Fourth Circuit Discusses Differing Standards for Abstention of Declaratory and Nondeclaratory Claims

Per Great American Ins. Co. v. Gross, 468 F.3d 199 (4th Cir. Oct. 30, 2006):

When a complaint states claims for both nondeclaratory and declaratory relief, there is a question as to which standard--Colorado River or Brillhart/Wilton--governs the decision whether to order a stay in favor of the parallel state proceedings. Some courts have held that the Brillhart/Wilton discretionary standard is per se supplanted by the harsher Colorado River standard whenever an action includes both declaratory and non-frivolous nondeclaratory claims. See Kelly Inv., Inc. v. Continental Common Corp., 315 F.3d 494, 497 n. 4 (5th Cir.2002); Village of Westfield v. Welch's, 170 F.3d 116, 124 n. 5 (2d Cir.1999). Other courts hold that jurisdiction is mandatory (subject only to Colorado River constraints) if the nondeclaratory claims can exist independently of the declaratory claims, such that they could survive even if the declaratory claims vanished. See United Nat'l Ins. Co. v. R & D Latex Corp., 242 F.3d 1102, 1112-13 (9th Cir.2001). Another view, embraced by some district courts, looks to the "heart of the action" to determine if the Colorado River or the Brillhart/Wilton standard should apply. See, e.g. ITT Indus., Inc. v. Pacific Employers Ins. Co., 427 F.Supp.2d 552, 555- 56 (E.D.Pa.2006). Under this standard, if the outcome of the nondeclaratory claims hinges on the outcome of the declaratory ones, the Brillhart/Wilton standard governs; conversely, if the opposite applies, the Colorado River standard controls. See Lexington Ins. Co. v. Rolison, 434 F.Supp.2d 1228, 1236 (S.D.Ala.2006).

Our jurisprudence suggests that, in a "mixed" complaint scenario, the Brillhart/Wilton standard does not apply, at least to the nondeclaratory claims. For example, in Chase Brexton, we stated that the Brillhart/ Wilton standard does not apply when a declaratory judgment claim is joined with a nondeclaratory claim, such as a claim for damages or injunctive relief. 411 F.3d at 466-67. Because a court is required to address nondeclaratory claims, per Colorado River, we observed that the benefit derived from exercising discretion not to grant declaratory relief is frustrated. Id. at 466.

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We need not express a definitive view on this point to resolve the Insureds' argument, because even if we applied the more relaxed Brillhart/ Wilton standard to Great American's complaint, the result would not change. To determine whether to proceed with a federal declaratory judgment action when a parallel state court action is pending, we have focused on four factors: (1) whether the state has a strong interest in having the issues decided in its courts; (2) whether the state court could resolve the issues more efficiently than the federal court; (3) whether the presence of overlapping issues of fact or law might create unnecessary entanglement between the state and federal court; and (4) whether the federal action is mere procedural fencing in the sense that the action is merely the product of forum shopping. Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371, 377 (4th Cir.1994).