Medical Mutual Insurance Company of North Carolina v. Rebecca Alejandrino Littaua

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 21-1215
MEDICAL MUTUAL INSURANCE COMPANY OF NORTH CAROLINA,
Plaintiff - Appellant,
v.
REBECCA ALEJANDRINO LITTAUA; TRI-CITIES INFECTIOUS DISEASE
ASSOCIATES, P.C.; KYUNG CHUN YEON,
Defendant – Appellees.
Appeal from the United States District Court for the Eastern District of Virginia, at
Richmond. Henry E. Hudson, Senior District Judge. (3:20-cv-00822-HEH)
Argued: March 9, 2022 Decided: May 23, 2022
Before GREGORY, Chief Judge, and NIEMEYER and AGEE, Circuit Judges.
Affirmed by published opinion. Chief Judge Gregory wrote the opinion, in which
Judge Niemeyer and Judge Agee joined.
ARGUED: Danny Mark Howell, LAW OFFICES OF DANNY M. HOWELL, PLLC,
McLean, Virginia, for Appellant. Edward Kyle McNew, MICHIEHAMLETT, PLLC,
Charlottesville, Virginia, for Appellee. ON BRIEF: Robert Jackson Martin, IV, LAW
OFFICES OF DANNY M. HOWELL, PLLC, McLean, Virginia, for Appellant. Thomas
W. Williamson, Jr., WILLIAMSON LAW LC, Richmond, Virginia; M. Bryan Slaughter,
MICHIEHAMLETT, PLLC, Charlottesville, Virginia, for Appellees.

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GREGORY, Chief Judge:
This appeal requires us to determine whether the district court properly declined to
exercise jurisdiction. Because the district court was within its discretion to decline to hear
a declaratory judgment action in light of a parallel state-court case, we affirm.
I.
This controversy originates from a medical malpractice lawsuit brought by Ki Hoon
Yeon’s (the “Decedent”) estate administrator in the Circuit Court of the City of Petersburg,
Virginia. Among numerous defendants in that case are Rebecca Alejandrino Littaua, M.D.
(“Dr. Littaua”) and her medical practice, Tri-Cities Infectious Disease Associates, P.C.
(“Tri-Cities”). Medical Mutual Insurance Company of North Carolina (“Med Mutual”) is
Dr. Littaua and Tri-Cities’ insurance carrier. Med Mutual initially provided the defense
for the state case but, during discovery, alleged that Dr. Littaua had made a material
modification or alteration to the Decedent’s medical records. Med Mutual then brought
the federal action, that is the subject of this appeal, seeking a declaratory judgment
concluding that it has no obligation to provide insurance coverage for the defense of the
state case.
The alleged record alteration is the sole factual support for denial of insurance
coverage. Specifically, the Complaint states: “In January 2019, Dr. Littaua made changes
in her patient chart for [the Decedent], including certain substantive and material
alterations, modifications, and deletions thereto.” J.A. 8. The Complaint provided no more
details and contained no specifics as to the nature of the change, why it was made, what

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effect it had on the accuracy or completeness of Decedent’s chart, or whether the altered
information was inaccurate or irrelevant. Med Mutual contends that by committing the
alleged alteration Dr. Littaua violated Section IV(e) of her medical malpractice insurance
policy (the “Policy”).
Yeon filed a motion to dismiss. The district court issued an order and memorandum
opinion dismissing the case without prejudice. Med. Mut. Ins. Co. of N. Carolina v. Littaua,
No. 3:20-CV-822-HEH, 2021 WL 622435, at *2 (E.D. Va. Feb. 17, 2021). The district court
held that Virginia courts were better suited to decide Virginia medical malpractice matters,
the state court could more efficiently weigh the evidentiary value of Dr. Littaua’s alleged
alterations, and any resolution by the district court as to whether the alterations were material
could result in “unnecessary entanglement” under the test set forth by our Court in Nautilus
Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371, 376–77 (4th Cir. 1994) (abrogated in part
on other grounds by Wilton v. Seven Falls Co., 515 U.S. 277 (1995)).
II.
Here, the district court declined to exercise jurisdiction over a declaratory judgment
action while a parallel action was (and is) pending in state court. We review such a decision
for an abuse of discretion.1 New Wellington Fin. Corp. v. Flagship Resort Dev. Corp., 416
F.3d 290, 297 (4th Cir. 2005) (citing Wilton, 515 U.S. at 290).
1 We have also described exercise of this discretion as “especially crucial” where,
like here, a parallel or related proceeding is pending in state court. Riley v. Dozier Internet
L., PC, 371 F. App’x 399, 401 (4th Cir. 2010) (citing New Wellington, 416 F.3d at 297);
(Continued)

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Under the Declaratory Judgment Act, upon the proper pleading by an interested
party, a district court “may declare [their] rights and other legal relations.” 28 U.S.C.
§ 2201(a) (emphasis added). See Trustgard Ins. Co. v. Collins, 942 F.3d 195, 201–02 (4th
Cir. 2019). This Act “merely permits” federal courts to hear those cases rather than
granting litigants a right to judgment. Id. at 201 (citing Wilton, 515 U.S. at 287); United
Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 493 (4th Cir. 1998) (“This permissive language
has long been interpreted to provide discretionary authority to district courts to hear
declaratory judgment cases”).
When a § 2201 action is filed in federal court while a parallel state case is pending,
we have recognized that “courts have broad discretion to abstain from deciding declaratory
judgment actions.” VonRosenberg v. Lawrence, 781 F.3d 731, 734 (4th Cir. 2015), as
amended (Apr. 17, 2015) (emphasis omitted). In those cases, federal courts weigh
“considerations of federalism, efficiency, and comity” to choose whether to retain
jurisdiction over the case. New Wellington, 416 F.3d at 297 (quoting Nautilus, 15 F.3d at
376); see also Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 495 (1942). Following the
Supreme Court, this Court recognizes that hearing declaratory judgment actions in such
circumstances is ordinarily “uneconomical,” “vexatious,” and risks a “gratuitous
interference” with state court litigation. New Wellington, 416 F.3d at 297 (quoting
Brillhart, 316 U.S. at 495).
see Centennial Life Ins. Co. v. Poston, 88 F.3d 255, 257 (4th Cir. 1996) (explaining that in
such circumstances district courts possess “wide discretion”).

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With these principles in mind, when deciding whether to hear such a declaratory
judgment action, we require consideration of four factors:
(1) whether the state has a strong interest in having the issues decided in its
courts; (2) whether the state courts could resolve the issues more efficiently
than the federal courts; (3) whether the presence of “overlapping issues of
fact or law” might create unnecessary “entanglement” between the state and
federal courts; and (4) whether the federal action is mere “procedural
fencing,” in the sense that the action is merely the product of forum-
shopping.
Id. (citing Nautilus Ins., 15 F.3d at 377).2
Applying these principles to the case at hand, we find that the district court did not
abuse its discretion when it declined to exercise jurisdiction.
A.
Regarding the first Nautilus factor, we agree with the district court’s conclusion that
Virginia has a strong interest in having this dispute resolved in its courts. States hold a
strong interest when the question of state law is “difficult, complex, or unsettled.”
Nautilus, 15 F.3d at 378 (citing Hawaii Hous. Auth. v. Midkiff, 467 U.S. 229, 236, (1984));
cf. Myles Lumber Co. v. CNA Fin. Corp., 233 F.3d 821, 824 (4th Cir. 2000) (finding no
strong state interest when the case was not difficult, problematic, nor implicating a state
public policy issue).
Here, the “issues raised in the federal declaratory action” are whether Dr. Littaua
breached Section IV(e) of the Policy when she allegedly altered the Decedent’s records,
2 The district court applied only the first three factors to reach its decision. Med.
Mut., 2021 WL 622435, at *2. Like the district court, we find no suggestion of procedural
fencing ourselves.

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and whether a breach of that provision would relieve Med Mutual of its duties to defend
and indemnify in the state action. Nautilus, 15 F.3d at 376–77. The relevant portion of
Section IV(e) of the Policy provides that the insured has the duty “[t]o not, with regard to
any Claim or Medical Incident, attempt to or actually destroy, alter, modify, or delete any
evidence, or potential evidence, relating to any patient care information, data, records, or
films, whether existing in paper or any electronic format, regardless of where and how
stored.” J.A. 43 (emphasis omitted).
The issues presented in this case are unsettled. The Supreme Court of Virginia has
not yet spoken as to what sort of record alterations are sufficient to breach such a provision,
nor has it addressed whether such a provision is enforceable if it serves to void medical
malpractice coverage. Further, the review of Section IV(e) is complex because a breach
must be an act that “attempt[s] to or actually” affects “evidence” or “potential evidence.”
Determining evidentiary value under Section IV(e) requires a close and contextual review
of the malpractice case pending in state court. Whether something is potential evidence
depends upon the nuances of that state case and how it develops. The limits of what might
be potential evidence in this medical malpractice case are not simple to determine. The
resources necessary, both those of the parties and of the district court, to determine the
limits of “potential evidence” in this case would be considerable. Because of the unsettled
and complex nature of the state law questions at issue here, the state interest favors
abstention. Nautilus, 15 F.3d at 378 (citing Hawaii Hous. Auth., 467 U.S. at 236).
Virginia also has a strong interest in determining whether, even if breached, a
provision such as Section IV(e) can deprive a physician of malpractice insurance coverage.

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The Supreme Court has recognized that the States have a “special responsibility” and great
interest in regulating their licensed professionals. See Gunn v. Minton, 568 U.S. 251, 264
(2013) (finding, through a statutory federal jurisdiction analysis, a great state interest in
hearing a legal malpractice case in state court) (internal quotation omitted). While
retention of the case at bar by the district court would not require it to hear the merits of
the medical malpractice action, its findings and decision could have grave consequences
upon physician insurance coverage in Virginia. At oral argument, counsel for Med Mutual
conceded that coverage would be voided for even a minor alteration if it were material to
Section IV(e). Oral Argument at 45:44, Medical Mutual Insurance Co NC v. Rebecca
Littaua, (4th Cir. Mar. 9, 2022) (No. 21-1215), https://www.ca4.uscourts.gov/OAarchive/mp3/21-
1215-20220309.mp3. Furthermore, Med Mutual does not allege the substantive details of
the alteration that it claims to be a material breach of Section IV(e). (Compl. ¶ 11.) This
provision could be plainly interpreted to capture a swathe of innocuous or beneficial
physician conduct. If the standard set by the district court considers such conduct to be
material breaches of Section IV(e), innocent physicians would find themselves without
coverage or constraining their behavior to keep their coverage. Even if the standard were
set narrowly in district court, including any matter as a material breach beyond what the
Virginia Supreme Court would accept generates unnecessary stress on Virginia’s
healthcare system. Virginia has a strong state interest to determine, in the first instance,
how such a contract provision should affect its healthcare regime. See VRCompliance LLC
v. HomeAway, Inc., 715 F.3d 570, 573–74 (4th Cir. 2013) (finding that Texas had a strong
interest in being first to resolve the meaning of its complex choice-of-law provisions);

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Mitcheson v. Harris, 955 F.2d 235, 237–38 (4th Cir. 1992) (“Absent a strong
countervailing federal interest, the federal court . . . should not elbow its way into [a]
controversy to render what may be an ‘uncertain and ephemeral’ interpretation of state
law”) (quoting Pennhurst State School & Hosp. v. Halderman, 465 U.S. 89, 122 n. 32
(1984)).
Appellees highlight that no case from the Supreme Court of Virginia discusses an
insured’s duty to not alter medical records in the medical malpractice context, but Med
Mutual considers this insufficient to deem the matter unsettled. Med Mutual argues that
resolving this case would amount to routine application of settled law. Med Mutual cites
Auto-Owners Ins. Co. v. Cash, No. 1:09-CV-396, 2009 WL 2601136, at *3 (M.D.N.C.
Aug. 20, 2009) in which a district court reasoned that while North Carolina’s highest court
had not precisely addressed the facts in the case, it had already resolved what “occurrence”
and “property damage” meant in similar contexts. Similarly, Med Mutual argues that
although Virginia’s highest court has not yet addressed the facts at issue, questions of
breach and materiality are settled matters of contract law. See also 10B M.J. INSURANCE
§ 154 (2021).
While Med Mutual’s argument may have merit, such reasoning does not apply to
this case. The question is not unsettled about how to define “alter,” “patient care
information,” or the Policy’s “Medical Incident” term, or other similar phrases. Rather,
one of the unsettled questions is how to apply “potential evidence.” Defining and applying
this term requires analysis of the state court proceeding. And resolving the other unsettled

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question of how severe a breach must be to become material is a task best left to the
Virginia Supreme Court.
Overall, while Virginia law regarding breach and materiality is well settled, whether
the alleged alteration in this case breaches Section IV(e) and whether that provision can
void coverage are novel and complex questions and represent an important policy question
the state has a strong interest in resolving. Mitcheson, 955 F.2d at 238 (quoting Pennhurst,
465 U.S. at 122 n. 32); see also Gunn, 568 U.S. at 264.
B.
The second Nautilus factor inquires “whether the issues raised in the federal action
can more efficiently be resolved in the court in which the state action is pending.” Nautilus,
15 F.3d at 377; see Brillhart, 316 U.S. at 495. This inquiry reviews “whether the claims
of all parties in interest [to the federal proceeding] can satisfactorily be adjudicated in [the
state] proceeding, whether necessary parties have been joined, [and] whether such parties
are amenable to process in [the state] proceeding.” Brillhart, 316 U.S. at 495; Nautilus, 15
F.3d at 378–79; Great Am. Ins. Co. v. Gross, 468 F.3d 199, 212 (4th Cir. 2006).
Here, Med Mutual is not a party to the state case, and the state issue of Dr. Littaua’s
and Tri-Cities’ liability is separate from the federal issue of whether Med Mutual has the
duties to defend and indemnify. When presented with similar facts, we have found that
efficiency does not support abstention. Gross, 468 F.3d at 212 (finding that the insurer
was not a party to the state case and that the federal insurance issue was distinct from the
state liability issue). But those are not all the facts relevant to the efficiency factor.
Although not alone sufficient to justify abstention, this court does consider that Med

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Mutual had the ability to bring this same declaratory action in the state court where the
malpractice action is pending. See Gross, 468 F.3d at 212. Furthermore, this case may
more “satisfactorily be adjudicated” in a state proceeding because the Virginia court would
have more knowledge of the evidence which Section IV(e) would require the presiding
court to review. Brillhart, 316 U.S. at 495. Given these circumstances, the efficiency
factor may favor retaining this case in federal court, but it is not a clear victory for retention,
and efficiency is just one part of the analysis.
C.
Next, this Court must consider the third Nautilus factor: “whether permitting the
federal action to go forward would result in unnecessary entanglement between the federal
and state court systems because of the presence of overlapping issues of fact or law.”
Nautilus, 15 F.3d at 376–77 (internal quotations omitted). The concern is that if the federal
court were to reach final judgment on issues shared with the state case the state court may
be precluded from examining those issues. Nautilus, 15 F.3d at 377. “[T]he core question
that we must resolve is whether the district court’s efforts to decide the coverage issue
would result in entanglement, through gratuitous interference, with state court proceedings
by preempting critical factual findings that the state court will have to make in resolving
[the state plaintiff’s] claims.” Penn-Am. Ins. Co. v. Coffey, 368 F.3d 409, 413 (4th Cir.
2004).
Here, the overlapping issues of fact are whether and to what extent Dr. Littaua
altered the Decedent’s medical records and what will be considered actual or potential
evidence in the state trial. For a district court to determine if a breach occurred, it must

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resolve the factual circumstances surrounding the alleged record alteration. If, as Med
Mutual contends, Section IV(e) is a cooperation clause or otherwise a condition precedent,
the insured’s willful breach must be substantial and material to relieve the insurer of its
contractual duties. State Farm Mut. Auto. Ins. Co. v. Davies, 226 Va. 310, 315, 310 S.E.2d
167, 169 (1983) (affirming that breach of an insurance cooperation clause case depends on
whether the willful lack of cooperation was substantial and material). If the case were
retained, Med Mutual would bear the burden to prove such a breach. Id. Here, this would
entail proving that Dr. Littaua willfully altered the records of a deceased patient whose
estate ultimately sued Dr. Littaua for medical malpractice. Such facts could be used by the
plaintiff in state court to help prove her case. Furthermore, the district court would be
required to determine what constitutes “evidence” or “potential evidence” under the Policy.
This is a necessarily contextual exercise that may either influence or preclude the state
court’s factual determinations.
Med Mutual contends that there is no factual overlap issue because the record
alteration has not yet been alleged in state court. The argument goes that the issue is not
before the state court and never will be because neither party would risk voiding the
insurance coverage.3 Therefore, Med Mutual argues the federal issue does not overlap
with the state case. However, this Nautilus factor is not so limited because certainty of
3 Lack of coverage for the Plaintiff diminishes her ability to recover. Lack of
coverage for the Defendants means the insurer is not providing the defense in the state case,
nor indemnity in the event of a judgment.

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preclusion is not the standard. Rather, the factor is concerned with those issues of fact that
might preclude the state court. Trustgard, 942 F.3d at 202; Nautilus, 15 F.3d at 377.
Here, factual overlap is not certain, but the risk is present and significant. The
medical records are of primary importance in wrongful death suits such as this where
medical malpractice is the core issue. The facts surrounding the alteration could aid the
plaintiff in state court. Although this might be considered a close call, abstention here
avoids the preclusive circumstances we seek to avoid. Trustgard, 942 F.3d at 202
(“Abstention helps avoid duplicative litigation and interference with state-court
proceedings”); Nautilus, 15 F.3d at 377, 379.
III.
On the balance of the factors, we cannot identify legal error by the district court.
The factors favoring abstention are at least as strong, if not stronger, than those favoring
retention. Considerations of federalism and comity counsel that the district court was
within its discretion to stay its hand. Penn-America Ins. Co., 368 F.3d at 412. Med Mutual
has not demonstrated an abuse by the district court of its broad discretion. VonRosenberg,
781 F.3d at 734. Accordingly, after careful review and for the foregoing reasons, the
judgment of the district court is hereby
AFFIRMED.

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