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Forum Shopping in Declaratory Judgment

Cases

Kevin C. McNamara, EsquireThomas, Thomas & Hafer LLP

305 N. Front Street, 6FLHarrisburg, PA 17101

www.tthlaw.com

Concurrent jurisdiction in State and Federal Courts in

coverage disputes

The Federal Declaratory Judgment Act (28 U.S.C. § 2201), provides, in pertinent part, that:

“[i]n a case of actual controversy within its jurisdiction … any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.” 28 U.S.C. § 2201 (a).

The U.S. Supreme Court has determined that the Declaratory

Judgment Act affords district courts “unique and substantial discretion in

deciding whether or not to declare the rights of litigants,” and has described

the Act as “an enabling Act, which confers discretion upon the courts

rather than an absolute right upon the litigant.” Wilton v. Seven Falls Co., 515

U.S. 277, 286-87 (1995).

Federal district courts retain this discretion to decline jurisdiction over declaratory judgment actions “even when the suit otherwise satisfies subject matter jurisdictional prerequisites,” such as diversity jurisdiction.

A district court has discretion to decline to exercise jurisdiction over

a declaratory judgment action in favor of a parallel state court

proceeding that has already been commenced. AMA /American

Marketing Assoc. Inc.. v. Maple Ave. Apartments, L.P., 2007 WL

2071902 (E.D. Pa. 2007).

A district court is only divested of its discretion to decline jurisdiction over a

declaratory judgment action where issues of federal statutory

interpretation, the government’s choice of a federal forum, an issue of sovereign immunity, or the inadequacy of the state

proceeding, are involved. State Auto Ins. Co. v. Summy, 234 F.3d 131, 134

(3d. Cir. 2000).

The Third Circuit Court of Appeals has set forth the following relevant considerations for

a District Court to take into account when deciding on whether to decline jurisdiction

over a declaratory judgment action:

(a) A general policy of restraint when the same issues are pending to a state court.  (b) An inherent conflict of interest between an insurer’s duty to defend in a state court and its attempt to characterize that suite in federal court as falling within the scope of a policy exclusion.  (c) The avoidance of duplicative litigation.

Additionally, where state law on an issue is “firmly established, there

would seem to be even less reason for the parties to resort to federal

courts. Unusual circumstances may occasionally justify such action, but declaratory judgments in such cases should be rare.” Summy, supra, at

136.

In the context of federal declaratory judgment actions concerning matters of insurance coverage, the Third Circuit Court of Appeals has specifically held that “[t]he desire of insurance companies and their insureds to receive declarations in federal court on matters of purely state law has no special call in the federal forum”

Miscellaneous Considerations

● What is the alternative available venue

● Quality of the bench

● Counsel’s relationship to the bench

● Complexity of the issues  ● Novelty of the issues

● Existing precedent in the county court

Questions/Comments?