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STATE FARM FIRE & CASUALTY COMPANY v. CORRY

July 8, 2004.

STATE FARM FIRE & CASUALTY COMPANY, Plaintiff
v.
WILLIAM J. CORRY, IAN LIPSCHUTZ, LEON SAVAGE, and SPECTRUM ARENA LIMITED PARTNERSHIP, Defendants.



The opinion of the court was delivered by: LOUIS POLLAK, Senior District Judge

OPINION

In this action brought pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201-2202, State Farm Fire & Casualty Company ("State Farm") seeks a declaratory judgment that it has no duty to defend and indemnify William J. Corry in the underlying lawsuit. Corry is a third-party defendant in a tort action pending in the Philadelphia County Court of Common Pleas, and holds a homeowners insurance policy issued by State Farm.

Presently before the court is State Farm's motion for summary judgment. For the reasons set forth below, the motion will be denied, and the declaratory judgment action will be dismissed so far as it relates to State Farm's duty to defend Corry in the state court proceeding. A decision by this court on the remainder of the complaint, as it relates to State Farm's duty to indemnify, will be stayed pending a final judgment in the Court of Common Pleas.

  Factual and Procedural Background

  is declaratory judgment action has its origin in an altercation that took place during a Philadelphia Flyers hockey game at the First Union Center in Philadelphia on May 14, 2000. Ian Lipschutz and Leon Savage, who were attending the game, claim that they were assaulted inside the arena and in an adjacent parking lot, causing them serious physical injury. On September 13, 2002, Lipschutz and Savage filed a tort action in the Court of Common Pleas for Philadelphia County against the owner and operator of the First Union Center, Spectrum Arena Limited Partnership ("SALP").*fn1 The state court complaint alleges that SALP and its employees were negligent and/or reckless in failing to provide supervision and security adequate to prevent injury to Lipschutz and Savage.

  After filing an answer denying all liability, SALP filed a joinder complaint against William J. Corry for indemnification and/or contribution. SALP alleges that it was Corry who assaulted Lipschutz and Savage, and contends that any injury suffered by Lipschutz and Savage was due to Corry's "negligence, carelessness, recklessness and intentional conduct."

  Corry held a homeowners insurance policy issued by State Farm. Upon learning that SALP had filed a joinder complaint against him, Corry filed a claim with State Farm, asserting that the insurer was obligated to defend and indemnify him. By letter dated April 2, 2003, State Farm informed Corry that it would provide him with a defense, but that it reserved its right to deny defense or indemnity should it be determined either that Corry had acted in violation of the policy or that the injuries claimed fell beyond the scope of the policy.

  On May 1, 2003, State Farm filed the instant declaratory judgment action in this court, seeking a determination regarding its obligation to defend and indemnify Corry. The underlying suit in the Court of Common Pleas was subsequently stayed pending this action's resolution. State Farm filed a motion for summary judgment on September 23, 2003. There has been no response from any of the defendants in the declaratory judgment action to either the complaint or the motion for summary judgment.*fn2

  Although none of the parties initially contested this court's jurisdiction, in a March 29, 2004, memorandum and order I observed that jurisdiction over a Declaratory Judgment Act case is discretionary, turning on considerations of practicality and judicial administration. Noting that common issues appeared to arise in both the state court proceeding and this federal declaratory judgment action, I ordered the parties to submit briefing regarding the question of whether this court should exercise its discretionary jurisdiction. Having reviewed the submissions of State Farm and Corry and given the matter further consideration, I am prepared to issue this opinion.

  Discussion

  This court has jurisdiction under 28 U.S.C. § 1332 based on the diversity of the parties and the amount in controversy, which exceeds $75,000.*fn3 Venue is proper under 28 U.S.C. § 1391(a) because the events giving rise to State Farm's request for declaratory judgment occurred in Philadelphia, which is within the Eastern District of Pennsylvania.

  Even when subject matter jurisdiction is otherwise present, the court's exercise of its power to grant declaratory relief pursuant to the Declaratory Judgment Act ("Act") is discretionary. The Act provides in pertinent part:
In a case of actual controversy within its jurisdiction . . . any Court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.
28 U.S.C. § 2201(a). "The Act only gives a court the power to make" such a declaration; "it does not require that the court exercise that power." Step-Saver Data Sys., Inc. v. Wyse Tech., 912 F.2d 643, 646-47 (3d Cir. 1990); see also Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494 (1942) (emphasizing that the district courts are under no compulsion to exercise their jurisdiction under the Act). A district court has greater discretion to decline jurisdiction under the Declaratory Judgment Act than under the traditional abstention doctrine of Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 813 (1976), which permits abstention only under exceptional circumstances. See Terra Nova Insurance Co. v. 900 Bar, 887 F.2d 1213, 1223-24 (3d Cir. 1989). In the declaratory judgment context, the district court's exercise of jurisdiction "yields to considerations of practicality and wise judicial administration." Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995). The Supreme Court has instructed that when a case is brought pursuant to the act, the district court should consider declining jurisdiction when "parallel proceedings, presenting opportunity for ventilation of the same state law issues, [are] underway in state court." Wilton, 515 U.S. at 290 (reaffirming discretionary standard articulated in Brillhart). In Terra Nova, the Third Circuit identified several additional factors for a district court to consider in deciding whether to exercise jurisdiction over a declaratory judgment action. These criteria include the following:
(1) the likelihood that the declaration will resolve the uncertainty of obligation that gave rise to the controversy; (2) the convenience of the parties; (3) the public interest in a settlement of the uncertainty of obligation; and (4) the availability and relative convenience of other remedies.
Terra Nova 887 F.2d at 1224 (quoting Interdynamics, Inc. v. Wolf, 698 F.2d 157, 167 (3d Cir. 1982)). The Terra Nova court also raised the additional concern that, in declaratory judgment actions arising in the insurance context, a race for collateral estoppel might ensue if the "same factual question lies at the heart of both an insurance overage dispute and the underlying tort action." Terra Nova, 887 F.2d at 1224 (internal quotations omitted). With these principles in mind, I turn to State Farm's motion for summary judgment.

  Summary judgment is appropriate if the moving party can "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). At the summary judgment stage, the court must view the evidence, and draw all reasonable inferences, in the ...


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