Federal Court Dismisses Coverage Case Because of Pending State Court Case

EVANSTON INSURANCE COMPANY v. RESIDENTIAL PRIVATE CARE, LLC, Dist. Court, ED Michigan 2012 - Google Scholar:

The district court in Michigan has dismissed a declaratory judgment action filed by an insurance company alleging that there was no coverage for an incident.  The underlying state court case alleged that an employee of Residential Private care stole money and jewelry from a patient.

The court explained the requirements as follows:

"In determining whether it is proper for a district court to exercise subject matter jurisdiction over a declaratory judgment request, the Sixth Circuit applies the five factors enumerated in Grand Trunk W. R.R. Co. v. Consol. Rail Co., 746 F.2d 323, 326 (6th Cir. 1984). The five factors are:

(1) whether the declaratory action would settle the controversy;

(2) whether the declaratory action would serve a useful purpose in clarifying the legal relations in issue;

(3) whether the declaratory remedy is being used merely for the purpose of "procedural fencing" or "to provide an arena for a race for res judicata;"

(4) whether the use of a declaratory action would increase friction between our federal and state courts and improperly encroach on state jurisdiction; and

(5) whether there is an alternative remedy which is better or more effective.

Id.

With respect to the fourth factor — whether the use of a declaratory action would increase friction between our federal and state courts — courts are to consider three additional sub-factors:

(1) whether the underlying factual issues are important to an informed resolution of the case;

(2) whether the state trial court is in a better position to evaluate those factual issues than is the federal court; and

(3) whether there is a close nexus between the underlying factual and legal issues and state law and/or public policy, or whether federal common law or statutory law dictates a resolution of the declaratory judgment action.

Scottsdale Ins. Co. v. Roumph, 211 F.3d 964, 968 (6th Cir. 2000); see alsoTravelers Indem. Co. v. Bowling Green Professional Associates, PLC, 495 F.3d 266, 271 (6th Cir. 2007).^[2]"

^{The court held that the federal court case would cause friction with the state court an impermissibly encroach on that court's jurisdiction.}

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Edward X. Clinton, Jr.