Opinion
Case No. 04-1017-JTM
March 24, 2004
MEMORANDUM AND ORDER
The present dispute arises from a highway construction project in Finney County, Kansas, involving subcontractor Garcia-Chicoine Enterprises, its surety (Inland Insurance), sub-subcontractor SSL, LLC, an engineering firm, and the surety for the general contractor (National Fire Insurance Company of Hartford). SSL brought the present action here. Two months earlier, Garcia-Chicoine sued SSL and Inland in Nebraska state court. SSL later removed the action to the United States District Court for the District of Nebraska. The matter is now before the court on the motion of the defendants Garcia-Chicoine and Inland to Dismiss or Stay. The defendants seek a determination that the court should abstain from proceeding with the matter while the Nebraska action is pending.
Plaintiff SSL contends as a preliminary matter that the court should not address abstention on the grounds that the case falls within one of two exceptions of the general first-to-file rule. SSL argues that the general rule has no application because, first, it gave notice by letter of a dispute and demanded payment from Garcia-Chicoine on June 23, 2003. In this context, SSL suggests that Garcia-Chicoine's Nebraska action was merely for declaratory judgment, "a `preemptive strike' rather than a suit to recover money damages." (Dkt. No. 13, at 7). Second, SSL argues that the first-to-file rule is inapplicable because the balance of circumstances in the case demonstrate that Kansas is in any event a more convenient forum. See Terra International, Inc. v. Mississippi Chemical Corporation, 922 F. Supp. 1334, 1345-46 (N.D. Iowa 1996) (discussing exceptions to first-to-file rule).
The court finds no merit in either attempt to escape the general rule. First, the pleadings submitted to the court evidence more than a declaratory judgment action. The October 27, 2003 Amended Complaint filed in Lancaster County Court does advance a Declaratory Judgment claim, but it advances three other causes of action (breach of contract, negligent and fraudulent misrepresentation) and requests damages on each of those claims, independent of any declaratory judgment, of "not less than $144,000." (Dkt. No. 10, Exh. 2, at 4-5). SSL's argument that Garcia-Chicoine "preempted" its ability to reach the courthouse door has no merit. The demand letter cited by SSL was written some four months before Garcia-Chicoine filed its Nebraska claim, and some six months before SSL itself sued in Kansas. SSL has provided no evidence that Garcia-Chicoine lulled or misled it (that it would not seek legal relief) in any meaningful sense, nor is there any evidence (that filing their actions two months apart) the two proceedings could otherwise be considered a "dead heat."
The only other potential exception to the first-to-file rule is the balance of convenience (a secondary forum need not give precedence to the first where, under the sort of general balancing of interests 28 U.S.C. § 1404(a), the secondary forum would in any event be the proper venue. Under this approach, the court must balance the interests of the parties and witnesses, and the interests of justice.
SSL argues that the balance of factors support a determination that Kansas is the more convenient and appropriate forum. It stresses that all construction materials provided were delivered in Kansas, all services performed by SSL were performed in California or Kansas, no SSL employee ever entered into Kansas. SSL also contends that third-party witnesses are primarily located in Kansas. On the other hand, it appears that Kansas is not a particularly convenient) or, (at least, not a substantially more convenient) forum for any of the parties: SSL's principal place of operations is in California. Although it is unclear at this stage of the litigation, it would appear that much of SSL's engineering work may have occurred in California. Garcia-Chicoine and Inland are both companies with principal operations in Nebraska. None of the other parties herein has principal operations in Kansas. There has been no showing that the material witnesses are either unwilling to appear in Nebraska or could not provide testimony by alternate means. Given that SSL bears the burden of showing that Kansas is a markedly more convenient forum, see Chrysler Credit Corp. v. Country Chrysler Inc., 928 F.2d 1509, 1515 (10th Cir. 1991), the court must apply the general (first-to-file rule) the court concludes that plaintiff's burden has not been met.
The court finds that abstention is appropriate pursuant to Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 1246 (1976). Relevant factors in determining whether to abstain under the Colorado River doctrine include the inconvenience of the federal forum, the interest in avoiding piecemeal litigation, the order in which jurisdiction was obtained, which law controls, and the adequacy of the alternate forum to protect the plaintiff's rights. Applying these standards to the present action, the court finds that a stay (rather than dismissal) is appropriate.
The litigation brought by SSL here and the Nebraska litigation initiated by Garcia-Chicoine are extremely similar in the issues raised, and the court has a strong interest in avoiding piecemeal litigation. As noted earlier, there is no showing that Kansas is a more convenient forum for resolving what is essentially a dispute between a California corporation and a Nebraska corporation. While Kansas law is involved in the dispute, the Nebraska litigation was commenced first. There is every reason to believe that the plaintiff's interests can be adequately protected in Nebraska courts. Resolution of the Nebraska action will materially advance the resolution of this proceeding, including any claims against defendant National Fire. In sum, the court finds that a stay of the present matter is appropriate and consistent with the doctrine first identified in Colorado River. See Simmsaver Technology v. Sermax Corp., 858 F. Supp. 154 (D. Kansas 1994). In light of this` decision, the court finds no basis at the present time for granting defendants' request for either dismissal or injunctive relief.
The present matter is stayed pending further proceedings in Nebraska.
IT IS ACCORDINGLY ORDERED this 24th day of March, 2004, that the defendants' Motion to Dismiss or Stay (Dkt. No. 9) is granted as provided herein, and the present matter is stayed.