OCTOBER TERM, 1994
WILTON ET AL. v. SEVEN FALLS CO. ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
No. 94-562. Argued March 27, 1995-Decided June 12, 1995
Petitioner underwriters refused to defend or indemnify respondents under several commercial liability insurance policies in litigation between respondents and other parties over the ownership and operation of certain Texas oil and gas properties. Mter a verdict was entered against respondents and they notified petitioners that they intended to file a state court suit on the policies, petitioners sought a declaratory judgment in federal court that their policies did not cover respondents' liability. Respondents filed their state court suit and moved to dismiss or, in the alternative, to stay petitioners' action. The District Court entered a stay on the ground that the state suit encompassed the same coverage issues raised in the federal action, and the Court of Appeals affirmed. Noting that a district court has broad discretion to grant or decline to grant declaratory judgment, the court did not require application of the test articulated in Colorado River Water Conservation Dist. v. United States, 424 U. S. 800, and Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U. S. 1, under which district courts must point to "exceptional circumstances" to justify staying or dismissing federal proceedings. The court reviewed the District Court's decision for abuse of discretion, and found none.
1. The discretionary standard of Brillhart v. Excess Ins. Co. of America, 316 U. S. 491, governs a district court's decision to stay a declaratory judgment action during the pendency of parallel state court proceedings. Pp. 282-288.
(a) In addressing circumstances virtually identical to those present here, the Court in Brillhart made clear that district courts possess discretion in determining whether and when to entertain an action under the Declaratory Judgment Act (Act), even when the suit otherwise satisfies subject matter jurisdiction. While Brillhart did not set out an exclusive list of factors governing the exercise of this discretion, it did provide some guidance, indicating that, at least 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. Pp. 282-283.
(b) The Act's distinct features justify a standard vesting district courts with greater discretion in declaratory judgment actions than that permitted under the "exceptional circumstances" test set forth in Colorado River and Moses H. Cone, neither of which dealt with declaratory judgments. On its face, the Act makes a textual commitment to discretion by specifying that a court "may" declare litigants' rights, 28 U. S. C. § 2201(a) (emphasis added), and it has repeatedly been characterized as an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant. Pp. 283-287.
(c) Petitioners' argument that, despite the unique breadth of this discretion, district courts lack discretion to decline to hear a declaratory judgment suit at the outset depends on the untenable proposition that a court, knowing at the litigation's commencement that it will exercise its discretion to decline declaratory relief, must nonetheless go through the futile exercise of hearing a case on the merits first. Nothing in the Act recommends this reading, and the Court is unwilling to impute to Congress an intention to require such a wasteful expenditure of judicial resources. Pp. 287-288.
2. District courts' decisions about the propriety of hearing declaratory judgment actions should be reviewed for abuse of discretion, not de novo. It is more consistent with the Act to vest district courts with discretion in the first instance, because facts bearing on the declaratory judgment remedy's usefulness, and the case's fitness for resolution, are particularly within their grasp. Proper application of the abuse of discretion standard on appeal can provide appropriate guidance to district courts. Pp. 288-289.
3. The District Court acted within its bounds in staying the declaratory relief action in this case, since parallel proceedings, presenting opportunity for ventilation of the same state law issues, were underway in state court. pp. 289-290.
41 F.3d 934, affirmed.
O'CONNOR, J., delivered the opinion of the Court, in which all other Members joined, except BREYER, J., who took no part in the consideration or decision of the case.
Michael A. Orlando argued the cause for petitioners.
With him on the briefs were Patrick C. Appel and Paul LeRoy Crist.