Russo v. Eastwood Constr. Partners, LLC

MARY RUSSO, SANCHELLE JOHNSON, JULIANN CALLERY, and WENDI O'BRIEN,individually and on behalf of all others similarly situated, BRIANNA BENDIK, KYLE GREGO,AHMAD LEWIS, NEVERROL THOMPSON, RANDY BROWN, MARVIN RAVENEL, JUAN DOZIER,MARIA TURNER, MATTHEW SHREVE, MAE TAYLOR, SAMUELHALVERSON,NICOLE FLOYD,DOLORES SMILEY, LUCINDA LIFERIDGE, JANELLE WRIGHT,LYNN WASHINGTON, JEREMY SHELTRA, PETER FORTNER, JASON POGAR,JESSICA ANCRUM, MEGAN FELKEL, JEREMY MCNEER, JANICA HUNTER,CHRISTIAN HALLOCK, SHERRYL ANDERSON, and KATHLEEN HARVEY, Plaintiffs, v. EASTWOOD CONSTRUCTION PARTNERS, LLC f/k/a Eastwood Construction, LLC f/k/aEastwood Homes, Inc.; EASTWOOD HOMES, INC.; EXTERIOR CONTRACT SERVICES,LLC; SOUTHCOAST EXTERIORS, INC.; and ALPHA OMEGA CONSTRUCTION GROUP, INC., Defendants.

No. 2:20-cv-4267-DCN

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA CHARLESTON DIVISION

March 18, 2021

ORDER

This matter comes before the court on plaintiffs Mary Russo, Sanchelle Johnson, Juliann Callery, Wendi O'Brien, Brianna Bendik, Kyle Grego, Ahmad Lewis, Neverrol Thompson, Randy Brown, Marvin Ravenel, Juan Dozier, Maria Turner, Matthew Shreve, Mae Taylor, Samuel Halverson, Nicole Floyd, Dolores Smiley, Lucinda Liferidge, Janelle Wright, Lynn Washington, Jeremy Sheltra, Peter Fortner, Jason Pogar, Jessica Ancrum, Megan Felkel, Jeremy McNeer, Janica Hunter, Christian Hallock, Sherryl Anderson, and Kathleen Harvey's (collectively, "plaintiffs") motion to remand, ECF No. 9. For the reasons set forth below, the court abstains from exercising jurisdiction over this action pursuant to Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976), and dismisses it.

I. BACKGROUND

Plaintiffs filed this construction defect action against several of the contractors who constructed their homes—defendants Eastwood Construction Partners, LLC; Eastwood Homes, Inc. (collectively, "Eastwood"); Exterior Contract Services, LLC ("Exterior Contract"); Southcoast Exteriors, Inc. ("Southcoast"); and Alpha Omega Construction Group, Inc. ("Alpha Omega") (collectively, "defendants"). The thirty named plaintiffs bring their claims individually and on behalf of a proposed class of 388 "or more" homeowners, who plaintiffs allege are similarly situated. ECF No. 1-1, Amend. Compl. ¶¶ 57-70. They assert three causes of action: (1) negligence/gross negligence, (2) breach of implied warranties, and (3) unfair trade practices under the South Carolina Unfair Trade Practices Act ("SCUPTA"). Amend. Compl. The allegations primarily concern the construction of plaintiffs' roofs.

Plaintiffs filed this action in the Charleston County Court of Common Pleas on August 27, 2020. ECF No. 5-1. Plaintiffs filed an amended complaint on December 4, 2020. Amend. Compl. Eastwood removed the action to this court on December 9, 2020, arguing that the court has subject matter jurisdiction pursuant to the Class Action Fairness Act ("CAFA"), 28 U.S.C. §§ 1453 and 1332(d). Plaintiffs' motion to remand argues that this action does not fall within CAFA's expansion of federal jurisdiction,meaning that the court must remand it. Without diving too deeply into the merits of the motion to remand, the court addresses a few important aspects of that jurisdictional dispute, which it finds pertinent to the issue of abstention. For the court to have jurisdiction over this action pursuant to CAFA, defendants must demonstrate that there has been a similar class action filed against similar defendants within the last three years. 28 U.S.C. § 1332(d)(4)(A)(ii). As such, Eastwood states in its notice of removal that "Eastwood has been the subject of a similar putative class action within the last three years." ECF No. 1 at 2. One month later, plaintiffs filed their motion to remand, arguing that the court does not have CAFA jurisdiction because, among other reasons, no similar class actions have been filed within the last three years. ECF No. 9. In response, Eastwood disagrees, explaining that plaintiffs' counsel, one day prior to filing the instant action, filed a "duplicate" class action with the same allegations, same claims, and on behalf of the exact same class, Smiley v. Exterior Contract Services, No. 2020-CP-10-03786 (Chas. County Court of Common Pleas August 26, 2020) ("Smiley"). ECF No. 16 at 7. The only difference between Smiley and the instant action, Eastwood continues, is that Eastwood is named as a defendant in this action but not in Smiley. In reply, plaintiffs agree that Smiley is "a duplicate" of this action. ECF No. 19 at 2.¹ Further, plaintiffs' counsel concede that the filing of two duplicative actions was nothing more than an act of strategic procedural gamesmanship:

The homeowners filed the Smiley action in state court against the subcontractor defendants who constructed their roofs—Exterior Contract [ ]; Southcoast [ ]; and Alpha Omega[.] Days later, the homeowners filed this action to add additional homeowners as plaintiffs and to add claimsagainst Eastwood. Due to concerns about Eastwood attempting to use purported arbitration provisions in agreements with certain homeowners to stay or delay Plaintiffs' pursuit of their claims, . . . Plaintiffs opted to leave the Smiley action pending as a duplicate action in which Plaintiffs could proceed were this action stopped or delayed by Eastwood and its contracts with homeowners.

ECF No. 19 at 6-7 (emphasis added).

The court initially scheduled a hearing on the motion to remand for February 23, 2021. During its preparation for the hearing, the court determined that the unique procedural circumstances of this case raised a jurisdictional issue more fundamental than those addressed in the motion to remand. Accordingly, the court emailed the parties, postponing the hearing and requesting supplemental briefs on the issue of Colorado River abstention, pursuant to which, as the court discusses in much greater detail below, a federal court may dismiss an action "for reasons of wise judicial administration" when a concurrent action is pending in state court and extraordinary circumstances justify dismissal. 424 U.S. at 817. Given the court's duty to vigorously police its own subject matter jurisdiction, Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583 (1999), the court raised this issue on its own initiative.

On March 8, 2021, plaintiffs and defendants filed supplemental memoranda on the issue. ECF Nos. 36 and 37. Defendants now take the position that abstention is inappropriate, meaning that the court should exercise jurisdiction over this action rather than dismiss it. Ironically, though, defendants' argument against abstention requires them to contradict the position they adopted in opposing the motion to remand. The doctrine of Colorado River abstention requires that the federal action be "substantially similar" to a concurrent state action. New Beckley Min. Corp. v. Int'l Union, United Mine Workers of Am., 946 F.2d 1072, 1073 (4th Cir. 1991). Opposing remand,defendants argue that Smiley and this action are "duplicate[s]." ECF No. 16 at 7. Now, opposing abstention, defendants argue that Smiley and this action contain "significant differences," meaning that they are not "substantially similar." ECF No. 36 at 4. In other words, defendants paradoxical position requires them to simultaneously argue that the two relevant actions are "duplicates" yet not "substantially similar."² Because the court has given the parties the opportunity to present written arguments, this matter is ripe for the court's review.

II. DISCUSSION

Article III's bestowal of federal jurisdiction over "cases" and "controversies" has instilled in district courts a "virtually unflagging obligation" to exercise that jurisdiction over matters properly brought before them. Colorado River, 424 U.S. 800 at 817. Nevertheless, Supreme Court jurisprudence has carved out "extraordinary and narrow" exceptions to that general duty to adjudicate in the form of several doctrines of abstention. Id. (quoting Allegheny Cty. v. Frank Mashuda Co., 360 U.S. 185, 188 (1959)); see also Burford v. Sun Oil Co., 319 U.S. 315, 334 (1943); Younger v. Harris, 401 U.S. 37, 54 (1971). The Supreme Court espoused one such doctrine in Colorado River, proclaiming that a district court may abstain from exercising jurisdiction over an action otherwise properly before it "due to the presence of a concurrent state proceeding" for "reasons of wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation." Id. at 817 (quoting Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co., 342 U.S. 180, 182 (1952)). While wise judicial policy and extraordinary circumstances may justify dismissal, courts must remain cognizant that"[a]bstention from the exercise of federal jurisdiction is the exception, not the rule." Id. at 814. As the Supreme Court noted, circumstances warranting abstention, "though exceptional, do nevertheless exist." Id. at 818. This case presents one such instance.

Two conditions must be present for a court to decline jurisdiction pursuant to Colorado River. First, "there must be parallel proceedings in state and federal court." Gannett Co. v. Clark Const. Grp., Inc., 286 F.3d 737, 741 (4th Cir. 2002). "Suits are parallel if substantially the same parties litigate substantially the same issues in different forums." New Beckley Min. Corp., 946 F.2d at 1073. And second, "'exceptional circumstances' warranting abstention must exist." Gannett, 286 F.3d at 741. Courts in the Fourth Circuit employ the following factors to guide their analysis:

(1) whether the subject matter of the litigation involves property where the first court may assume in rem jurisdiction to the exclusion of others; (2) whether the federal forum is an inconvenient one; (3) the desirability of avoiding piecemeal litigation; (4) the relevant order in which the courts obtained jurisdiction and the progress achieved in each action; (5) whether state law or federal law

...