4.1.5 Discretionary Power of the Court to Grant or Deny Declaratory Judgment

• Jurisdiction: Arizona

The existence of an actual case or controversy and parties does not guarantee that the declaratory judgment action will proceed. Under both Arizona and federal law, the court is empowered with discretionary authority to grant or deny relief on a declaratory judgment action.^[32] Prior to filing, consideration should be given to whether the court will exercise its discretionary power and enter the requested declaratory relief.

Under Arizona's declaratory judgment statutes, a court is invested with wide authority and discretion to take that action which will permit the court to terminate the controversy or remove an uncertainty.^[33] The court's power to refuse to grant declaratory relief is limited to cases where a declaration of rights would be unnecessary or improper at the time under all the circumstances.^[34]

The court may decline to exercise jurisdiction over a declaratory judgment action if the action does not terminate the controversy between the parties.^[35] The existence of another remedy does not preclude a declaratory judgment.^[36] However, a declaratory judgment is not intended to provide a substitute for an established procedure for review of decrees or appealable orders,^[37] or to review an administrative decision when there exists a procedure to appeal.^[38]

Arizona courts have refused to enter declaratory judgment relief where necessary parties are not before the court.^[39] A.R.S. Sec. 12-1841 specifies the proper parties to be joined in any declaratory judgment action:

When declaratory relief is sought, all persons shall be made parties who have or claim any interest which would be affected by the declaration, and no declaration shall prejudice the rights of persons not parties to the proceeding.

This section should be read in conjunction with Rule 19(a), Arizona Rules of Civil Procedure, regarding persons to be joined if feasible.

The pendency of other actions raising the same issues that will be litigated in the declaratory judgment action will generally foreclose a court from considering the declaratory judgment action.^[40]

Principles of equity apply in determining whether declaratory relief will be granted.^[41]

A federal district court possesses broad discretion to refuse to entertain an action under the federal Declaratory Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional prerequisites.^[42] The United States Supreme Court has declared:

The Declaratory Judgment Act was an authorization, not a command. It gave the federal courts competence to make a declaration of rights; it did not impose a duty to do so. Of course a District Court cannot decline to entertain an action as a matter of whim or personal disinclination. A declaratory judgment, like other forms of equitable relief, should be granted only as a matter of judicial discretion, exercised in the public interest.^[43]

The district court's discretion mainly turns on whether the declaratory action involves state law issues. In determining whether to exercise its discretionary power, the court "must balance concerns of judicial administration, comity, and fairness to the litigants."^[44] However, recent Ninth Circuit cases indicate that, as a general rule, a federal district court "will decline to assert jurisdiction in insurance coverage and other declaratory relief actions presenting only issues of state law during the pendency of parallel proceedings in state court unless there are circumstances present to warrant an exception to that rule."^[45]

A federal district court may also decline to exercise jurisdiction in situations similar to those in which an Arizona court would also decline, as discussed above. Therefore, for example, a district court may decline to exercise jurisdiction where the declaratory relief will not terminate the controversy,^[46] where necessary parties have not been joined,^[47] and where the party seeking relief has acted inequitably.^[48]

A federal district court possesses broad discretion to refuse to entertain an action under the Federal Declaratory Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional prerequisites.^[49] In determining whether to retain jurisdiction, the district court will utilize the factors enumerated in Brillhart v. Excess Insurance Co.^[50] The district court should (1) avoid needless determination of state law issues; (2) discourage litigants from filing declaratory judgment actions as a means of forum shopping; and (3) avoid duplicative litigation. The Brillhart factors, however, are not exhaustive. The Ninth Circuit in Government Employees Insurance Co. ("Geico") v. Dizol^[51] has indicated that it is appropriate to also consider whether a subsequent declaratory judgment action (either in federal or state court) is filed merely for the purposes of procedural fencing. The Ninth Circuit has indicated, prior to Geico v. Dizol, that a district court should decline jurisdiction in favor of a parallel state court action unless "exceptional circumstances" exist that warrant federal jurisdiction.^[52]

Although the Federal Declaratory Judgment Act gives federal district courts discretion in exercising jurisdiction, the Ninth Circuit Court of Appeals has recently observed in Geico v. Dizol^[53] that the district court's discretion is not unfettered and that a district court cannot decline to entertain jurisdiction over a declaratory judgment action as a matter of whim or personal disinclination. In Dizol, the court found that there was no presumption in favor of abstention in declaratory judgment actions generally, nor in insurance coverage cases specifically.^[54]

The court in Dizol observed that there was "no authority for the proposition that an insurer is barred from invoking diversity jurisdiction to bring a declaratory judgment action against an insured on an issue of coverage."^[55] Previously, the court had...