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Avera McKennan Hospital v. EMC-Employers Mutual Casualty Co.

United States District Court, D. South Dakota, Southern Division

September 7, 2018



          Lawrence L. Piersol, United States District Judge

         Defendant EMC - Employers Mutual Casualty Company ("EMC"), has moved the Court based upon the abstention doctrine for an Order dismissing or, in the alternative, staying this action pending resolution of a lawsuit in Minnesota. (Doc. 11.) For the reasons set forth below, the motion is denied.


         On July 4, 2015, Marlyn and Kathlene Bootsma were injured in a motorcycle accident in Minnesota. The Bootsmas were treated at Avera McKennan Hospital ("Avera") in Sioux Falls. Avera filed a hospital lien under South Dakota law but it did not submit the Bootsmas' bills to the Bootsmas' health insurer, BlueCross BlueShield of Minnesota ("BCBS"). EMC, the insurer for the negligent driver, paid the Bootsmas $500, 000 to settle the case against its insured. The lawyer for the Bootsmas placed the disputed funds into his trust account, and the Bootsmas sued Avera in Minnesota state court to determine the proper distribution of the funds. In the Minnesota case, the Bootsmas claim that Avera breached its contract with BCBS by failing to submit the hospital bills within 120 days, and thus Avera has waived its right to recover payment for the hospital bills. Bootsmas allege that they are third party beneficiaries to the BCBS contract and were damaged by Avera's breach of that contract, and they also assert a cause of action against Avera for slander upon their credit and reputations.

         The case before this Court is an action to enforce a hospital lien in the amount of $ 142, 026.62 under South Dakota's hospital lien statute, SDCL § 44-12-8. Avera sued the tortfeasor's insurer, EMC, claiming that EMC impaired Avera's lien on settlement proceeds when EMC settled with the Bootsmas without paying Avera for the medical services it provided. Avera brought this lawsuit against EMC in state court in South Dakota. EMC removed the action to this Court based on diversity of citizenship pursuant to 28 U.S.C. § 1332. EMC now asks the Court to dismiss or stay the action.


         EMC requests dismissal or stay of this action under either the Wilton abstention doctrine or the Colorado River abstention doctrine. Avera argues that the Wilton abstention doctrine does not apply here and that the Colorado River factors weigh against abstention.

         Wilton Abstention Doctrine Federal courts have a "virtually unflagging obligation" to decide cases within the scope of their jurisdiction. Mata v. Lynch, ___ U.S. ___, 135 S.Ct. 2150, 2156 (2015) (quoting Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976)); see also Sprint Comm'ns, Inc. v. Jacobs, 571 U.S. 69, 72 (2013) ("In the main, federal courts are obliged to decide cases within the scope of federal jurisdiction. Abstention is not in order simply because a pending state-court proceeding involves the same subject matter."). The Supreme Court has, however, established certain exceptions to the general rule requiring district courts to exercise their jurisdiction. Sprint, 571 U.S. at 72. Brillhart v. Excess Ins. Co. Of American, 316 U.S. 491 (1942), exemplifies one such exception: because of the text of the Declaratory Judgment Act, abstention is at times permissible for actions brought in pursuit of a declaratory judgment. The Eighth Circuit has explained what is often referred to as the Brillhart/Wilton abstention doctrine:

the test articulated in Colorado River for a federal court to abstain when there are parallel state proceedings does not apply to actions under the Declaratory Judgment Act. See Wilton, 515 U.S. at 286, 115 S.Ct. 2137. Federal courts have more discretion to abstain in an action when a party seeks relief under the Declaratory Judgment Act. See Wilton, 515 U.S. at 286-87, 115 S.Ct. 2137; Brillhart, 316 U.S. at 494-95, 62 S.Ct. 1173. This broader discretion arises out of the Declaratory Judgment Act's language that a court "may declare the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C. § 2201(a) (emphasis added). The Supreme Court has noted that it has "repeatedly characterized the Declaratory Judgment Act as 'an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant.'" Wilton, 515 U.S. at 287, 115 S.Ct. 2137 (quoting Public Serv. Comm'n of Utah v. Wycoff Co., 344 U.S. 237, 241, 73 S.Ct. 236, 97 L.Ed. 291 (1952)). In emphasizing the uniqueness of the Declaratory Judgment Act, the Court commented that its "textual commitment to discretion, and the breadth of leeway we have always understood it to suggest, distinguish the declaratory judgment context from other areas of the law in which concepts of discretion surface." Id. at 286-87, 115 S.Ct. 2137. Therefore, in a declaratory judgment action, a federal court has broad discretion to abstain from exercising jurisdiction even if there are no exceptional circumstances as articulated in Colorado River. See Scottsdalelns. Co. v. DetcoIndus., Inc., 426 F.3d 994, 997 (8th Cir.2005).

Royal Indent. Co. v. Apex Oil Co., 511 F.3d 788, 792-93 (8th Cir. 2008).

         Accordingly, federal courts possess broad discretion to abstain from exercising jurisdiction over declaratory judgment lawsuits. See Wilton, 515 U.S. at 289 (stating district court Brillhart abstention decisions are reviewed only for abuse of discretion). And where there exists a "parallel" state court action to the federal declaratory judgment action, and the federal case involves questions of state law, the district court's discretion is at its peak due to principles of federalism and comity. See Lexington Ins. Co. v. Integrity Land Title Co., 721 F.3d 958, 967-68 (8th Cir. 2013) (detailing the difference in court discretion when there is a parallel state court proceeding). However, the present case is not the type for which Brillhart/Wilton abstention is warranted. Avera does not request a declaratory judgment, the Minnesota case is not a parallel state court proceeding, [1] South Dakota hospital lien law is at issue here and the substantive law at issue in the Minnesota action is Minnesota contract and tort law.[2]

         Colorado River Abstention Doctrine

         EMC maintains that this Court should abstain because Avera's suit parallels the Bootsmas' Minnesota suit and because "exceptional circumstances" warrant application of Colorado River abstention. Avera maintains the federal and state cases are not parallel and that, even if they were, there are no exceptional circumstances warranting abstention.

         The Supreme Court has made it clear that "[a]bstention from the exercise of federal jurisdiction is the exception, not the rule." Colorado River, 424 U.S. at 813. Before a federal court can abstain under the Colorado River doctrine, there must be (A) parallel proceedings in federal and state ...

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