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United Fire and Casualty Co. v. G.R.P. Mechanical

March 9, 2006


The opinion of the court was delivered by: Reagan, District Judge



In this case, Plaintiff seeks declaratory judgment under Fed. R. Civ. P. 57 and 28 U.S.C. § 2201 (the Federal Declaratory Judgments Act). Jurisdiction is based on diversity of citizenship. This case was reassigned to this Court from Judge David R. Herndon, who severed it from other cases originally brought together. Plaintiff moved for reconsideration in that case (Case No. 05-0389), which was granted on January 11, 2006. Consequently, that case was remanded to the Circuit Court of Madison County, Illinois.

The central issue in the case that has been remanded to state court is a contract dispute between Defendant and a third party. The central issue in the case that remains before this Court is whether the insurance policy issued to Defendant by Plaintiff covers the losses that resulted from this contract dispute. Thus both cases arise from the same set of events. Defendant GRP Mechanical asserts that this situation requires that this Court dismiss or stay the proceedings pending the outcome of that state court case (Docs. 8, 9). Plaintiff United Fire & Casualty responded, disagreeing (Doc. 15) and Defendant replied (Doc. 16). The Court set a hearing for oral argument on the motion for February 23, 2006. But that hearing was cancelled due to other pressing matters on the Court's docket, and was rescheduled for April 27, 2006.

Upon further review, the Court has decided that no oral argument is necessary. The record and briefs are sufficient to inform the Court's decision.



The central authority which gives rise to the opportunity to abstain is Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942). That case, also an insurance dispute governed by state law with a related proceeding pending in state court, noted that although the Federal Declaratory Judgments Act confers jurisdiction upon the district courts in such cases, those courts are "under no compulsion to exercise that jurisdiction." Id. at 494. Indeed, "ordinarily it would be uneconomical as well as vexatious for a federal court to proceed in 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. Gratuitous interference with orderly and comprehensive disposition of a state court litigation should be avoided." Id. at 495. The district court should determine whether the issues in the case can be more readily and justly resolved in the state court proceeding. See id. It is important to differentiate such cases from those contemplated by Colo. River Water Conservation Dist. v. United States, 424 U.S. 800 (1976), which held that federal courts should only abstain from exercising their jurisdiction in exceptional circumstances. The Supreme Court, in resolving a Circuit split, held that declaratory judgment cases should be held only to the more permissive abstention standard of Brillhart rather than the strict standard of Colorado River. See Wilton v. Seven Falls Co., 515 U.S. 277, 289 (1995).

Plaintiff, citing Brillhart, Colorado River, and Wilton, correctly points out that this Court is not required to abstain or stay but has discretion in the case. Plaintiff also correctly summarizes the major factors to be considered: (1) whether the question in the federal case is distinct from that in the state case; (2) whether the parties in both cases are identical (including whether one case or the other is more comprehensive); (3) whether the federal case will be useful or merely duplicative; and (4) whether declaratory judgment or other appropriate relief will be available to deserving parties if the federal case does not proceed.See, e.g., Nationwide Ins. v. Zavalis, 52 F.3d 689, 692 (7th Cir. 1995). However, Plaintiff incorrectly states that the scales begin at equipoise when examining these factors. Instead, the language regarding "uneconomical and vexatious" federal proceedings found in Brillhart and its progeny suggest that district courts should be at least somewhat inclined toward abstention. Both parties discuss these four factors, as the Court will examine below. It its response brief Plaintiff also discusses at length its opposition to Defendant's motion for summary judgment (Doc. 28), which seems irrelevant. The Court will not discuss that motion in this Order.


1. Whether the Question is Distinct

The state court case revolves around whether the insurance policy Plaintiff issued to Defendant covers the economic damages Defendant sustained in the course of performing a contract involving at least two other parties. The federal case seeks a declaratory judgment that Plaintiff's insurance policy does not apply to the situation presented in this case. Whether state insurance contracts apply in certain situations is a matter of state law. At a minimum, there are issues of contract interpretation in the case, and all of them arise under Illinois law. It is hard to fathom what distinct question could be presented such that a federal declaratory action is warranted.

2. Whether the Parties are Identical or Comprehensive

The two parties in this case are parties in the state court case. Subcontractor Kienstra Concrete is also a party in the state court case. Kienstra was a party in the companion case (05-0389) which was remanded to the state court by Judge Herndon. Additionally, RCS, one of Defendant's subcontractors, is a party to the state court case. Evidence concerning RCS's workmanship would certainly be at issue in the case at bar. Thus is it possible that in this Court, RCS's non-party role in the case could trigger responsibility for coverage on the part of Plaintiff, while RCS could be simultaneously found not liable in the state court ...

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