Opinion ID: 162215
Heading Depth: 2
Heading Rank: 1

Heading: Whether Brillhart Applies

Text: 23
24 Under Wilton and this circuit's case law, a district court has discretion to withhold its exercise of jurisdiction over declaratory judgment actions. See Wilton, 515 U.S. at 289-90, 115 S.Ct. 2137; Mhoon, 31 F.3d at 982-83. The United States and Texas parties argue that the federal action in this case is not a declaratory judgment action but rather a quiet title action. They do not dispute that the United States' complaint prays only for declaratory relief. They argue, however, that because the district court had subject matter jurisdiction under 28 U.S.C. § 1345 (United States as a plaintiff), a jurisdictional basis independent from the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202, the action is not a declaratory judgment action. We disagree. 25 Whether a district court has discretion to entertain a suit for declaratory judgment does not depend solely on the jurisdictional basis of the suit. As the Supreme Court stated in Wilton, district courts possess discretion in determining whether ... to entertain an action under the Declaratory Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional prerequisites.  515 U.S. at 282, 115 S.Ct. 2137 (emphasis added). This is because the Declaratory Judgment Act itself is an enabling Act, which confers a discretion on the courts, regardless of the jurisdictional bases upon which the suit is brought. Id. at 287, 115 S.Ct. 2137 (quotation omitted); see also Nat'l Union Fire Ins. Co. v. Karp, 108 F.3d 17, 21 (2d Cir.1997). Thus, in both Wilton and Brillhart, the seminal cases dealing with discretion to dismiss or stay declaratory judgment actions, the Supreme Court held the district court had discretion to abstain even though an independent jurisdictional basis for the suit, diversity of citizenship, existed. See Wilton, 515 U.S. at 280, 290, 115 S.Ct. 2137; Brillhart, 316 U.S. at 493, 494-95, 62 S.Ct. 1173. 26 Other courts have applied the Brillhart rule when subject matter jurisdiction was premised on grounds other than diversity. In Odeco Oil & Gas Co. v. Bonnette, the Fifth Circuit held that the district court did not abuse its discretion in dismissing a suit for declaratory relief brought under admiralty jurisdiction. See 4 F.3d 401, 403 n. 2, 404 (5th Cir.1993). Some courts have held that district courts have discretion to refuse to entertain suits involving a federal question if the relief requested is declaratory in nature. See, e.g., Int'l Ass'n of Entrepreneurs of Am. v. Angoff, 58 F.3d 1266, 1270 (8th Cir.1995) (finding no abuse of discretion in district court's refusal to exercise jurisdiction over suit asserting that ERISA preempted state insurance licensing requirement); Dr. Beck & Co. G.M.B.H. v. Gen'l Elec. Co., 317 F.2d 538, 539 (2d Cir.1963) (patent infringement); see also 10B Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2761 (3d ed.1998). But see Wilton, 515 U.S. at 290, 115 S.Ct. 2137 (describing a case raising issues of federal law as one which lies on the outer boundaries of Brillhart discretion). Additionally, the Second and Third Circuits have held that a district court with jurisdiction pursuant to the federal interpleader statute had discretion under Brillhart to dismiss claims for declaratory relief. See Karp, 108 F.3d at 21; NYLife Distribs., Inc. v. Adherence Group, Inc., 72 F.3d 371, 372 (3d Cir.1995). 9 27 The nature of the relief requested by the plaintiff, not the jurisdictional basis of the suit, is the touchstone. In Sinclair Oil Corp. v. Amoco Production Co., this court drew a distinction between suits seeking declaratory relief and those seeking coercive relief: The Federal Declaratory Judgments Act authorizes, but does not compel, federal jurisdiction over suits seeking declaratory relief. Thus, unlike coercive actions, declaratory actions do not invoke the federal judiciary's `virtually unflagging obligation' to exercise its jurisdiction. 982 F.2d 437, 440 (10th Cir.1992) (emphasis added) (footnote and citation omitted). If the plaintiff only requests a declaration of its rights, not coercive relief, the suit is a declaratory judgment action for purposes of determining whether the district court has broad discretion under Brillhart to refuse to entertain the suit. See Safety Nat'l Cas. Corp. v. Bristol-Myers Squibb Co., 214 F.3d 562, 564 (5th Cir.2000) (holding that in a suit seeking coercive relief as well as declaratory relief, broad Brillhart standard inappropriate). Because the United States requested only declaratory relief, 10 the federal action in this case is a declaratory judgment action. 11 28
29 The appellants also argue that Brillhart does not apply unless there is an identity of parties and issues in the state and federal actions. Because the United States' rights in Elephant Butte Reservoir are not at issue in the New Mexico proceeding and the Texas parties are not parties to the New Mexico stream adjudication, they assert the proceedings are not parallel. 30 The circuit has addressed this issue with respect to Colorado River abstention and decided that a finding of parallel proceedings is a threshold condition for engaging in the Colorado River analysis. See Fox v. Maulding, 16 F.3d 1079, 1081 (10th Cir.1994). Even in the Colorado River context, however, exact identity of parties and issues is not required. Rather, state and federal proceedings are sufficiently parallel if substantially the same parties litigate substantially the same issues. Id. (quotation omitted). This court has not declared previously what level of similarity is required before a district court may engage in the Brillhart analysis. We now hold the degree of similarity should be considered in the evaluation of the Brillhart/Mhoon factors, rather than considered as a threshold condition. 31 The Brillhart analysis differs fundamentally from the Colorado River analysis. Because federal courts have a virtually unflagging obligation ... to exercise the jurisdiction given them, a district court should decline jurisdiction under Colorado River only in exceptional circumstances. Colorado River, 424 U.S. at 817-18, 96 S.Ct. 1236. Requiring district courts to first determine whether the federal and state proceedings are parallel before considering the other Colorado River factors is consistent with the narrowness of the doctrine. Brillhart, however, gives district courts a freer hand. The Declaratory Judgment Act, the backbone of the Brillhart doctrine, confers upon district courts unique and substantial discretion in deciding whether to declare the rights of litigants. Wilton, 515 U.S. at 286, 115 S.Ct. 2137; see also 28 U.S.C. § 2201(a). To guide the district courts in the exercise of such substantial discretion, this court articulated in Mhoon several factors to weigh. See 31 F.3d at 983. We give the district court's assessment of each factor great deference. See id. ([This court] will only ask whether the trial court's assessment of [the factors] was so unsatisfactory as to amount to an abuse of discretion.). Requiring evaluation of the parallel nature of the proceedings prior to the Brillhart/Mhoon analysis would short-circuit the district court's weighing of these factors and would thus unnecessarily limit the district court's broad discretion. 32 Moreover, the Mhoon factors clearly encompass inquiry into the proceedings' similarity. The five factors include [1] whether a declaratory action would settle the controversy; [2] whether it would serve a useful purpose in clarifying the legal relations at issue. Id. These two factors are necessarily driven by the degree of identity of parties and issues in the concurrent proceedings. Without some degree of similarity between the proceedings, a federal declaratory judgment will likely not settle the controversy between the parties, nor would it clarify all the legal relations at issue. These remain, however, only factors in the analysis; they are not determinative. See Aetna Cas. & Sur. Co. v. Ind-Com Elec. Co., 139 F.3d 419, 423 (4th Cir.1998) (Clearly, the existence of [a parallel] proceeding should be a significant factor in the district court's determination. But it is not dispositive.); Am. Nat'l Fire Ins. Co. v. Hungerford, 53 F.3d 1012, 1016 (9th Cir.1995) ([O]ur precedent and Supreme Court decisions clearly indicate that a number of additional factors must be considered [in addition to the identity of issues and parties].), overruled on other grounds, Gov't Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir.1998) (en banc). 33 Tenth Circuit precedent is not to the contrary. In ARW Exploration Corp. v. Aguirre, this court deemed the district court's dismissal of a declaratory judgment action an abuse of discretion because there was no pending state proceeding whatsoever. See 947 F.2d at 454; see also Fed. Reserve Bank v. Thomas, 220 F.3d 1235, 1247 (11th Cir.2000) (It is an abuse of discretion ... to dismiss a declaratory judgment action in favor of a state proceeding that does not exist.). But see Found. for Interior Design Educ. Research v. Savannah Coll. of Art & Design, 244 F.3d 521, 525-26 (6th Cir.2001) (applying abuse of discretion standard when no parallel proceeding existed). We recognized that the state proceeding could not provide an adequate remedy because it had been dismissed without adjudicating the questions at issue in the federal action. See Aguirre, 947 F.2d at 454-55. Accordingly, the federal declaratory action would serve some useful purpose. See id. Rather than dictate that the parallel nature of the proceedings be considered in a preliminary step, Aguirre firmly places the similarity of the proceedings in the process of balancing the Brillhart/Mhoon factors. See Mhoon, 31 F.3d at 983 (listing as factors [2] whether [the declaratory judgment action] would serve a useful purpose and [5] whether there is an alternative remedy which is better or more effective).
34 In Brillhart, the Supreme Court cast some doubt on whether a district court has discretion to decline jurisdiction over a declaratory judgment action presenting a federal question. The Court observed, Ordinarily it would be uneconomical as well as vexatious for a federal court to proceed in a declaratory judgment suit ... not governed by federal law.  316 U.S. at 495, 62 S.Ct. 1173 (emphasis added). In Wilton, the Court specifically reserved the question of whether the presence of a federal question deprives a district court of discretion to refuse jurisdiction. 515 U.S. at 290, 115 S.Ct. 2137 (We do not attempt at this time to delineate the outer boundaries of that discretion in other cases, for example, cases raising issues of federal law.). This court need not decide whether the presence of a federal question renders the exercise of Brillhart discretion inappropriate because appellants have not demonstrated that issues of federal law will arise in the federal action. 35 The United States and Texas parties contend that the federal action implicates three sources of federal law: (1) Section 8 of the Reclamation Act; (2) the interstate and international obligations contained in the Rio Grande Compact and the 1906 treaty with Mexico; and (3) the contracts between the United States and the New Mexico and Texas parties. 36
37 The United States first argues that in Section 8 of the Reclamation Act, Congress was careful to reserve authority over interstate streams. Section 8 provides that though the federal government must honor state law when it appropriates water for Reclamation projects, nothing herein shall in any way affect any right of... the Federal Government ... in, to, or from any interstate stream or the waters thereof. Reclamation Act, § 8, 32 Stat. 390 (codified at 43 U.S.C. § 383). Section 8 does not create an issue of federal law in the United States' federal suit. Rather, the interstate stream provision of Section 8 was intended to make clear that the Reclamation Act should not be construed to affect a then-pending equitable apportionment dispute between two states in the Supreme Court. See Wyoming v. Colorado, 259 U.S. 419, 463, 42 S.Ct. 552, 66 L.Ed. 999 (1922); see also Arizona v. California, 373 U.S. 546, 623, 83 S.Ct. 1468, 10 L.Ed.2d 542 (1963) (holding that Congress intended to leave untouched the law of interstate equitable apportionment with interstate portion of Section 8). The United States and Texas parties cite to no authority for the proposition that interstate streams are exempted from the rest of Section 8, which requires the federal government to comply with state law in the acquisition and distribution of water to the extent such law is not inconsistent with congressional provisions authorizing the project in question. 12 See California v. United States, 438 U.S. at 665, 674, 98 S.Ct. 2985. Indeed, this court has held otherwise. See Jicarilla Apache Tribe v. United States, 657 F.2d 1126, 1144 (10th Cir.1981) (holding United States must comply with state law in distribution of water from the Navajo River, an interstate stream). Because the instant federal action does not involve an interstate equitable apportionment dispute, the interstate portion of Section 8 is not relevant. 38 b. Interstate and international obligations imposed by the Rio Grande Compact and the 1906 Treaty with Mexico 39 The Rio Grande Compact was joined by the states of Colorado, New Mexico, and Texas for the purpose of equitably apportioning water between the three states. See Rio Grande Compact pmbl., reprinted at N.M. Stat. Ann. § 72-15-23 (1978). To that end, the Compact contains tables outlining the delivery obligations of each state to the next downstream state. In Article IV, New Mexico is obligated to deliver a quantity of water to Texas every year as determined by a table. The 1906 Treaty with Mexico obligates the United States to deliver 60,000 acre-feet of water every year to Mexico. See 1906 Treaty, 34 Stat. 2953. 40 Because Congress consented to its creation, the Compact is federal law. See New Jersey v. New York, 523 U.S. 767, 811, 118 S.Ct. 1726, 140 L.Ed.2d 993 (1998). Likewise, interpretation of international treaties raises questions of federal law. See Air Fr. v. Saks, 470 U.S. 392, 396, 105 S.Ct. 1338, 84 L.Ed.2d 289 (1985). Because, however, neither the Rio Grande Compact nor the 1906 Treaty will be consulted in the federal action, no issues of federal law arise. 41 The Treaty and the Compact do obligate delivery of water, but the appellants have not referenced any language in either that purports to create water rights in any of the signatory parties. Even reading the obligation to deliver water as giving the water recipient a right to the water, those water rights are irrelevant to the quiet title action. The Treaty and the Compact only require water deliveries to the states or Mexico, not the named defendants. Because the federal quiet title action only involves the competing claims of the United States and the named defendants, the water rights given to the states or Mexico are irrelevant. 42 The United States and Texas intimate several times in their brief that, apart from the Compact and the Treaty, the interstate and international nature of the Project favors a federal forum. There are statements in numerous cases that any adjudication of rights in an interstate stream raises questions of federal common law. See, e.g., Hinderlider v. La Plata River & Cherry Creek Ditch Co., 304 U.S. 92, 110, 58 S.Ct. 803, 82 L.Ed. 1202 (1938) (Jurisdiction over controversies concerning rights in interstate streams is not different from those concerning boundaries. These have been recognized as presenting federal questions.); Texas Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 641 n. 13, 101 S.Ct. 2061, 68 L.Ed.2d 500 (1981) (Many of these cases arise from interstate water disputes. Such cases do not directly involve state boundaries ...; they nonetheless involve especial federal concerns to which federal common law applies.); Illinois v. City of Milwaukee, 406 U.S. 91, 103, 92 S.Ct. 1385, 31 L.Ed.2d 712 (1972) (When we deal with air and water in their ambient or interstate aspects, there is federal common law .... (footnote and citation omitted)). 43 Unlike Hinderlider and the other interstate stream cases, this case is not an equitable apportionment dispute between two states. Hinderlider involved a dispute between a water user in Colorado and the Colorado State Engineer, who, pursuant to a Compact with New Mexico, shut off water to Colorado users for a ten day period. See 304 U.S. at 95-97, 58 S.Ct. 803. The defendant water officials contended that the federal courts lacked jurisdiction, but the Supreme Court held that whether the water of an interstate stream must be apportioned between the two States is a question of `federal common law.' Id. at 110, 58 S.Ct. 803; see also Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 427, 84 S.Ct. 923, 11 L.Ed.2d 804 (1964) ([ Hinderlider ] implies that no State can undermine the federal interest in equitably apportioned interstate waters....). The United States and Texas parties contend that the United States seeks to remove a cloud over its title to Project water so that it may fulfill its delivery obligations under the Compact and the Treaty. The equitable apportionment of the Rio Grande is the goal of both the Compact and the Project, they argue. The federal action is, however, a suit for declaratory relief seeking a determination of the relative rights of the United States and the named defendants. The question of whether and how Rio Grande water should be apportioned among states is not directly at issue. 44 This court declines to expand the interstate equitable apportionment line of cases to encompass this case. The reluctance to create common law is a core feature of federal court jurisprudence. See Erie R.R. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); United States v. Hudson, 11 U.S. (7 Cranch) 32, 33-34, 3 L.Ed. 259 (1812) (declining to create a federal common law libel criminal offense). Federal courts should only fashion common law in a few and restricted circumstances. Wheeldin v. Wheeler, 373 U.S. 647, 651, 83 S.Ct. 1441, 10 L.Ed.2d 605 (1963). Moreover, federal common law exists, only when state law cannot be used. City of Milwaukee v. Illinois, 451 U.S. 304, 314 n. 7, 101 S.Ct. 1784, 68 L.Ed.2d 114 (1981). The federal courts created common law in the equitable apportionment disputes because there were dueling state legal regimes. Erwin Chemerinsky, Federal Jurisdiction § 6.2.5 (3d ed. 1999) (Obviously, in a conflict between two states, neither states' laws can be applied to resolve the dispute. Therefore, in the absence of a pertinent federal statute, federal common law must be created to ensure interstate harmony.). There is no need in this case for interstitial federal common law. The United States asserts title to Project water under either New Mexico or Texas law, depending on which right is asserted. There is, however, no uncertainty over which state's laws applies to determine the United States' rights. Because there is no legal vacuum to fill, federal common law need not, and will not, arise in the federal action. 45 c. Federal Contracts 46 The obligations to and rights of the United States under its contracts are governed exclusively by federal law. Boyle v. United Techs. Corp., 487 U.S. 500, 504, 108 S.Ct. 2510, 101 L.Ed.2d 442 (1988). Thus, the question is whether the United States' declaratory judgment action involves obligations to or rights of the United States under its contracts. 47 The United States' and Texas parties' assertion that the federal action will involve the construction of federal contracts is fatally weakened by the lack of citation to the record. The United States and Texas parties do not cite to specific contractual language relevant to the title dispute that is the subject of this federal action. Indeed, there is not even a citation to a contract contained in the record. Moreover, the United States' complaint fails to mention the existence and relevance of federal contracts. This court declines to sift through the record to find support for the appellants' contentions. See S.E.C. v. Thomas, 965 F.2d 825, 827 (10th Cir.1992) (quotation omitted).