                              In the

United States Court of Appeals
               For the Seventh Circuit

Nos. 08-3445 & 08-3529

R.R. S TREET & C O ., INC., and
N ATIONAL U NION F IRE INSURANCE C OMPANY
OF P ITTSBURGH , PA, as subrogee of
R.R. S TREET AND C O ., INC.,
                                    Plaintiffs-Appellants,
                                v.


V ULCAN M ATERIALS C OMPANY, n/k/a
L EGACY V ULCAN C ORP.,
                                                 Defendant-Appellee.


            Appeals from the United States District Court
        for the Northern District of Illinois, Eastern Division.
             No. 08 C 1182—Virginia M. Kendall, Judge.



     A RGUED F EBRUARY 27, 2009—D ECIDED JUNE 25, 2009




 Before M ANION, R OVNER, and T INDER, Circuit Judges.
  M ANION, Circuit Judge. Under what is known as the
Wilton/Brillhart abstention doctrine, district courts
possess significant discretion to dismiss or stay claims
seeking declaratory relief, even though they have subject
2                                  Nos. 08-3445 & 08-3529

matter jurisdiction over such claims. R.R. Street & Com-
pany, Inc. (“Street”) and National Union Fire Insurance
Company of Pittsburgh, PA (“National Union”) sued
Vulcan Materials Company (“Vulcan”) in this diversity
action for declaratory relief and money damages related
to Vulcan’s refusal to defend and indemnify Street in
several underlying lawsuits. Relying on the Wilton/
Brillhart doctrine, Vulcan moved to dismiss the action or,
alternatively, to stay the action pending resolution of a
California state court action in which all three
parties were involved. The district court granted
Vulcan’s motion, dismissing the plaintiffs’ claims for both
declaratory and non-declaratory relief based on the
Wilton/Brillhart abstention doctrine. Street and National
Union appeal. Because we conclude that the district
court lacked discretion under the Wilton/Brillhart
doctrine to dismiss the non-declaratory claims and
should have exercised its discretion under that doctrine
to retain the declaratory claim, we reverse and remand.


                            I.
  Vulcan manufactures a dry-cleaning solvent called
PerSec. In 1961, Vulcan made Street the exclusive dis-
tributor of PerSec in the United States. In 1992, Vulcan
and Street entered an agreement in which Vulcan
allegedly promised to defend and indemnify Street for all
claims brought against Street related to its distribution
of PerSec. Subsequent to that agreement, several lawsuits
(the “underlying lawsuits”) were filed against Street
and Vulcan in California for harms allegedly caused by
PerSec. Those underlying lawsuits are still active.
Nos. 08-3445 & 08-3529                                         3

  Vulcan has liability insurance with many insurance
companies, one of which is National Union. In 2005,
some of those insurers, including National Union, filed a
lawsuit in California state court (“the Vulcan Insurance
Action”) seeking a declaration that they owe no coverage
obligations to Vulcan in various lawsuits.
   National Union also insures Street under several general
liability policies and has been defending Street in the
underlying lawsuits because Vulcan has refused to
defend or indemnify Street in those suits, as Street claims
Vulcan promised to do under their 1992 agreement. On
February 26, 2008, Street and National Union (as Street’s
subrogee) filed a diversity action against Vulcan in the
Northern District of Illinois.1 In their amended complaint,
the plaintiffs asserted claims for breach of contract, com-
mon law indemnity, and promissory estoppel, seeking
money damages for Vulcan’s refusal to defend and indem-
nify Street in the underlying lawsuits. Street and
National Union also brought a claim for declaratory
relief under the Declaratory Judgment Act, 28 U.S.C.
§§ 2201-2202, asking the district court to declare that
Vulcan owes defense and indemnity obligations to Street
in the underlying lawsuits.


1
   On the same day, Street filed cross-claims against Vulcan in
one of the underlying lawsuits, United States v. Lyon, No. 1:07-
CV-00491-LJO-GSA (E.D. Cal.), raising the same claims for
relief it sought in its complaint in this case. On June 25, 2008,
the district court in Lyon, applying the Wilton/Brillhart absten-
tion doctrine, granted Vulcan’s motion to dismiss Street’s cross-
claims after determining its claims for money damages
were wholly dependent on its claim for declaratory relief.
4                                    Nos. 08-3445 & 08-3529

   Vulcan then filed a cross-complaint against Street and
National Union in the Vulcan Insurance Action seeking
a declaration that it has no duty to defend or indemnify
Street in the underlying lawsuits.2 Vulcan also filed a
motion to dismiss (or, alternatively, to stay) the plain-
tiffs’ complaint in this case. Vulcan argued that the district
court should either dismiss the case under the Wil-
ton/Brillhart abstention doctrine or stay the action
under either Wilton/Brillhart or the Colorado River absten-
tion doctrine pending resolution of the Vulcan Insurance
Action in California state court. The district court granted
Vulcan’s motion, dismissing the action pursuant to the
Wilton/Brillhart doctrine. The court did not discuss
Colorado River abstention. Relying on the Lyon court’s
order of dismissal, the district court first determined that
Wilton/Brillhart was applicable to the entire case because
the plaintiffs’ claims for damages were dependent upon
their claim for declaratory relief. Then, the court applied
the relevant Wilton/Brillhart factors and decided they
counseled in favor of dismissing the action. After their
motions to alter or amend the judgment were denied,
the plaintiffs appealed the dismissal of the case.


                             II.
  On appeal, the plaintiffs argue that the district court’s
dismissal was erroneous because Wilton/Brillhart does not



2
 Street was not a party to the Vulcan Insurance Action until
Vulcan filed that cross-complaint.
Nos. 08-3445 & 08-3529                                     5

apply to this action. Whether an abstention doctrine is
applicable in the first place is a question of law that we
review de novo. See AAR Int’l, Inc. v. Nimelias Enters. S.A.,
250 F.3d 510, 518 (7th Cir. 2001) (whether two pro-
ceedings are parallel, which is a prerequisite for Colorado
River abstention, is a matter of law subject to de novo
review); Prop. & Cas. Ins. Ltd. v. Cent. Nat’l Ins. Co. of
Omaha, 936 F.2d 319, 321 (7th Cir. 1991) (whether a case
meets traditional abstention requirements is a question
of law subject to de novo review).
  Under the Declaratory Judgment Act (“the Act”), “[i]n a
case of actual controversy within its jurisdiction . . . any
court of the United States . . . may declare the rights
and other legal relations of any interested party seeking
such declaration.” 28 U.S.C. § 2201(a). Since its inception,
the Act “has been understood to confer on federal
courts unique and substantial discretion in deciding
whether to declare the rights of litigants.” Wilton v. Seven
Falls Co., 515 U.S. 277, 286 (1995). In other words, in
passing the Act, “Congress sought to place a remedial
arrow in the district court’s quiver; it created an opportu-
nity, rather than a duty, to grant a new form of relief to
qualifying litigants.” Id. at 288.
  Consistent with the discretionary nature of the relief
permitted by the Act, the Supreme Court held in Brillhart
v. Excess Insurance Co. of America, 316 U.S. 491 (1942), that
district courts possess considerable leeway in deciding
whether to entertain declaratory judgment actions even
though subject matter jurisdiction is established. In
Wilton, the Court confirmed the continued vitality of
6                                        Nos. 08-3445 & 08-3529

Brillhart, rejecting the argument that exceptional circum-
stances under the Colorado River doctrine 3 must exist in
order to justify abstention in a declaratory judgment
action. Id. at 286.
  There is no doubt that a court may dismiss or stay an
action under the Wilton/Brillhart abstention doctrine
where solely declaratory relief is sought. Id. at 288, 290; Sta-
Rite Indus., Inc. v. Allstate Ins. Co., 96 F.3d 281, 287 (7th
Cir. 1996); see Brillhart, 316 U.S. at 492, 495. But where, as
here, both declaratory and non-declaratory relief is
sought, does the Wilton/Brillhart standard even apply,
and, if so, under what circumstances? This issue has
received different treatment in the courts of appeals
that have addressed it and is one of first impression in
this court.
  The Fifth Circuit has adopted a strict bright-line ap-
proach: When an action includes a claim for declaratory
relief along with any non-frivolous claim for coercive
relief, Wilton/Brillhart abstention is completely inap-
plicable to all claims, and the Colorado River doctrine
governs instead. New England Ins. Co. v. Barnett, 561 F.3d
392, 395 (5th Cir. 2009) (collecting cases). The Second and



3
  Colorado River Water Conservation Dist. v. United States, 424 U.S.
800 (1976). In Colorado River, the Supreme Court held that,
despite the federal courts’ “virtually unflagging obligation” to
exercise the jurisdiction conferred on them by Congress, in
exceptional circumstances a district court may abstain from
exercising such jurisdiction where parallel state proceedings
were pending. Id. at 817-20.
Nos. 08-3445 & 08-3529                                          7

Tenth Circuits have agreed with the Fifth Circuit’s ap-
proach, albeit in dicta. United States v. City of Las Cruces,
289 F.3d 1170, 1181-82 (10th Cir. 2002); Vill. of Westfield
v. Welch’s, 170 F.3d 116, 125 n.5 (2d Cir. 1999).4
  In contrast, the Ninth Circuit first determines “whether
there are claims in the case that exist independent of any
request for purely declaratory relief, that is, claims that
would continue to exist if the request for a declaration
simply dropped from the case.” United Nat’l Ins. Co. v.
R&D Latex Corp., 242 F.3d 1102, 1112 (9th Cir. 2001) (quot-
ing Snodgrass v. Provident Life & Accident Ins. Co., 147 F.3d
1163, 1167-68 (9th Cir. 1998) (per curiam)). If independent
non-declaratory claims are present, then “the district
court is without discretion to . . . decline to entertain



4
  The Fourth Circuit’s approach is roughly similar to the Fifth
Circuit’s. When a declaratory claim is joined with non-declara-
tory claims, the Wilton/Brillhart standard does not apply to the
non-declaratory claims. Great Am. Ins. Co. v. Gross, 468 F.3d
199, 211 (4th Cir. 2006). Whether the district court retains
discretion under Wilton/Brillhart to abstain from hearing the
declaratory claim is a point on which the Fourth Circuit’s case
law is unclear. Compare Chase Brexton Health Servs., Inc. v.
Maryland, 411 F.3d 457, 466-67 (4th Cir. 2005) (observing
that judicial economy counsels against dismissing claims for
declaratory relief while adjudicating non-declaratory claims),
with Myles Lumber Co. v. CNA Fin. Corp., 233 F.3d 821, 824
(4th Cir. 2000) (concluding that, in an action where both declara-
tory and non-declaratory claims were brought, it would be an
abuse of discretion to remand the declaratory claim under
Wilton/ Brillhart, assuming that doctrine applied to the claim).
8                                       Nos. 08-3445 & 08-3529

these causes of action. Indeed, the district court has a
‘virtually unflagging’ obligation to exercise jurisdiction
over these claims.” Gov’t Employees Ins. Co. v. Dizol, 133
F.3d 1220, 1226 n.6 (9th Cir. 1998) (en banc). Non-declara-
tory claims are “independent” of a declaratory claim
when they are alone sufficient to invoke the court’s
subject matter jurisdiction and can be adjudicated
without the requested declaratory relief. R&D Latex, 242
F.3d at 1113; Snodgrass, 147 F.3d at 1167-68. Regarding
the declaratory claim, “[t]he district court should not, as
a general rule . . . decline to entertain the claim for de-
claratory relief. If a federal court is required to deter-
mine major issues of state law because of the existence
of non-discretionary claims, the declaratory action
should be retained to avoid piecemeal litigation.” Dizol,
133 F.3d at 1225-26. Thus, under the Ninth Circuit’s
approach, concern for judicial economy significantly
limits the discretion afforded by Wilton/Brillhart over a
declaratory claim when independent non-declaratory
claims are present.5 Where the non-declaratory claims



5
  The Eighth Circuit has adopted the “essence of the lawsuit”
approach, under which a federal court is not obligated “auto-
matically to apply the exceptional circumstances test articu-
lated in Colorado River” when both non-declaratory and declara-
tory relief are sought. Royal Indem. Co. v. Apex Oil Co., 511 F.3d
788, 793 (8th Cir. 2008). Instead, because the Act authorizes a
court to grant “[f]urther necessary or proper relief based on
a declaratory judgment or decree,” 28 U.S.C. § 2202, the
district court may abstain from non-declaratory claims under
                                                    (continued...)
Nos. 08-3445 & 08-3529                                          9

are not independent, the district court has discretion
under Wilton/Brillhart to abstain from hearing the entire
action. See R&D Latex, 242 F.3d at 1113.
  With respect to the Fifth Circuit (and the courts of
appeals that follow that circuit’s approach), we do not
think the mere fact that a litigant seeks some non-
frivolous, non-declaratory relief in addition to declaratory
relief means that a district court’s Wilton/Brillhart discre-
tion to decline to hear the declaratory claim should be
supplanted by the narrower Colorado River doctrine.
While that approach is commendable for its ease of appli-
cation by both litigants and courts, it unduly curtails a
district court’s “unique and substantial discretion” to



5
   (...continued)
Wilton/Brillhart “so long as the further necessary or proper
relief would be based on the court’s decree so that the essence
of the suit remains a declaratory judgment action,” Royal
Indem. Co., 511 F.3d at 793-94. The independence of non-declara-
tory claims from declaratory claims hinges on whether the
grant of declaratory relief is a necessary predicate to the grant
of non-declaratory relief. See id. at 794 (holding that the plain-
tiff’s claims for contribution, subrogation, unjust enrichment,
equitable estoppel, and attorney fees, costs, and interest were
not independent but rather “further necessary or proper relief”
because “[i]f the district court were to reject [the plaintiff’s]
claims under the Declaratory Judgment Act, it could not
recover on th[ose] claims”). Thus, the Eighth Circuit’s approach
is similar to the Ninth Circuit’s, except that the jurisdictional
independence of the non-declaratory claims does not appear
to be a consideration.
10                                      Nos. 08-3445 & 08-3529

abstain from hearing claims for declaratory relief. Wilton,
516 U.S. at 286. And, unlike the Fifth and Fourth Circuits,
we do not believe that a district court is required
to adjudicate all non-frivolous claims seeking non-declara-
tory relief irrespective of their independence from
the declaratory claim. As we discuss below, see n.6,
only when non-declaratory claims are viable in federal
court regardless of the declaratory claim does a district
court have an obligation to hear such claims.
  We therefore think the Ninth Circuit’s approach is
preferable and adopt the following test: Where state and
federal proceedings are parallel and the federal suit
contains claims for both declaratory and non-declaratory
relief, the district court should determine whether the
claims seeking non-declaratory relief are independent 6 of



6
   A claim for non-declaratory relief is “independent” of the
declaratory claim if: 1) it has its own federal subject-matter-
jurisdictional basis, and 2) its viability is not wholly dependent
upon the success of the declaratory claim. If a claim satisfies
this test, then the district court’s “virtually unflagging obliga-
tion” to exercise jurisdiction over a non-declaratory claim
is triggered.
   In other words, this test requires a court to adjudicate non-
declaratory claims if it “determine[s] . . . there are claims in
the case that exist independent of any request for purely
declaratory relief, that is, claims that would continue to exist
if the request for a declaration simply dropped from the case.”
R&D Latex Corp., 242 F.3d at 1112 (quoting Snodgrass, 147
F.3d at 1167-68) (emphasis added). Otherwise, if, after fac-
                                                   (continued...)
Nos. 08-3445 & 08-3529                                         11

the declaratory claim. If they are not, the court can
exercise its discretion under Wilton/Brillhart and
abstain from hearing the entire action.7 But if they are,
the Wilton/Brillhart doctrine does not apply and, subject
to the presence of exceptional circumstances under
the Colorado River doctrine, the court must hear the inde-
pendent non-declaratory claims. The district court then
should retain the declaratory claim under Wilton/
Brillhart (along with any dependent non-declaratory
claims) in order to avoid piecemeal litigation.
  Applying that standard to this case, and assuming the
Vulcan Insurance Action is a parallel proceeding, we
conclude that the district court erred in dismissing the
action under Wilton/Brillhart. Were the declaratory
claim dropped from the case, the district court would
still have diversity jurisdiction 8 over the plaintiffs’ breach


6
  (...continued)
toring out the requested declaratory relief, there are no
viable non-declaratory claims, then the district court may
abstain from the entire action under Wilton/Brillhart without
running afoul of its near-unwavering obligation to hear
claims within its jurisdiction.
7
  The Supreme Court counsels that a stay is often the
preferable course where the basis for abstaining is the
pendency of a state-court proceeding. Wilton, 515 U.S. at 288 n.2.
8
  Although the plaintiffs did not plead a specific amount in
controversy in their complaint, it does not appear to a legal
certainty that the amount in controversy is less than the juris-
dictional threshold from 28 U.S.C. § 1332(a). See St. Paul
                                                  (continued...)
12                                     Nos. 08-3445 & 08-3529

of contract, common law indemnity, and promissory
estoppel claims that seek relief in the form of money
damages, and the requested declaratory relief is not a
prerequisite to resolution of those claims.9 Put simply,
the non-declaratory claims are independent of the declara-
tory claim because they could stand alone in federal
court—both jurisdictionally and substantively—irrespec-
tive of the declaratory claim. Therefore, the district court
was without discretion under Wilton/Brillhart to dismiss
the non-declaratory claims and should have exercised
its discretion under that doctrine to retain the declara-
tory claim.10




8
   (...continued)
Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938).
Indeed, they state in their opening briefs (and in a sur-reply to
Vulcan’s motion to dismiss in the district court) that Vulcan
owes them in excess of $16 million for past breaches of its
coverage obligations. In addition, the plaintiffs are completely
diverse from the defendant. Hence, the jurisdictional prerequi-
sites under § 1332 are satisfied.
9
  Even if the legal issues involved in deciding the declaratory
claim would be dispositive of all of the non-declaratory claims,
that would not necessarily mean that the latter are not inde-
pendent of the former. R&D Latex Corp., 242 F.3d at 1112-13.
10
  The district court did not decide whether exceptional circum-
stances exist under the Colorado River doctrine that would
warrant a stay of the case, and we express no opinion on
that matter.
Nos. 08-3445 & 08-3529                                  13

                            III.
  We conclude that the plaintiffs’ claims for non-declara-
tory relief were independent of their claim for declaratory
relief, and thus Wilton/Brillhart abstention was an inap-
propriate basis for dismissal of those claims. In addition,
the district court should have retained the declaratory
claim under Wilton/Brillhart for reasons of judicial econ-
omy. Accordingly, we R EVERSE the judgment of the dis-
trict court and R EMAND the case for further proceedings.




                          6-25-09
