U.S. Fidelity and Guar. Co. v. Murphy Oil USA, Inc.

• Decision Date: 08 April 1994
• Docket Number: No. 93-2118,93-2118
• Citation: 21 F.3d 259
• Parties: UNITED STATES FIDELITY AND GUARANTY COMPANY, Appellant, v. MURPHY OIL USA, INCORPORATED, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 259

21 F.3d 259

UNITED STATES FIDELITY AND GUARANTY COMPANY, Appellant, v. MURPHY OIL USA, INCORPORATED, Appellee.

No. 93-2118.

United States Court of Appeals Eighth Circuit.

Submitted Dec. 13, 1993.

Decided April 8, 1994.

Lon A. Berk, Washington, DC, argued (Stephen Zielezienski and Walter J. Andrews of Washington, DC and Sharon Rau Dissinger of Baltimore, MD, appeared on the brief), for appellant.

M. Samuel Jones, III, Little Rock, AR, argued (Eugene Anderson and Tracy Makow, New York City and James Baine and Timothy New, El Dorado, AR, appeared on the brief), for appellee.

Before McMILLIAN, FAGG, and BOWMAN, Circuit Judges.

BOWMAN, Circuit Judge.

United States Fidelity and Guaranty Company (USF & G) appeals the District Court's ¹ decision to stay USF & G's declaratory judgment action brought in that court against Murphy Oil USA, Inc., in favor of a similar action, filed by Murphy Oil, pending in state court. We affirm.

In 1991 USF & G filed an action in the United States District Court for the Southern District of Alabama seeking a declaration that its insurance contracts with Murphy Oil do not provide coverage for four environmental claims against Murphy Oil. A few months later, Murphy Oil filed a similar action in state court in El Dorado, Arkansas, Murphy Oil's headquarters and principal place of business. The state action named all of Murphy Oil's primary and excess insurance carriers, including USF & G, that might be obligated to indemnify Murphy Oil on six underlying environmental claims, including the four in the federal action. There is no dispute that both cases require the application of Arkansas state insurance law. ² The day after Murphy Oil filed suit in state court, it moved to dismiss or to stay or, in the alternative, to transfer USF & G's federal action, and by the end of the year the case was transferred to the United States District Court for the Western District of Arkansas in El Dorado. Shortly thereafter, Murphy renewed its motion to dismiss or stay the federal action. In January 1993 the Magistrate Judge recommended the motion be denied, but the District Court rejected the Magistrate's Findings and Recommendations on April 1, 1993, and ordered the federal action stayed. This appeal followed.

Initially we must resolve a dispute between the parties regarding the applicable law and appropriate standard of review, and at the same time reconcile what might appear to be conflicting decisions from this Court on the same issues.

USF & G's suit is for a declaratory judgment and was brought under the District Court's diversity jurisdiction. Years ago, the Supreme Court noted that district courts are "under no compulsion to exercise" their jurisdiction under the Declaratory Judgment Act, 28 U.S.C. Secs. 2201, 2202 (1988). Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 494, 62 S.Ct. 1173, 1175, 86 L.Ed. 1620 (1942). The Court said, "Ordinarily it would be uneconomical as well as vexatious for a federal court to proceed in a declaratory judgment suit where another suit is pending in a state court presenting the same issues, not governed by federal law, between the same parties." Id. at 495, 62 S.Ct. at 1175-76. Since then, the Court reaffirmed its "prior holding that a federal district court should, in the exercise of discretion, decline to exercise diversity jurisdiction over a declaratory judgment action raising issues of state law when those same issues are being presented contemporaneously to state courts." Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 126, 88 S.Ct. 733, 746, 19 L.Ed.2d 936 (1968) (citing Brillhart, 316 U.S. 491). Very recently, the Court reiterated the position: "As we have noted, the Declaratory Judgment Act affords the district court some discretion in determining whether or not to exercise that jurisdiction, even when it has been established." Cardinal Chem. Co. v. Morton Int'l, Inc., --- U.S. ----, ----, 113 S.Ct. 1967, 1974 n. 17, 124 L.Ed.2d 1 (1993) (citing Brillhart, 316 U.S. at 494-96, 62 S.Ct. at 1175-76). The language of the Act dictates that result: "In 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. Sec. 2201 (emphasis added).

After Brillhart, the Supreme Court announced two decisions that elaborated upon the discretion vested in the district court to abstain from the exercise of federal jurisdiction when a parallel state action is pending, in essence articulating a new abstention doctrine. ³ See Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976); Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). From these two cases emerged the "exceptional circumstances" test, six factors to be considered when a district court is called upon to abstain from exercising its jurisdiction because of a pending state action. It was clear from the Court's opinions that it viewed the district courts' obligation to exercise jurisdiction in such cases as almost without exception.

Neither Colorado River nor Moses H. Cone, however, were declaratory judgment actions brought under diversity jurisdiction, so the applicability of the "exceptional circumstances" test to declaratory judgment diversity actions remained an unanswered question. In 1990 a panel of this Court applied the Colorado River-Moses H. Cone factors to a declaratory judgment diversity jurisdiction case and determined that the district court had not abused its discretion by refusing to abstain in favor of a pending state action. Government Employees Ins. Co. v. Simon, 917 F.2d 1144, 1148-51 (8th Cir.1990) (hereinafter GEICO ). Two years later, we spelled it out in no uncertain terms: "[T]he Colorado River/Moses H. Cone exceptional circumstances test applies to actions brought in federal court under the Declaratory Judgment Act, where diversity is the basis for federal jurisdiction, and abstention is considered on grounds that wise judicial administration favors deference to a concurrent state court action." Insurance Co. of Pa. v. Syntex Corp., 964 F.2d 829, 834 (8th Cir.1992). The Syntex Court, however, reviewed the district court's decision only for an abuse of discretion, as had the GEICO Court before it. A year later, this Court affirmed the dismissal of a declaratory judgment diversity action, citing Brillhart and noting, "[T]he federal courts' power to exercise jurisdiction over declaratory judgment actions is discretionary." Aetna Casualty & Sur. Co. v. Jefferson Trust & Sav. Bank of Peoria, 993 F.2d 1364, 1366 (8th Cir.1993). Possibly because this was a summary affirmance under Eighth Circuit Rule 47B, the Court did not discuss Colorado River or Moses H. Cone, so it is unclear whether the factors from those cases were applied. In any event, the Court reviewed the decision under the abuse of discretion standard.

We think Syntex and Jefferson Trust are reconcilable. The discretionary nature of the district court's exercise of jurisdiction in declaratory judgment actions does not mean that the decision to abstain can be made "as a matter of whim or personal disinclination." Public Affairs Assocs., Inc. v. Rickover, 369 U.S. 111, 112, 82 S.Ct. 580, 582, 7 L.Ed.2d 604 (1962) (per curiam). The conclusion that the district court has discretion to make a decision does not mean that the decision is made under no guidelines whatever. The Brillhart Court recognized that proposition. While noting some of the factors a district court might consider in exercising its discretion (some of which are not unlike some of the Colorado River-Moses H. Cone factors), the Court declined to "attempt a comprehensive enumeration of what in other cases might be revealed as relevant factors governing the exercise of a District Court's discretion." Brillhart, 316 U.S. at 495, 62 S.Ct. at 1176. Syntex has revealed that, in this Circuit, the district court's discretion in a declaratory judgment action brought under diversity jurisdiction while a parallel state action is pending is informed by the Colorado River-Moses H. Cone "exceptional circumstances" factors. But declaring the test that should apply neither narrows the scope of the district court's discretion in applying those factors nor broadens the scope of review by this Court on appeal. ⁴

It is clear to us that Brillhart survives Colorado River and Moses H. Cone in declaratory judgment actions, and that Syntex does not hold otherwise. After Colorado River was decided (but before the decision in Moses H. Cone ), a divided Supreme Court had occasion to consider "the virtually unflagging obligation of the federal courts to exercise the jurisdiction given them," Colorado River, 424 U.S. at 817, 96 S.Ct. at 1246, and the plurality opinion noted that the obligation was not without limitation even in an action that was not seeking a declaratory judgment. "That ['unflagging obligation'] language underscores our conviction that a district court should exercise its discretion with this factor in mind, but it in no way undermines the conclusion of Brillhart that the decision whether to defer to the concurrent jurisdiction of the state court is, in the last analysis, a matter committed to the district court's discretion." Will v. Calvert Fire Ins. Co., 437 U.S. 655, 664, 98 S.Ct. 2552, 2558, 57 L.Ed.2d 504 (1978) (plurality opinion). Four justices joined this part of the opinion. The dissenting opinion in this case, joined by four justices as well (all of whom were a part of the six-justice Colorado River majority), also is enlightening on the question of the continued viability of Brillhart in the special circumstance of a declaratory judgment action:

As is readily apparent, crucial to this Court's approval of the District Court's dismissal of...