An individual, partner, shareholder or business owner may seek a declaratory judgment after a legal controversy has arisen but before any damages have occurred or any laws have been violated. A declaratory judgment does not require that any action be taken or that any rights have actually been jeopardized.
The purpose of a declaratory judgment (often called declaratory relief) is to allow the court to address controversies “one step sooner than normal” — after a dispute has arisen, but before steps are taken which would give rise to a claim for damages or other relief. A declaratory judgment allows disputes to be resolved before the parties irrevocably jeopardize their rights. The remedy of declaratory judgment is meant to afford security and relief against uncertainty with view toward avoiding litigation, not toward aiding it.
Declaratory relief is often sought in situations involving contracts to determine a parties’ rights under the contract. However declaratory judgment cases can be brought in many commercial and business litigation scenarios.
To bring a declaratory judgment lawsuit, a plaintiff must plead facts satisfying each of the following elements with regard to each of his or her claims: (1) tangible legal interests; (2) the defendant’s conduct is opposed to those interests; and (3) an ongoing actual controversy between the parties that is likely to be prevented or redressed by court action. A plaintiff must meet two requirements to have standing to bring a declaratory judgment action: (1) there must be an actual controversy and (2) the plaintiff must be an interested party. An “actual controversy” exists when there is a concrete dispute the resolution of which will result in the immediate and definitive determination of parties’ rights and aid in concluding the controversy. Generally, the existence of another remedy does not preclude a party from bringing a declaratory judgment case to court. This is a generally an emergency business litigation matter.
A declaratory judgment has the force of a final judgment with respect to the rights of the parties subject to that judgment. Finality attaches to a declaratory judgment on the date judgment is entered by the court.