Opinion ID: 32178
Heading Depth: 3
Heading Rank: 1

Heading: The Absence of Pending State Cases

Text: 54 A threshold issue is the impact of the absence of any pending state court action between Sherwin-Williams and the declaratory judgment defendants when the district court dismissed this case. When a pending state court suit raises the same issues as a federal declaratory judgment action, the central question for a district court under Brillhart and Wilton is whether the controversy is better decided in state or federal court. A district court may decline to decide a declaratory judgment suit where another suit is pending in a state court presenting the same issues, not governed by federal law, between the same parties. Brillhart, 316 U.S. at 495, 62 S.Ct. at 1176. Wilton expressly reserved the question whether the lack of a pending state court proceeding limited a district court's discretion to decide or dismiss a declaratory judgment action. 515 U.S. at 290, 115 S.Ct. at 2144 (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 or cases in which there are no parallel state proceedings.). This court has not specifically addressed the effect of the absence of a pending parallel state case on a district court's discretion to dismiss a federal declaratory judgment action. Of the circuits that have considered this question, some have held that a court retains discretion to dismiss a declaratory judgment action even if there is no pending parallel state court action, while others have stated that the district court had to decide the declaratory judgment action in the absence of a pending related state court action. 55 The Fourth Circuit and the Ninth Circuit have both held that a district court retains discretion to dismiss a declaratory action when no parallel state case is pending. In Aetna Cas. & Sur. Co., 139 F.3d 419, 423 (4th Cir.1998), the Fourth Circuit stated that There is no requirement that a parallel proceeding be pending in the state court before a federal court should decline to exercise jurisdiction over a declaratory judgment action.... To hold otherwise would in effect create a per se rule requiring a district court to entertain a declaratory judgment action when no state court proceeding is pending. Such a rule would be inconsistent with our long-standing belief that district courts should be afforded great latitude in determining whether to grant or deny declaratory relief. The court emphasized that [c]learly, the existence of such a [parallel state] proceeding should be a significant factor in the district court's determination whether to hear a declaratory action. Id. The Ninth Circuit has also held that a district court has discretion to dismiss a declaratory judgment suit even without a pending parallel state proceeding. In Golden Eagle Ins. Co. v. Travelers Cos., 103 F.3d 750, 754 (9th Cir.1996), overruled on other grounds by Dizol, 133 F.3d 1220, the court stated that nothing in the Declaratory Judgment Act requires a parallel state proceeding in order for the district court to exercise its discretion to decline to entertain the action.... [T]he absence of a parallel state proceeding is not necessarily dispositive; the potential for such a proceeding may suffice. 103 F.3d at 754. 56 A later Ninth Circuit case, Huth v. Hartford Ins. Co. of the Midwest, 298 F.3d 800 (9th Cir.2002), is instructive. An insurance company filed suit in federal court seeking a declaratory judgment that a defendant was not entitled to certain benefits. The declaratory judgment defendant later filed a state court declaratory judgment suit, which was removed to federal court on diversity grounds. The two actions were consolidated in federal court, leaving no pending state cases. The declaratory judgment defendant in the earlier-filed suit moved to stay the federal declaratory judgment action and to remand her later-filed case to the state court. The insurance company argued that the lack of a pending state action required the federal court to hear the declaratory judgment action. The Ninth Circuit again rejected this argument, stating that there are other factors the district court must weigh in deciding whether to dismiss the declaratory judgment action. 298 F.3d at 802-03. The court went on to analyze whether the district court had properly applied the Ninth Circuit's Brillhart -based discretionary test for deciding whether to hear to dismiss a declaratory judgment suit. 57 The Tenth and Eleventh Circuits have stated that dismissing a declaratory judgment action where there is no pending parallel state proceeding is an abuse of discretion. In Federal Reserve Bank of Atlanta v. Thomas, 220 F.3d 1235 (11th Cir.2000), the Federal Reserve Bank sought a federal court declaratory judgment of its liability to an injured employee under a state worker's compensation statute. The injured employee brought a related case in state court and filed a motion in federal court to dismiss the federal declaratory judgment action. The federal district court dismissed the case, finding that it did not have subject matter jurisdiction and that the federal court should abstain in deference to the pending state case. The Eleventh Circuit reversed. The court found that under 12 U.S.C. § 632, federal courts have jurisdiction over all suits to which the Federal Reserve Bank is a party, even if the claims are based on state law. The court noted that the application of section 632 effectively mean[t] that there will be no state court action to which the federal district court [could] defer, because the Federal Reserve Bank could remove any state case the injured employee might bring. The court concluded that it is an abuse of discretion ... to dismiss a declaratory judgment action in favor of a state court proceeding that does not exist. Id. at 1247 (citing Michigan Tech Fund v. Century Nat'l Bank of Broward, 680 F.2d 736 (11th Cir.1982)). 58 In ARW Exploration Corp. v. Aguirre, 947 F.2d 450 (10th Cir.1991), the Tenth Circuit also held that a district court abused its discretion when it dismissed a declaratory judgment action after a related state court proceeding had been dismissed. In that case, however, the state court had not addressed the issues raised in the federal declaratory judgment action and those claims could no longer be adjudicated in state court because the state court proceeding had been dismissed. Id. at 454. Both factors weighed in favor of the federal court's exercise of jurisdiction. The Tenth Circuit later cited with approval the Fourth Circuit's decision in Aetna Cas. & Sur. Co., stating that where simultaneously pending state actions and federal declaratory judgment actions are not perfectly parallel, the extent of similarity is a factor in the decision whether to exercise discretion to hear a declaratory action, but is not determinative. United States v. Las Cruces, 289 F.3d 1170, 1183 (10th Cir. 2002)( Aguirre firmly places the similarity of the proceedings in the process of balancing the Brillhart/Mhoon factors [of whether the declaratory judgment would serve a useful purpose and whether there is an alternative remedy which is better or more effective].); see also Continental Cas. Co. v. Robsac, 947 F.2d 1367, 1373 (9th Cir.1991). 59 This court finds that a per se rule requiring a district court to hear a declaratory judgment action is inconsistent with the discretionary Brillhart and Wilton standard. As the Court stated in Wilton, the Declaratory Judgment Act has been understood to confer on federal courts unique and substantial discretion in deciding whether to declare the rights of litigants. Id. at 286, 115 S.Ct. at 2142. 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 289, 115 S.Ct. at 2143. The lack of a pending parallel state proceeding should not automatically require a district court to decide a declaratory judgment action, just as the presence of a related state proceeding does not automatically require a district court to dismiss a federal declaratory judgment action. 5 60 Even without a per se rule requiring a district court to hear a declaratory judgment action where there is no pending state litigation, the presence or absence of a pending parallel state proceeding is an important factor. The absence of any pending related state litigation strengthens the argument against dismissal of the federal declaratory judgment action. In this case, although the lack of a pending parallel state proceeding did not require the district judge to hear the declaratory judgment action, it is a factor that weighs strongly against dismissal. 61