In a significant federal jurisdiction ruling, the U.S. Court of Appeals for the Sixth Circuit clarified the jurisdictional standards applicable to “mixed actions”—lawsuits that combine requests for both coercive relief (like monetary damages) and noncoercive relief (such as declaratory judgments). The decision, issued in Fire-Dex, LLC v. Admiral Insurance Co., No. 24-3781, vacated an Ohio federal district court’s remand of declaratory judgment claims back to state court, finding the lower court erred in declining to exercise jurisdiction.
Background
Fire-Dex, a manufacturer of firefighting gear, faces numerous lawsuits over alleged exposure to toxic chemicals. After Admiral Insurance Co. sought declaratory judgment in federal court over its coverage obligations, Fire-Dex countersued in state court for both declaratory relief and damages for bad faith denial of coverage. Admiral removed the case to federal court, where the district court remanded only the declaratory claims to state court and stayed the damages claims pending that outcome.
The Court’s Decision
On appeal, a unanimous Sixth Circuit panel rejected the lower court’s approach. Instead, the Sixth Circuit adopted a new standard: when a district court has jurisdiction over coercive claims and no abstention doctrine applies, the court must exercise jurisdiction. Discretion is allowed only as to purely declaratory claims—but even that discretion can be constrained.
The court held that because Fire-Dex’s declaratory and damages claims both hinge on the same breach of contract issues, it was an abuse of discretion to abstain from hearing the declaratory claims. The Sixth Circuit explained that where both claims involve the same legal question, equity counsels against abstention. The Sixth Circuit reaffirmed the federal courts’ duty to exercise jurisdiction where Congress has granted it—especially when parallel claims are intertwined.
Key Takeaways
This case is likely not only applicable to policyholders and insurers, but it could have broader implications for any declaratory judgment claims. Overall, where damages and declaratory claims are based on the same legal issues, federal courts may be obligated to retain jurisdiction—even if the case originates in state court. This ruling provides parties who prefer federal court a stronger basis to keep their entire case there.
