Wilton v. Seven Falls Co.

515 U.S. 277 (1995)

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Nature of the Case

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Facts

A dispute between the Hill Group and other parties over the ownership and operation of oil and gas properties in Winkler County, Texas, appeared likely to culminate in litigation. The Hill Group asked London Underwriters to provide them with coverage under several commercial liability insurance policies. London Underwriters refused to defend or indemnify the Hill Group. In September 1992, after a 3-week trial, a Winkler County jury entered a verdict in excess of $100 million against the Hill Group on various state law claims. The Hill Group gave London Underwriters notice of the verdict in late November 1992. On December 9, 1992, London Underwriters filed suit in the United States District Court for the Southern District of Texas, basing jurisdiction upon diversity of citizenship under 28 U.S.C. 1332. London Underwriters sought a declaration under the Declaratory Judgment Act, 28 U.S.C. 2201(a) that their policies did not cover the Hill Group's liability for the Winkler County judgment. After negotiations with the Hill Group's counsel, London Underwriters voluntarily dismissed the action on January 22, 1993. London Underwriters did so, however, upon the express condition that the Hill Group give London Underwriters two weeks' notice if they decided to bring suit on the policy. On February 23, 1993, the Hill Group notified London Underwriters of their intention to file such a suit in Travis County, Texas. London Underwriters refiled their declaratory judgment action in the Southern District of Texas on February 24, 1993. As promised, the Hill Group initiated an action against London Underwriters on March 26, 1993, in state court in Travis County. The Hill Group's codefendants in the Winkler County litigation joined in this suit and asserted claims against certain Texas insurers, thus rendering the parties nondiverse and the suit nonremovable. On the same day that the Hill Group filed their Travis County action, they moved to dismiss or, in the alternative, to stay London Underwriters' federal declaratory judgment action. The District Court entered a stay on June 30, 1993: the state lawsuit pending in Travis County encompassed the same coverage issues raised in the declaratory judgment action and determined that a stay was warranted in order to avoid piecemeal litigation and to bar London Underwriters' attempts at forum shopping. London Underwriters filed a timely appeal. The Fifth Circuit affirmed in an unpublished opinion filed on July 29, 1994: 'a district court has broad discretion to grant (or decline to grant) declaratory judgment.' The Court of Appeals did not require application of the test articulated in Colorado River, and Moses H. Cone under which district courts must point to 'exceptional circumstances' to justify staying or dismissing federal proceedings. Citing the interests in avoiding duplicative proceedings and forum shopping, the Court of Appeals reviewed the District Court's decision for abuse of discretion and found none.