United States District Court, D. Utah
MOLINA HEALTHCARE OF UTAH, INC. Plaintiff,
TODD E. KISER, in his capacity as the Liquidator of Arches Mutual Insurance Company, Defendant.
MEMORANDUM DECISION AND ORDER
BENSON, DISTRICT JUDGE
the court is Defendant's Motion to Dismiss or Stay
Proceeding. (Dkt. No. 9.) The Motion has been fully briefed
by the parties, and the court has considered the arguments
set forth in those filings. Pursuant to civil rule 7-1(f) of
the U.S. District Court for the District of Utah Rules of
Practice, the court elects to determine the motion on the
basis of the written memoranda and finds that oral argument
would not be helpful or necessary. DUCivR 7-1(f).
action arises from a liquidation proceeding for Arches Mutual
Insurance Company, an insolvent former health maintenance
organization, currently pending in the Third Judicial
District Court in Salt Lake County, State of Utah, No.
150907803. That state court action has been proceeding for
over three years. Plaintiff Molina Healthcare of Utah filed
its Complaint for declaratory relief in this court on January
10, 2019, arguing that the assessment that Defendant Todd E.
Kiser, in his capacity as Liquidator of Arches, seeks to make
against Molina is preempted by federal Medicare law. (Dkt.
No. 2.) On February 26, 2019 Defendant moved the court to
dismiss, or in the alternative, stay this action, in
accordance with the Declaratory Judgment Act and the
McCarran-Ferguson Act. (Dkt. No. 9.)
Declaratory Judgment Act provides that “[i]n a case of
actual controversy within its jurisdiction, ... any [U.S.]
court, upon the filing of an appropriate pleading,
may declare the rights and other legal relations of
any interested party seeking such declaration, whether or not
further relief is or could be sought.” 28 U.S.C. §
2201(a) (emphasis added). “Because of the Act's use
of the word ‘may,' ... courts have the power, but
not the duty, to hear claims for declaratory judgment.”
Mid-Continent Cas. Co. v. Village at Deer Creek
Homeowners Ass'n, Inc., 685 F.3d 977, 980 (10th Cir.
2012). Accordingly, the court enjoys “unique and
substantial discretion in determining whether to declare the
rights of litigants” under the Declaratory Judgment
Act. United States v. City of Las Cruces, 289 F.3d
1170, 1179-80 (10th Cir. 2002).
Tenth Circuit has provided five factors for trial judges to
use when deciding whether to hear a case under the
Declaratory Judgment Act: 1) whether a declaratory action
would settle the controversy; 2) whether it would serve a
useful purpose in clarifying the legal relations at issue; 3)
whether the declaratory remedy is being used merely for the
purpose of “procedural fencing” or “to
provide an arena for the race to res
judicata”; 4) whether use of a declaratory action
would increase friction between our federal and state courts
and improperly encroach upon state jurisdiction; and 5)
whether there is an alternative remedy which is better or
more effective. State Farm Fire & Cas. Co. v.
Mhoon, 31 F.3d 979, 983 (10th Cir. 1994).
the first and second Mhoon factors, “whether
the declaratory judgment settles a controversy and clarifies
the legal relationships at issue [hinges] on the overall
question of whether the controversy would be better settled
in state court.” See City of Las Cruces, 289
F.3d at 1187. The court agrees with Defendant that it should
not entertain this action where the same fact-dependent
issues are likely to be decided in the pending state court
proceeding. The state court proceeding includes all of the
affected HMOs, in addition to Molina Healthcare.
this controversy would be more appropriately addressed in the
state court proceeding. As to the third factor, the Tenth
Circuit has “recognized ‘procedural fencing'
and ‘a race to res judicata' where an
identical or substantially similar action is proceeding in
state court, ” Ace Am. Ins. Co. v. Dish
Network, LLC, No. 13-cv-560-REB-MEH, 2014 WL 811993, at
*18 (D.Colo. Mar. 3, 2014) (citing Franklin Life Ins. Co.
v. Johnson, 157 F.2d 653, 656 (10th Cir.1946)), which is
also a factor here. As to the fourth factor, the
McCarran-Ferguson doctrine weighs heavily against this court
interfering with the State of Utah's regulation of the
business of insurance under these circumstances. As to the
fifth factor, the court holds that the state court proceeding
is the better avenue to effectively and efficiently address
the issues presented in the instant case.
foregoing reasons, the court elects to abstain from hearing
this declaratory judgment action. Defendant's Motion to
Dismiss is hereby GRANTED, ...