In Fire-Dex, LLC v. Admiral Ins. Co., No. 24-3781 (6th Cir. June 2, 2025), the Sixth Circuit rejects the holdings of seven other circuits and holds that when a demand for relief under the Declaratory Judgment Act, 28 U.S.C. § 2201(a), is combined with a claim for injunctive relief or damages (“coercive relief”), it is nearly always an abuse of discretion for the court to abstain from the declaratory-relief claim.
This case implicates three lawsuits, culminating in the present insurance-coverage dispute. The first was a product-liability action. “Fire-Dex manufactures personal protective equipment for firefighters. Several firefighters and their spouses filed lawsuits against Fire-Dex alleging that its products have exposed them to carcinogens like per- and polyfluoroalkyl substances (‘PFAS’).” Those actions were consolidated into Multi-District Litigation in South Carolina, still pending.
Second, “Fire-Dex had purchased general commercial liability insurance policies from Admiral Insurance Company. Fire-Dex asked Admiral to defend it against the firefighters’ lawsuits and to indemnify it against potential liability. Admiral didn’t believe its policies covered the firefighters’ lawsuits. So it filed a declaratory judgment action in federal court in Ohio asking the court to declare as much.” But because declaratory relief is discretionary with the court – district courts “may” issue such relief under 28 U.S.C. § 2201(a) – the district court exercised its discretion to deny the relief. This order was affirmed on appeal.
Third, the present suit, Fire-Dex sued Admiral in Ohio state court. It “sought a declaration from the state court that Admiral had to defend Fire-Dex in the underlying firefighter lawsuits and indemnify Fire-Dex for any liability,” plus compensatory damages for breach of contract and damages for bad-faith denial of coverage. Admiral removed the case to federal court, citing diversity jurisdiction.
In the present action, in relevant part, Fire-Dex moved for remand to state court, while Admiral filed a counterclaim for declaratory relief “that its policies didn’t require it to defend and indemnify Fire-Dex in the underlying lawsuits.” The district court split the difference. It “remanded Fire-Dex’s claim for declaratory relief and Admiral’s counterclaim for declaratory relief back to state court . . . . The [district] court paired that remand of the declaratory claims with a stay of Fire-Dex’s damages claims for breach of contract and bad faith pending the resolution of the state court litigation.”
The Sixth Circuit vacates and remands.
“Fire-Dex’s removed claim is a so-called ‘mixed action’—one that seeks both coercive relief (damages) and non-coercive (declaratory) relief. So, we must first determine what standard should guide the district court’s decision whether to exercise jurisdiction.” While noting the principle that federal courts have a “virtually unflagging obligation” to exercise jurisdiction where appropriately invoked, “this case involves one of the few exceptions to this rule: abstention.”
“While discretion to abstain from exercising jurisdiction is rare, declaratory judgments are different. Congress expressly vested federal courts with discretion whether to entertain actions for declaratory relief. If a party asks for declaratory relief, the court ‘may declare the rights and other legal relations of any interested party seeking such declaration.” 28 U.S.C. § 2201(a) (emphasis added). In short, whether to grant declaratory relief is discretionary.”
“Mixed actions like the one before us pair a request for coercive relief with a request for declaratory relief. As a result, these actions raise the question of what standard or standards should guide the district court in deciding whether to exercise jurisdiction—ones that normally attach to claims for coercive relief (like damages and injunctions), those that attach to claims for declaratory relief, or some combination of the two?”
“Although the framing is complex, the answer is rather simple. Start with coercive claims in mixed actions. If the district court has subject matter jurisdiction over a claim for coercive relief, the court must exercise jurisdiction over that claim unless a traditional abstention doctrine applies. The pairing of a coercive claim with a declaratory claim doesn’t affect the district court’s unflagging obligation to exercise jurisdiction over the coercive claim.”
The panel notes that the Declaratory Judgment Act explicitly does not expand the subject-matter jurisdiction of federal courts, but merely provides for a novel remedy. Obversely, the act “does it expand federal courts’ authority to shirk the jurisdiction that Congress has given them. The presence of a declaratory claim alongside a traditional coercive claim is not a get-out-of-jurisdiction-free card.”
Getting to the core of the problem, the panel notes that even though a declaratory judgment action customarily entrusted to the district court’s discretion, “in a mixed action, the district court may have less discretion than normal to refuse to hear a declaratory judgment claim . . . . Why? Because the presence of a coercive claim will often significantly reduce the district court’s discretion to abstain from adjudicating the declaratory relief claim . . . . When a declaratory claim in a mixed action presents the same legal issue as the coercive claim over which the district court must exercise jurisdiction, these equitable considerations will counsel heavily in favor of not abstaining.”
The panel assesses competing approaches taken by seven other circuits to the “mixed action” issue, yet finds their “standards are unsatisfying and unmoored from Congress’s mandates. The best way to honor Congress’s directives is to apply the normal rules of mandatory jurisdiction and abstention to coercive claims and the discretionary standard to declaratory judgment claims. If no traditional abstention doctrine applies to the coercive claim, the district court must exercise jurisdiction over that claim. Meanwhile, a district court would still have discretion to decline to decide the declaratory claim. But that discretion will often be abused if the declaratory claim turns on the same legal issues as the coercive claim.”
Applying the standard articulated above, therefore, the panel holds the district court’s abstention to be an abuse of discretion. “Fire-Dex asked the court to (1) provide damages for a breach of a contract due to Admiral’s refusals to take certain actions and to (2) separately declare that these same refusals were unlawful. Thus, the answer to the damages question compels an answer to the declaratory relief question—and vice-versa. They are two sides of the same coin . . . . And no traditional abstention doctrine stood in the way of the normal rule of mandatory jurisdiction over the breach of contract damages claim. Therefore, it would be an abuse of discretion not to exercise jurisdiction over Fire-Dex’s declaratory claim and Admiral’s mirror-image declaratory counterclaim.”