Wilton v. Seven Falls Co.

The Hill Group (defendant) had commercial-liability-insurance policies with London Underwriters (plaintiff), an insurance company. In 1992 a $100 million verdict was entered against the Hill Group. The Hill Group notified London Underwriters of the verdict. London Underwriters filed a lawsuit in federal district court under the Declaratory Judgment Act, based on diversity jurisdiction, seeking a declaratory judgment that under its policies, it was not required to indemnify the Hill Group. London Underwriters and the Hill Group entered negotiations, and London Underwriters dismissed its federal lawsuit against the Hill Group on the condition that the Hill Group would notify London Underwriters if it intended to file a lawsuit based on the insurance policies. The Hill Group notified London Underwriters that it intended to file a claim in state court. London Underwriters refiled its declaratory-judgment action in federal court, and the Hill Group filed an action against London Underwriters in Texas state court. The Hill Group moved to dismiss or stay London Underwriters’ federal declaratory-judgment action, and the federal district court stayed the case. The district court reasoned that the Hill Group’s state lawsuit raised the same questions that London Underwriters’ federal lawsuit raised, and that staying the lawsuit was necessary to avoid overlapping litigation in the state and federal court systems. The court of appeals held that a district court had discretion to stay a declaratory-judgment action. Finding no abuse of discretion, the court of appeals affirmed the district court’s stay. London Underwriters appealed, arguing that the district court was allowed to stay a declaratory judgment action only if exceptional circumstances justified such a stay. The United States Supreme Court granted certiorari.