Eighth Circuit Adopts Fourth Circuit Test for Determining Whether to Exercise Jurisdiction over Declaratory Judgment Action

The Eighth Circuit in Scottsdale Ins. Co. v. Detco Industries, Inc., 426 F.3d 994 (8th Cir. Oct. 20, 2005), has adopted the Fourth Circuit's six-factor test to determine whether abstention by the district court would be appropriate in a declaratory judgment action in which there are no parallel state court proceedings:

In Aetna Casualty & Surety Co. v. Ind-Com Electric Co., for example, the Fourth Circuit articulated a six-factor test to determine whether abstention by the district court would be appropriate in a declaratory judgment action in which there are no parallel state court proceedings. 139 F.3d at 422. According to the Fourth Circuit, the relevant factors to consider are: (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.' " Id. (internal citations omitted).

We agree with our sister circuits that a federal district court is afforded greater discretion in determining whether to exercise jurisdiction over a declaratory judgment action than in other circumstances. We also agree that the district court's discretion is limited when no parallel proceedings are pending in state court, because in those circumstances there are less-pressing interests of practicality and wise judicial administration. For example, in the absence of parallel state court proceedings, it is less likely that "the claims of all parties in interest can satisfactorily be adjudicated" in the state court proceeding. Wilton, 515 U.S. at 283, 115 S.Ct. 2137 (quoting Brillhart, 316 U.S. at 495, 62 S.Ct. 1173). Accordingly, we conclude that the Fourth Circuit's six-factor test should be applied by the district court in determining whether to exercise jurisdiction over a declaratory judgment action.