Outside Publication

Maintaining Order in Declaratory Judgment Actions, New York Law Journal

April 03, 2006

Reprinted with permission from the April 3 edition of the New York Law Journal © 2006 ALM media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, reprints@alm.com or visit www.almreprints.com.

OFTEN, the ''wronged" party is not the one to bring suit in fed­eral court. Rather, under the Declaratory Judgment Act (DJA), 28 U.S.C. §2201 et seq., a party threatened with litigation can preemp­tively sue in federal court for a declarato­ry judgment of no liability, provided that the requisite federal subject matter juris­diction otherwise exists.[1] Under the fore­going circumstances, the party who ordinarily would have been the defendant, by virtue of winning the race to the court­house, instead becomes the plaintiff to a declaratory judgment action. The defens­es that such a party would have raised in opposition to the threatened suit instead become its affirmative claims for declara­tory relief. Further, a declaratory judgment defendant frequently will respond by coun­terclaiming on the very causes of action that were the basis of the original "threat" Thus, the underlying issues are litigated, but in a context that reverses traditional notions of "plaintiff" and "defendant."

Since the Federal Rules of Civil Proce­dure generally treat plaintiffs and defen­dants the same, a declaratory judgment action presents few difficulties during the pretrial stages of the case. However, at trial-particularly jury cases-putting the defenses ahead of the affirmative claims can lead to a confusing, even illogical, presentation of evidence. Federal Rule of Evidence 611 provides federal court prac­titioners with a potential solution to this problem.

Order of Presentation

Declaratory relief is governed by the DJA, which provides in relevant part that: "In a case of actual controversy within its jurisdiction...any Court of the United States, upon the tiling of an appropriate pleading, may declare the rights and other legal relations of any interested party seek­ing such declaration, whether or not fur­ther relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such." 28 U.S.C. §2201(a). Accordingly, a federal court has the power to declare the rights of parties within Its jurisdiction where an actual controversy exists.[2]

As explained in Japan Gas Lighter Assn. a. Ronson Corp.,[3] the DJA has both equi­table and practical value: "The Declara­tory Judgment Act was designed to relieve potential defendants from the Damoclean threat of impending litigation which a harassing adversary might brandish, while initiating suit at his leisure or never. The Act permits parties so situated to forestall the accrual of potential damages by suing for a declaratory judgment, once the adverse positions have crystallized and the conflict of interests is real and immediate." This value is tempered some­what by the U.S. Constitution, Article III, Section 2 which extends the judicial power only to "cases" and "controver­sies." Thus, in order to establish declara­tory jurisdiction, a plaintiff must establish: (a) that a defendant's conduct created a real and reasonable apprehension of lia­bility on the part of the plaintiff, and (b) that the plaintiff has engaged in a course of conduct that has brought it into adver­sarial conflict with the defendant.[4]

Where the declaratory judgment defen­dant has brought counterclaims against the plaintiff, both parties may bear bur­dens of proof on distinct issues. Thus, in a trial in which the court follows the tra­ditional order of presentation, the plain­tiff will present evidence on its defenses to the defendant's counterclaims first, before those claims are set forth and explained to the finder of fact. The result can be a duplicative and disordered pres­entation.

To understand why, one need only examine how declaratory judgment trials tend to play out in practice. For example, in patent litigation-a frequent source of declaratory judgment actions-a patentee typically will accuse a party of infringe-merit That party, in turn, will respond by bringing a declaratory judgment action, typically for a declaration that the patent in question is invalid or unenforceable and/or that there is no infringement. The patentee usually then will counterclaim for infringement.

At trial, the "plaintiff" (i.e., the alleged infringer) will proceed first, presenting evi­dence including direct testimony on its requested relief (i.e., a declaration of patent invalidity, unenforceability and/or non-infringement). in the second stage, the "defendant" (the patentee) must then simultaneously present evidence both: (a) in defense of that declaratory relief claim, and (b) in support of its infringement counterclaim. What follows is a third stage of trial, at which the plaintiff simultane­ously offers its rebuttal on its case and its opposition on defendant's counterclaim, and then a wholly superfluous fourth stage, wherein the defendant finally offers the rebuttal case on its counterclaim.

This convoluted order of presentation might make some sense in those cases in which the claims and counterclaims at issue are separate and distinct. In declara­tory judgment actions, however, the so-called "claims" generally are just the arguments that the plaintiff would have presented as "defenses" had it lost the race to the courthouse. As demonstrated in the patent lawsuit hypothetical above, the declaratory judgment plaintiffs claims for patent invalidity, unenforceability and non-infringement are actually just defens­es to patent infringement. Trying the defenses in advance of the claims will both lengthen the trial and force the finder of fact to take in the evidence backwards. By the time the case is trial-ready, whatever value the declaratory judgment action had as a "preemptive strike" will have long been used up. The ensuing problems with presentation of evidence are an unneces­sary byproduct.


There are two remedies to this situa­tion. The obvious way to avoid such inef­ficiencies is to move to realign the parties so that the declaratory judgment defen­dant becomes the plaintiff and vice-versa However, absent issues of subject matter jurisdiction (district courts have broad discretion to realign parties consistent with their true interests in order to pre­serve diversity),[5] or blatant forum shopping,[6] federal courts generally are loath to realign parties. As a matter of longstanding tradition, if not necessarily well-reasoned jurisprudence, the courts have held that, so long as the party designated as plaintiff (Le., the one that won the race to court) retains the burden of proof on any issue-even one for declaratory relief-such party is entitled to retain its "plaintiff" designation, and with it the privilege of opening and closing at trial. As a result, federal case law is something of a graveyard for failed realignment motions.[7]

The second, lesser tried, remedy is a motion to set the order of evidence at trial, pursuant to Rule 611(a) of the Federal Rules of Evidence. Rule 611(a) provides that "The Court shah exercise reasonable control over the mode and order of inter­rogating witnesses and presenting evi­dence so as to I) make the interrogation and presentation effective for the ascer­tainment of truth, 2) avoid needless Con­sumption of time, and 3) protect witnesses from harassment or undue embarrass­ment." While a motion under Rule 611(a) cannot alter the parties' designations as plaintiff and defendant, it can employ the court's considerable discretion over the presentation of trial evidence, to effect a more economic and sensible trial.

The Advisory Committee Notes to Rule 611(a) state that: "ultimate responsibility for the effective working of the adversary system rests with the judge." As one court further has explained, "it is well estab­lished that a trial court has broad discre­tion to exercise control over the order of presentation at trial. -As a result, if the evi­dence will be more clearly presented by requiring a particular party to come for­ward first, a trial court may alter the order of presentation at trial...indeed, trial judges have not hesitated to change the order of presentation at trial where the cir­cumstances warranted such a change."[8]

Though Rule 611(a) has not been wide­ly cited in the case law for this purpose, it is a useful tool to present to a court faced with the backwards presentation of evidence caused by a declaratory judg­ment action. For example, in Allendale Mut. Ins. Co. u. Bull Data Sys., the Illinois district court applied Rule 611(a) In rul­ing that the declaratory defendants were to present their case first at trial.[9] There, in an action brought by insurers seeking a declaration of the policy's liability lim­its, the court explained that the declara­tory defendants, which had brought counterclaims against plaintiffs for, among other things, breach of contract, were the "real, as opposed to nominal," plaintiffs to the action.[10] Citing F.RE. 611 and Fed. R. Civ. P, 16, the court held that such a pro­cedure was "in keeping with the Court's goal of ensuring the presentation of evidence to the fact-finder in an orderly and sensible manner."[11]

Similarly, in Grayling Industries, Inc. o. GPAC Inc., the Georgia district court, though not citing Rule 611(a) expressly, recognized the same inherent principle that the -determination of the right to open and close a case rests largely in the sound discretion of the trial court."[12] Based thereon, the court reordered the sequence of evidence such that the defen­dant, which had filed a counterclaim for patent infringement, would open and close the case to the jury.[13]

Accordingly, given the anomalies of evi­dence presentation in many declaratory judgment actions, a defendant/counter-claimant should consider a pretrial motion pursuant to Rule 61 I(a) to reorder evi­dence so that it proceeds first on its coun­terclaims, Such a motion offers the court a means for eliminating duplicative evi­dence presentation, reducing the need to recall witnesses, and allowing for a more understandable presentation of evidence Though Rule 611(a) has not been widely discussed, federal court practitioners should consider this tool in seeking to avoid jury confusion, the needless con­sumption of time, and general inefficien­cies at trial.

[1]. The DIA confers no independent basis for juris­diction; It Is procedural only. See Aetna Life Ins. Co. v. Haworth, 300 US. 227. 240 (1937).

[2]. See Amana Refrigeration, Inc v. Quadlux, Inc.,172. 172 F.3d 852,855 (Fed. Cir. 1999)

[3]. 257 E.Supp. 219, 237 (D.N.J. 1966).

[4]. See Starter Corp. v. Converse, Inc. 84F.3d 592, 595 (2d Cir. 1996).

[5]. See Lewis v. Odell, 503 F.2d 445, 447 (2d Cir. 1974)

[6]. See, e.g.. Datamize Inc. v. Fid Brokerage Servs., LLC. 2004 U.S. Dist. Lexis 29100, **20-21(E.D. Tex April 22, 2004).

[7]. See e.g., Anheauser Busch, Inc. v. Labatt Ltd, et al, 89 F.3d 1339, 1344 (8th Cir. 1996), cert. denied, 519 U.S. 1109 (1997); Friede & Goldman, Ltd. v. Gotaverken Arendal Consultants, AB, 2000 U.S. Dist. Lexis 8090, *7 (E.D. La. May 26, 2000); Litton Sys. v. VHC, Inc, 1998 U.S. Dist. Lexis 10305, **4-5 (N.D. Tex. July 9, 1998); Starter Corp. v. Converse Inc., 1996 U.S. Dist. Lexis 17892, *7 (S.D.N.Y. Dec. 2, 1996).

[8]. Johnson v. Mortham. 915 F.Supp. 1574, 1581 (N.D. Fla. 1996).

[9]. 1995 U.S. Dist. Lexis 25, *9 (N.D. Ill. Jan. 3 1995).

[10]. Id. at *8

[11]. Id. at *9

[12]. 1992 U.S. Dist. Lexis 20702, **1-2 (N.D. Ga. Feb. 11, 1992) (quoting Commercial Iron & Metal Co. v. Bache Halsey, Stewart, Inc., 581 F.2d 246 (10th Cir. 1978)).

[13]. Id. at **2-3