While almost all civil lawsuits seek monetary damages or injunctive or other equitable relief (or both), courts may order declaratory relief, stating the rights and obligations of the parties involved before any harm actually occurs, while stopping short of awarding damages or other equitable orders. Unlike a monetary claim seeking retrospective relief for past harm, a declaratory judgment grants prospective relief sorting out rights and duties to guard against future harm.
While state courts regularly entertain declaratory judgment claims, if your client is threatened in an unfamiliar jurisdiction where you are concerned about an unfriendly state court, a hostile jury, or a problematic state procedure, you may consider seeking declaratory relief in federal court. The federal declaratory relief statute, 28 U.S.C. § 2201, provides:
In a case of actual controversy within its jurisdiction . . . any court of the United States, 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 could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.
While state courts have unlimited jurisdiction, Article III of the U.S. Constitution limits federal court jurisdiction to constitutional questions, disputes covered by federal law, and a few additional grounds. Experienced litigators know that federal judges are often looking for avenues to dismiss claims and clear their dockets, so you must carefully set forth the grounds for declaratory relief when filing in district court. Because trial court decisions to exercise or decline the hearing of declaratory relief claims are reviewed for abuse of discretion (Wilton v. Seven Falls Co., Inc., 515 U.S. 277, 290 (1995)), the district court judge’s initial jurisdictional ruling will usually constitute the final word.
For a declaratory relief action to cross the threshold of a federal courthouse, the plaintiff must plead two elements: (1) federal jurisdiction and (2) an actual justiciable case or controversy.
First, the claim must invoke federal jurisdiction, involving substantive federal law—either constitutional or statutory (28 U.S.C. § 1331) or diversity jurisdiction (28 U.S.C. § 1332). Where the complaint seeks only declaratory relief, federal diversity jurisdiction most often arises in insurance coverage disputes where the amount at stake far surpasses the $75,000 jurisdictional minimum. A pleading that fails to invoke federal jurisdiction will be dismissed outright.
The second, more difficult, element of a successful federal declaratory relief claim is to demonstrate the existence of an actual case or controversy warranting federal court relief. The Declaratory Judgment Act permits a district court, when faced with “a case of actual controversy,” to “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). Such a justiciable controversy must be “definite and concrete, touching the legal relations of parties having adverse legal interests,” and it must seek “specific relief through a decree of a conclusive character as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (citing Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240–41 (1937)). Distinguishing actual controversies (controversies that are “definite and concrete”) from merely hypothetical controversies or those that seek only an unenforceable advisory opinion is crucial to ensure that a declaratory judgment action proceeds in federal court. Where the underlying controversy has been resolved, the need for declaratory relief is moot, and a court will not decide such a claim.
A common pleading defect is seeking a court declaration of the rights of a party regarding a cause of action that has not actually been claimed. Such a request does not constitute an actual controversy and remains only hypothetical. One such instance would be a party seeking declaratory relief and asking the court to state what the court would rule if the opposing party brought a claim. Requesting a premature ruling would allow the moving party to begin developing a defense against that claim, should it be raised, while deterring the opposing party from bringing that claim altogether in anticipation of the assertion of such a defense. Pub. Serv. Comm’n of Utah v. Wycoff Co., Inc., 344 U.S. 237, 244 (1952). Similarly, if a plaintiff seeks declaratory judgment of its rights if it brought its own potential claim, such as which law would govern, without first bringing that cause of action, the plaintiff would also be requesting that the court issue judgment on a dispute that is hypothetical and not actual or “definite.” Calderon v. Ashmus, 523 U.S. 740, 745 (1998).
Further, asserting an actual controversy as a basis for declaratory judgment is not in itself sufficient to ensure a federal court will entertain the claim. Courts have applied multiple factors to ensure that an actual controversy is actionable, including that a real threat of injury exists, that the threat is caused by the challenged action, and that declaratory judgment in favor of the moving party would redress that threat. GTE Directories Publ’g Corp. v. Trimen Am., Inc., 67 F.3d 1563 (11th Cir. 1995). Ultimately, demonstrating that the claimant faces a real threat of injury suffered will strengthen the chance of the court entertaining the action and granting declaratory relief.
Even when an actual controversy exists and redressability is appropriate, that does not guarantee that the court will find that declaratory relief is the appropriate remedy. “The Declaratory Judgment Act by its express terms vests a district court with discretion to determine whether it will exert jurisdiction over a proposed declaratory action or not.” Dow Jones & Co., Inc. v. Harrods Ltd., 346 F.3d 357, 359 (2d Cir. 2003). Courts should exercise jurisdiction “(1) when the judgment will serve a useful purpose in clarifying and settling the legal relations in issue, and (2) when it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding.” Broadview Chem. Corp. v. Loctite Corp., 417 F.2d 998, 1001 (2d Cir. 1969). “If either prong is met, the action must be entertained.” Cont’l Cas. Co. v. Coastal Sav. Bank, 977 F.2d 734, 737 (2d Cir. 1992).
In some instances, there is an alternative remedy that would better suit the moving party, giving the court an out to dismiss the declaratory judgment complaint. Federal Rule of Civil Procedure 57 provides, however, that the “existence of another adequate remedy does not preclude a declaratory judgment that is otherwise appropriate.” Instead, whether declaratory relief is appropriate depends on the comprehensive resolution sought. Where the claimant pleads specific substantive facts, a court is more likely to grant declaratory relief as an equitable remedy. Munguia v. Wells Fargo Bank, N.A., et al., 2015 WL 3751811, at *3 (C.D. Cal. 2015). In addition, some injuries are incapable of being cured by other remedies such as monetary damages, such that declaratory relief is the only mechanism for a person to continue his or her career or livelihood. Simon v. Coop. Educ. Serv. Agency, 46 F.4th 602, 613–14 (7th Cir. 2022). In any circumstance, the Declaratory Judgment Act instructs that federal courts should not dismiss declaratory relief actions solely because more appropriate alternative remedies may exist. 28 U.S.C. § 2201(a). However, the court may dismiss a stand-alone declaratory relief action if the declaration sought would not resolve the underlying dispute.
Turning to substantive areas of the law, federal courts regularly entertain declaratory relief actions in intellectual property. Klinger v. Conan Doyle Estate, Ltd., 755 F.3d 496, 497 (7th Cir. 2014) (copyright); Shloss v. Sweeney, 515 F. Supp. 2d 1068, 1071 (N.D. Cal. 2007) (copyright); Starter Corp. v. Converse, Inc., 84 F.3d 592, 594 (2d Cir. 1996) (trademark); Fina Tech., Inc. v. Ewen & Razavi, 265 F.3d 1325, 1325 (Fed. Cir. 2001) (patent). Declaratory relief claims can be used to determine if a party has a valid patent or a protectable trademark or to determine copyright ownership between competing parties. Federal courts also regularly allow declaratory relief claims regarding the existence or extent of insurance coverage, provided that diversity jurisdiction exists (as discussed above). Wilton v. Seven Falls Co., Inc., 515 U.S. 277, 290 (1995). For example, the court can declare that a party or an event is or is not covered by insurance, in analyzing a policy in the context of a claim. Aetna Life Ins. Co. v. Haworth et al., 300 U.S. 227, 242 (1937).
A well-pleaded declaratory relief complaint will set forth
(i) a statement of jurisdiction and venue,
(ii) the factual background of the dispute,
(iii) a description of the actual controversy,
(iv) the legal grounds for the claim, and
(v) the specific declaration being sought.
Such a complaint can be a valuable weapon in the litigator’s arsenal. If jurisdiction exists, a federal court may provide a speedy and decisive ruling setting forth the parties’ rights on a key issue, potentially heading off monetary losses or the uncertainty of extended litigation. However, you must ground an action for federal declaratory relief in actual facts that create an actual case or controversy, rather than ask the court to issue an advisory opinion on an issue that may or may not materialize.
