Prudential Ins. Co. of America v. Doe

• Decision Date: 06 April 1998
• Docket Number: No. 97-1797.,No. 97-1955.,97-1797.,97-1955.
• Citation: 140 F.3d 785
• Parties: The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Appellant, v. John DOE, Individually and as parent and guardian ad litem for Jane Doe, a minor, Appellee. The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Appellee, v. John DOE, Individually and as parent and guardian ad litem for Jane Doe, a minor, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

140 F.3d 785

The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Appellant, v. John DOE, Individually and as parent and guardian ad litem for Jane Doe, a minor, Appellee.

The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Appellee, v. John DOE, Individually and as parent and guardian ad litem for Jane Doe, a minor, Appellant.

No. 97-1797.

No. 97-1955.

United States Court of Appeals, Eighth Circuit.

Submitted January 13, 1998.

Decided April 6, 1998.

Rehearing Denied May 8, 1998.

Richard Joseph Pautler, St. Louis, MO, argued (Lewis R. Mills, on the brief), for Appellant.

Ronald A. Norwood, St. Louis, MO, argued (John M. Hessel, on the brief), for Appellee.

Before RICHARD S. ARNOLD, Chief Judge, BRIGHT and WOLLMAN, Circuit Judges.

WOLLMAN, Circuit Judge.

The Prudential Insurance Company of America (Prudential) appeals the district court's order dismissing Count II of its second amended complaint. John Doe and Jane Doe¹ appeal the district court's grant of summary judgment on Count I of that complaint. We reverse the district court's dismissal of Count II and remand for further proceedings; we affirm the order granting summary judgment on Count I.

I.

John Doe is an attorney who resides in St. Louis, Missouri, and is a partner in a Belleville, Illinois, law firm. In 1993, Doe's firm contracted with Prudential for group insurance, which included managed medical coverage. The contract includes a choice of law provision that designated Illinois law as the law governing the contract, as well as a provision that limits benefits to 30 days for hospital inpatient stays for "mental, psychoneurotic and personality disorders, alcoholism and drug abuse."

In April 1994, Doe claimed benefits for Jane Doe, his minor daughter, for hospitalization for recurrent major affective disorder. Prudential, relying on the limitation, denied hospital inpatient benefits for care and treatment of Jane Doe beyond 30 days. Doe sought review of the denial through Prudential's Southwest Group Operations Regional Appeal Committee, which upheld the original denial of the claim.

Upon transmittal of the committee's decision in June of 1994, Prudential immediately filed this action in the United States District Court for the Eastern District of Missouri pursuant to the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132(a)(3), and the Declaratory Judgment Act, 28 U.S.C. § 2201. Prudential sought a declaratory judgment regarding the benefits, if any, due the Does under the plan. The district court initially dismissed the complaint for lack of subject matter jurisdiction. We reversed the dismissal and remanded the matter to the district court. See The Prudential Ins. Co. of America v. Doe, 76 F.3d 206 (8th Cir.1996).

Meanwhile, in March of 1995, the Does filed an action against Prudential in Illinois state court alleging invasion of privacy, intentional infliction of emotional distress, negligent infliction of emotional distress, defamation, and violation of the Illinois Mental Health and Developmental Disabilities Confidentiality Act, 740 Ill. Comp. Stat. 110/1 et seq. Prudential then filed a second amended and supplemental complaint setting forth a second count, which alleged that (1) all of the claims asserted by the Does in the Illinois action were preempted by ERISA; (2) all of the claims asserted by the Does in the Illinois action were mandatory counterclaims in the federal action; (3) the filing of the federal action in a federal district court by Prudential was absolutely privileged and could not give rise to any state law liability; and (4) the Illinois Mental Health and Developmental Disabilities Confidentiality Act has no extraterritorial effect and the filing the federal action in a federal court in Missouri did not violate the act.

Prudential moved for summary judgment on both counts. The Does alternatively moved to dismiss, abstain, stay, or transfer both counts. As indicated above, the district court granted Prudential's motion for summary judgment on Count I and the Does' motion to dismiss Count II.

II.

We deal first with Prudential's appeal from the dismissal of Count II. Citing Texas Employers' Ins. Ass'n v. Jackson, 862 F.2d 491 (5th Cir.1988) (en banc), the district court held that the declaratory judgment sought by Prudential in Count II would have the effect of enjoining the further prosecution of the Illinois action and would thus violate the Anti-Injunction Act, 28 U.S.C. § 2283.² This is a question of law that we review de novo. See Camberos v. Branstad, 73 F.3d 174, 176 (8th Cir.1995).

In Jackson, a workman filed a suit in state court after being injured during the course of employment covered by the Longshore and Harbor Workers' Compensation Act (LHWCA). 862 F.2d at 493. See generally 33 U.S.C. §§ 901-950. The workman filed the suit against his employer's LHWCA insurer, alleging fraud and bad faith. See Jackson, 862 F.2d at 493. Nearly one year later, the insurer sought declaratory relief in federal court, seeking inter alia, a declaratory judgment that the LHWCA preempted the workman's state law claims. See id. at 495-96. The Fifth Circuit held that the insurer's declaratory relief was barred by the Anti-Injunction Act, reasoning that since an injunction would be barred by the Anti-Injunction Act, the issuance of a declaratory judgment that would have essentially the same effect as an injunction is similarly barred. See id. at 506.

We conclude that the rationale of Jackson does not foreclose Prudential's declaratory judgment action. First, in contrast to the situation in Jackson, it is significant that Prudential, the declaratory plaintiff in this action, was the first litigant to file suit. The Fifth Circuit recognized this significance in Royal Ins. Co. of America v. Quinn-L Capital Corp., 3 F.3d 877, 886 (5th Cir.1993). After concluding that Jackson represented a novel type of abstention, the Quinn-L court noted that "in some cases the date on which the state court suit was filed can make a difference in the application of the abstention doctrine." Id. at 886. The court concluded that a federal court need not abstain from proceeding with a declaratory judgment action "where the federal suit is filed substantially prior to any state suits, significant proceedings have taken place in the federal suit, and the federal suit has neither the purpose nor the effect of overturning a previous state court ruling." Id. We believe that the present case falls squarely within the class of actions just described. Indeed, had the district court not dismissed the case for want of jurisdiction, the merits of Count I might well have been decided before the filing of the Illinois action.

Second, the Supreme Court's decision in Wilton v. Seven Falls Co., 515 U.S. 277, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995), vests the district courts with broad discretion in deciding whether to hear a declaratory judgment action. In Wilton, the Supreme Court confronted the question whether the "exceptional circumstances" test expressed in Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 818-820, 96 S.Ct. 1236, 1246-48, 47 L.Ed.2d 483 (1976), and Moses H. Cone Mem'l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 14, 103 S.Ct. 927, 936, 74 L.Ed.2d 765 (1983), is applicable to a district court's decision to stay or dismiss a Declaratory Judgment Act suit during the pendency of a parallel state court proceeding. The Court, rejecting the exceptional circumstances standard and invoking the discretionary standard set forth in Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942), held that "district 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, 515 U.S. at 280-82, 115 S.Ct. at 2140.

We conclude that it was within the district court's discretion to proceed to hear and adjudicate Prudential's action. There remains Prudential's argument that abstention by the district court would constitute an abuse of discretion in this case in light of the abstention criteria set forth in Federated Rural Elec. Ins. Corp. v. Arkansas Elec. Coop. Inc., 48 F.3d 294, 297 (8th Cir.1995). Federated Rural Elec. was decided prior to Wilton, however, and applied the exceptional circumstances test of Colorado River and Moses H. Cone, a test that Wilton makes clear does not control in declaratory judgment actions. "Distinct features of the Declaratory Judgment Act, we believe, justify a standard vesting district courts with greater discretion in declaratory judgment actions than that permitted under the `exceptional circumstances' test of Colorado River and Moses H. Cone." Wilton, 515 U.S. at 285-87, 115 S.Ct. at 2142. Thus, Wilton requires application of the Brillhart factors to the abstention question in this case. See Wilton, 515 U.S. at 286, 115 S.Ct. at 2142 ("[n]o subsequent case, in our view, has called into question the application of the Brillhart standard to the Brillhart facts."); Government Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir.1998) (en banc) ("[t]he Brillhart factors remain the philosophic touchstone for the district court."); Youell v. Exxon Corp., 74 F.3d 373, 375 (2nd Cir.1996) (per curiam).

Accordingly, on remand the district court should examine the "scope of the pending state court proceeding" and consider "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." Brillhart, 316 U.S. at 495, 62 S.Ct. at 1176.

III.

Turning to the Does' cross-appeal, we first address their argument that the district court lacked subject matter jurisdiction to consider Prudential's allegations. See Bannister v. Sorenson 103 F.3d 632, 636 (8th Cir.1996). The types of actions that...