7.42 - (1) Federal Court—Abstention

• Jurisdiction: New York

(1) Federal Court—Abstention

Traditionally, from the insurer’s perspective, federal courts were the forum of choice because of the experience of the federal judiciary and composition of the jury panel. Consequently, when the proper jurisdiction predicates were present, counsel representing the insurer would readily select the federal forum. Until somewhat recently, most federal courts accepted jurisdiction, even in light of a 1942 U.S. Supreme Court decision that held that district courts were “under no compulsion” to assume jurisdiction of these cases.²⁰⁰⁵ Although the Supreme Court left the discretion with the district court, it held that proceeding with a declaratory judgment action in federal court might not be economical when a pending state court action involved the same issue.²⁰⁰⁶ The Supreme Court generally reaffirmed the Brillhart approach in Wilton v. Seven Falls Co.²⁰⁰⁷

The key question is whether the insurance carrier will have a better chance of prevailing in a federal forum, which in turn begs the question of whether that forum is even available.²⁰⁰⁸ A federal district court generally must consider six factors in determining whether to accept or abstain:

1. Is there a res over which either the state or federal court has established jurisdiction?

2. Which forum—state or federal—is more convenient?

3. Are we perpetrating piecemeal litigation?

4. What is the procedural priority of the state versus the federal case?

5. Does state or federal law apply?

6. Can the state protect the plaintiff’s federal right?²⁰⁰⁹

A comparison of the decisions of the various federal circuit courts subsequent to Brillhart reveals no “clarity or consistency.”²⁰¹⁰

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Notes:

^[2005] . Brillhart v. Excess Ins. Co., 316 U.S. 491 (1942).

^[2006] . Id. at 495; see Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983); Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976).

^[2007] . 515 U.S. 277 (1995).

^[2008] . T. E. Allen, III, Federal Court Abstention in Insurance Coverage Cases, FICC 1994 Annual Meeting; Declaratory Judgments Act, 28 U.S.C. §§ 2201–2241.

^[2009] . For a more detailed discussion of these factors, see Allen, supra note ; Grace Giesel, The Expanded Discretion of Lower Courts to Regulate Access to the Federal Courts After Wilton v. Seven Falls Co.: Declaratory Judgment Actions and Implications Far Beyond, 33 Hous. L. Rev. 393 (1996). See also Linda S. Mullenix, Federal Abstention in Declaratory Judgment Actions, ABA...