Rox-Ann Reifer v. Westport Insurance Corp
2014 U.S. App. LEXIS 8014
| 3rd Cir. | 2014Background
- Reifer sued her former attorney Russo for legal malpractice after losing employment and suffering damages; Russo had a claims-made malpractice policy with Westport and failed to notify Westport of the claim during the policy period.
- Russo’s policy lapsed before Reifer filed a formal complaint; Westport refused to defend or indemnify; a state jury later found Russo liable and awarded Reifer damages; Russo assigned any insurance rights to Reifer.
- Reifer (as assignee) filed a declaratory-judgment action in Pennsylvania state court seeking a declaration that Westport must pay the judgment because Westport failed to show prejudice from late notice.
- Westport removed the declaratory action to federal court on diversity grounds; the magistrate judge recommended dismissal on the merits, but the district court sua sponte declined to exercise discretionary jurisdiction under the Declaratory Judgment Act (DJA), remanding the case to state court and denying reconsideration.
- Westport appealed, challenging (1) whether the DJA applied and (2) whether the district court abused its discretion in declining jurisdiction; the Third Circuit affirmed the remand and denial of reconsideration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether DJA governed the action | Reifer framed suit as a declaratory judgment seeking a coverage declaration that Westport "must pay" the already-entered state-court judgment | Westport contended the complaint was really a suit for money damages (no DJA discretion) because declaration would directly award monetary relief | Court: DJA applies — substance was a coverage declaration; ability to recover money does not preclude DJA jurisdiction |
| Whether remand order is appealable | N/A | N/A | Court: Remand under DJA is a "final decision" appealable under 28 U.S.C. § 1291 (functionally like Quackenbush) |
| Standard of review for declining DJA jurisdiction | N/A | N/A | Court: Abuse-of-discretion review (Wilton); rejected pre-Wilton heightened standard from Exxon Corp. |
| Whether district court abused discretion in declining jurisdiction (no parallel state proceeding existed) | Reifer argued state-law issues and public-policy concerns over attorney-regulation and coverage rules are best resolved in state court | Westport argued state law is settled; district court had already expended resources and should have retained jurisdiction; absence of parallel state case favors federal exercise | Court: No abuse of discretion — absence of parallel state proceedings is only one factor; state-law novelty and policies relating to attorney regulation weighed heavily toward remand; remand affirmed |
Key Cases Cited
- Quackenbush v. Allstate Ins. Co., 517 U.S. 706 (1996) (remand orders under abstention doctrines can be appealable final decisions)
- Wilton v. Seven Falls Co., 515 U.S. 277 (1995) (district courts have broad discretion whether to hear declaratory-judgment actions; review for abuse of discretion)
- Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942) (factors guiding when federal courts should decline declaratory relief in the face of state proceedings)
- State Auto Ins. Cos. v. Summy, 234 F.3d 131 (3d Cir. 2000) (insurance declaratory-judgment guidance; federal courts should be reluctant when state law is unsettled and state proceedings can resolve the issues)
- Snodgrass v. Provident Life & Accident Ins. Co., 147 F.3d 1163 (9th Cir. 1998) (DJA remand orders are functionally indistinguishable from Quackenbush remands and appealable)