Court Opinion

ID: 9490104
Source: CourtListenerOpinion
Date Created: 2023-08-05 13:32:41.351419+00
Date Added: 2024-06-11T17:53:53.754835
License: Public Domain

SCHROEDER, Circuit Judge,
Dissenting:
I respectfully dissent from the majority’s opinion that sends this case back to the district court. In my view, the district court did not err when it assumed jurisdiction of this declaratory judgment action. The underlying tort litigation had been settled, and no party even suggested to the district- court that there was a better forum in which to resolve the last remaining issue in litigation that was already greatly protracted.
The majority’s holding, that the district court must now consider whether it should have assumed jurisdiction in the first place, takes our court another step along the wrong road, and, contrary to the majority’s contention, does not represent the “clear command of the Supreme Court in Wilton.'” Maj. Opinion at 1008 (citing Wilton v. Seven Falls Co., - U.S. -, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995)). Moreover, by continuing to reinforce in this circuit the presumption against federal jurisdiction in diversity insurance litigation, we continue to move away from Congress’ objectives in both creating the Declaratory Judgment Act and maintaining the vitality of diversity jurisdiction.
The Declaratory Judgment Act, 22 U.S.C. §§ 2201 and 2202, was enacted in 1934. It was almost immediately implemented by Federal Rule of Civil Procedure 57. In the 60 years since the Rule’s adoption, the federal courts’ declaratory judgment jurisdiction has been invoked in insurance litigation more often than in any other area, with the possible exception of patent litigation. See Charles Alan Wright, Federal Courts, § 100 at 715 (5th ed. 1994). Thus, there has been routine invocation of declaratory judgment jurisdiction in diversity insurance cases at a level comparable to declaratory judgments in federal question patent cases. This history belies this circuit’s view that federalism concerns require frequent abdication of federal jurisdiction in favor of state court resolution of insurance issues. Neither the statute nor the Rule requires us to do so. The Rule expressly provides that in the appropriate circumstances the “existence of another ade*1013quate remedy does not preclude a judgment for declaratory relief_” Fed.R.Civ.P. 57.
In addition, there is certainly nothing in Supreme Court jurisprudence to warrant a presumption against the exercise of declaratory judgment jurisdiction in federal court. In fact, the Supreme Court’s language in Wilton, that the “facts bearing on the usefulness of the declaratory judgment remedy, and the fitness of the case for resolution, are peculiarly within [the district courts’] grasp[,]” appear to foreclose such a presumption. Wilton, — U.S. at-, 115 S.Ct. at 2144.
In Brillhart and Wilton, the Supreme Court did stress the discretionary nature of declaratory judgment jurisdiction, but those were cases in which the district court refused to exercise jurisdiction after one of the parties specifically asked the court to dismiss or stay the action because of the existence of a pending state action. In both cases, the Supreme Court held that district courts could exercise their discretion to decline jurisdiction, but only after carefully considering whether the same issues could have been litigated in the state court proceeding, and whether it would have been more appropriate to litigate them there. Thus, for example, the Brillhart Court held that when asked to decline jurisdiction, the district court must assess the “correctness” of the claim forming the basis of the motion to dismiss. The Court stated:
The motion rested upon the claim that since another proceeding was pending in a state court in which all the matters in controversy between the parties could be fully adjudicated, a declaratory judgment in the federal court was unwarranted. The correctness of this claim was certainly relevant in determining whether the [district [c]ourt should assume jurisdiction and proceed to determine the rights of the parties....
Where a district court is presented with a claim such as was made here, it should ascertain whether the questions in controversy between the parties to the federal suit, and which are not foreclosed under the applicable substantive law, can better be settled in the proceeding pending in the state court. This may entail inquiry into the scope of the pending state court proceeding and the nature of defenses open there. The federal court may have to consider whether the claims of all parties in interest can satisfactorily be adjudicated in that proceeding, whether necessary parties have been joined, whether such parties are amenable to process in that proceeding, etc.
Brillhart, 316 U.S. at 494-95, 62 S.Ct. at 1176. The requirement announced m Brill-hart is inapplicable to a ease like this, where no claim was ever made in the district court that the issues could and should be litigated in another proceeding.
Similarly, in its latest pronouncement on the issue, in Wilton, the Court again spoke only to the factors that courts must explicitly consider when faced with a claim that jurisdiction should be declined.'
The absence of any Supreme Court insistence on express jurisdictional analysis in cases like this one, where jurisdiction is assumed rather than declined, is consistent with the history of federal declaratory judgment jurisdiction. The father of the federal Declaratory Judgment Act, Professor Boreh-ard, pointed out more than 50 years ago that the appropriateness of declaratory judgment jurisdiction can generally be assumed when a district court exercises such jurisdiction. He stated that courts
rarely indicate the special grounds upon which the court’s discretion is exercised in favor of a declaratory judgment. When it is so exercised, it may be assumed first that all the jurisdictional and procedural prerequisites of justiciability were present. In addition, the court must have concluded that its judgment will “terminate the uncertainty or controversy giving rise to the proceeding” and that it will serve a useful purpose in stabilizing legal relations. The wide discretion of the court in moulding the declaration to the needs of the occasion ... enables it to respond effectively to those practical requirements.
Edwin Borehard, Declaratory Judgments 296 (2d ed. 1941) (emphasis added). Brill-hart was decided after Borehard made this statement and the Court did not refute this *1014point. Thus, the majority’s decision in this case, requiring that the district court explain why it assumed jurisdiction in the absence of any obvious alternative remedy, finds support nowhere.
Professor Wright has summarized the key reasons why a court may decline to entertain an action for declaratory judgment. A court “may refuse to give such relief where the judgment sought would not settle the controversy between the parties, or would cause inconvenience to some of them, or where the Declaratory Judgment Act is being used for ‘procedural fencing.’ ” Wright, supra, at 715 (footnotes omitted). None of those circumstances is present here. In this case, all of these factors militate in favor of the exercise of jurisdiction. Here, the underlying state court action had been settled and was therefore no longer “pending” in any real sense; the declaratory judgment action was intended to end the controversy; no one has suggested that dismissal would have been more convenient to the parties; and these parties were not actively involved in any other litigation, so no one could have been engaged in “procedural fencing.” The district court considered this case to be a good candidate for the exercise of jurisdiction and nothing in the record suggests that by doing this it abused its discretion.
Our road to today’s decision, vacating the district court judgment rather than reviewing it, appears to have begun with Continental Cas. Co. v. Robsac Indus., 947 F.2d 1367 (9th Cir.1991). In Robsac, the insured had already sued its insurer in state court, so that the parties to the proceeding were engaged in state litigation to determine the very issues that the insurer sought to litigate in the federal declaratory judgment action. The district court had summarily denied the insured’s motion to stay the federal proceedings and decided the merits. On appeal, rather than simply remanding for the district court to explain why the exercise of federal jurisdiction was appropriate, as Brillhart and later Wilton would seem to dictate, we held as a matter of law that declaratory judgment jurisdiction was not appropriate.
We went further in American National Fire Insurance Co. v. Hungerford, 53 F.3d 1012 (9th Cir.1995), where the district court had entered a declaratory judgment in a case in which there was no pending state action between the insured and the insurer. In Hungerford, it was the underlying tort litigation between the injured party and the insured that was pending in state court. Because the question of insurance coverage to be litigated in the declaratory judgment pro-céeding involved policy exclusions that related to the conduct of the insured, we held that the district court should not have entertained the action, but should have told the insurer to proceed in state litigation. See also Allstate Insurance Co. v. Mercier, 913 F.2d 273 (6th Cir.1990).
Finally, in Employers Reinsurance Corp. v. Karussos, 65 F.3d 796 (9th Cir.1995), although acknowledging that after Wilton we could not review the district court de novo, we drew upon Robsac to create a presumption that all insurance coverage eases belong in state rather than federal court. In Karus-sos, we said that the proper inquiry on appeal is whether the district court abused its discretion in determining that circumstances warranted an exception to the “general rule that the action belongs in state rather than federal court.” Karussos, 65 F.3d at 799. In Karussos, we did not even consider whether the insurance coverage issue could have been decided in the state court proceeding, a question which, in Brillhart, was critical.
Now, in this ease, for the first time, we hold that the district court erred in proceeding with dispatch to decide the merits of a declaratory judgment action, even though (a) it was clear that the issues could not be decided in a related state court litigation because the state litigation had already been settled, and that (b) both parties were willing to have the district court decide the case.
This holding is a mistake. It is an abandonment of our duty to follow congressional policies enacted within constitutional constraints that were long ago determined to permit declaratory judgments in appropriate eases such as this one. See Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 57 S.Ct. 461, 81 L.Ed. 617 (1937). Our circuit law, that district courts should abstain in the absence of *1015exceptional circumstances warranting the exercise of jurisdiction, is hard to square with the statute, the Rule, 60 years of history, or Supreme Court case law.
For these reasons I cannot join the majority opinion of my colleagues.