Monday, November 28, 2005

Eighth Circuit Adopts Declatory Judgment Action Abstention Test

The Eighth Circuit in Scottsdale Ins. Co. v. Detco Industries, Inc., 426 F.3d 994 (8th Cir. Oct. 20, 2005) has resolved the question of how lower courts are to determine whether or not they should stay or dismiss a declaratory judgment action when there are no parallel state court proceedings. Adopting the test set forth by the Fourth Circuit in Aetna Cas. & Sur. Co. v. Ind-Com Elec. Co., 139 F.3d 419, 422 (4th Cir.1998), the court embraced the following six-factor test:

(1) whether the declaratory judgment sought “will serve a useful purpose in clarifying and settling the legal relations in issue”; (2) whether the declaratory judgment “will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the [federal] proceeding”; (3) “the strength of the state's interest in having the issues raised in the federal declaratory judgment action decided in the state courts”; (4) “whether the issues raised in the federal action can more efficiently be resolved in the court in which the state action is pending”; (5) “whether permitting the federal action to go forward would result in unnecessary ‘entanglement’ between the federal and state court systems, because of the presence of ‘overlapping issues of fact or law’ ”; and (6) “whether the declaratory judgment action is being used merely as a device for ‘procedural fencing’--that is, ‘to provide another forum in a race for res judicata’ or ‘to achiev[e] a federal hearing in a case otherwise not removable.’ ”


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