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Columbia Gas of Pennsylvania v. American International Group

January 27, 2011

COLUMBIA GAS OF PENNSYLVANIA, PLAINTIFF,
v.
AMERICAN INTERNATIONAL GROUP, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Donetta W. Ambrose Senior Judge, U.S. District Court

OPINION AND ORDER

SYNOPSIS

In this declaratory judgment action, which was removed from the Court of Common Pleas of Beaver County on grounds of diversity jurisdiction, Plaintiff asserts claims of bad faith, and seeks insurance coverage in connection with a personal injury matter pending in Beaver County.*fn1 In the underlying action, Janet and David Green sued Columbia Gas, Heath Consultants, and two contractor defendants for injuries sustained as the result of a gas explosion. The insurers who are named as Defendants to the declaratory judgment matter are not parties to the underlying action. The underlying action involves cross-claims for contribution and indemnity. Columbia Gas presently avers that Heath, a policyholder of the insurer Defendants, was contractually obligated to mark utility lines in the area where a guard rail was being installed. The installing contractors punctured a gas line, and an explosion occurred at the Green‟s residence.

In the present action, Plaintiff Columbia Gas names as Defendants its co-defendants in the underlying action, as well as several insurers. Presently, Plaintiff avers that Heath, a policyholder of the insurer Defendants, entered into an agreement with Plaintiff to procure certain coverage, indemnify Plaintiff, and include Plaintiff as an additional insured on insurance policies.

Before the Court are Plaintiff‟s Motion to Remand, Defendant AIG‟s Motion to Dismiss, and Defendant Illinois National‟s Motion to Dismiss. For the following reasons, the Motion to Remand will be granted, and the Defendants‟ Motions to Dismiss denied without prejudice.

OPINION

Because it impacts the initial exercise of jurisdiction over this matter, I first address Plaintiff‟s Motion to Remand. Plaintiff argues that this Court should not exercise jurisdiction over this matter, primarily because of the pending state court litigation. The Declaratory Judgment Act provides that a court "may declare the rights. . . of any interested party." 28 U.S.C. §§ 2201. The Act "confers a discretion on the courts rather than an absolute right upon the litigant." Wilton v. Seven Falls Co., 515 U.S. 277, 287, 132 L. Ed. 2d 214, 115 S. Ct. 2137 (1995). That discretion, however, is not without limits.*fn2 Generally speaking, there are two principles pertinent in the present context:

First, Colorado River abstention permits a district court to decline jurisdiction where a parallel state court action is ongoing, and where "exceptional circumstances" exist. Second, under the Brillhart [/Wilton] abstention doctrine, if the parallel claims sought to be dismissed or stayed seek relief under the Declaratory Judgment Act, the district court is permitted to exercise "greater discretion" than is "permitted under the 'exceptional circumstances' test of Colorado River" in determining whether to abstain.

Hartford Life Ins. Co. v. Rosenfeld, 5-5542, 2007 U.S. Dist. LEXIS 55819, at **9-10 (D.N.J. Aug. 1, 2007).

The parties, and the cases to which they cite, ably outline the varying views within this Circuit regarding whether Colorado River, Brillhart/Wilton, or some hybrid approach applies to so-called "mixed" actions such as the present one -- i.e., a suit that brings both declaratory and coercive claims. Some courts have hewed to Colorado River in mixed actions, and retained jurisdiction over the entire litigation. See Hutchinson Group, Ltd. v. Am. Int'l Specialty Line, 5-1745, 2006 U.S. Dist. LEXIS 36349, at **10-12 (W.D. Pa. 2006). Others have followed a so-called "heart of the matter" or "essence of the lawsuit" approach, and found Brillhart/Wilton abstention appropriate when damages claims were clearly dependent on the declaratory relief sought. See Franklin Commons East Partnership v. Abex Corp., 997 F. Supp. 585, 592 (D.N.J. 1998); see also Leonard v. State Farm Mut. Auto. Ins. Co., 8-1451, 2009 U.S. Dist. LEXIS 87241 (W.D. Pa. Sept. 29, 2009); General Nutrition Corp. v. Charter Oak Fire Ins. Co., 2007 U.S. Dist. LEXIS 75775. Still others have endorsed an "independent claim" approach, and retained jurisdiction over a coercive claim that could have been brought without the declaratory claim, while applying discretionary standards to the declaratory portion of the complaint. Perelman v. Perelman, 688 F. Supp. 2d 367 (E.D. Pa. 2010); see also Web.com v. Federal Ins. Co., 06-1032, 2007 U.S. Dist. LEXIS 90889 (W.D. Pa. Dec. 11, 2007).*fn3 Our Court of Appeals has not spoken on the issue, and the appellate courts that have weighed in have taken different paths. There is no resounding majority view, and no simple compromise between the duty to exercise jurisdiction over coercive claims, and the discretion to exercise jurisdiction over declaratory claims.

Certainly, Defendants‟ prompts about a federal court‟s obligation to hear a case within its jurisdiction are well taken. In a "pure" diversity matter, divorced from any interrelated declaratory claims, I would cleave to that obligation.*fn4 In a case such as this one, however, which implicates statutorily-granted discretion, other important principles are entitled to careful regard. In that vein, I agree with my sister court that "[t]o apply the Colorado River standard to actions containing both declaratory judgment and coercive claims without an analysis of the facts at hand would be to ignore the Supreme Court's specific recognition that declaratory judgment actions necessitate a different treatment than other types of cases." ITT Indus. v. Pac. Emplrs. Ins. Co., 427 F. Supp. 2d 552, 557 (E.D. Pa. 2006); see also Coltec Indus., Inc. v. Cont'l Ins. Co., No. 4-5718, 2005 U.S. Dist. LEXIS 8837 (E.D. Pa. May 11, 2005).*fn5 My reluctance to adopt Colorado River wholesale is buttressed by the explicit recognition that the "restrictive teachings" of that case did not "diminish[] the jurisdictional discretion contained in the Declaratory Judgment Act.." State Auto Ins. Cos. v. Summy, 234 F.3d 131, 134 (3d Cir. 2000). Under present circumstances, espousing Colorado River alone is not an adequate solution.

Likewise, I am mindful that courts should "promote judicial economy by avoiding duplicative and piecemeal litigation." Id. at 135. As observed in a different context, piecemeal litigation "creates delay; it adds to the costs and efforts that must be expended by both the parties and the courts; and.it diminishes the coherence of the proceedings." Adapt of Phila. v. Phila. Hous. Auth., 433 F.3d 353, 364 (3d Cir. 2006). Duplicative litigation, and the potential for different outcomes in different courts, is undesirable for apparent reasons. Accordingly, the "independent claim" approach, which will often -- and likely would, in this case -- result in an unsought, de facto severance or bifurcation of related claims between state and federal fora, is also unsatisfactory.*fn6

I am persuaded that an approach that examines the crux of the litigation, and carefully considers the law surrounding a court‟s discretionary exercise of jurisdiction, best accommodates a balance between the various interests at stake. Of course, the Declaratory Judgment Act itself does not confer a federal court with jurisdiction; thus, every declaratory judgment action to which discretion attaches is likewise supported by an independent basis for federal jurisdiction. The Act itself, therefore, inherently contemplates that a court will have discretion whether to exercise jurisdiction over a dispute between parties of diverse citizenship, if the dispute is declaratory in nature. Given the administrative, jurisprudential, and other concerns expressed supra, it is fundamentally reasonable to pull a dependent coercive claim within the ambit of the discretion afforded its declaratory counterpart. "It would be the tail wagging the dog if the presence of a subordinate claim were sufficient to require a federal court to hear primary claims that it has determined are better resolved elsewhere." Franklin Commons East P'ship v. Abex Corp., 997 F. Supp. 585, 592 (D.N.J. 1998).

Defendants contend that the heart of this matter is not declaratory, because, as they correctly state, a claim for bad faith is separate and distinct from the underlying contract claim; it is not per se required that a plaintiff prevail on the underlying claim before pursuing one for bad faith. Pennsylvania‟s bad faith statute, however, affords relief "[i]n an action arising under an ...


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