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Castlepoint National Insurance Co. v. Boyer-Rosene Moving and Storage, Inc.

United States District Court, N.D. Illinois, Eastern Division

December 3, 2014



MANISH S. SHAH, District Judge.

CastlePoint National Insurance Company, Hartford Underwriters Insurance Company, and National Union Fire Insurance Company of Pittsburgh, PA, are all insurance companies. In a prior action, CastlePoint and Hartford-but not National Union-paid money to settle a workers'-compensation claim. Now CastlePoint seeks a judicial declaration that National Union was primarily obligated to provide the relevant workers'-compensation insurance. Also, CastlePoint and Hartford seek reimbursement from National Union for the money paid to the injured worker.

National Union contends that it rescinded the relevant insurance policy, and it is concurrently litigating that issue in California state court. Before me are National Union's motion to dismiss or stay the case, on abstention grounds, and CastlePoint's motion to remand the case to state court, on the basis that this court lacks subject-matter jurisdiction. For the reasons discussed below, those motions are denied.

I. Case History

Bruce Knoll was injured, filed a workers'-compensation claim, and obtained payment from CastlePoint and Hartford through a settlement agreement. [15] ¶¶ 15-28. National Union did not participate in the settlement process or pay Knoll any money. [15] ¶ 27. CastlePoint and Hartford contend that National Union issued an insurance policy-Policy No. WC XXX-XX-XXXX-that obligated it to pay Knoll's claim. [15] ¶ 35; [25] ¶ 4.

CastlePoint brought suit against National Union and several other defendants, in the Circuit Court of Cook County. [1] at 1. As initially filed, the case did not present a federal question and the parties were not completely diverse. See, e.g., [1-5] ¶¶ 1, 5-6, 8. After some defendants settled, CastlePoint filed a second amended complaint, seeking relief only from National Union (though other parties were named as "nominal" defendants). [1-6]. National Union removed the case to this court on the basis of diversity jurisdiction. [1]. Hartford-one of the nominal defendants-brought a cross-claim seeking relief only from National Union. [25].[1]

In this court, National Union moved to dismiss or stay, on abstention grounds: National Union argued that a pending state-court case might resolve the issues in this case. [39]. CastlePoint and Hartford opposed that motion. [49]; [49] at 1 n.1. CastlePoint also moved to remand this case to state court, arguing that National Union's abstention argument stripped this court of subject-matter jurisdiction. [50].

II. National Union's Motion to Dismiss or Stay

CastlePoint and Hartford's claims against National Union are based on an insurance policy-Policy No. WC XXX-XX-XXXX-that National Union issued. [15] ¶ 35; [25] ¶ 4. National Union's primary defense is that it rescinded that policy. [40] at 5. Indeed, before this suit was filed, National Union sought, from a California state court, a declaration that it had rescinded the policy. [40] at 2. National Union was unsuccessful at the trial level, and the case is now on appeal. [40] at 2-3.

In light of that pending California state action, National Union asks me to dismiss or stay this case, under the Wilton/Brillhart abstention doctrine. [40]. That doctrine was recently explained by the Seventh Circuit:

Wilton-Brillhart abstention applies when a federal court is called upon to proceed in a declaratory judgment suit where another suit is pending in state court presenting the same issues, not governed by federal law, between the same parties. In such a case, the question for the district court is whether the questions in controversy between the parties to the federal suit can better be settled in the proceeding pending in the state court. A concern for comity underlies this doctrine. As the Court put it in Wilton, where another suit involving the same parties and presenting opportunity for ventilation of the same state law issues is pending in state court, a district court might be indulging in gratuitous interference if it permitted the federal declaratory action to proceed.
Wilton-Brillhart abstention is possible because of the federal court's unique and substantial discretion in deciding whether to declare the rights of litigants. The Declaratory Judgment Act is an enabling Act, which confers a discretion upon the courts rather than an absolute right upon the litigant. The propriety of declaratory relief in a particular case will depend upon a circumspect sense of its fitness informed by the teachings and experience concerning the functions and extent of federal judicial power. In contrast to most other actions, there is nothing automatic or obligatory about the assumption of jurisdiction by a federal court to hear a declaratory judgment action.
Several factors guide the court's discretion, including the scope of the pending state court proceeding and whether the claims of all parties in interest can satisfactorily be adjudicated in that proceeding. This is an inherently discretionary call for the district court, because facts bearing on the usefulness of the declaratory judgment remedy, and the fitness of the case for resolution, are peculiarly within its grasp.

Arnold v. KJD Real Estate, LLC, 752 F.3d 700, 707 (7th Cir. 2014) (quotations, citations, and ...

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