Filed: Nov. 14, 2012
Latest Update: Feb. 12, 2020
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 12-1745 MIDATLANTIC INTERNATIONAL, INC., Plaintiff - Appellant, v. AGC FLAT GLASS NORTH AMERICA, INC., Defendant - Appellee. Appeal from the United States District Court for the Eastern District of Virginia, at Norfolk. Robert G. Doumar, Senior District Judge. (2:12-cv-00169-RGD-FBS) Submitted: October 16, 2012 Decided: November 14, 2012 Before DAVIS and KEENAN, Circuit Judges, and HAMILTON, Senior Circuit Judge. Vacated and r
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 12-1745 MIDATLANTIC INTERNATIONAL, INC., Plaintiff - Appellant, v. AGC FLAT GLASS NORTH AMERICA, INC., Defendant - Appellee. Appeal from the United States District Court for the Eastern District of Virginia, at Norfolk. Robert G. Doumar, Senior District Judge. (2:12-cv-00169-RGD-FBS) Submitted: October 16, 2012 Decided: November 14, 2012 Before DAVIS and KEENAN, Circuit Judges, and HAMILTON, Senior Circuit Judge. Vacated and re..
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-1745
MIDATLANTIC INTERNATIONAL, INC.,
Plaintiff - Appellant,
v.
AGC FLAT GLASS NORTH AMERICA, INC.,
Defendant - Appellee.
Appeal from the United States District Court for the Eastern
District of Virginia, at Norfolk. Robert G. Doumar, Senior
District Judge. (2:12-cv-00169-RGD-FBS)
Submitted: October 16, 2012 Decided: November 14, 2012
Before DAVIS and KEENAN, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Vacated and remanded by unpublished per curiam opinion.
James L. Chapman, IV, CRENSHAW, WARE & MARTIN, PLC, Norfolk,
Virginia, for Appellant. James N. L. Humphreys, William C.
Bovender, Joseph B. Harvey, HUNTER, SMITH & DAVIS, LLP,
Kingsport, Tennessee, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
MidAtlantic International, Inc. (MidAtlantic) brought this
diversity action against AGC Flat Glass North America, Inc.
(AGC) in the United States District Court for the Eastern
District of Virginia following AGC’s refusal to pay MidAtlantic
for several thousand tons of dolomite. Invoking the abstention
doctrine in Colorado River Water Conservation Dist. v. United
States, 424 U.S. 800 (1976), the district court dismissed this
action in favor of a related action in Tennessee state court
which commenced before the federal action. Because we conclude
that the federal action does not meet the criteria for Colorado
River abstention, we vacate the district court’s judgment and
remand for further proceedings.
I
MidAtlantic is a Barbadian corporation with its principal
place of business in St. Michael, Barbados. Prior to the
commencement of the parties’ litigation, MidAtlantic supplied
dolomite to AGC, a Delaware corporation with its principal place
of business in Alpharetta, Georgia. AGC used the dolomite as
part of its glass manufacturing business.
The dolomite supplied by MidAtlantic was imported from
Spain in bulk quantity by ship, stored in a warehouse in
Norfolk, Virginia, and then placed in AGC-supplied rail cars at
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the warehouse. The rail cars would then make their way to
various factories operated by AGC. Each bulk shipment came with
a certificate of analysis from the mine. AGC paid for the
dolomite as each rail shipment was made. The written contract
between the parties specified that if AGC ever stopped buying
the dolomite “for whatever reason,” AGC would pay MidAtlantic
for any dolomite remaining in the warehouse within thirty days
of the date of the invoice. (J.A. 5).
In June 2011, AGC arranged for the shipment of 8,267.38
tons of dolomite. The dolomite was stored in Norfolk with
approximately 500 tons of dolomite still on hand from a prior
shipment. A certificate of analysis for the June 2011 shipment
was furnished to AGC. According to MidAtlantic, AGC raised no
concerns about the test results, nor did they request further
testing of the dolomite. Between June and December 2011, AGC
purchased and used at its glass manufacturing facility in
Kingsport, Tennessee approximately 4,000 tons of the dolomite
from the June 2011 shipment. In December 2011, AGC notified
MidAtlantic that there was spinel in the dolomite that exceeded
specifications. Consequently, AGC refused to pay for the
dolomite remaining in the warehouse in Norfolk.
On March 9, 2012, AGC filed a complaint in Tennessee state
court (Sullivan County) against MidAtlantic asserting a claim
for breach of contract based on nonconforming goods and a claim
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for a declaratory judgment that it was not responsible to pay
for the remaining dolomite in the warehouse in Norfolk. On
March 30, 2012, MidAtlantic filed an action in the United States
District Court for the Eastern District of Virginia seeking
nearly $800,000.00 in damages for AGC’s alleged breach of
contract.
On April 30, 2012, AGC filed a motion to dismiss pursuant
to Rule 12(b) of the Federal Rules of Civil Procedure, arguing
that the federal action should be dismissed either under the
“first-to-file” rule, or, alternatively, under Colorado River
abstention. The district court rejected the “first-to-file”
argument as inapplicable because the two actions were not
pending in separate federal courts. With respect to abstention
under Colorado River, the district court held that exceptional
circumstances were present warranting the surrendering of
federal court jurisdiction. In particular, the district court
identified three factors which, in its opinion, weighed heavily
in favor of abstention. First, the district court found that
the federal forum was inconvenient because the “the great
majority of records, evidence, and witnesses pertaining to this
case” were located in Tennessee at AGC’s glass manufacturing
facility. (J.A. 107). Next, the district court found that
abstention was necessary to avoid piecemeal litigation involving
the same parties and the same issues. Finally, the district
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court found that abstention was warranted because the federal
action was vexatious in nature, because MidAtlantic had not
“offered [any] reason why this case should be tried in federal
court rather than, or in addition to state court,” and had
“fail[ed] to provide any justification” or “even attempt to
explain why it waited until after . . . AGC had filed the state
court action to file the federal suit or, indeed, why it filed
suit at all when the claims at issue were already pending in
state court.” (J.A. 109). As a result of its conclusion that
Colorado River abstention was appropriate, the district court
dismissed the federal action without prejudice. MidAtlantic
noted a timely appeal.
II
On appeal, MidAtlantic contends that the district court
erred when it abstained from entertaining its claim for breach
of contract. We review the district court’s abstention decision
for an abuse of discretion. Chase Brexton Health Servs., Inc.
v. Maryland, 411 F.3d 457, 464 (4th Cir. 2005).
It is well-settled that “our dual system of federal and
state governments allows parallel actions to proceed to judgment
until one becomes preclusive of the other.” Id. at 462.
Indeed, “[d]espite what may appear to result in a duplication of
judicial resources, ‘[t]he rule is well recognized that the
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pendency of an action in the state [court] is no bar to
proceedings concerning the same matter in the Federal court
having jurisdiction.’” McLaughlin v. United Va. Bank, 955 F.2d
930, 934 (4th Cir. 1992) (quoting McClellan v. Carland,
217 U.S.
268, 282 (1910)). Moreover, the Supreme Court has cautioned
that federal courts are bound by a “virtually unflagging
obligation . . . to exercise the jurisdiction given them.”
Colorado
River, 424 U.S. at 817. As we noted in Chase Brexton,
“[f]ederal courts have no more right to decline the exercise of
jurisdiction which is given, than to usurp that which is
not.”
411 F.3d at 462 (citation and internal quotation marks omitted).
The Supreme Court, however, has indicated that, in certain
limited instances, “federal courts may decline to exercise their
jurisdiction, in otherwise ‘exceptional circumstances,’ where
denying a federal forum would clearly serve an important
countervailing interest.” Quackenbush v. Allstate Ins. Co., 517
U.S. 706, 716 (1996) (quoting Colorado
River, 424 U.S. at 813).
“These ‘exceptional circumstances’ inevitably relate to a policy
of avoiding unnecessary constitutional decisions and of
accommodating federal-state relations.” Chase
Brexton, 411 F.3d
at 462.
In Colorado River, the Court noted that there were
“principles unrelated to considerations of proper constitutional
adjudication and regard for federal-state relations which govern
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in situations involving the contemporaneous exercise of
concurrent jurisdictions, either by federal courts or by state
and federal courts.” 424 U.S. at 817. According to the Court,
these principles rest on considerations of “[w]ise judicial
administration, giving regard to conservation of judicial
resources and comprehensive disposition of litigation.”
Id.
(citation and internal quotation marks omitted). In general,
the pendency of an action in state court is no bar to
proceedings in federal court concerning the same matter.
Id.
As between two federal district courts, the general rule is that
duplicative litigation should be avoided.
Id. The Court
explained that the difference in approach between federal-state
concurrent jurisdiction and wholly federal concurrent
jurisdiction stemmed from the “virtually unflagging obligation
of the federal courts to exercise the jurisdiction given them.”
Id.
In assessing whether Colorado River abstention is
appropriate, we must remain mindful that this form of abstention
“is an extraordinary and narrow exception to the duty of a
District Court to adjudicate a controversy properly before it”
and that “[a]bdication of the obligation to decide cases can be
justified under [abstention] only in the exceptional
circumstances where the order to the parties to repair to the
state court would clearly serve an important countervailing
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interest.” Id. at 813 (citation and internal quotation marks
omitted). Accordingly, our task “is not to find some
substantial reason for the exercise of federal jurisdiction by
the district court; rather, the task is to ascertain whether
there exist ‘exceptional’ circumstances, the ‘clearest of
justifications,’ . . . to justify the surrender of that
jurisdiction.” Moses H. Cone Mem. Hosp. v. Mercury Const.
Corp.,
460 U.S. 1, 25-26 (1983) (citation and internal quotation
marks omitted).
The threshold question in deciding whether Colorado River
abstention is appropriate is whether there are parallel federal
and state actions. Chase Brexton, 411 F.3d at 463. Here,
MidAtlantic concedes that the federal action is parallel to the
Tennessee state court action. Because the federal action is
parallel, we now must carefully balance several factors “with
the balance heavily weighted in favor of the exercise of
jurisdiction.” Moses H.
Cone, 460 U.S. at 16. Although the
decision to dismiss a federal suit because of parallel state-
court litigation does not rest on a checklist,
id., we have
identified six factors to guide the 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
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relevant order in which the courts obtained jurisdiction and the
progress achieved in each action; (5) whether state law or
federal law provides the rule of decision on the merits; and (6)
the adequacy of the state proceeding to protect the parties’
rights. Chase Brexton, 411 F.3d at 463-64.
With respect to the first factor, whether the subject
matter of the state litigation involves res or property, the
parties agree that no res or property is involved over which the
Tennessee state court has asserted jurisdiction. Accordingly,
this factor weighs against abstention. Gannett Co., Inc. v.
Clark Const. Group, Inc., 286 F.3d 737, 747 (4th Cir. 2002).
With respect to the second factor, whether the federal
forum is an inconvenient one, the district court found that this
factor weighed in favor of abstention. According to the
district court, although AGC had some contacts with the state of
Virginia (the contract in part was performed in Virginia, AGC
was authorized to do business in Virginia, and AGC had an
appointed agent to receive service of process in Virginia), such
evidence was “clearly insufficient to outweigh the convenience
of trying a case in the jurisdiction in which nearly all of the
records and witnesses are located.” (J.A. 107).
In Colorado River, the Supreme Court identified “the
inconvenience of the federal forum” as a factor for the federal
court to consider in deciding whether to dismiss a federal court
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action because of a concurrent state proceeding. 424 U.S. at
818. The Court cited only Gulf Oil Corp. v. Gilbert,
330 U.S.
501 (1947), as support for consideration of this
factor. 424
U.S. at 818. Gulf Oil involved the doctrine of forum non
conveniens. 330 U.S. at 502. The district court had dismissed
a suit filed in the Southern District of New York.
Id. at 503.
The disputed event had occurred in Virginia, and the witnesses
and evidence were located in Virginia, some 400 miles from the
New York forum.
Id. at 503, 511. The Court noted that
compulsory process would not be available for some witnesses if
the matter remained in the New York federal court.
Id. at 511.
In Colorado River, the Court referred to the inconvenience of
trying the case in the federal district court in Denver, 300
miles from the disputed area and from the Colorado state court
with jurisdiction over that
area. 424 U.S. at 820.
The district court’s consideration of this factor is
somewhat troubling. On the one hand, the distance between
Sullivan County, Tennessee and Norfolk, Virginia is over 400
miles. Moreover, it appears, based on the scant record before
us, that many of the witnesses and much of the evidence is
located in Tennessee. Such facts support the district court’s
analysis under the authority of Gulf Oil and Colorado River. On
the other hand, it is a bit of an overstatement to say that this
case is all about conduct and witnesses in Tennessee. The
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dolomite was imported into Virginia, stored in Virginia, and
some of the dolomite at issue presumably remains in a warehouse
there. With such conflicting evidence before it, perhaps the
most prudent course for the district court would have been to
take evidence on the question, especially since the record does
not disclose which of the forums was more convenient for
MidAtlantic. In any event, we need not address whether the
district court’s evaluation of this factor amounted to an abuse
of discretion, because we can resolve this appeal by assuming
for the sake of argument that the inconvenience of the federal
forum factor favors abstention.
With respect to the third factor, the desirability of
avoiding piecemeal litigation, the district court found that the
Tennessee state court action and the federal action “will no
doubt pose serious res judicata problems depending on which
court first reaches the merits of the case.” (J.A. 108). As a
result, the district court concluded this factor favored
abstention.
However, res judicata problems are not the threat with
which Colorado River was concerned; it is a prospect inherent in
all concurrent litigation. And the Supreme Court in Colorado
River instructed federal courts that they are normally to accept
jurisdiction even in the face of concurrent state litigation.
424 U.S. at 817. The “mere potential for conflict in the
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results of adjudications, does not, without more, warrant
staying exercise of federal jurisdiction.” Id. at 816.
Accordingly, the district court erred when it determined that
this factor weighed in favor of abstention. See
Gannett, 286
F.3d at 746 (“The threat of different outcomes in these breach
of contract actions, however, is not the type of inconsistency
against which abstention is designed to protect, in that Gannett
and Clark are both parties to the Federal and State Contract
Actions; thus, res judicata effect will be given to whichever
judgment is rendered first. . . . Insofar as abstention does
not lessen the threat of inefficiency or inconsistent results
beyond those inherent in the duplicative nature of these
proceedings and there is nothing in the nature of breach of
contract actions that renders the fact of duplicative
proceedings exceptionally problematic, the district court abused
its discretion by determining that the possibility of piecemeal
litigation weighs in favor of abstention.”).
The fourth factor-the order in which jurisdiction was
obtained by the courts-does not counsel in favor of abstention
because the litigation in Tennessee state court is not further
along than the federal action. See Moses H. Cone, 460 U.S. at
21 (noting that fourth factor is not “measured exclusively by
which complaint was filed first, but rather in terms of how much
progress has been made in the two actions”).
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The fifth factor, whether state law or federal law provides
the rule of decision on the merits, and the sixth factor,
assessing the adequacy of the state proceeding to protect the
parties’ rights, do not weigh in favor of abstention. These
factors “typically are designed to justify retention of
jurisdiction where an important federal right is implicated and
state proceedings may be inadequate to protect the federal
right, . . . or where retention of jurisdiction would create
needless friction with important state policies.” Gannett, 286
F.3d at 746 (citation and internal quotation marks omitted). As
in Gannett, the fact that state law is implicated in this breach
of contract action does not militate in favor of abstention,
“particularly since both parties may find an adequate remedy in
either state or federal court.”
Id. at 747 (citation and
internal quotation marks omitted).
In our view, consideration of the Colorado River factors
leads to the inescapable conclusion that this case does not
present exceptional circumstances justifying a federal court
surrendering its jurisdiction. The only factor that arguably
weighs in favor of abstention is the inconvenience of the
federal forum factor. Yet, this factor, standing alone under
the circumstances of this case, is insufficient to uphold the
district court’s decision. Cf. AXA Corporate Solutions v.
Underwriters Reins. Corp., 347 F.3d 272, 279 (7th Cir. 2003)
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(“The court was aware that there are powerful reasons for giving
precedence to the Texas proceeding: all the parties are there,
in one capacity or another, and there is no special expertise an
Illinois federal court can bring to bear that would outweigh the
efficiencies inherent in the ability to consider the case as a
whole. Yet that cannot be enough; otherwise, the Court would
not have stressed the ‘unflagging obligation’ of the federal
courts to hear cases properly before them.”). MidAtlantic
properly filed this case in federal court, and it is entitled to
its federal forum. * Accordingly, we vacate the district court’s
*
We note that, in its opinion, the district court also
found that MidAtlantic’s filing of the federal action was
premised on an improper motive. Such finding was based on the
facts that MidAtlantic filed the federal action “almost
immediately after being served” in the Tennessee state court
action and that MidAtlantic failed to “offer any explanation as
to why” the federal action was filed. (J.A. 109-10). The
district court’s findings raise the question of whether a
party’s motivation in pursuing parallel state or federal
litigation may be a relevant factor in the exceptional
circumstances equation. In dicta, the Supreme Court has
remarked that motivation may play a role in the Colorado River
abstention determination. Moses H. Cone, 460 U.S. at 17–18
n.20. We need not decide what role an improper motive plays in
the Colorado River abstention determination, because there is no
evidence to support the district court’s finding that
MidAtlantic had an improper motive in bringing the federal
action. There is nothing sinister in the timing of the filing
of the federal action–a later complaint is always going to be
filed in the parallel litigation context, and there is nothing
extraordinary about a three-week difference. Nor can we discern
an improper motive from the forum selected by MidAtlantic.
After all, part of the contract was performed in Virginia, AGC
was authorized to do business in Virginia, AGC had an appointed
agent to receive service of process in Virginia, and some of the
(Continued)
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judgment and remand for further proceedings consistent with this
opinion.
We dispense with oral argument because the facts and legal
contentions are adequately presented in the materials before the
court and argument would not aid the decisional process.
VACATED AND REMANDED
dolomite at issue presumably remains in a warehouse there.
Finally, the circumstances in which courts have found improper
motive simply are not present here. Cf. Vulcan Chem. Techs.,
Inc. V. Barker, 297 F.3d 332, 343-44 (4th Cir. 2002) (after
applying the six Colorado River factors, the court discussed the
inherent unfairness of allowing a company that was ordered to
pay $21 million in damages in a California state court case to
vacate that decision in a subsequent federal action in
Virginia); Villa Marina Yacht Sales, Inc. v. Hatteras Yachts,
947 F.2d 529, 534 (1st Cir. 1991) (stating that the district
court did not err in counting “the motivation factor against
retaining jurisdiction” where the district court found that the
plaintiff’s decision to switch to federal court stemmed from the
plaintiff’s unsuccessful effort to obtain a preliminary
injunction in the state court); Telesco v. Telesco Fuel &
Masons’ Materials, Inc.,
765 F.2d 356, 363 (2d Cir. 1985)
(affirming the dismissal of a federal action filed by a state
court plaintiff, noting that deference to the state court is
appropriate where the same party is the plaintiff in both courts
and sues in the federal court on the same cause of action after
suffering some failures in the earlier state court action).
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