In the
United States Court of Appeals
For the Seventh Circuit
No. 09-2019
E NVISION H EALTHCARE, INC.,
Plaintiff-Appellant,
v.
P REFERRED O NE INSURANCE C OMPANY,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 09 CV 00078—John F. Grady, Judge.
A RGUED JANUARY 13, 2010—D ECIDED M AY 12, 2010
Before B AUER, M ANION, and T INDER, Circuit Judges.
M ANION, Circuit Judge. After being denied coverage
for substantial medical expenses, Bradley Romer sued
PreferredOne Insurance Company in Minnesota state
court claiming it improperly rescinded his insurance
policy. The dispute drew in other parties and bred
further suits: PreferredOne filed a third-party complaint
for indemnification against Envision Healthcare, Inc., in
the Minnesota case and days later Envision sued
2 No. 09-2019
PreferredOne in an Illinois federal court, seeking a dec-
laration that it has no duty to indemnify PreferredOne.
The district court exercised its discretion under the Wilton/
Brillhart abstention doctrine and dismissed the federal
case. Envision appeals. Because the third-party pro-
ceedings in Minnesota are parallel to the federal case
and it was not an abuse of discretion for the district court
to abstain from hearing the declaratory action, we affirm.
I.
Envision Healthcare, Inc. (“Envision”) is a wholesale
insurance broker; it works with health insurance compa-
nies to market their products. In that capacity, it also
recruits, trains, and oversees retail agents who solicit
customers. In 2006, Envision entered into a General
Agent Agreement (“GAA”) with PreferredOne, a
Minnesota-based insurance company, to market and sell
its policies. One of Envision’s agents, Edward Thomas,
sold a PreferredOne health insurance policy to Bradley
Romer. Some time later, Romer had two knee opera-
tions. The first in May 2007, was completed without
incident. But after the second in September 2007,
Romer contracted a staph infection and was hospitalized
for over a week. The cost of the second operation and
the subsequent stay exceeded one hundred thousand
dollars. The bulk of this expense was attributed to treat-
ment of the staph infection.
After receiving the hospital bill, PreferredOne began
looking a little deeper into Romer’s policy application
and discovered that he had failed to disclose a pre-
No. 09-2019 3
existing condition. And on that basis, PreferredOne
rescinded the policy and refused to pay for Romer’s
second operation and subsequent stay. Romer then sued
PreferredOne in Minnesota state court for breach of
contract. In the complaint, he claims that in the applica-
tion interview with Thomas he truthfully answered all
of the application questions and relied on Thomas to
accurately complete the form.
Citing the GAA, PreferredOne filed a third-party com-
plaint in the Minnesota action against Envision and
Thomas for indemnification from any resulting judg-
ment it suffers. Two days later, Envision filed a
declaratory action against PreferredOne in the United
States District Court for the Northern District of Illinois,
seeking a declaration that it has no duty to indemnify
PreferredOne under the GAA. The crux of Envision’s
argument is that the GAA was executed in 2006 be-
tween PreferredOne and what it calls “old” Envision. In
May 2007, another company, J.K. Acquisitions, acquired
many of the assets of “old” Envision, including the name
“Envision Healthcare” and the right to collect commis-
sions owed by PreferredOne. The Envision Healthcare
that entered into the 2006 GAA, “old” Envision, was
dissolved and “new” Envision began collecting com-
missions from PreferredOne without the burden of the
indem nification clause. Naturally, PreferredOne
disputes these claims.
After Envision filed suit in federal court, it filed a
motion to dismiss the third-party complaint in the Minne-
sota case. Among other things, it argued that the Minne-
4 No. 09-2019
sota case was duplicative of the federal case. In its words,
they “involve[] the exact same legal issue” and in the
interest of judicial economy the third-party suit should
be stayed pending the outcome of the federal case. That
motion was denied, and the Minnesota case moved
forward.
PreferredOne then moved to dismiss the declaratory
action in federal court for lack of personal jurisdiction.
The district court recognized that the two cases are
parallel actions because they involve the same parties
and present the same legal issue: whether Envision
owes PreferredOne a duty to indemnify. Therefore, the
court exercised its discretion and dismissed the case
under the Wilton/Brillhart abstention doctrine. Wilton v.
Seven Falls Co., 515 U.S. 277 (1995); Brillhart v. Excess Ins. Co.
of Am., 316 U.S. 491 (1942). On appeal, Envision argues
that the district court erred in its decision, and in
support it claims that the two proceedings are not parallel.
II.
Before addressing the merits of this appeal, we
consider the appropriate standard of review. The parties
argue that our review of the district court’s application
of the Wilton/Brillhart abstention doctrine is de novo.
They are correct, in part. Our cases are clear that we
review the underlying legal questions de novo. R.R. Street
& Co., Inc. v. Vulcan Materials Co., 569 F.3d 711, 714 (7th
Cir. 2009). Indeed, our review of legal questions is always
plenary. But the district court’s decision of whether to
abstain under Wilton/Brillhart is a different matter.
No. 09-2019 5
As the Supreme Court noted in Wilton “a district court
is authorized, in the sound exercise of its discretion, to
stay or to dismiss an action seeking a declaratory judg-
ment.” 515 U.S. at 288. And we review that decision
“for abuse of discretion.” 1 Id. at 289-90.
III.
“Under what is known as the Wilton/Brillhart absten-
tion doctrine, district courts possess significant discretion
to dismiss or stay claims seeking declaratory relief, even
though they have subject matter jurisdiction over such
claims.” R.R. Street & Co., 569 F.3d at 713. This discretion
arises from the Declaratory Judgment Act, 28 U.S.C.
§§ 2201-2202 itself, which provides that district courts
“may declare the rights and other legal relations of any
interested party seeking such declaration.” 28 U.S.C.
§ 2201(a). The discretionary nature of the Act led the
1
Some of our post-Wilton cases have reviewed both the
applicability of the doctrine and the district court’s decision de
novo. See, e.g., Newell Operating Co. v. Int’l Union of United Auto.,
Aerospace & Agric. Implement Workers of Am., 532 F.3d 583, 591
(7th Cir. 2008); N. Shore Gas Co. v. Salomon Inc., 152 F.3d 642, 647
(7th Cir. 1998); Matter of VMS Sec. Litig., 103 F.3d 1317, 1327
(7th Cir. 1996). However, as these cases conflict with the
Supreme Court’s holding in Wilton, they are in error and are
hereby overruled. Because our decision overrules these cases,
we have circulated it to the full court as required by our
Circuit Rule 40(e). No judge in regular active service voted
to hear the case en banc.
6 No. 09-2019
Supreme Court to hold in Brillhart and Wilton that
district courts have substantial discretion in deciding
whether to declare the rights of litigants and may, in the
sound exercise of their discretion, stay or dismiss an
action seeking a declaratory judgment in favor of an
ongoing state court case. See Brillhart v. Excess Ins. Co. of
Am., 316 U.S. 491, 494-95 (1942); Wilton, 515 U.S. at 288
(noting “a district court is authorized, in the sound exer-
cise of its discretion, to stay or to dismiss an action
seeking a declaratory judgment”).
As the Supreme Court explained in Brillhart, there is
no set criteria for when a court should exercise its dis-
cretion to abstain. 316 U.S. at 495 (“We do not now
attempt a comprehensive enumeration of what in other
cases may be revealed as relevant factors governing the
exercise of a District Court’s discretion.”). But the classic
example of when abstention is proper occurs where, as
it is here, solely declaratory relief is sought and parallel
state proceedings are ongoing. Vulcan Materials, 569 F.3d
at 715. That does not mean that abstention is limited to
parallel proceedings. Nationwide Ins. v. Zavalis, 52 F.3d
689, 692 (7th Cir. 1995). But as the Supreme Court has
made clear, the Wilton/Brillhart abstention doctrine ap-
propriately applies in a diversity case where a declara-
tory judgment is sought and a parallel state proceeding
also exists. Wilton, 515 U.S. at 283; Provident Tradesmens
Bk. & Tr. Co. v. Patterson, 390 U.S. 102, 126 (1968) (noting
“we reaffirm our prior holding that a federal district court
should, in the exercise of discretion, decline to exercise
jurisdiction over a diversity action raising issues of
state law when those same issues are being presented
contemporaneously to state courts”).
No. 09-2019 7
The question then becomes whether the Minnesota
case is parallel to the federal case. Two actions are
parallel when substantially the same parties are con-
temporaneously litigating substantially the same issues
in two fora. Sta-Rite Indus., Inc. v. Allstate Ins. Co., 96 F.3d
281, 287 (7th Cir. 1996); see also Interstate Material Corp. v.
City of Chicago, 847 F.2d 1285, 1288 (7th Cir. 1988) (noting
“[a] suit is ‘parallel’ when substantially the same
parties are contemporaneously litigating substantially
the same issues in another forum” (quotation omitted)).
Here, the third-party suit in Minnesota involves
the same parties as the federal case: Envision and
PreferredOne. And the same precise legal question will
be answered in both suits: whether Envision owes
PreferredOne a duty to indemnify it for any loss in-
curred in the Romer suit. Thus, the two suits are paral-
lel. The fact that the parties are part of a third-
party suit, rather than an original action in Minnesota,
does not affect the analysis of whether they are parallel.
See TruServ Corp. v. Flegles, Inc., 419 F.3d 584, 592 (7th Cir.
2005) (noting the inquiry is focused on “whether there
is a substantial likelihood that the [state court] litiga-
tion will dispose of all claims presented in the federal
case” (quotation omitted)).
Thus, the district court properly concluded that this
case is one that the Wilton/Brillhart abstention may be
applied to. And we find that the district court did not
abuse its discretion in abstaining from reaching the
merits of Envision’s suit and needlessly interfering with
the ongoing Minnesota state court proceedings. Brillhart,
316 U.S. at 495 (“Gratuitous interference with the orderly
8 No. 09-2019
and comprehensive disposition of a state court litigation
should be avoided.”). Accordingly, we A FFIRM the judg-
ment of the district court.
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