Opinion ID: 32178
Heading Depth: 3
Heading Rank: 2

Heading: The Presence of Federal Questions in the Declaratory Judgment Action

Text: 62 Sherwin-Williams argues that the district court's failure to consider the presence of federal questions before dismissing the declaratory judgment action was an abuse of discretion. Sherwin-Williams sought a declaratory judgment that it could not be liable to a school district for lead paint abatement costs based on its membership in lead paint trade associations, on First Amendment grounds. Sherwin-Williams also sought a declaratory judgment that the Federal Hazardous Substances Act (FHSA) preempted any claims of inadequate labeling of its products after the passage of that act. Appellees argue that although Sherwin-Williams raised these federal law issues, the case primarily involved issues of state tort law. Appellees argue that a federal court faced with a declaratory judgment suit involving mixture of federal and state law issues, where the state law issues predominate, should decline to decide the case. Appellees also argue that Sherwin-Williams already had a federal forum for its federal claims and defenses, because the two suits filed in state court had been removed to federal court. 6 63 Neither Brillhart nor Wilton decided whether the presence of a federal question in a declaratory judgment action limited a district court's discretion to decide or dismiss the action. 515 U.S. at 290, 115 S.Ct. at 2144. Although the presence of a federal question is not specifically identified as one of the seven Trejo factors, those factors are nonexclusive. Two circuits have held that a district court should consider the presence of federal questions when deciding whether to dismiss a declaratory judgment suit. In Verizon Communications, Inc. v. Inverizon Int'l, Inc., 295 F.3d 870 (8th Cir.2002), plaintiff sought a declaration that its trademark did not infringe on defendant's rights under both the federal Lanham Act and state unfair competition statutes. The district court abstained in favor of a state court suit brought by the declaratory judgment defendant six weeks after the federal declaratory judgment suit was filed. The Eighth Circuit court began by noting that neither Wilton nor Brillhart involved a federal question; although the district court had properly considered the factors in Wilton and Brillhart, but failed to mention one very significant factor not at issue in Wilton and Brillhart -the presence of a federal question that is not present in the state court action. Verizon, 295 F.3d at 873. In Youell v. Exxon Corp., 74 F.3d 373 (2d Cir.1996), the Second Circuit considered a district court's dismissal of a declaratory judgment action that was brought after the related state court suit. An oil company whose tanker ran aground sued the company's insurer, in state court, alleging that the insurer breached the insurance agreement. Sometime later, the insurer filed a declaratory judgment action in federal court, arguing that it was not liable under the insurance agreement for the loss. The federal district court dismissed the declaratory judgment action. The Second Circuit reversed on the ground that the issue presented in the declaratory judgment action was a novel issue of federal admiralty law, stating that a federal question of first impression must all but demand that the federal court hear the case. Youell, 74 F.3d at 376 (citation omitted). In Prudential Ins. Co. of Am. v. Doe, 140 F.3d 785, 790 (8th Cir.1998), the presence of ERISA-based claims in a federal declaratory judgment action supported the district court's exercise of jurisdiction over that case. 64 Verizon and Youell are distinguishable in some respects from this case. The Verizon court noted that the federal Lanham Act was the gravamen of the federal complaint. In the present case, there are two federal law issues — the First Amendment and the federal preemption defenses — and two state tort law issues raised, each important to the outcome. The facts of Youell raised novel issues of federal admiralty law. In the present case, the question of statutory preemption is not novel. This court has already held that the FHSA preempts state law causes of action for failure to warn. See Comeaux v. Nat'l Tea Co., 81 F.3d 42, 43 (5th Cir.1996). The Sixth Circuit has held in a case involving abstention under the Declaratory Judgment Act that when state and federal courts have concurrent jurisdiction to decide preemption questions, a federal court should abstain to allow the state court to consider the preemption issues. However ... if the issues present facially conclusive claims of federal preemption, we will not abstain, but instead will decide the preemption question. U.S. v. Kentucky, 252 F.3d 816, 826 (6th Cir. 2001) (citations omitted). State and federal courts have concurrent jurisdiction over First Amendment questions. See In re Bay Area Citizens Against Lawsuit Abuse, 982 S.W.2d 371 (Tex.1998) (holding that requiring an advocacy group to disclose its donor lists violated the First Amendment). 65 The presence of federal law questions, their relationship to state law questions, the ability of the federal court to resolve state law issues, and the ability of a state court to resolve the federal law issues are important to deciding whether a state or federal court should be the one to decide the issues raised in the federal court declaratory judgment action. The presence of federal law issues must always be a major consideration weighing against surrender of federal jurisdiction. See Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 26, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). The presence of federal law issues is especially important when there is no pending state court proceeding to which the federal district court can defer. If the federal law issue is important to the case, even if state law questions are also present and important to the outcome, and no state court case is pending, that weighs in favor of the federal court exercising its discretion to decide the declaratory judgment action. 66 This case did not involve novel questions of state law. Lead paint abatement suits are highly fact-intensive. The fourth question Sherwin-Williams identified — whether it had a duty to reimburse the various defendant counties and school districts for abatement — may not have been susceptible to resolution in the declaratory judgment suit. The legal basis of Sherwin-Williams's liability did not, however, rest on novel or undecided issues of state tort law. See United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 494 (4th Cir.1998). Federal courts have interpreted similar state tort law issues. See Hughes v. Tobacco Inst., Inc., 278 F.3d 417 (5th Cir. 2001) (applying Texas tort law to suits against tobacco manufacturers and trade association); Jefferson v. Lead Indus. Assoc., Inc., 106 F.3d 1245, 1248 (5th Cir. 1997) (We do not lightly abdicate our mandate to decide issues of state law while sitting in diversity.); Aguirre, 947 F.2d at 454-55 (it has from the first been the duty of the federal courts, if their jurisdiction has been properly invoked, to decide questions of state law whenever necessary to the rendition of a judgment.) (citations omitted). 67 The two federal law issues raised were both important as affirmative defenses to the state law causes of action. Those defenses could have been raised in state court, and the declaratory judgment complaint raised state law issues in addition to the federal law defenses. But at the time the federal court dismissed the declaratory judgment action, there were no pending state court cases. The district court failed to consider the presence, nature, and role of the federal law issues Sherwin-Williams raised in the declaratory judgment complaint. 68