Opinion
Civil Action No. 3-99-CV-1926-P
May 4, 2000
MEMORANDUM OPINION AND ORDER
Presently before the Court is Defendants' Motion for Abstention and brief in support, filed January 28, 2000, and Plaintiff's Response in Opposition to Defendants' Motion for Abstention, filed February 15, 2000. No reply was filed. For the following reasons, Defendant's Motion for Abstention is hereby DENIED.
BACKGROUND
On April 7, 1999, Defendants, Gordon Floor Covering, Inc. ("Gordon") and Stan Schniderman ("Schniderman") (collectively the "Defendants"), citizens of the State of California, sued Plaintiff Magna Group, Inc. ("Magna") in California state court seeking damages arising out of certain contractual dealings between Gordon and Magna (the "California Action"). Magna Group filed a counterclaim asserting breach of contract, breach of fiduciary duty, and common law fraud. On June 10, 1999, Magna, a Texas corporation, sued the Defendants in Texas state court asserting substantially the same facts and legal claims. (the "Texas Action"). The Defendants removed the Texas Action to federal court on August 30, 1999, based upon the diversity of the parties. Defendants now move this Court to abstain from exercising its jurisdiction over the Texas Action in light of the pendency of the California Action. Plaintiff argues that Defendants have failed to meet their substantial burden of proof sufficient for this Court to refrain from exercising jurisdiction to have the trial on the merits in this Court. It is this controversy that is now before this Court.
DISCUSSION
"Abstention" refers to judicially created doctrines that allow a federal court to abstain from the exercise of federal jurisdiction and dismiss a case when there is a similar action pending in state court. Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 813-819 (1976). While the pendency of a state court action does not bar proceedings concerning the same matter in federal court, dismissal or a stay of a federal suit due to the presence of a concurrent state proceeding may be appropriate in certain circumstances. Id. at 818-19. There are four categories of abstention, none of which apply to the case at bar. See Rex E. Lee Richard G. Wilkins, An Analysis of Supplemental Jurisdiction and Abstention with Recommendations for Legislative Action, 1990 B.Y.U.L. Rev. 321, 335 (1990). However, dismissal or a stay may be proper on another ground set forth in the United States Supreme Case, Colorado River Water Conservation District v. United States, 424 U.S. 800. This ground is "one resting not on considerations of state-federal comity or on avoidance of constitutional decisions, as does abstention, but on `considerations of wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.'" Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 14-15 (1983) (quoting Colo. River, 424 U.S. at 817). The Colorado River doctrine raises the question of "whether a federal court may stay or dismiss an action on the sole ground that there is a similar action pending in state court in which the controversy between the parties can be resolved." Lee Wilkins, supra, at 357. Thus, a court can avoid piecemeal litigation and encourage comprehensive settlement of a controversy by declining to exercise its jurisdiction. Colo. River, 424 U.S. at 817; Armco, Inc. v. Moore Exploration, Inc., 603 F. Supp. 1, 1 (S.D. Tex. 1984).
Neither Party contends that any of the categories of the abstention doctrine apply to this case.
Although commonly referred to as an abstention doctrine, the Supreme Court has flatly rejected this categorization. 17A C. Wright, A. Miller, E. Cooper, Federal Practice and Procedure § 4247 (1988).
A court should consider all of the circumstances surrounding a case when determining whether the Colorado River doctrine allows for the dismissal or stay of a federal action. The Supreme Court has developed a list of six general factors relevant to the inquiry of whether a federal court should dismiss or stay its proceedings due to the existence of the related state court proceeding. Those factors are: (1) the assumption by either court over any res or property; (2) the inconvenience of the federal forum; (3) the avoidance of piecemeal litigation; (4) the order in which jurisdiction was obtained; (5) whether federal or state law supplies the rule of decision; and (6) whether the state court proceeding will adequately protect the rights of the party seeking to invoke the federal jurisdiction. Evanston Ins. Co. v. Jimco, 844 F.2d 1185, 1191-93 (5th Cir. 1988); Garber v. Sir Speedy, Inc., 930 F. Supp. 267, 270 (N.D.Tex. 1995).aff'd, 91 F.3d 137 (5th Cir. 1996). No one factor is necessarily determinative. Moses Cone, 460 U.S. at 15. This list is not exclusive and other factors may be considered. Id. 16; Fox v. Maulding, 16 F.3d 1079, 1082 (10th Cir. 1994); Travelers Indem. Co. v. Madonna, 914 F.2d 1364, 1370-71 (9th Cir. 1990). A federal district court must take into account both its obligation to exercise jurisdiction and the factors counseling against that exercise. Moses Cone, 460 U.S. at 15-16. The duplicative nature of the actions cannot alone justify abstention. Black Sea Investment, Ltd. v. United Heritage Corp., 2000 WL 201829, at *2 (5th Cir. March 9, 2000). Only exceptional circumstances and the clearest of justification will warrant dismissal. Id. at 14, 16. A district court's decision to abstain from exercising jurisdiction is reviewed for abuse of discretion. Evanston, 844 F.2d at 1191.
1. Assumption by either court of jurisdiction over a res
This case does not involve any res or property over which any court, state or federal, has taken control. However, the absence of this factor is not neutral. Rather, the absence of the first factor weighs against abstention. Murphy v. Uncle Ben's, Inc., 168 F.3d 734 (5th Cir. 1999).
2. The relative inconvenience of the forums
This factor mainly involves the physical proximity of the federal forum to the evidence and witnesses. Evanston, 844 F.2d at 1191. Magna argues for Texas as the most convenient forum because all of the documents and several witnesses are located in Texas. However, the documents will undoubtedly be required for the California litigation regardless of how this Court continues. Moreover, Magna's counsel for both the California and Texas action resides and works in California, Gordon lobbies for California as the most convenient forum because most of the witnesses reside in that state. In short, neither of the forums impose a great inconvenience on either party. While Gordon demonstrated the federal forum as more inconvenient for him than the state forum is for Magna, the evidence does not indicate that "the inconvenience of the federal forum is so great," as to favor abstention. See Evanston, 844 F.2d at 1192.
3. The desirability of avoiding piecemeal litigation
Piecemeal litigation occurs when different tribunals consider the same issue, thereby duplicating efforts and possibly reaching different results. Vance v. Boyd Miss., Inc., 923 F. Supp. 905, 912 (S.D. Miss. 1996) (citing Am. Int'l Underwriters, Inc. v. Continental Ins. Co., 843 F.2d 1253, 1258 (9th Cir. 1988)). The policy behind avoiding piecemeal litigation is to encourage wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.Vance, 923 F. Supp. at 912.
In this case, identical claims against Gordon are pending before both the California state tribunal and this Court. All causes of action pursued against Gordon in federal court were alleged against Gordon in state court. This creates the threat of inconsistent rulings. See Am. Int'l Underwriters, 843 F.2d at 1258 (weighing this factor in favor of abstention where parallel proceedings threatened not only a waste of judicial resources due to duplicative litigation, but also possibly conflicting results). Moreover, the Texas Action will not resolve all of the claims between the parties because Gordon has not made its claims against Magna in this proceeding. The California Action, on the other hand, includes all of the claims between the parties. This factor weighs in favor of abstention.
4. The order in which jurisdiction was obtained
Priority should not be measured exclusively by which complaint was filed first, but rather in terms of how much progress has been made in the two actions. Cone, 460 U.S. at 21. Although Gordon filed the state court suit a couple of months before this action commenced and the parties in the state court lawsuit have expended substantial time, effort and expense conducting discovery for the state court action, the parties have not made significant progress in the California Action. The California court has not yet taken up any substantive issues or motions. Rather, the parties have spent most of their time resolving discovery disputes and motions for sanctions. The California Action is set for trial on July 5, 2000, whereas the scheduling order in place for the Texas Action provides for discovery to continue until August 31, 2000, with trial in December 2000. However, after reviewing the activities on the California docket, it seems unlikely that the case will actually go to trial in July. In fact, at its current pace, the California court will not likely reach the merits of the case at a time significantly sooner than will this Court. Accordingly, this factor weighs against abstention.
Prior to rendering this order, my law clerk contacted the clerk's office for the Superior Court of the State of California for the County of Los Angeles, Northwest District, and inquired about the status of the California Action. The California clerk's office gave specific information about the activity on the California Action's docket and stated that, in his experience, the California Action would likely not reach trial in July.
5. The extent to which federal law provides the rules of decision on the merits
Currently, there is no federal law at issue in this case. Magna informs the Court of its possible intention of adding a federal claim for wire fraud prior to the scheduling order deadline for amending pleadings. Magna's argument reserving the right to file a federal cause of action does not persuade the Court to weigh this factor against abstention. Magna cannot rely upon mere assertions of the possibility of a federal claim. This factor alone will not ordinarily justify abstention. See Evanston, 844 F.2d at 1193; Microsource, Inc. v. Superior Signs, Inc., No. Civ. A. 3:97-CV-2733-G, 1998 WL 119537 (N.D.Tex. Mar. 9, 1998). However, the absence of a federal legal issue weighs in favor of abstention.
Magna has not presented any evidence demonstrating an inability to file this federal claim in state court. Moreover, as this Court's ruling will merely stay and not dismiss the Texas Action, Magna may also bring any possible federal claim in the Texas Action once the California Action has been resolved.
6. Adequate protection in state court
This is a factor that can only be a neutral factor or weigh against, not for, abstention, Evanston, 844 F.2d at 1193. This factor has weighed against abstention in cases where the state court may not have had authority to exercise jurisdiction over the subject matter of a party's claims. See Moses Cone, 460 U.S. at 26-27 (doubting whether the state court could compel arbitration); Weiner v. Shearson Hammill Co., 521 F.2d 817, 821 (9th Cir. 1975) (doubting the state court's subject matter jurisdiction). The California court is fully capable of resolving the Parties' disputes concerning the alleged contract, even though at least some of the laws to be applied are Texas state laws. Therefore, this factor does not weigh against abstention.
7. Other considerations
Other considerations weigh against abstention in this case. It appears as though both parties may have engaged in forum shopping when filing their actions. However, the alignment of the parties as they appear before this Court represent the appropriate posture of the parties.
CONCLUSION
After reviewing the all of the factors, the Court finds that the present action does not constitute the type of exceptional case in which abstention is appropriate. The motion rests predominantly upon the duplicative nature of the federal action and the California Action; however, the duplication of efforts alone is insufficient to warrant this Court's refusal to exercise its jurisdiction. Accordingly, the Court hereby DENIES Defendants' Motion for Abstention.
SO ORDERED