Bryan Rarick v. Federated Service Insurance Co
852 F.3d 223
| 3rd Cir. | 2017Background
- Two Pennsylvania employees (Rarick and Easterday) sued their employers’ insurers in state court seeking both declaratory relief (that state law requires uninsured/underinsured motorist coverage despite employer waivers) and legal relief (breach-of-contract damages).
- Both cases were removed to federal court under diversity jurisdiction; no related state-court proceedings remained pending after removal.
- The Eastern District of Pennsylvania applied a “heart of the matter” test, concluded the essence of each suit was declaratory, and remanded under the District Court’s discretionary power under the Declaratory Judgment Act.
- Insurers appealed, arguing federal courts should adjudicate the breach claims when diversity jurisdiction exists. Plaintiffs argued the declaratory nature justified declining federal jurisdiction.
- The Third Circuit evaluated which legal standard governs mixed actions seeking both declaratory and coercive relief and whether the district court abused its discretion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Which legal standard applies when a complaint seeks both declaratory and legal relief? | Use the “heart of the matter” (essence) test to decide if action is essentially declaratory and therefore discretionary under the DJA. | Apply the independent-claim test (or bright-line in some circuits); legal claims should compel federal jurisdiction when independent. | The independent-claim test governs in the Third Circuit. |
| If legal claims are independent, must the federal court adjudicate them? | Plaintiffs: discretionary abstention may still be appropriate even with attendant legal claims. | Defendants: Colorado River’s “virtually unflagging obligation” to hear legal claims controls; adjudicate independent legal claims absent extraordinary circumstances. | If legal claims are independent, the court has a “virtually unflagging obligation” to hear them (subject to Colorado River exceptions). |
| Did the district court err by using the heart-of-the-matter test here? | Plaintiffs defended the district court’s use of the test and remand. | Defendants argued the test permits artful pleading to evade federal jurisdiction. | Yes — the Third Circuit rejected the heart-of-the-matter test as enabling jurisdictional avoidance. |
| Were the plaintiffs’ legal claims independent of their declaratory claims in these cases? | Plaintiffs: breach claims dependent on policy interpretation; discretion to remand. | Defendants: breach claims were independent and satisfy diversity jurisdiction. | The Court held the legal claims were independent; remanded to district court to consider whether Colorado River exceptional circumstances justify abstention. |
Key Cases Cited
- Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (recognition of district court discretion under the Declaratory Judgment Act)
- Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (federal courts’ "virtually unflagging obligation" to exercise jurisdiction and narrow exceptions)
- Wilton v. Seven Falls Co., 515 U.S. 277 (reaffirming Brillhart discretion over declaratory judgments)
- Reifer v. Westport Ins. Corp., 751 F.3d 129 (3d Cir.) (prior Third Circuit analysis of when to decline jurisdiction under DJA)
- R.R. Street & Co. v. Vulcan Materials Co., 569 F.3d 711 (7th Cir.) (articulation of the independent-claim test)
- VonRosenberg v. Lawrence, 781 F.3d 731 (4th Cir.) (bright-line approach prioritizing legal claims)