Rarick v. Federated Serv. Ins. Co.

Rarick v. Federated Serv. Ins. Co.

Opinion

 [*225]  OPINION OF THE COURT

HARDIMAN, Circuit Judge.

In Brillhart v. Excess Insurance Company of America, 316 U.S. 491, 62 S. Ct. 1173, 86 L. Ed. 1620 (1942), the Supreme Court held that federal courts have broad discretion to decline to hear actions arising under the Declaratory Judgment Act. Decades later the Court reminded federal courts that they have a "virtually unflagging obligation" to exercise jurisdiction over actions seeking legal relief. Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817, 96 S. Ct. 1236, 47 L. Ed. 2d 483 (1976). But this "unflagging obligation" does not undermine the discretion inherent in the Declaratory Judgment Act as interpreted in Brillhart. See Wilton v. Seven Falls Co., 515 U.S. 277, 286-88, 115 S. Ct. 2137, 132 L. Ed. 2d 214 (1995).

What about complaints [**2]  that seek both declaratory and legal relief? Our sister courts of appeals and district courts within the Third Circuit have disagreed over the legal standard applicable in such cases. The United States District Court for the Eastern District of Pennsylvania in the two appeals we consider here adopted a "heart of the matter" test and, after finding that the essence of each action was declaratory, declined to exercise jurisdiction. In our view, the heart of the matter test is problematic because it enables plaintiffs to avoid federal subject matter jurisdiction through artful pleading. Accordingly, we will vacate the orders of the District Court and remand the cases for further proceedings.

A resident of Pennsylvania, Brian Rarick worked for a company that insured its vehicles under a business automobile policy provided by Federated Service Insurance Company, a Minnesota corporation. Under that policy, Rarick's employer waived uninsured motorist coverage for most of its employees, including Rarick.

In his complaint, Rarick alleged that he suffered injuries after he crashed a company car insured by Federated Service when an unidentified vehicle forced him off the road. Rarick reported [**3]  the accident and submitted a claim to Federated Service for uninsured motorist benefits, in accordance with the Pennsylvania Motor Vehicle Financial Responsibility Law, 75 Pa. Cons. Stat. §§ 1701, et seq. Federated Service denied the claim, citing its waiver of uninsured motorist coverage for employees like Rarick.

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