United States District Court, M.D. Pennsylvania
JAMES M. MUNLEY, District Judge.
Before the court is the Plaintiff Allstate Insurance Company's (hereinafter "plaintiff" or "Allstate") declaratory judgment complaint. Plaintiff seeks a declaration that Allstate is not required to indemnify Defendant Josh Moyer under a renters insurance policy issued to him in relation to a lawsuit that has been filed in the Court of Common Pleas of Schuylkill County, Pennsylvania. After a review of this matter, we will decline to exercise jurisdiction and dismiss the case sua sponte.
This case arises out of a dispute over whether plaintiff is obliged to provide coverage pursuant to a renters insurance policy that it issued to Defendant Josh Moyer. An automobile accident occurred on January 22, 2008, in Tamaqua Borough, Schuylkill County, Pennsylvania. At the time of the accident, Chanita Guerrero drove a vehicle which struck Derek Bade, a pedestrian, causing Bade to suffer head trauma and necessitating the amputation of his leg, among other injuries. (Doc. 1, Compl. ¶ 23; Ex. A at 43). Guerrero pled guilty to multiple crimes, including aggravated assault by vehicle while driving under the influence of alcohol while a minor. (Compl. ¶ 24).
Derek Bade brought suit in the Schuylkill County Court of Common Pleas alleging that Josh Moyer and the other defendants owned and operated a restaurant called La Dolce Casa in Tamaqua, Pennsylvania, where Guerrero consumed alcohol before causing the accident that injured Bade. (Id. ¶¶ 25-28). The complaint further alleges that Moyer consumed alcohol with Guerrero at the restaurant and at another location. (Id.)
Allstate has agreed to defend and indemnify Moyer under the terms of an automobile policy issued to him under a reservation of rights, but seeks a declaration from this court that it has no obligation to indemnify Moyer under the terms of the renters policy issued to him. (Id. ¶ 3).
The court has jurisdiction pursuant to the diversity statute, 28 U.S.C. § 1332. Allstate is incorporated under the laws of the State of Illinois with its principal place of business in Illinois. (Id. ¶ 5). The defendants are citizens of Pennsylvania. (Id. ¶¶ 6-18). Additionally, the amount in controversy exceeds $75, 000. (Id. ¶ 19). Because complete diversity of citizenship exists among the parties and the amount in controversy exceeds $75, 000, the court has jurisdiction over this case. See 28 U.S.C. § 1332 ("district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between... citizens of different states [.]")
Generally, in diversity cases, we apply the law of Pennsylvania. Chamberlain v. Giampapa , 210 F.3d 154, 158 (3d Cir. 2000) (citing Erie R.R. v. Tompkins , 304 U.S. 64, 78 (1938)). However, "federal courts are to apply state substantive law and federal procedural law." Hanna v. Plumer , 380 U.S. 460, 465 (1965). The instant case is before the court in the form of a declaratory judgment action, and federal courts have concluded that declaratory judgment actions are procedural rather than substantive. See Fischer & Porter Co. v. Moorco Int'l Inc. , 869 F.Supp. 323, 326 (E.D. Pa. 1994) (holding that "[c]ase law indicates that the [Declaratory Judgment] Act is procedural in nature, and therefore federal law, not state law, governs whether claims may be heard under it."); Farmers Alliance Mut. Ins. Co. v. Jones , 570 F.2d 1384, 1386 (10th Cir. 1978) (holding that the [Declaratory Judgment] Act involves procedural remedies and not substantive rights.... The Act does not create substantive rights for parties; it merely provides another procedure whereby parties may obtain judicial relief."). As a result, the court here would apply substantive Pennsylvania law in interpreting the insurance contract, but the procedural strictures of the Federal Declaratory Judgment Act, 28 U.S.C. § 2201. See Fischer & Porter , 869 F.Supp. at 326.
Under the Declaratory Judgment Act, "[i]n 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." 28 U.S.C. § 2201(a) (emphasis added); see also Reifer v. Westport Ins. Corp. , 751 F.3d 129 (3d Cir. 2014). The United States Supreme Court has explained that "[d]istrict courts possess discretion in determining whether and when to entertain an action under the Declaratory Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional prerequisites." Wilton v. Seven Falls Co. , 515 U.S. 277, 282 (1995). The Supreme Court has emphasized that district courts are under no compulsion to exercise this discretionary jurisdiction. Brillhart v. Excess Ins. Co. of Am. , 316 U.S. 491, 494-95 (1942). "Rather than being subject to the normal principle that federal courts should adjudicate claims within their jurisdiction, ' district courts exercising DJA discretion are governed by considerations of practicality and wise judicial administration.'" Reifer at 139 (quoting Wilton at 288).
A court's decision to exercise its discretion to hear an action under the Declaratory Judgment Act "requires some inquiry into the scope of the state court proceeding, the nature of defenses available there, and whether the claims of all parties in interest can satisfactorily be adjudicated in that proceeding." Sate Auto Ins. Co. v. Summy , 234 F.3d 131, 133 (3d Cir. 2001). Further, "[a] federal court should also decline to exercise its discretionary jurisdiction when doing so would promote judicial economy by avoiding duplicative and piecemeal litigation." Id. at 135. These considerations are especially important because "district courts should give serious consideration to the fact that they do not establish state law, but are limited to predicting it." Id . A court may sua sponte exercise its discretion not to hear a declaratory judgment action. See id. at 136.
"Due to the high volume of declaratory judgment actions filed by insurance companies and their insureds, the Third Circuit has warned that [t]he desire of insurance companies and their insureds to receive declarations in federal court on matters of purely state law has no special call on the federal forum.'" Nationwide Agribusiness Ins. Co. v. Sheriff, 2015 WL 365679, *1 (M.D.Pa. 2015) (quoting State Auto Ins. Cos. v. Summy , 234 F.3d 131, 136 (3d Cir. 2000)). To this end, the Third Circuit enumerated the following eight factors to guide district court in exercising its discretion with respect to decalratory judgment actions:
1) the likelihood that a federal court declaration will resolve the uncertainty of obligation which ...