United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
January 26, 2006
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 05-60405
Summary Calendar
SUSIE PIERCE STEWART,
Plaintiff - Appellee,
v.
WESTERN HERITAGE INSURANCE COMPANY,
Defendant - Appellant.
Appeal from the United States District Court
for the Southern District of Mississippi
Before HIGGINBOTHAM, BENAVIDES, and DENNIS, Circuit Judges.
BENAVIDES, Circuit Judge:
The parties ask this Court to determine whether the district
court correctly stayed this lawsuit pending the outcome of a
related state court proceeding. We hold that the lower court
erred, and therefore REVERSE and REMAND.
I. FACTUAL AND PROCEDURAL BACKGROUND
The present case concerns a previous lawsuit in Mississippi
state court. The plaintiffs in that suit claimed that Boardwalk
Lounge, Inc. was responsible for the wrongful death of one of its
patrons, Ryan Yates. Susie Pierce Stewart (“Appellee”) is
Boardwalk’s sole shareholder, officer, and registered agent.
Boardwalk was insured by Western Heritage Insurance Company
(“Appellant”), who claims to have denied any obligation to defend
or indemnify Boardwalk. No one defended the lawsuit and the
plaintiffs took a default judgment of $1.4 million. Shortly
thereafter, Boardwalk and the Appellee filed for bankruptcy.
On October 23, 2003, the Appellee filed this lawsuit alleging
breach of insurance contract and bad faith in the United States
District Court for the Southern District of Mississippi. The case
proceeded in federal court with the entry of a case management
order followed by a motion for summary judgment filed by the
Appellant. The discovery deadline expired in October 2004, and the
court set a trial date of February 14, 2005.
Meanwhile, on July 6, 2004, the trustee for Boardwalk filed
suit in the Circuit Court of Hinds County, Mississippi. The
complaint named the Appellant, the Appellee, Phillip Dunn (an
insurance agent), and others who were later dismissed from the
suit. The state complaint mirrors the federal suit except that it
also includes claims against the Appellee and Appellant for breach
of fiduciary duty and claims against Dunn. The Appellant removed
the case on grounds of improper joinder. The trustee moved to
remand.
Following the commencement of the trustee’s suit, the Appellee
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filed two separate motions to voluntarily dismiss this action. The
Appellant opposed both. The Appellee also moved to join Dunn as a
party.1 Additionally, the Appellant filed a motion to join
Boardwalk’s trustee as a necessary party to this case. The
magistrate judge granted that motion and ordered the Appellee to
serve the trustee with process. The trustee, however, has never
been joined and is not a party to this action.2 The court set a
hearing on all pending motions and a pretrial conference for early
February 2005. At the hearing, the court stayed the case pending
a ruling on the remand motion in the trustee’s suit. The two cases
were before different judges.
On March 22, 2005, the trustee’s suit was remanded on the
grounds that Dunn had been properly joined. On March 31, 2005, the
court in this case, acting sua sponte, entered an order that
“terminated” all pending motions and stayed the case pending the
resolution of the trustee’s suit in Mississippi state court. The
Appellant appeals that order.
II. DISCUSSION
We review a district court’s decision to stay a case pending
1
If Dunn is joined, it would defeat diversity jurisdiction
as both the Appellee and Dunn hail from Mississippi. See
Cornhill Ins. PLC, v. Valsamis, Inc., 106 F.3d 80, 84 (5th Cir.
1997).
2
The Appellee states that it never had an opportunity to
join the trustee because the district court stayed the case.
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the outcome of parallel proceedings in state court for abuse of
discretion. Kelly Inv., Inc. v. Continental Common Corp., 315 F.3d
494, 497 (5th Cir. 2002). If the decision rests on an
interpretation of law, our review is de novo. Id.
A district court’s decision to enter a permanent stay is
governed by Colorado River Water Conservatory District v. United
States, 424 U.S. 800, 813 (1976). Colorado River applies when
suits are parallel, having the same parties and the same issues.
Diamond Offshore Co. v. A&B Builders, Inc., 302 F.3d 531, 540 (5th
Cir. 2002).3 Under Colorado River, a district court may abstain
from a case only under “exceptional circumstances.” Colorado
River, 424 U.S. at 813 (describing abstention as “an extraordinary
and narrow exception to the duty of a District Court to adjudicate
a controversy properly before it”).
In deciding whether “exceptional circumstances” exist, the
Supreme Court identified six relevant factors:
1) assumption by either court of jurisdiction over a res,
2) relative inconvenience of the forums, 3) avoidance of
piecemeal litigation, 4) the order in which jurisdiction
was obtained by the concurrent forums, 5) to what extent
federal law provides the rules of decision on the merits,
and 6) the adequacy of the state proceedings in
protecting the rights of the party invoking federal
jurisdiction.
Kelly Inv., 315 F.3d at 497; see also Wilton v. Seven Falls Co.,
3
If the suits are not parallel, the federal court must
exercise jurisdiction. Republicbank Dallas, N.A. v. McIntosh,
828 F.2d 1120, 1121 (5th Cir. 1987).
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515 U.S. 277, 285–86 (1995). We do not apply these factors
mechanically, but carefully balance them “with the balance heavily
weighted in favor of the exercise of jurisdiction.” Moses H. Cone
Mem’l Hosp. v. Mercury Constr. Corp., 469 U.S. 1, 16 (1983). The
balancing is done on a case-by-case basis. Id.
The district court did not apply the Colorado River test when
it stayed this case. Therefore, we review the factors for the
first time on appeal. We assume, but do not decide, that the cases
are parallel.
A. Res at Issue
Neither the state nor federal court has assumed jurisdiction
over any res in this case. We have rejected the contention that
the absence of this factor is “a neutral item, of no weight in the
scales.” Evanston Ins. Co. v. Jimco, Inc., 844 F.2d 1185, 1191
(5th Cir. 1988).4 This factor supports exercising federal
jurisdiction. Murphy, 168 F.3d at 738.
B. Inconvenience Between Forums
When courts are in the same geographic location, the
4
This holding in Evanston Insurance conflicts with the
holding in Bank One, N.A. v. Boyd, 288 F.3d 181, 185 (5th Cir.
2002) (“The first factor is not relevant to the present case as
neither the state nor federal district court have assumed
jurisdiction over any res or property.”) Because Evanston
Insurance predated Bank One, the former controls our analysis.
E.g., Southard v. Texas Bd. of Criminal Justice, 114 F.3d 539,
549 (5th Cir.1997). The first factor, therefore, is relevant
even if no res exists in the case. Murphy v. Uncle Ben’s, Inc.,
168 F.3d 734, 738 (5th Cir. 1999).
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inconvenience factor weighs against abstention. Id. at 738. Both
the state and federal courthouses hearing these two cases are
located in Jackson, Mississippi. This factor, therefore, supports
exercising federal jurisdiction.
C. Avoidance of Piecemeal Litigation
The pendency of an action in state court does not bar a
federal court from considering the same matter. Bank One, N.A.,
288 F.3d at 185. While duplicative litigation is permitted,
Colorado River prevents “piecemeal litigation, and the concomitant
danger of inconsistent rulings with respect to a piece of
property.” Black Sea Inv. v. United Heritage Corp., 204 F.3d 647,
650–51. Again, no property is at issue in this case. The
potential, however, does exist for some piecemeal litigating as the
state court is the only forum hearing the breach of fiduciary duty
claims and claims against Dunn. For the remaining issues, a plea
of res judicata after the completion of one suit could eliminate
the problem of inconsistent judgments. Kelly Inv., 315 F.3d at
498. Nonetheless, as the litigation presently exists, the third
factor favors abstention.5
D. The Order in Which Jurisdiction Was Obtained
The inquiry under this factor is “how much progress has been
5
While the current captions suggest that different parties
exist, the record is clear that the magistrate intended to have
the trustee joined and the Appellee is attempting to join Dunn.
These efforts and the ability of the trustee to file a cross-
claim could moot these piecemeal characteristics.
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made in the two actions.” Murphy, 168 F.3d at 738. The federal
lawsuit progressed through an entire case management order, had a
summary judgment motion pending at the time of the stay, and a
trial date. With regard to the state proceeding, it is undisputed
that no trial date exists, and the record suggests that little, if
any, discovery has taken place. We have suggested that this factor
only favors abstention when the federal case has not proceeded past
the filing of the complaint. Id. Here, the case has clearly
progressed further. For that reason, this factor favors federal
jurisdiction.
E. The Extent Federal Law Governs the Case
“[T]he presence of state law issues weighs in favor of
surrender only in rare circumstances.” Black Sea Inv., 204 F.3d at
651 (reversing stay in case where state law governed). This case
involves only issues of state law as it is being heard by the court
under its diversity jurisdiction. Nonetheless, the Appellee has
failed to show that “rare circumstances” exist. Therefore, this
factor is “at most neutral.” Id.
F. Adequacy of State Proceedings
The sixth factor is either a neutral factor or one that weighs
against abstention. Id. The Appellant does not argue that the
state court would not adequately adjudicate the case. Under Black
Sea, therefore, this is a neutral factor.
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IV. CONCLUSION
With the exception of the factor considering “piecemeal
litigation,” all of the Colorado River factors weigh against
abstention or remain neutral. Given that we must balance these in
favor of the exercise of jurisdiction, abstention in this case is
inappropriate. The facts do not overcome the “extraordinary and
narrow exception” to the “virtually unflagging obligation of the
federal courts to exercise the jurisdiction given them.” Colorado
River, 424 U.S. at 814, 817. Because abstention is prohibited by
Colorado River, we need not address the Appellant’s argument that
the federal and state cases are not parallel.
For the reasons above, the district court abused its
discretion in staying this case. Therefore, we REVERSE and REMAND
for proceedings consistent with this opinion.
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