August 14, 2007
Two recent abstention cases of note:
First, yesterday in Amerisourcebergen Corporation v. Roden, the 9th Circuit reversed the district court's decision to abstain under Younger v. Harris. The case provides a thoughtful discussion of Younger and parallel proceedings. It begins:
We explore once again the sometimes complex relationship between state and federal civil proceedings when parties in the midst of litigation on one side of the divide file factually related proceedings on the other. Understandably concerned with judicial economy and respect for ongoing state proceedings, the district court dismissed the federal suit under the Younger abstention doctrine.
In a second recent abstention case involving parallel proceedings, a district court decided to stay litigation in favor of the state proceedings. Craggs Construction Co. v. Federal Insurance Co., 2007 WL 1452938 (May 15, 2007). Ordinarily, the Colorado River doctrine, requiring "exceptional circumstances" and providing a multifactor balancing test, severely limits the circumstances in which a federal court can abstain in favor of state proceedings. When reading Craggs, I was surprised at the following statement that the Colorado River test doesn't apply when the court is only asked to stay proceedings pending the resolution of the state case:
This six-factor balancing test is only to be applied when a federal court is considering whether to dismiss an action (through abstention from the exercise of federal jurisdiction) because of parallel state court litigation, however. Dismissal is not the action this Court is taking through granting a stay in this case. As Plaintiff points out, if Plaintiff receives a defense verdict on [its] claims then Defendant will owe no damages to Plaintiff and no trial in this federal action will be necessary. Staying this case is simply a matter of using judicial resources (both state and federal) most appropriately. As the present suit could be mooted by the outcome in the related state trial, this Court finds it more than proper to grant a stay at this time.
This district court, like the one reversed in Amerisourcebergen above, was trying to craft a solution to the problem created by duplicative litigation and the Supreme Court's adherence to the principle that federal courts have a virtually unflagging obligation to exercise conferred jurisdiction. This distinction, though, seems to have been tried and rejected in the Supreme Court long ago, in Moses H. Cone Memorial Hospital v. Mercury Construction Co :
The Hospital argues that the Colorado River test is somehow inapplicable because in this case the District Court merely stayed the federal litigation rather than dismissing the suit outright, as in Colorado River. It contends that Mercury remains free to seek to reopen the federal suit on a showing that the state suit has failed to adjudicate its rights, and that a stay is less onerous than a dismissal. We have already rejected this distinction....
We have no occasion in this case to decide whether a dismissal or a stay should ordinarily be the preferred course of action when a district court properly finds that Colorado River counsels in favor of deferring to a parallel state-court suit. We can say, however, that a stay is as much a refusal to exercise federal jurisdiction as a dismissal. When a district court decides to dismiss or stay under Colorado River, it presumably concludes that the parallel state-court litigation will be an adequate vehicle for the complete and prompt resolution of the issues between the parties. If there is any substantial doubt as to this, it would be a serious abuse of discretion to grant the stay or dismissal at all. Thus, the decision to invoke Colorado River necessarily contemplates that the federal court will have nothing further to do in resolving any substantive part of the case, whether it stays or dismisses. [Also see Wilton v. Seven Falls 515 U.S. 277, 281 (describing the test articulated in Colorado River and Moses H. Cone as requiring courts to point to "exceptional circumstances to justify staying or dismissing federal proceedings."]
A quick citation check on Colorado River reveals just how frequently this situation arises. Appeals courts continue to follow the Supreme Court guidance that only truly "exceptional circumstances" justify abstention in favor of parallel state proceedings under Colorado River. It's natural to assume that identical simultaneous lawsuits constitute exceptional circumstances, but that is not so -- instead, the existence of such lawsuits is the trigger for the exceptional-circumstances test. (In fact, the Fifth Circuit has never approved a stay or dismissal under Colorado River abstention). Concurring in the Ninth Circuit's decision yesterday, Judge Ferguson aptly noted that the solution must come from the legislature:
The majority is correct that current abstention doctrine mandates a reversal, but this case presents a problem that requires a larger solution. Although the Colorado River doctrine does not provide a basis for the dismissal below, its underlying principle of wise judicial administration counsels in favor of permitting a stay. The first-to-file rule, crafted in the interest of judicial economy, allows a federal district court to stay a proceeding where another matter involving the same issues and parties is already pending before a different district court. Similarly, where the first suit was filed in a state court and the second suit is a diversity jurisdiction case with no federal question at issue, I believe the federal court should maintain the discretion to stay its proceeding pending the outcome in the state forum. Absent legislation to that effect, however, I must concur.
Also see Martin H. Redish, Intersystemic Redundancy and Federal Court Power: Proposing a Zero Tolerance Solution to the Duplicative Litigation Problem, 75 Notre Dame Law Review 1347 (May 2000). Quotations have been edited for readability -- RR