Aultman v. Capital Rubber & Specialty Co. Inc

AULTMAN, TYNER, & RUFFIN, LTD. PLAINTIFF

v.CAPITAL RUBBER & SPECIALTY CO., INC., ET AL DEFENDANTS

CIVIL ACTION NO. 2:10cv223KS-MTP

UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF MISSISSIPPI

HATTIESBURG DIVISION

Dated: January 21, 2011

MEMORANDUM OPINION AND ORDER

This matter is before the court on a Motion for Stay and/or to Dismiss or in the Alternative to Transfer [#3] filed on behalf of the defendant, Capital Rubber & Speciality Co., Inc. ("CR&S"). The court, having reviewed the motion, the response, the pleadings and exhibits on file, the briefs of counsel, the authorities cited and being fully advised in the premises finds that the motion is not well taken and should be denied. The court specifically finds as follows.

BACKGROUND

This litigation is a suit for breach of contract, wherein the defendant Capital Rubber & Specialty Co., Inc. allegedly breached its agreement to pay to Aultman Tyner attorneys fees and out of pocket expenses in relation to representation in asbestos litigation. CR&S is a Louisiana corporation not licensed to conduct business in the State of Mississippi. Aultman Tyner & Ruffin, Ltd. ("Aultman, Tyner") is a licensed Mississippi law firm. Aultman, Tyner initially filed suit in the Circuit Court of Forrest County, Mississippi. In response to the state suit, CR&S filed a Motion to Stay or to Dismiss or inthe Alternative to Transfer to challenge personal jurisdiction and to raise the issue with the inconvenience of the forum.

After the issues were briefed the State Court received evidence in the form of affidavits and counter-affidavits and heard oral argument on the motion to dismiss on June 25, 2010. Circuit Judge Robert Helfrich took the matter under advisement after the hearing. Aultman, Tyner asserts that no discovery, or other action has occurred in the state court case and it remains pending in the Circuit Court of Forrest County as the parties await Judge Helfrich's decision on the Motion to Dismiss.

Aultman Tyner contends that it has an urgent need to prosecute this litigation and recover the monies owed to it by CR&S, as the Plaintiff has no assurances CR&S will be solvent in the future. Thus, on September 10, 2010, Aultman Tyner filed the Complaint in the instant matter asserting diversity jurisdiction. The Complaint in the instant matter is identical to the Amended Complaint filed in State Court. CR&S contends that by bringing this second action, Aultman, Tyner seeks nothing less than an end-run around its own choice of the original forum-in effect attempting an impermissible removal of its own State Court case.

Aultman, Tyner counters that it has offered to consider an alternative forum if CR&S will bond the amount of the Plaintiff's demand. CR&S has to date refused to do so, thus, according to Aultman, Tyner leaving it no recourse but to file a second suit, in hopes of moving this litigation forward. CR&S has now filed a Motion to Stay or to Dismiss, or in the Alternative to Transfer this matter to Louisiana in this litigation.

ABSTENTION

CR&S contends that pursuant to the dictates of the United States Supreme Court in Colorado River Water Conservation District v. United States, 424 U.S. 800, 817-19, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), considerations of "wise judicial Administration" provide discretion for the federal court to abstain or stay exercise of its jurisdiction when there are "parallel" state court proceedings. Indeed, the concept rests on the idea of promoting a "conservation of judicial resources, " avoiding duplicative litigation, and discouraging forum shopping. Colorado River, 424 U.S. at 817, 96 S.Ct. at 1246, and St. Paul Insurance Company v. Trejo, 39 F.3d 585 (5^th Cir. 1994). The Fifth Circuit has held that the two cases are considered parallel if they involve the same parties and the same issues. Diamond Offshore Co. v. A & B Builders, Inc., 302 F.3d 531, 538-41 (5^th Cir.2002) (overruled on other grounds, Grand Isle Shipyard, Inc. v. Seacor Marine, LLC, 589 F.3d 778 (5^th Cir. 2009)).

Both parties agree that the appropriate abstention standards for the court to apply are set forth in Colorado River as refined in Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). See also Safety Nat. Cas. Corp. v. Bristol-Myers Squibb Co. 214 F.3d 562, 564 (5^th Cir. 2000). Under the Colorado River doctrine, this court may abstain from hearing a case in only "exceptional circumstances." See Kelly Inv., Inc. v. Cont'l Common Corp., 315 F.3d 494, 497 (5^th Cir.2002).

Further, abdication of the obligation to decide cases under the doctrine of abstention can be justified in "exceptional circumstances, where denying a federal forum would clearly serve an important countervailing interest, " such as considerations of "proper constitutional adjudication, regard for federal-state relations, or wise judicial administration." Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996) (citations and internal quotations omitted). "Unless there is a legitimate reason to abstain, federal courts 'cannot abdicate their authority or duty in any case in favor of another jurisdiction.'" Vulcan Materials Co. v. City of Tehuacana, 238 F.3d 382, 390 (5^th Cir.2001) (quoting New Orleans Pub. Serv., Inc. v. Council of New Orleans, 491 U.S. 350, 358, 109 S.Ct. 2506, 105 L.Ed.2d 298 (1989)).

There are six factors which have been developed from Colorado River and its progeny to assist the court in determining if exceptional circumstances exist so as to allow the court to abstain from hearing a particular action. Those six factors are: (1) assumption by either state or federal court over a res; (2) relative inconvenience of the forum; (3) avoidance of piecemeal litigation; (4) order in which jurisdiction was obtained by the concurrent forum; (5) extent federal law provides the rules of decision on the merits; and (6) adequacy of the state proceedings in protecting the rights of the party invoking federal jurisdiction. Stewart v. Western Heritage Ins. Co. 438 F.3d 488, 491 (5^th Cir. 2006); see Colorado River, 424 U.S. at 818, 96 S.Ct. 1236; Moses H. Cone, 460 U.S. at 23, 103 S.Ct. 927.

However, "the decision whether to dismiss a federal action because of parallel state-court litigation does not rest on a mechanical checklist, but on a careful balancing of the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction." Moses H. Cone, 460 U.S. at 16, 103 S.Ct. 927; Further, "[a]bstention from the exercise of federal jurisdiction is the exception, not the rule." Colorado River, 424 U.S. at 813, 96 S.Ct. 1236 CS&R asserts that the first two Colorado River factors do not apply (there is no property attached in either court, and both the federal and state courts in Mississippi are equally convenient), but all other factors favor a stay. However, as Aultman, Tyner points out in Stewart v. Western Heritage Ins. Co., 438 F.3d 488 (5^th Cir. 2006) the Fifth Circuit held that a district court should not have abstained from hearing a cause of action brought by the insured's bankrupt sole shareholder against insurers for its breach of contract and bad faith failure to pay, notwithstanding pendency of parallel state court action commenced by the bankruptcy trustee. In doing so, the Court reviewed the Colorado River test and noted that neither the state nor federal court had assumed jurisdiction over any res. Id. at 492.

Contrary to CR&S's argument however, the Court rejected the contention that the absence of this factor is "a neutral item, of no weight in the scales" and determined it in fact supported exercising federal jurisdiction. Id. (citing Evanston Ins. Co. v. Jimco, Inc., 844 F.2d 1185, 1191 (5^th Cir. 1988); and Murphy v. Uncle Ben's Inc., 168 F.3d 734, 738 (5^th Cir. 1999)). Further, with regards to the second factor, when courts are in the same geographical locations, the inconvenience factors weighs against abstention. Id. (citing Murphy, 168 F.3d at 738). Therefore, a consideration of the first two Colorado River factors counsel against abstention.

As to factor three, CR&S argues that by not granting a stay, duplicative, piecemeal litigation would surely result as Aultman, Tyner could push or pull against progress in one case or the other depending on where they felt they could obtain the most advantageous forum. Thus, CR&S claims that it would force it to defend two identical cases at the same time. However, in Stewart, the Court noted that there was some potential for piecemeallitigating as the state court was the only forum for hearing certain claims but went on to conclude that a plea of res judicata after the completion of one suit could eliminate the remaining issues and the problem of an inconsistent judgment. 438 F.3d at 492.

In Murphy v. Uncle Ben's, Inc., 168 F.3d 734, 138 (5^th Cir. 1999), cited in Stewart, the Court reviewed this factor and noted that cases with no more than one plaintiff, one defendant, and one issue did not involve piecemeal litigation and determined that parallel litigation was duplicative, not piecemeal and that duplicative litigation was not a factor to be considered in an abstention determination. Id. at 738 (citing Evanston 844 F.2d at 1192 (citing Colorado Riveri, 424 U.S. at 817. Indeed, the Murphy court went on to state that [t]he only bar to dual prosecution is dismissal due to res judicata." Id. Thus, as in Murphy, this factor weighs against abstention.

Regarding the fourth factor, the inquiry is "how much progress has been made in the two actions." Stewart 438 F.3d at 492 (citing Murphy, 168 F.3d at 738). CR&S asserts that jurisdiction was obviously obtained more than six months earlier in the State Court and that the dispositive motion to dismiss has been fully briefed, argued and taken under advisement by Judge Helfrich. Aultman, Tyner points out that no discovery has occurred in either case and concurs with...