United States District Court, E.D. Pennsylvania
EDWARD G. SMITH, District Judge.
This case is of a common variety: an insurance company seeks a declaration that it owes neither a duty to defend nor a duty to indemnify a business entity and certain individuals in an underlying state court action. Before any proceedings of substance on the merits have taken place, the court sua sponte raises the question of whether the court should decline to exercise jurisdiction under the Declaratory Judgment Act ("DJA"), 28 U.S.C. §§ 2201-2202. In response, the parties agree that this case raises purely state-law issues, although they disagree about the impact of the state court action on the instant matter. While these observations, standing alone, help frame the mechanism of resolution, they do not exhaust it. For what ultimately is required is a synthesis of these observations, among others, within the context of understanding the scope of federal power. Undertaking such a synthesis, the court applies recent Third Circuit precedent to conclude that the court should indeed decline to exercise jurisdiction over this matter and dismiss the complaint.
I. ALLEGATIONS AND PROCEDURAL HISTORY
On January 27, 2014, the plaintiff, State National Insurance Co., Inc., filed a complaint against the defendants, Dale Landis and John Landis, as administrators and persons representing the estate of Charles L. Landis, Duston Lewis, Vincent Mastandrea, June Johnson, Kevin Johnson, William Johnson, and J & B Hotel, Inc., in which it advances a single claim for declaratory relief in connection with an action currently pending in the Court of Common Pleas of Lancaster County. Compl. at ¶¶ 16, 25-27, Doc. No. 1. That action, commenced on October 4, 2012, and docketed at CI-12-14795, involves allegations that the defendant, Duston Lewis ("Lewis"), struck, and eventually ran over, Charles Landis ("Landis") with his car while intoxicated. Id. at Ex. A, Am. Compl. After receiving treatment at Lancaster General Hospital, Landis died on January 5, 2012. Id. The controlling complaint in state court asserts various state statutory and common law claims against Le\vis, the corporation operating the establishment at which Lewis consumed alcoholic beverages, namely J & B Hotel, Inc., and numerous purported agents of that corporation, including Vincent Mastandrea, Kevin Johnson, William Johnson, and June Johnson, and seeks compensation for Landis's death. Id.
As is common in the insurance industry, the plaintiff filed the instant complaint in federal court for the sole purpose of obtaining a declaration pursuant to the DJA that it does not owe a duty to either defend or indemnify the defendants, Vincent Mastandrea, Kevin Johnson, William Johnson, June Johnson, and J & B Hotel, Inc., in the underlying state court litigation under an insurance policy issued to J & B Hotel, Inc. for the policy period of May 2, 2011, to May 2, 2012. Compl. at ¶¶ 15, 20, 25-27. More specifically, the plaintiff contends that it owes no such duties because the allegations surrounding the state court action fall squarely within the confines of two policy exclusions, namely a liquor liability exclusion and an assault and battery exclusion. Id. at ¶¶ 21-23.
After the plaintiff effectuated service,  the defendants, Vincent Mastandrea, Kevin Johnson, William Johnson, and J & B Hotel, Inc. (the "Hotel Defendants"), filed an answer to the complaint on February 26, 2014. Answer of the Defs. Vincent Mastandrea, Kevin Johnson, William Johnson, and J & B Hotel, Inc., Doc. No. 4. The defendants, Dale Landis and John Landis, as administrators and persons representing the estate of Charles L. Landis (the "Estate Defendants"), filed an answer to the complaint shortly thereafter. Answer and Affirmative Defenses of Defs. Dale Landis and John Landis as Adm'rs and Perss. Representing the Estate of Charles L. Landis to Compl. for Declaratory J., Doc. No. 5. Chief Judge Petrese B. Tucker transferred this matter from the Honorable Lawrence F. Stengel to the undersigned on May 2, 2014. Order, Doc. No. 7.
On June 27, 2014, and after conducting a review of the complaint, the court issued an order to show cause inviting the parties to brief the question of whether the court should decline to exercise jurisdiction over this matter given both the discretionary nature of the DJA and the recent holding of Reifer v. Westport Ins. Corp., 751 F.3d 129 (3d Cir. 2014). Order to Show Cause, Doc. No. 9. The court set a briefing schedule and scheduled oral argument to occur in conjunction with the initial pretrial conference on August 12, 2014. Id.
The plaintiff filed its response on July 9, 2014, in which it argues that the court should exercise jurisdiction over this matter in part because the underlying state court action does not constitute a parallel state proceeding. Pl.'s Resp. to June 27, 2014; Order to Show Cause ("Pl.'s Resp.") at 4-5, Doc. No. 10. Employing substantially similar reasoning, both sets of defendants filed responses on July 24, 2014, in which they separately request that the court decline to exercise jurisdiction over this case. Answer of the Defs. Vincent Mastandrea, Kevin Johnson, William Johnson, and J & B Hotel, Inc. to Rule to Show Cause ("Answer of Hotel Defendants"), Doc. No. 11; Defs.' Br. in Opp'n to Pl.'s Resp. to Order to Show Cause ("Answer of Estate Defendants"), Doc. No. 12. Though the response of the Estate Defendants covers more ground in breadth and depth than that of the Hotel Defendants, neither response directly challenges the plaintiffs characterization of the underlying state court action as something other than a parallel proceeding. Answer of Hotel Defendants at 2-4; Answer of Estate Defendants at 7-9.
The court held oral argument on August 12, 2014, and the jurisdictional issue is ripe for disposition.
A. Governing Analytical Framework
The DJA provides that a jurisdictionally-competent federal court "may declare the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C. § 2201(a) (emphasis added). Through the vehicle of establishing a remedy, Congress textually carved out a sphere of discretion into an otherwise "virtually unflagging obligation of the federal courts to exercise the jurisdiction given them." Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976) (citations omitted). In other words, the "statute's textual commitment to discretion" vests federal courts with "unique and substantial discretion in deciding whether to declare the rights of litigants." Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995) (citations omitted). While "the Supreme Court has... framed DJA discretion in broad terms, " it has also made the point that a court's exercise of that discretion "is bounded and reviewable." Reifer, 751 F.3d at 139-40. Determining the precise boundaries of DJA discretion, then, has been a lively topic of judicial inquiry for, at minimum, the last seventy years.
Although undergirded by the common theme that a court's exercise of DJA discretion must be "sound and reasoned, " the controlling standard to be applied has evolved over time and has recently culminated into a rebuttable presumption analysis informed by a multi-factor balance test. See id. at 139-40, 146 (observing this theme, but taking it through various rhetorical iterations). Beginning with Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942), a case involving pending state garnishment proceedings, the Supreme Court described the district court's duty under the circumstances presented as an ascertainment of "whether the questions in controversy between the parties to the federal suit, and which are not foreclosed under the applicable substantive law, can better be settled in the proceeding pending in the state court." Id. at 495. The Court described this duty against the theoretical backdrop of avoiding "[g]ratuitous interference with the orderly and comprehensive disposition of a state court litigation." Id. In implementing this duty, the Court instructed that lower courts may be required to survey "the scope of the pending state court proceeding and the nature of defenses open there, " including "whether the claims of all parties in interest can satisfactorily be adjudicated in that proceeding, whether necessary parties have been joined, whether such parties are amenable to process in that proceeding, etc." Id. The Court ...