Federal Abstention in Declaratory Judgment Actions

 This article previews the issues and arguments in Wilton v. Seven Falls Co., on the Supreme Court’s 1994-95 appellate docket. This case asks the Supreme Court to delineate the appropriate standards under which a federal court may decline to exercise jurisdiction in a declaratory judgment action. This is the second time in two years that the Court has been asked to resolve this issue. 

The Court will address two issues in this appeal. The chief issue is whether a federal court that has jurisdiction over a federal declaratory judgment action may in its discretion decline to  exercise that jurisdiction in deference to a later filed, duplicative state court lawsuit. More narrowly, Wilton asks whether the exceptional circumstances test announced by the Supreme Court in Colorado River Water Conservation District v. United States favors federal court abstention in a federal declaratory judgment action. A subsidiary issue is whether an appellate court should review a district court's decision to abstain in these circumstances by reviewing the facts freshly or by determining whether the trial court abused its discretion.

The Federal Declaratory Judgment Act, 28 U.S.C. § 2201 (1988), gives litigants an opportunity to secure a federal court judgment declaring the rights and obligations of parties to a dispute.  Federal courts have equitable discretion to grant or deny such declaratory relief. In recent years, the availability of federal declaratory relief has found itself in tension with the discretionary ability of federal courts to decline to hear a case properly in its jurisdiction.  When a federal district court declines to exercise jurisdiction over a case which it is authorized to hear, the court is said to abstain. The various rules governing the decision to abstain are referred to as abstention doctrines.

Wilton is significant because it again offers the Supreme Court the opportunity to more clearly define the relationship of discretionary jurisdiction in a declaratory judgment action with  discretionary jurisdiction under Colorado River abstention doctrine. The case  essentially raises the very same issues raised and argued two years ago in Granite State, a case the Court accepted for review and then dismissed.

The recurrence of these same issues, as well as the split among federal courts, clearly indicates

that the lower federal courts need guidance in determining when to decline to exercise declaratory judgment jurisdiction under federal abstention doctrine. Because of the prevalence of insurance companies seeking federal declaratory judgment, the issues raised in this case will continue to perplex the lower federal courts until the Supreme Court delineates the prevailing abstention standard for declaratory judgment actions.