## Facts

- Texas oil-and-gas investors (the Hill Group) faced likely litigation over ownership and operation of oil and gas properties in Winkler County, Texas.
- London market insurers (London Underwriters) issued commercial liability policies to the Hill Group but refused to defend or indemnify them by letter dated July 31, 1992.
- In September 1992, a Winkler County jury returned a verdict exceeding $100 million against the Hill Group on state-law claims.
- On December 9, 1992, the insurers filed a federal diversity action seeking a declaratory judgment that the policies did not cover the Hill Group’s liabilities.
- The insurers voluntarily dismissed that federal action on January 22, 1993, conditioned on receiving two weeks’ notice before any coverage suit was filed.
- After the Hill Group gave notice on February 23, 1993, the insurers refiled their federal declaratory judgment action on February 24, 1993.
- On March 26, 1993, the Hill Group filed a related insurance-coverage action in Texas state court in Travis County that included additional parties, making the state case non-diverse and non-removable.
- The Hill Group moved to dismiss or stay the federal declaratory judgment action; the federal district court stayed it because the state action encompassed the same coverage issues.

## Issues

1. Whether a district court’s decision to stay a declaratory judgment action in favor of parallel state litigation is governed by the discretionary standard of *Brillhart* or by the “exceptional circumstances” test of *Colorado River*/*Moses H. Cone*.
2. What appellate standard of review applies to a district court’s stay or dismissal of a declaratory judgment action in deference to parallel state proceedings.

## Decision

- The Supreme Court affirmed the Fifth Circuit and upheld the district court’s stay.
- The Court held that *Brillhart*’s discretionary framework governs stays or dismissals of pure declaratory judgment actions when parallel state proceedings are pending.
- The Court rejected applying the *Colorado River*/*Moses H. Cone* “exceptional circumstances” test to such declaratory-only actions.
- The Court held that appellate review of these discretionary decisions is for abuse of discretion.
- Applying *Brillhart*, the Court concluded the stay was permissible because the non-removable state action more comprehensively addressed the same state-law coverage disputes.

## Legal Principles

- The Declaratory Judgment Act’s permissive text (“may declare”) gives federal courts substantial discretion to decide whether to grant declaratory relief, even when subject-matter jurisdiction exists.
- In declaratory judgment actions parallel to state proceedings involving the same parties and state-law issues, a district court may stay or dismiss to avoid gratuitous interference with state-court adjudication.
- The *Colorado River*/*Moses H. Cone* “exceptional circumstances” limitation is directed to abstention from coercive actions (e.g., damages) and does not control discretionary decisions in pure declaratory judgment suits.
- A district court may consider the scope and comprehensiveness of the state proceeding and whether it can satisfactorily resolve the dispute, including when the state case includes additional parties and claims that cannot be brought in the federal action.
- Decisions to stay or dismiss under the Declaratory Judgment Act in favor of parallel state litigation are reviewed on appeal for abuse of discretion.

## Conclusion

The Court held that district courts have broad discretion under the Declaratory Judgment Act to stay or dismiss a pure declaratory judgment action in favor of parallel state proceedings under *Brillhart*, and that such decisions are reviewed for abuse of discretion rather than under the stricter *Colorado River* framework.


Wilton v. Seven Falls Co., 515 U.S. 277 (1995)