An Ohio district court correctly granted a pharmaceutical distributor’s motion to remand to state court a case regarding whether its insurer must provide defense in ongoing opioid litigation, the U.S. Court of Appeals for the Sixth Circuit ruled.
In a March 30 opinion, the appellate court said the U.S. District Court for the Southern District of Ohio properly followed the Declaratory Judgment Act when it declined to exercise jurisdiction in Cardinal Health Inc. v. National Union Fire Insurance Co. of Pittsburgh PA.
Cardinal Health, one of several defendants in ongoing state and federal lawsuits against opioid distributors related to the opioid epidemic, sought defense under its insurance policies with National Union. The insurer has continually reserved its right to deny coverage.
Cardinal Health brought declaratory action in Ohio state court. In response, National Union sought to remove the case to federal court, but the Southern District of Ohio declined jurisdiction, arguing that state court is better equipped to handle unsettled legal issues of state law, such as whether the conduct alleged in opioid litigation constitutes an “occurrence” under the relevant policy.
The Sixth Circuit looked at whether the Southern District of Ohio adhered to the Declaratory Judgment Act by analyzing the five factors of Grand Trunk W. R.R. Co. v. Consol. Rail Corp., a case involving when a district court should exercise or decline jurisdiction.
The Sixth Circuit particularly honed on Grand Trunk‘s last two factors: whether the use of a declaratory action by the district court would increase friction between federal and state courts and improperly encroach upon state jurisdiction; and whether there is an alternative remedy which is better or more effective.
The Sixth Circuit noted that district court accepting jurisdiction would increase friction between federal and state courts because of cases currently pending in Ohio state courts “regarding the scope of insurance coverage for distributors sued as part of the opioid litigation,” including a pending decision from the Supreme Court of Ohio.
“Ohio law is simply not clear on the issue of whether insurers have a duty to defend opioid distributors and thus there is a risk that a federal court’s decision will conflict with Ohio state courts currently considering the issues,” the court wrote.
In response to the last factor of Grand Trunk, the Sixth Circuit argued that the state court is in superior position to resolve the case because Ohio’s declaratory judgments statute permits courts to decide questions of contract construction and to declare rights under the contract.
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