# ALLIED WORLD INSURANCE COMPANY v. SCHIBELL & MENNIE LLC

> District Court, D. New Jersey · December 29, 2020

URL: https://www.frixlaw.com/law-library/cases/10269849

## Case

- **Court:** District Court, D. New Jersey
- **Decided:** December 29, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10269849

## How later opinions describe it (automated extraction)

- noting that a “subsequently filed state court declaratory judgment action” designed to create a parallel state proceeding is not improper

## Opinion text

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

ALLIED WORLD INSURANCE
COMPANY,

Plaintiff,

v.
Case No. 3:19-cv-19426 (BRM) (ZNQ)

SCHIBELL & MENNIE LLC f/k/a
OPINION
SCHIBELL MENNIE & KENTOS LLC,

RICHARD D. SCHIBELL, and MARY
KENTOS as Executrix of ESTATE
OF MARK D. KENTOS,

Defendants.

MARTINOTTI, DISTRICT JUDGE
Before this Court is a Motion to Dismiss filed by Defendants Schibell & Mennie LLC f/k/a
Schibell Mennie & Kentos LLC (the “Firm”), Richard D. Schibell (“Schibell”) (collectively,
“Defendants”) seeking to dismiss Plaintiff Allied World Insurance Company’s (“Plaintiff”)
Amended Complaint for Declaratory Judgment (the “Amended Complaint”) which seeks a judicial
declaration pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202 (the “DJA”) that
Plaintiff has no duty to defend or indemnify coverage to Defendants, in connection with any claim
asserted by third parties against them, including, but not limited to, the underlying lawsuit filed
against Defendants in the Superior Court of New Jersey, Monmouth County, captioned Estate of
Mark D. Kentos v. Richard D. Schibell, Esq., et al., Case No. MON-L-3180-17 (“Kentos
Lawsuit”). Defendants argue the Court should abstain from retaining jurisdiction over this action
because it pertains only to state law disputes between the parties and is presently the subject of a
parallel pending state court litigation. (ECF No. 26.) Plaintiff filed an opposition to the Motion to
Dismiss (ECF No. 32) and Defendants replied. (ECF No. 42.) Having reviewed the submissions
filed in connection with the Motion and having declined to hold oral argument pursuant to Federal
Rule of Civil Procedure 78(b), for the reasons set forth below and for good cause appearing,

Defendants’ Motion to Dismiss is GRANTED.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY1
This matter arises out of a dispute over lawyers professional liability insurance policy
indemnity and defense coverage. Plaintiff is a corporation organized and existing under the laws
of New Hampshire and maintains its principal place of business in New York, New York and
“legally transacts insurance business.”2 (Am. Compl. (ECF No. 4) ¶ 4.) The Firm is a New Jersey
limited liability company with its principal office located in Oakhurst, New Jersey (id. ¶ 5) and is
composed of two members: Schibell and John G. Mennie (“Mennie”) both of whom are citizens
of New Jersey. (Id. ¶¶ 5–6.)3 Mary Kentos, as Executrix of Estate of Mark D. Kentos (the “Kentos
Estate”), represents the interests of the late Mark D. Kentos, a former employee, member and/or
partner of the Firm who, at the time of his death, was a resident and citizen of New Jersey. (Id ¶ 7.)4

1 For the purposes of this Motion to Dismiss, the Court accepts the factual allegations in the
Amended Complaint as true and draws all inferences in the light most favorable to Plaintiff. See
Phillips v. Cty. of Allegheny, 515 F.3d 224, 228 (3d Cir. 2008). The Court also considers any
“document integral to or explicitly relied upon in the complaint.” In re Burlington Coat Factory
Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (quoting Shaw v. Dig. Equip. Corp., 82 F.3d 1194,
1220 (1st Cir. 1996)).
2 The Court understands the insurance policies in question specifically refer to legal malpractice
insurance policies.

3 Mennie was neither a party in the Complaint or the Amended Complaint. (See ECF Nos. 1, 4.)

4 According to the Amended Complaint, the “Kentos Estate is named as a defendant in this action
because the Kentos Estate is the plaintiff in the Kentos Lawsuit and may claim an interest in one
A. Policy Applications
Plaintiff issued four “LPL Assure Lawyers Professional Liability Insurance” policies to the
Firm for policy period: (1) July 3, 2016 to July 3, 2017 (“2016 Policy”); (2) July 3, 2017 to July
3, 2018 (“2017 Policy”); (3) July 3, 2018 to July 3, 2019 (“2018 Policy”); and (4) July 3, 2019 to

July 3, 2020 (“2019 Policy”) (collectively, “the Policies”). (Id. ¶¶ 11–14.) Subject to its terms and
conditions, each of the Policies provides a $2 million per claim and aggregate limit of liability.
(Id. ¶ 15. ) Each of the Policies states:
By acceptance of this Policy, all Insureds affirm or reaffirm as of the
Inception Date of this Policy that:

1. the statements in the Application are true and accurate and are
specifically incorporated herein, and are all Insureds’ agreements,
personal representations and warranties;
2. all such communicated information shall be deemed material to
the Insurer’s issuance of this Policy;
3. this Policy is issued in reliance upon the truth and accuracy of
such representations;
4. this Policy embodies all agreements existing between the Insureds
and the Insurer, or any of its agents, relating to this insurance; and
5. if any representation is false or misleading, this Policy shall be
void from the inception.

(Id. ¶ 16.) Plaintiff issued the 2016 Policy to the Firm in reliance upon the Firm’s answers on the
2016 insurance application dated June 7, 2016 (“2016 Application”). (Id. ¶ 18.) Specifically,
Question 11(a) of the 2016 Application asked: “Has any attorney been the subject of any bar
complaint, investigation or disciplinary proceeding within the past 5 years?” (Id. ¶ 19.) The Firm
answered “No” to Question 11(a). (Id.) Plaintiff issued the 2017 Policy to the Firm in reliance
upon the 2016 Application, as well as the Firm’s submission of a renewal insurance application,
which was signed by Schibell and dated May 9, 2017 (the “2017 Application”). (Id. ¶ 20.) Question

of the Policies to the extent that it is awarded a judgment or settlement in connection with the
Kentos Lawsuit.” (Id.); see infra Section I.A.
l0(a) of the 2017 Application asked: “Have there been any new bar complaints, investigations or
disciplinary proceedings against any attorney?” (Id. ¶ 21.) The Firm answered “No” to Question
10(a). (Id.) Plaintiff issued the 2018 Policy to the Firm in reliance upon the 2016 Application and
the 2017 Application, as well as the Firm’s submission of a renewal insurance application, which
was signed by Schibell and dated May 18, 2018 (the “2018 Application”).5 (Id. ¶ 22.)

B. Misrepresentations in Policy Applications
Plaintiff contends, unbeknownst to Plaintiff, the Firm made material misrepresentations
and omissions during the application process for the Policies. (Id. ¶ 26.)
i. Disciplinary Action against Schibell
On December 9, 2013, the Office of Attorney Ethics of the Supreme Court of New Jersey
(the “OAE”) filed a disciplinary action complaint against Schibell in the Supreme Court of New
Jersey, in the matter of Office of Attorney Ethics v. Richard D. Schibell, Esq., Docket No. XIV-
2012-0450E (the “Disciplinary Action”). (Id. ¶ 27.) The OAE alleged Schibell made false
representations to the OAE about the nature of various remittances in connection with the Firm’s

trust account, commingled funds, made false statements of material fact to disciplinary authorities
as well as engaged in conduct of dishonesty, fraud, deceit, or misrepresentation in violation of the
Rules of Professional Conduct. (Id. ¶¶ 28–30.)6 Thereafter, a disciplinary action review board
(“Disciplinary Review Board”) issued a decision in the Disciplinary Action dated March 20, 2017
(the “Decision”), and concluded that Schibell engaged in a “protracted scheme and subsequent

5 The 2016 Application, 2017 Application, and 2018 Application are collectively referred to herein
as the “Applications.”

6 The Court understands the “Rules of Professional Conduct” to refer to the New Jersey Rules of
Professional Conduct.
cover up, [and] that he knowingly made false statements to the OAE.” (Id. ¶ 41.) The Disciplinary
Review Board determined it was appropriate to impose a censure on Schibell. (Id. ¶ 42.)
ii. Kentos Lawsuit
On August 6, 2019, the Firm provided Plaintiff with notice of the Amended Complaint

filed in the Kentos Lawsuit, which is currently pending against the Firm and Schibell, and sought
defense and indemnity coverage from Plaintiff in connection with same. (Id. ¶ 43.) As alleged in
the Kentos Lawsuit brought by the Kentos Estate, Kentos applied for and was issued a life
insurance policy by Northwestern Mutual, Policy No. 18464894, with a death benefit in the amount
of $1,500,000.00 (the “Life Insurance Policy”). (See ECF No. 4-12 ¶ 14.) In the application for the
Life Insurance Policy, Schibell on behalf of the Firm, declared that certain information regarding
the Life Insurance Policy was true, including “$500,000 of the life insurance benefits was to be
used to fund a business buy/sell agreement with Kentos,” and “Kentos owned a 1% ownership
interest in Schibell, Mennie & Kentos, LLC which business had a value of $8,000,000.” (Id. ¶ 15.)
Schibell signed the application on behalf of the Firm which provided directly below the signature

line the following language: “Any person who includes any false or misleading information on
any application for an insurance policy is subject to criminal and civil penalties.” (Id. ¶ 16.) Kentos
alleged, “[a]ll or a portion of the Life Insurance Policy was intended for the benefit of Kentos and
his children.” (Id. ¶ 17.) Relatedly, stemming from divorce proceedings between Kentos and Erin
Kelly in the matter of Mark Kentos v. Erin Kentos¸ Docket No. FM-13-921-15A, a judgement of
divorce was prepared by the Firm which expressly recognized the Life Insurance Policy was for
the benefit of Kentos and his children and not for the benefit of the Firm. (Id. ¶ 22–24.)7 Following

7 In a premarital agreement dated October 22, 2012 between Kentos and Erin Kelly, Kentos listed
the Policy as his personal asset, along with another life insurance policy issued to him by
Northwestern Mutual with a similar death benefit of $1.5million. (Id. ¶ 19.)
Kentos’ death, the Life Insurance Policy proceeds were deposited into the Firm’s special escrow
account on December 22, 2016. (Id. ¶ 36.) The entire $1,500,000.00 in Life Insurance Policy
proceeds were paid directly to Schibell after Kentos’ death, at his personal residence, and no
portion of the Life Insurance Policy proceeds were paid for the benefit of Kentos’ children, as

intended. (See id. ¶¶ 38–42.)
After receiving notice of the Kentos Lawsuit, Plaintiff also independently learned of the
Disciplinary Action and obtained a copy of the Decision against Schibell. (ECF No. 4 ¶ 44.) By
way of letter to the Firm dated August 23, 2019 (the “Letter”), Plaintiff reserved its rights under
the 2018 Policy in connection with the Kentos Lawsuit (id. ¶ 45) and asked for copies of all
communications, submissions and filings made by or on behalf of Schibell and/or by or on behalf
of the Firm in connection with the Disciplinary Action, as well as copies of any communications,
submissions, filings and orders made or entered by the OAE and/or the Disciplinary Review Board
in the Disciplinary Action. (Id. ¶ 46.) In the Letter, Plaintiff also asked whether the Firm had any
record of having disclosed the Disciplinary Action to Plaintiff in connection with its underwriting

of any of the Policies. (Id. ¶ 47.) Pending receipt of the requested materials, Plaintiff agreed to
provide Defendants with a defense in the Kentos Lawsuit, subject to a full and complete reservation
of its rights. (Id. ¶ 48.) Plaintiff expressly reserved its right to withdraw from the defense and right
to recoup any and all claim expenses. (Id.) The Firm provided Plaintiff with a copy of the Decision
and confirmed it did not disclose the Disciplinary Action to Plaintiff. (Id. ¶ 49.) Despite numerous
requests, the Firm did not provide Plaintiff with a copy of the Disciplinary Action Complaint until
October 15, 2019. (Id. ¶ 50.)8 By letter to the Firm dated October 28, 2019, Plaintiff communicated

8 On October 10, 2019, Plaintiff independently obtained from the OAE a copy of the Disciplinary
Action Complaint. (Id. ¶ 51.)
its conclusion that it is entitled to rescind the Policies based on material misrepresentations made
in the Applications and that there would be no coverage for the Kentos Lawsuit. (Id. ¶ 52.) Plaintiff
subsequently clarified that its rescission of the Policies applied to the Firm, Schibell, and any other
insured who does not qualify as an “innocent insured.” (Id.)

On January 22, 2020, Plaintiff filed the one-count Amended Complaint9 against
Defendants seeking a judicial declaration by this Court that the Policies are rescinded and void ab
initio as to Defendants and any other insured who does not qualify as an “innocent insured,” and
Plaintiff, therefore, has no coverage obligations under the Policies for any claims asserted by third
parties against Defendants under the Policies, including but not limited to the Kentos Lawsuit. On
April 14, 2020, Defendants filed a Motion to Dismiss on the basis that the Court should abstain
from exercising jurisdiction over this declaratory judgment action because, among other reasons,
it only pertains to state law disputes which is the current subject of a parallel pending lawsuit filed
in the Superior Court of New Jersey, Monmouth County, Law Division, Docket No. MON-L-
1221-20 (“State Court Action”). (ECF No. 26-1 at 14–16.) On May 18, 2020, Plaintiff opposed

the Motion (ECF No. 32) and on June 4, 2020 Defendants replied. (ECF No. 42.)
II. LEGAL STANDARD
In general, the party “asserting jurisdiction[ ] bear[s] the burden of proving that jurisdiction
exists.” Castro v. United States Dep’t of Homeland Sec., 835 F.3d 422, 429 (3d Cir. 2016) (citation
marks omitted) (quoting Nuveen Mun. Trust ex rel. Nuveen High Yield Mun. Bond Fund v.
WithumSmith Brown, P.C., 692 F.3d 283, 293 (3d Cir. 2012)). However, a motion requesting that

9 Plaintiff first filed its declaratory judgment complaint in this Court on October 28, 2019 and
subsequently filed the Amended Complaint on January 22, 2020. (See ECF Nos. 1, 4.)
a district court decline to exercise jurisdiction over a DJA claim does not implicate a defect in
federal subject matter jurisdiction. Reifer v. Westport Ins. Corp., 751 F.3d 129, 133 (3d Cir. 2014).
Rather, the decision to exercise jurisdiction over DJA claims is committed to the “substantial
discretion” of the district court, as informed by a list of factors enumerated by the Third Circuit.
Id. at 137–48.10

III. DECISION
The DJA provides that a court “may declare the rights and other legal relations of any
interested party seeking such declaration.” 28 U.S.C. § 2201(a) (emphasis added). “The Supreme
Court has long held that this confers discretionary, rather than compulsory, jurisdiction upon
federal courts.” Reifer v. Westport Ins. Corp., 751 F.3d 129, 134 (3d Cir. 2014) (quoting Brillhart
v. Excess Ins. Co. of Am., 316 U.S. 491, 494 (1942)). This is in stark contrast to the general rule
“federal courts have a strict duty to exercise the jurisdiction that is conferred upon them by
Congress.” Reifer, 751 F.3d at 134 (quoting Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716
(1996)). Nonetheless, although the DJA confers on district courts a “unique and substantial

discretion,” the exercise of that discretion must be “sound and reasoned.” Reifer, 751 F.3d at 139;
Grand Cru, LLC v. Liberty Mut. Ins. Co., Civ. A. No. 20-6878, 2020 WL 6938359, at *6 (D.N.J.
Nov. 25, 2020).
The DJA is commonly invoked by insurance companies “to seek a declaratory judgment
on a purely state law matter” in federal court based on diversity subject matter jurisdiction. Id. at

10 Based on the pleadings, the Court is satisfied the requirements of § 1332 have been met with
complete diversity among the parties and an amount in controversy exceeding $75,000. See
Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 494 (1942); Muhlbaier v. Specialized Loan
Servicing LLC, Civ. A. No. 18-00125, 2018 WL 3238832, at *2 (D.N.J. July 3, 2018).
141. In response to such cases, the Third Circuit has previously observed that “[t]he desire of
insurance companies and their insureds to receive declarations in federal court on matters of purely
state law has no special call on the federal forum.” State Auto Ins. Cos. v. Summy, 234 F.3d 131,
136 (3d Cir. 2000). Consequently, it became common practice for district courts “to decline to

exercise jurisdiction over declaratory judgment actions, involving an insurance company, that are
solely brought on diversity, and have no federal question or interest.” Reifer, 751 F.3d at 142. This
principle is especially relevant because the interest of a state “in resolving its own law must not be
given short shrift simply because one party or, indeed, both parties, perceive some advantage in
the federal forum.” Summy, 234 F.3d at 136. Where state law is uncertain or undetermined, the
proper relationship between federal and state courts counsels district courts to “step back” and be
“particularly reluctant” to exercise DJA jurisdiction. Id. at 136. The fact that district courts are
limited to predicting—rather than establishing—state law requires “serious consideration” and is
“especially important in insurance coverage cases.” Id. at 135; Mattdogg, Inc. v. Philadelphia
Indem. Ins. Co., Civ. A. No. 206889, 2020 WL 6111038, at *4 (D.N.J. Oct. 16, 2020).

In Reifer, however, the Third Circuit cautioned against “declining jurisdiction per se” in
such cases, because a “wholesale, ‘revolving door’ dismissal of such cases” would evidence
neither sound nor reasoned discretion. Id. at 147 (citing Wilton v. Seven Falls Co., 515 U.S. 277,
286 (1995) and Bituminous Coal Operators’ Assoc., Inc. v. Int’l Union, United Mine Workers of
Am., 585 F.2d 586, 596 (3d Cir. 1978)) (citations omitted). The Third Circuit instructed district
courts to consider a non-exhaustive list of factors when determining whether to exercise
jurisdiction over such declaratory judgment actions, including:
(1) the likelihood that a federal court declaration will resolve the
uncertainty of obligation which gave rise to the controversy;
(2) the convenience of the parties;
(3) the public interest in settlement of the uncertainty of obligation;
(4) the availability and relative convenience of other remedies;
(5) a general policy of restraint when the same issues are pending in
a state court;
(6) avoidance of duplicative litigation;
(7) prevention of the use of the declaratory action as a method of
procedural fencing or as a means to provide another forum in a race
for res judicata; and
(8) (in the insurance context), an inherent conflict of interest
between an insurer's duty to defend in a state court and its attempt
to characterize that suit in federal court as falling within the scope
of a policy exclusion.

Reifer, 751 F.3d at 146.11 Importantly, “[t]he existence of pending parallel state proceedings
militates significantly in favor of declining jurisdiction, although it alone does not require doing
so.” Id. at 144–45. As such, when a parallel proceeding exists, a district court should decline to
exercise jurisdiction unless the district court has “rigorous[ly] ensur[ed] [itself] that the existence
of pending parallel state proceedings is outweighed by opposing factors.” Id. at 145.
A. Existence of a Parallel State Proceeding
The Third Circuit defines a parallel proceeding as “another proceeding [] pending in a state
court in which all the matters in controversy between the parties could be fully adjudicated.” Id. at
137 n.9 (quoting Brillhart, 316 U.S. at 495). The parties in the two actions need not be completely
identical in order to be parallel, but rather a “substantial identity of parties and claims” must exist.
IFC Interconsult, AG v. Safeguard Int’l Partners, LLC, 438 F.3d 298, 306 (3d Cir. 2006). In the

11 The Third Circuit has instructed district courts to give “meaningful consideration” to any
relevant factors, and that some factors may be weighed heavier than others based on the
circumstances of each case. Reifer, 751 F.3d at 146. The Third Circuit has also advised that “there
will be situations in which district courts must consult and address other relevant law or
considerations.” Id. Importantly, in the insurance coverage context, the fifth, sixth, and eighth
factors are “particularly relevant,” to the extent applicable, based on the facts of a particular case.
See Ewart v. State Farm Mutual Auto. Ins. Co., 257 F. Supp. 3d 722, 725 (E.D. Pa. 2017) (citing
State Auto Insurance Cos. v. Summy, 234 F.3d 131, 134 (3d Cir. 2000)).
context of insurance coverage actions, even when the coverage issue is not presently before the
state court, a state action will still be deemed parallel if the coverage issue “will as a matter of
logic necessarily arise before the matter is concluded in state court.” Atl. Mut. Ins. Co. v. Gula, 84
F. App’x 173, 175 (3d Cir. 2003).

Here, Defendants contend the State Court Action filed on April 9, 2020 by Defendants,
along with seven other “innocent insureds” against multiple parties including Plaintiff, and its
affiliate company, seeks damages arising out of Plaintiff’s improper rescission of the Policies and
its refusal to provide coverage in the Kentos Lawsuit. (ECF No. 26-1 at 13–14.) The claims pled
in the State Court Action include breach of contract, consumer fraud, and professional negligence.
(Id.) The relief sought on these claims includes a declaration that Plaintiff cannot rescind the
Policies, that Plaintiff must defend and indemnify Defendants in the Kentos Lawsuit, as well as
monetary damages. (Id.) Defendants therefore argue the State Court Action is parallel to the
present action “in that it encompasses the very same parties and relief sought by Plaintiff in this
matter – a declaration of the parties’ rights regarding the policies and coverage in the Kentos

claim.” (Id. at 14.) Plaintiff contends the State Court Action is “like this lawsuit” because it
concerns Plaintiff’s “decision to rescind the Policies based on material misstatements made in the
applications, and to deny coverage for the Kentos Lawsuit.” (ECF No. 32 at 11). The thrust of
Plaintiff’s argument against abstention, however, is the State Court Action is “strategic
gamesmanship,” and “an eleventh-hour attempt to forum shop,” and the Court should not reward
Defendants by granting abstention. (ECF 32 at 2–3.)
The Court finds the State Court Action clearly falls within the Third Circuit’s definition of
a parallel action. All the issues to be decided in this case are squarely before the state court through
Defendants’ complaint in the State Court Action. It is indisputable that the Superior Court of New
Jersey can fully adjudicate all the matters in controversy between the parties here through
resolution of that complaint. Just as the State Court Action can resolve Plaintiff’s pleas for
declaratory judgment regarding those of their insurance policies implicated by the Kentos Lawsuit,
so too can the State Court Action fully adjudicate Plaintiff’s claims regarding its duties under the

Policies vis-à-vis the State Court Action. Moreover, Defendants’ claims in the State Court Action
share a significant nexus of fact and law to those here, as they all involve Plaintiff’s obligations to
defend or indemnify Defendants in the Kentos Lawsuit. For these reasons, the Court finds the State
Court Action is a parallel proceeding to the present action. This finding creates a presumption
against exercising jurisdiction over the present action.
B. Other Reifer Factors
Having concluded there is a pending parallel state court proceeding, the Court must next
determine if the relevant Reifer factors outweigh the presumption the Court should decline
jurisdiction. BCB Bancorp. v. Progressive Cas. Ins. Co., Civ. A. No. 13-1261, 2014 WL 2434193,
at *6 (D.N.J. May 28, 2014).The Court finds they do not.

The first factor is whether a federal court declaration will resolve the uncertainty of the
obligation which gives rise to the controversy. While a federal court declaration could resolve
uncertainty about the parties’ rights and obligations under the Policies, a state court declaration
could do so as well. The claims here—including the request for declaratory judgment—are made
under state law, and a state forum can resolve the issues the same as a federal court. In that regard,
none of the parties assert that this action involves unsettled areas of state law. To the extent
Defendants argue the State Court Action is “more comprehensive” and “goes beyond the issues
raised,” warranting abstention (ECF No. 26-1 at 2, 25), the Court is not persuaded. The obligations
at issue here are Plaintiff's obligations to Defendants, not Plaintiff’s potential contribution
obligations to the other parties in the State Court Action. Uncertainties regarding such extraneous
obligations are inapposite to the decision to exercise jurisdiction over this case. Therefore, this
first Reifer factor is a neutral one.
The second factor is the convenience of the parties. The parties do not dispute that both the

federal and state forums are equally accessible to all parties and that neither action has proceeded
significantly past initial filings. The Court agrees. This is particularly true in light of the fact that
the state court and federal court share the same geographic region, thereby precluding any
argument there is a great geographical convenience served by keeping one case in federal court.
Sumner v. Tompkins Ins. Agencies, Inc., Civ. A. No. 16-2218, 2016 WL 3345453, at *5 (E.D. Pa.
June 15, 2016). Balancing these interests against each other, the Court finds the second Reifer
factor to be neutral.
The third factor considers the public interest in settlement of the uncertainty of obligation.
Defendants argue there is a “public interest in resolving this issue strongly favors deferring to the
state court,” because

there is no sensible argument that the federal court should be favored
in determining exclusively state court issues [as t]here is no doubt
that the availability of insurance coverage for New Jersey lawyers
and citizens is a paramount state interest of New Jersey. This case is
all about New Jersey.

(ECF No. 26-1 at 25.) Plaintiff argues “this matter does not implicate any public interest in the
settlement of the uncertainty of obligation,” and where no strong policy interest is implicated,
courts should exercise their discretion to maintain jurisdiction. (ECF No. 32 at 19.) The Court finds
the third factor to also be neutral because there is not any public interest at stake other than the
usual interests in fair adjudication, which this Court is well-equipped to address. Reifer, 751 F.3d
at 147 (providing that “federal and state courts are equally capable of applying settled state law to
a difficult set of facts”) (quoting Heritage Farms Inc. v. Solebury Twp., 671 F.2d 743, 747 (3d Cir.
1982)); see also Evanston Ins. Co. v. Neuromonitoring Techs., Inc., Civ. A. No. 18-11497, 2019
WL 1916203, at *4 (D.N.J. Apr. 30, 2019).
The fourth factor is the availability and relative convenience of other remedies. Defendants

argue the single remedy sought by Plaintiff—a declaratory judgment affirming Plaintiff’s
rescission of the Policies—is available in the State Court Action. (ECF No. 26-1 at 25.) Plaintiff
contends this Court “is practiced in applying state law to recission matters property before it,” and
should grant effective relief here. (ECF No. 32 at 20.) The fourth factor weighs against exercising
jurisdiction because the New Jersey Declaratory Judgment Act, N.J. Stat. Ann. §§ 2A:16-52–54,
allows for substantially similar relief to that provided by the DJA. See NL Indus., Inc. v. N.J. Dept.
of Envtl Prot., 936 A.2d 469, 472 (N.J. Super. Ct. App. Div. 2007) (providing that the DJA
empowers courts to “declare rights, status and other legal relations to afford litigants relief from
uncertainty and insecurity. Its purpose is to end uncertainty concerning the legal rights and
relations of parties before they have suffered ineradicable damage or injury for which only a

compensatory or coercive remedy can provide redress.”) (citations and quotations omitted).
Because the Court has determined that the State Court Action is a parallel proceeding, the
fifth and sixth factors, a general policy of restraint when the same issues are pending in a state
court and avoidance of duplicative litigation, both weigh against exercising jurisdiction.
The seventh factor seeks to prevent use of the declaratory action as a method of procedural
fencing or as a means to provide another forum in a race for res judicata. Both parties accuse the
other of forum shopping. Plaintiff argues:
It is the Schibell Defendants’ State Action - filed nearly six months
after Allied World had instituted this lawsuit and after the Schibell
Defendants had prevailed on Allied World and this Court to grant
multiple extensions of time, which were used to draft litigation to
file elsewhere - that evidences procedural maneuvering.

(ECF No. 32 at 22.) Defendants argue: “Plaintiff has filed an action in federal court that involves
a question of pure state law. In so doing, Plaintiff has dragged the federal court into a question of
New Jersey law solely because of some perceived advantage. Such obvious forum shopping should
not be approved by the Court.” (ECF No. 26-1 at 28.) The Court finds the seventh Reifer factor to
be neutral. In the Court’s view, “both sides have used the declaratory judgment device as a method
of procedural fencing.” Steadfast Ins. Co. v. Envtl. Barrier Co., LLC., Civ. A. No. 2:15-1442, 2016
WL 878122, at *6 (W.D. Pa. Mar. 8, 2016).12
Finally, as to the eighth factor, there is an inherent conflict of interest between Plaintiff’s
duty to defend Defendants in state court and its attempt to characterize that suit in federal court as
not falling within the scope of the Policies. Accordingly, this factor militates in favor declining
jurisdiction over this case. See Frederick Mut. Ins. Co. v. Target Corp., 301 F. Supp. 3d 515, 522
(E.D. Pa. 2018).
In sum, the Court concludes, after weighing all these factors, that it declines to exercise
jurisdiction. Contrary to Plaintiff’s contentions, it does not matter whether the parallel action is
pending in state or federal court; nor whether it was filed first or second. The existence of a

12 The Third Circuit addressed similar facts in Summy and concluded that it was “irrelevant that
[a] state declaratory judgment petition was filed after its counterpart in the District Court.” 234
F.3d at 136; Esurance Insurance Company v. Bowser, 710 F. App’x 110, 111–12 (3d Cir. 2018)
(noting that a “subsequently filed state court declaratory judgment action” designed to create a
parallel state proceeding is not improper). To the contrary, the Third Circuit has expressed greater
concern that “the state’s interest in resolving its own law must not be given short shrift simply
because one party or indeed, both parties, perceive some advantage in the federal forum.” Summy,
234 F.3d at 136.
pending, and more comprehensive lawsuit in New Jersey state court and the need to avoid
duplicative litigation makes it prudent to decline to exercise jurisdiction over this case.
IV. CONCLUSION
For the reasons discussed above, this Court abstains from exercising jurisdiction under the

DJA in this insurance coverage dispute, in favor of the parties proceeding in the ongoing and more
comprehensive state court litigation. Accordingly, Defendants’ Motion to Dismiss is GRANTED
and the case is CLOSED. An appropriate order follows.

Dated: December 29, 2020
/s/ Brian R. Martinotti
BRIAN R. MARTINOTTI
UNITED STATES DISTRICT JUDGE

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10269849. Public record. Not legal advice.