Seneca Insurance Company, Inc. v. Strange Land, Inc.
2017 U.S. App. LEXIS 11946
| 9th Cir. | 2017Background
- Strange Land owned insured Reno property; Seneca issued commercial policy (2013) and later investigated alleged material misrepresentations by Strange Land, disclaiming coverage and seeking rescission and damages in federal court.
- Belfor repaired the property, recorded a lien after nonpayment, and sued Strange Land and Seneca in Nevada state court seeking payment for repairs.
- Seneca filed the Federal Action (declaratory judgment, rescission, indemnity, damages > $75,000) before Belfor’s State Action; Seneca also filed interpleader and moved to dismiss or stay the State Action.
- The district court granted Strange Land’s request to abstain and stayed the Federal Action under Colorado River, prompting Seneca’s appeal.
- The Ninth Circuit reviewed de novo whether Colorado River abstention was appropriate and whether the district court abused its discretion in staying the federal case.
Issues
| Issue | Plaintiff's Argument (Seneca) | Defendant's Argument (Strange Land/Belfor) | Held |
|---|---|---|---|
| Applicability of Wilton/Brillhart (declaratory-only test) vs Colorado River | Seneca sought rescission and damages (not merely declaratory relief); thus Colorado River should apply | Strange Land argued the suit was declaratory-only so the more lenient Wilton/Brillhart test should apply | Colorado River applies because Seneca seeks non-declaratory relief (rescission and damages) |
| Whether Colorado River exceptional circumstances justify abstention | Federal forum should exercise jurisdiction; no exceptional circumstances present to override duty to decide | District court found piecemeal litigation and state-law predominance justified abstention | Ninth Circuit held district court abused discretion; no exceptional circumstances found; stay vacated |
| Specific Colorado River factors: rule of decision and piecemeal concerns | State-law issues do not automatically warrant abstention; federal courts routinely decide state-law claims | District court found state law predominates and complexity favored state adjudication | Rule-of-decision and piecemeal factors were not ‘‘rare’’ or exceptional here and do not favor abstention (factors neutral) |
| Adequacy/parallelism and forum shopping | State proceedings adequate but parallelism alone insufficient to justify abstention; no improper forum shopping by parties | Argued state forum would better resolve all issues and alleged Seneca forum-shopping | Adequacy and parallelism are neutral; no evidence of improper forum shopping; these do not justify stay |
Key Cases Cited
- Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976) (federal courts may abstain only in extraordinary circumstances to avoid duplicative litigation)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (Colorado River factors must be weighed pragmatically with strong presumption to exercise federal jurisdiction)
- Wilton v. Seven Falls Co., 515 U.S. 277 (1995) (discusses discretionary abstention in declaratory judgment actions)
- Brillhart v. Excess Ins. Co. of America, 316 U.S. 491 (1942) (federal courts ordinarily avoid declaratory suits duplicative of state proceedings)
- R.R. St. & Co. v. Transp. Ins. Co., 656 F.3d 966 (9th Cir. 2011) (articulates Ninth Circuit application of Colorado River multi-factor test)
- Smith v. Central Ariz. Water Conservation Dist., 418 F.3d 1028 (9th Cir. 2005) (Colorado River abstention is an exceedingly rare exception)