Summary
holding that parallelism does not require an exact identity of the parties; rather, "the parallel litigation requirement is satisfied when the main issue in the case is the subject of already pending litigation."
Summary of this case from Iacovacci v. Brevet Holdings, LLCOpinion
No. 00 Civ. 1333 (SHS).
January 3, 2001.
Opinion and Order
This action arises out of a dispute between Omni Contracting Company, Inc. — the general contractor on a certain project for the New York State Department of Transportation — and GBA Contracting Corp. — a subcontractor. GBA claims that Omni failed to pay it for work performed in connection with the project; in response, Omni claims that GBA breached the subcontract agreement, resulting in the need for Omni to perform corrective work. Omni now seeks to have this Court dismiss this action on the basis of what is known as the Colorado River abstention doctrine. The Court has considered all of the factors relevant to such a determination and, for the reasons set forth below, denies Omni's motion.
BACKGROUND
In August 1999, Omni commenced an action in New York State Supreme Court, Westchester County, against GBA and its surety, Frontier Insurance Company, seeking to recover more than $100,000 in costs related to the corrective work (the "Westchester action"), and GBA subsequently asserted counterclaims seeking recovery of the sums allegedly owed it by Omni for GBA's work on the project. In January 2000, GBA brought an action pursuant to a labor and material payment bond in New York State Supreme Court, New York County, against Fidelity and Deposit Company of Maryland, Omni's surety, also seeking to recover the sums allegedly owed it by Omni for GBA's work on the project (the "New York action"). That action was brought in New York County because the payment bond requires that suit be brought there.
Fidelity and Deposit timely removed the New York action to this Court on the grounds of diversity of citizenship, and, in February 2000, filed a third-party complaint against Omni and its President, Haleem Zihenni, seeking indemnification in the event that GBA prevails in its action against Fidelity and Deposit. Omni and Zihenni then moved to dismiss the entire action pursuant to the abstention doctrine set forth by the United States Supreme Court in Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976).
DISCUSSION
As a general matter, federal courts have a "virtually unflagging obligation" to exercise their jurisdiction.Colorado River, 424 U.S. at 817. "However, the district court has the discretion to abstain from exercising jurisdiction over an action where a concurrent state proceeding is pending based upon `considerations of wise judicial administration, giving regard to the conservation of judicial resources and comprehensive disposition of litigation."' Am. Alliance Ins. Co. v. Eagle Ins. Co., 961 F. Supp. 652, 655 (S.D.N.Y. 1997) (quoting Colorado River, 424 U.S. at 817).
When abstention pursuant to Colorado River is considered, the threshold inquiry is whether the state action and the federal action are essentially the same,i.e., are the "parallel" litigations. AMNEX, Inc. v. Rowland, 25 F. Supp.2d 238, 243 (S.D.N.Y. 1998). Complete identity of parties and claims is not required; the parallel litigation requirement is satisfied when the main issue in the case is the subject of already pending litigation. See Weiser v. Koch, 632 F. Supp. 1369, 1386); see also Machat v. Sklar, No 96 Civ. 3796, 1997 WL 599384, at *7 (S.D.N.Y. Sept. 29, 1997) ("What matters is that the claims concern the same events and involve sufficient overlap of subject matter."). The parties agree that the Westchester action and this action are parallel.
Once the threshold issue of concurrence between the federal case and the state case has been established, the court must weigh six factors, with the "balance heavily weighted in favor of the exercise of jurisdiction": (1) the assumption of jurisdiction by either court over any res or property, (2) the incovenience of the federal forum, (3) the avoidance of piecemeal litigation, (4) the order in which jurisdiction was obtained, (5) whether state or federal law supplies the rule of decision, and (6) whether the state court proceeding will adequately protect the rights of the party seeking to invoke federal jurisdiction. Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 16, 19-26 (1983); Burntett v. Physician's Online, Inc., 99 F.3d 72, 77 (2d Cir. 1996); AMNEX, 25 F. Supp. at 244. However, a decision to abstain must be bases on more than a simple tallying of these factors. L. Harbert, Inc. v. Aetna Cas. Sur. Co., No. 96 Civ. 8924, 1997 WL 539778, at *2 (S.D.N.Y. Aug. 28, 1997). Abstention does not rest on "a mechanical checklist," and the weight given to any particular factor "may vary greatly from case to case, depending on the particular setting of the case." Cone Memorial Hosp., 460 U.S. at 16.
Neither the first nor the second factor is implicated in this case. Neither this action nor the Westchester action involves the assumption of jurisdiction over property, and there has been no showing that the approximately 30 miles between this court and New York Supreme Court, Westchester County present a significant obstacle to anyone involved in the litigation. Thus, the absence of jurisdiction over a res and the convenience of this forum squint in the direction of the exercise of federal jurisdiction. See DeCisneros v. Younger, 871 F.2d 305, 307 (2d Cir. 1989).
As to the third factor, Omni correctly points out that the exercise of federal jurisdiction could result in "piecemeal litigation" with its attendant risks of inconsistent results. However, "the existence of those risks [standing alone] can weigh only modestly in favor of dismissal; otherwise dismissals pursuant to Colorado River would be the rule, not the exception." Asbestos Litig., 963 F. Supp. 247, 253 (S.D.N.Y. 1997).
Moreover, any risk of inconsistent adjudications was created by Omni when it chose to commence the Westchester action. The bond obtained by Omni from Fidelity and Deposit requires that any action be brought in New York County. Thus, Omni was undoubtedly aware that in the event of a counterclaim implicating the bond — a not unlikely event — GBA would be prevented by the venue provision from naming Omni's surety, Fidelity and Deposit, in an action in Westchester County. GBA's bond from Frontier, however, contained no venue provision, and was therefore no bar to Omni's assertion of a claim against Frontier. In making the tactical decision to bring suit in Westchester County, Omni assumed the risk that a counterclaim implicating the bond would be brought in Westchester against it and in New York County against Fidelity and Deposit. Omni also assumed, therefore, the foreseeable risk that Fidelity and Deposit would remove that counterclaim to Federal court and assert a claim against Omni for indemnification.
The fourth factor — the order in which jurisdiction was obtained — "is considered in a common-sense manner by examining how much progress has been made in each forum." Arkwright-Boston Mut. Ins. Co. v. City of New York, 762 F.2d 205, 211 (2d Cir. 1985). Discovery in this action is now complete and a trial has been scheduled for March 26, 2001. There has been no showing that a trial in Westchester will take place prior to that date. Accordingly, this factor weighs in favor of the exercise of federal jurisdiction.
As to the fifth factor, the rule of decision in this case will be provided by state law. Because federal courts routinely apply state law in diversity cases, however, the presence of unexceptional issues of state law does not weigh heavily in favor of surrender of jurisdiction. Arkwright-Boston, 762 F.2d at 211.
The sixth factor — whether the state court proceeding will adequately protect the rights of the party seeking to invoke federal jurisdiction — also weighs in favor of the exercise of federal jurisdiction. As noted above, the bond at issue here requires that any action be brought in New York County. Accordingly, GBA could not assert its claim against Fidelity and Deposit in Westchester County without the surety's consent.
CONCLUSION
In sum, two of the six Colorado River factors weigh in favor of abstention, and those weigh only modestly in favor. This is insufficient to overcome the "heavy presumption favoring the exercise of jurisdiction." See Law Enforcement Ins. Co. v. Corcoran, 807 F.2d 38, 40 (2nd Cir. 1986). Accordingly, Omni's motion to dismiss this action pursuant to the Colorado River abstention doctrine is denied.
SO ORDERED.