Royal Indem. Co. v. Apex Oil Co.

Decision Date02 January 2008
Docket NumberNo. 06-3461.,No. 06-3454.,No. 06-3469.,06-3454.,06-3461.,06-3469.
PartiesROYAL INDEMNITY COMPANY, individually and as successor by merger with Royal Insurance Company of America, formerly known as Royal Globe Insurance Company, Appellant, v. APEX OIL COMPANY, Inc., individually and as successor in interest to Clark Oil and Refining Corporation; Ace Insurance Company, of Illinois, as successor in interest to INA Insurance Company of Illinois; Central National Insurance Company of Omaha; Maryland Casualty Company, as successor in interest to American General Insurance Company; National Union Fire Insurance Company of Pittsburgh; TIG Insurance Company, successor in interest to International Insurance Company, successor in interest to International Insurance Company, Appellees. Royal Indemnity Company, individually and as successor by merger with Royal Insurance Company of America, formerly known as Royal Globe Insurance Company, Plaintiff, v. Apex Oil Company, Inc. individually and as successor in interest to Clark Oil and Refining Corporation; Ace Insurance Company, of Illinois, as successor in interest to INA Insurance Company of Illinois; Central National Insurance Company of Omaha; Maryland Casualty Company, as successor in interest to American General Insurance Company; National Union Fire Insurance Company of Pittsburgh; TIG Insurance Company, successor in interest to International Insurance Company, Defendants, v. National Union Fire Insurance Company of Pittsburgh, Third Party Plaintiff-Appellant, Corroon & Black of Missouri, Inc.; Frank B. Hall & Co. of Missouri, Inc., Third Party Defendants-Appellees. Royal Indemnity Company, individually and as successor by merger with Royal Insurance Company of America, formerly known as Royal Globe Insurance Company, Plaintiff, v. Apex Oil Company, Inc. individually and as successor in interest to Clark Oil and Refining Corporation; Ace Insurance Company, of Illinois, as successor in interest to INA Insurance Company of Illinois; Central National Insurance Company of Omaha; Maryland Casualty Company, as successor in interest to American General Insurance Company; National Union Fire Insurance Company of Pittsburgh; TIG Insurance Company, successor in interest to International Insurance Company, Defendants, TIG Insurance Company, successor in interest to, Cross-Claimant-Appellant, v. Apex Oil Company, Inc., Cross-Defendant-Appellee.
CourtU.S. Court of Appeals — Eighth Circuit

Dennis M. Dolan, argued, Chicago, IL (Daniel G. Litchfield, Chicago, IL, and John L. McMullin, St. Louis, MO, on the brief), for appellant.

John M. Horas, filed a joinder brief, St. Louis, MO, for TIG insurance.

Elizabeth A. Bradley, argued, Edwardsville, IL, for appellee.

Before LOKEN, Chief Judge, GRUENDER and BENTON, Circuit Judges.

GRUENDER, Circuit Judge.

Royal Indemnity Company brought this action pursuant to 28 U.S.C. §§ 2201 and 2202, to seek a declaration of the rights and obligations of Royal Indemnity Company, various other insurance companies and Apex Oil Company, Inc. ("Apex"), under certain insurance policies Royal Indemnity Company and the other insurance companies issued to Apex. For the reasons discussed below, we affirm the district court's1 decision to abstain, but we vacate the dismissal order and remand so that the court can instead enter an order staying the proceedings.

I. BACKGROUND

Between May 2003 and April 2005, the State of Illinois, the United States, and a group of individuals filed five separate lawsuits ("the underlying suits") against Apex in state and federal courts in Illinois based on the actions of Apex and its predecessor companies in releasing contaminants into the soil surrounding its oil refinery in Hartford, Illinois. Royal Indemnity Company defended Apex on the majority of the underlying suits. On August 5, 2005, Apex brought suit against multiple insurers in the Circuit Court of Madison County, Illinois ("the Illinois lawsuit"), seeking a declaration of the parties' rights and responsibilities with respect to the Hartford soil contamination under policies the insurance companies had issued to Apex.

On March 22, 2006, Royal Indemnity Company initiated this lawsuit by filing a complaint in federal court pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201 and 2202, "seeking adjudication of the parties' rights and obligations under certain insurance policies." In its complaint, Royal Indemnity Company also sought a declaration of the rights and responsibilities of the parties based on claims of equitable contribution, subrogation, unjust enrichment and/or equitable estoppel for the costs Royal Indemnity Company incurred in defending Apex as well as attorneys' fees, costs and interest. In this lawsuit, Royal Indemnity Company named Ace Insurance Company of Illinois; Central National Insurance Company of Omaha; Maryland Casualty Company, as successor in interest to American General Insurance Company; National Union Fire Insurance Company of Pittsburgh, PA; and TIG Insurance Company as defendants. In the course of this lawsuit, National Union and TIG Insurance Company filed separate cross-complaints against Apex, and National Union interpleaded Corroon & Black of Missouri, Inc., and Frank B. Hall & Co. of Missouri, Inc., as third-party defendants.

On May 19, 2006, Apex amended its complaint in the Illinois lawsuit to name as defendants the same entities who are parties to this lawsuit. Apex then filed a motion to dismiss this lawsuit as duplicative of the Illinois lawsuit. The Illinois lawsuit remains active, although two of the defendants, National Union and Corroon & Black, have filed motions to dismiss, which were still pending before the Illinois state court at the time this appeal was submitted. The district court granted Apex's motions to dismiss Royal Indemnity Company's initial complaint and National Union's and TIG's cross-claims, dismissing all claims without prejudice under the abstention doctrine of Wilton v. Seven Falls Co., 515 U.S. 277, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995). The district court found that the Illinois lawsuit and this lawsuit were parallel, that the claim was essentially one for declaratory judgment, and that it had the discretion to abstain from this lawsuit under Wilton and Brillhart v. Excess Insurance Co. of America, 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942).

Royal Indemnity Company, National Union and TIG (collectively "Royal")2 appeal the dismissal, claiming the district court erred in finding that it could abstain under Wilton and Brillhart. Royal requests that we either find that the abstention test articulated in Wilton and Brillhart does not apply or, in the alternative, that we remand so the district court can enter an order staying these proceedings instead of dismissing this lawsuit. We affirm the district court's decision to abstain, but we vacate the dismissal and remand for the district court to enter an order staying the proceedings in this lawsuit.

II. DISCUSSION

Although rare, federal courts may sometimes refrain from exercising jurisdiction over a case properly filed in federal court. "The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it." County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 188, 79 S.Ct. 1060, 3 L.Ed.2d 1163 (1959). In Colorado River Water Conservation District v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), the Supreme Court noted that federal courts have a "virtually unflagging obligation ... to exercise the jurisdiction given them." Under the standard articulated in Colorado River, a federal court should only abstain from a case in which there are parallel state proceedings for "exceptional circumstances." Id. at 813, 96 S.Ct. 1236 (quoting County of Allegheny, 360 U.S. at 188-89, 79 S.Ct. 1060).

However, the test articulated in Colorado River for a federal court to abstain when there are parallel state proceedings does not apply to actions under the Declaratory Judgment Act. See Wilton, 515 U.S. at 286, 115 S.Ct. 2137. Federal courts have more discretion to abstain in an action when a party seeks relief under the Declaratory Judgment Act. See Wilton, 515 U.S. at 286-87, 115 S.Ct. 2137; Brillhart, 316 U.S. at 494-95, 62 S.Ct. 1173. This broader discretion arises out of the Declaratory Judgment Act's language that a court "may declare the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C. § 2201(a) (emphasis added). The Supreme Court has noted that it has "repeatedly characterized the Declaratory Judgment Act as `an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant.'" Wilton, 515 U.S. at 287, 115 S.Ct. 2137 (quoting Public Serv. Comm'n of Utah v. Wycoff Co., 344 U.S. 237, 241, 73 S.Ct. 236, 97 L.Ed. 291 (1952)). In emphasizing the uniqueness of the Declaratory Judgment Act, the Court commented that its "textual commitment to discretion, and the breadth of leeway we have always understood it to suggest, distinguish the declaratory judgment context from other areas of the law in which concepts of discretion surface." Id. at 286-87, 115 S.Ct. 2137. Therefore, in a declaratory judgment action, a federal court has broad discretion to abstain from exercising jurisdiction even if there are no exceptional circumstances as articulated in Colorado River. See Scottsdale Ins. Co. v. Detco Indus., Inc., 426 F.3d 994, 997 (8th Cir.2005).

According to Brillhart, for a district court to have discretion to abstain in a proceeding under the Declaratory Judgment Act, the parallel state court proceeding must present "the same issues, not governed by federal law, between the same parties," and the court must evaluate ...

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