA and PICA are already parties in those actions,

and the Defendants have also represented during oral arguments that other insurance carriers

could potentially be brought into this case. However, the court notes that judicial economy is not

promoted unless the Defendants’ declaratory judgment action filed in Middlesex County is

transferred to Hudson County before the same judge, who is familiar with the case, and is

capable of resolving all claims among the parties. 

In further support of its position, Defendants relied on AIU Ins. Co. v. K. Hovnanian at

Newark Urban Renewal Corp. III, Inc., 2011 U.S. Dist. LEXIS 45329 (2011) where the court in

this District recently declined jurisdiction in a declaratory judgment action. In that case, which

presented similar issues to those currently before this Court, Judge Cooper considered sua sponte

whether the exercise of federal jurisdiction was appropriate. Ultimately, Judge Cooper declined

to exercise federal jurisdiction because that case: (1) involved issues of state insurance law; (2)

concerned issues that had been or likely would be raised in the underlying state court action; and

(3) could be more easily and efficiently adjudicated by the same judge overseeing the state

action. Id. at 3. Those same factors are present in this case, and as Judge Cooper similarly

concluded, militate abstention. Therefore, the Court will decline jurisdiction, and the Plaintiffs’

declaratory judgment action will be adjudicated in state court. 

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ORDER

 IT IS on this 13 day of October, 2011 th

ORDERED that Defendants’ motion to dismiss is granted; and it is further

ORDERED that PIPOA and PICA’s motion to intervene is dismissed; and it is further

ORDERED that the Clerk is directed to close this case accordingly. 

s/Peter G. Sheridan 

PETER G. SHERIDAN, U.S.D.J. 

October 13, 2011

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