[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
U.S. COURT OF APPEALS
_____________ ELEVENTH CIRCUIT
May 6, 2004
No. 01-12714 THOMAS K. KAHN
_____________ CLERK
D.C. Docket No. 99-07677-CV-DTKH
AMBROSIA COAL AND CONSTRUCTION COMPANY,
a Pennsylvania Corporation,
Plaintiff-
Counter-defendant-
Appellant,
versus
HECTOR CARLOS PAGES MORALES,
ANA CELIA PAGES,
GREEN ISLE PARTNERS LTD., S.E.,
GREEN ISLE-GP LTD., S.E., et al.
Defendants-
Cross-defendant-
Appellees,
ISLA VERDE BEACH HOTEL & CASINO, S.E.,
ISLA VERDE BEACH HOTEL & CASINO, INC.,
Defendants-Appellees,
SMALL CORPORATE SERVICES,
LENINE STROLLO,
Defendants-Counter-
Claimants-Cross-
Claimants.
____________
Appeal from the United States District Court
for the Southern District of Florida
____________
(May 6, 2004)
Before TJOFLAT and MARCUS, Circuit Judges, and MUSGRAVE*, District
Judge.
TJOFLAT, Circuit Judge:
I.
This litigation stems from the disposition of a leasehold interest in a parcel
of real estate (the “Leasehold”) located in Isla Verde, Puerto Rico. On September
15, 1994, the plaintiff in this case, Ambrosia Coal and Construction Company
(“Ambrosia”), entered into a Settlement Agreement (the “Agreement”) with all of
the defendants except Green Isle Partners Ltd., S.E. (“Green Isle, Ltd.”) and
related entities (collectively the “Green Isle defendants”).1 The Agreement called
for defendant Hector Carlos Pagés Morales (“Pagés”) to give Ambrosia $750,000
in cash and a nonnegotiable promissory note in the principal sum of $3.25 million
*
Honorable R. Kenton Musgrave, Judge, United States Court of International Trade,
sitting by designation.
1
The Green Isle defendants include, in addition to Green Isle, Ltd., Green Isle-GP Ltd.,
S.E., Green Isle JV, S.E., ACES Green Isle GP, Inc., ACES P.R., Inc., Rahn Green Isle GP, Inc.,
Rahn Green Isle LP, Inc., Green Isle Investors GP, ACES Green Isle Investors, Inc. In this
opinion, we sometimes refer to Green Isle, Ltd. separately.
2
to be paid in full in or before September 2001. The Agreement also obligated
Pagés to convey the Leasehold to Green Isle, Ltd., in return for which he would
receive a 33% limited partnership interest in Green Isle, Ltd. and a 33% interest in
its general partner. Finally, the Agreement required Pagés to place in a trust
(created by him) half of his partnership interest in Green Isle, Ltd., with the
proviso that the income that partnership interest generated would (1) be used to
pay off the $3.25 million note and (2) provide the sole funds for paying off the
note.
As required by the Agreement, Pagés delivered $750,000 and the $3.25
million note to Ambrosia, conveyed the Leasehold to Green Isle, Ltd., received
33% interests in that limited partnership and its general partner, and placed half of
his interest in Green Isle, Ltd. in a trust he created for the benefit of Ambrosia (the
“Trust”). According to Ambrosia’s second amended complaint (the “complaint”),
in December 1995, Pagés unilaterally reduced the chances that Ambrosia would
obtain payment in full of the $3.25 million note by agreeing to amendments to the
Green Isle, Ltd. partnership agreement. First, those amendments disposed of
approximately half of the partnership interest in Green Isle, Ltd. that Pagés had
placed in the Trust, thus reducing the amount of income that would be available to
pay off the note. Second, the amendments reclassified the portion of Pagés’s
3
partnership interest remaining in the Trust—from “full limited partnership status”
to “‘Class B’ limited partnership status”—so that the amount of income that
partnership interest generated would be “de minimus.” Ambrosia discovered these
amendments to Green Isle, Ltd.’s partnership agreement in January 1998.
II.
A.
In December 1999, Ambrosia filed this lawsuit in the United States District
Court for the Southern District of Florida (the “Federal Case”). Its complaint
contains nineteen counts. The centerpiece of most of these counts is Pagés’s
conduct in agreeing to the amendments to Green Isle, Ltd.’s partnership
agreement, which disposed of approximately half of the Green Isle, Ltd. interest he
had placed in Trust and reclassified what interest remained. The counts are as
follows:
Count I. Ambrosia seeks the rescission of the Agreement based on the
reduction of the Trust’s interest in Green Isle, Ltd.
Count II. Ambrosia seeks rescission of the Agreement on the ground that
Ambrosia was fraudulently induced to enter into the Agreement.
Count III. Ambrosia seeks rescission of the Agreement based on the Puerto
4
Rican doctrine of “dolo in contrahendo.”2
Count IV. Ambrosia seeks rescission of the December 1995 amendment of
the Green Isle, Ltd. partnership agreement.
Count V. Ambrosia seeks damages against the Green Isle defendants under
a Puerto Rican fraud statute, 31 P.R. Laws Ann. § 3499.3
Count VI. Ambrosia seeks rescission of the Agreement on the ground that
two parties to the Agreement, namely Garita Hotel Corporation (“Garita Corp.”)
and Garita Hotel Limited Partnership (“Garita Ltd.”), received no consideration
for entering into the Agreement.4
Count VII. Ambrosia seeks damages for breach of the Agreement against
Pagés and other defendants designated in Ambrosia’s complaint as the “Isla Verde
2
According to a Puerto Rico district court, “Wrongful representations or omissions
which affect the consent of a contracting party are . . . known as ‘dolo in contrahendo’.” Ocaso,
S.A. Compañia De Seguros y Reaseguros, v. Puerto Rico Mar. Shipping Auth., 915 F. Supp.
1244, 1257 (D. P.R. 1996). “‘Dolo in contrahendo’ may render a contract null if the nature of the
misrepresentations is such that it is concluded that it affected the freedom of consent of one of
the contracting parties.” Id.
3
Pursuant to 31 P.R. Laws Ann. § 3499, “Any person who may have acquired in bad
faith things alienated in fraud of creditors must indemnify the latter for the losses and damages
caused to them by the alienation whenever, for any reason whatsoever, it should be impossible
for him to return them.”
4
Ambrosia’s complaint alleges that “[a]ll rights, if any, inuring to Garita Hotel
Corporation and Garita Hotel Limited Partnership from the [allegations stated in Ambrosia’s
complaint] have been assigned to or are owned by [Ambrosia].”
5
defendants,”5 each of which are parties to the Agreement.
Count VIII. Ambrosia seeks damages against Pagés and the other Isla
Verde defendants for breach of the obligation of good faith.
Count IX. Ambrosia seeks damages against the Green Isle defendants and
the Isla Verde defendants under the dolo in contrahendo doctrine.
Count X. Ambrosia seeks damages against Pagés and the other the Isla
Verde defendants for failing to pay Garita Ltd. for the Leasehold, which they
purchased in 1991.6
Count XI. Ambrosia seeks damages against the Green Isle defendants and
the Isla Verde defendants on the theory that those defendants conspired with Pagés
to defraud Ambrosia by reducing the value of the Green Isle, Ltd. interest Pagés
had placed in Trust.
Count XII. Ambrosia seeks damages against the Green Isle defendants and
the Isla Verde defendants under 31 P.R. Laws Ann. § 3375.7
5
The Isla Verde defendants include, in addition to Pagés, Isla Verde Beach Hotel &
Casino, S.E., Isla Verde Beach Hotel & Casino, Inc., and Ana Celia Pagés. Of course, in this
opinion, we sometimes refer to Pagés separately.
6
Count X is not based, in whole or in part, on Pagés December 1995 conduct in
disposing of approximately half of the Green Isle, Ltd. interest he had placed in Trust and the
reclassification of that interest.
7
Section 3375 explains, “Contracts are perfected by mere consent, and from that time
they are binding, not only with regard to the fulfilment of what has been expressly stipulated, but
also with regard to all the consequences which, according to their character, are in accordance
6
Count XIII. Ambrosia seeks damages against the Green Isle defendants for
tortiously interfering with Ambrosia’s contractual relationship with Pagés under
the Agreement.
Count XIV. Ambrosia seeks an accounting from the Green Isle defendants
and the Isla Verde defendants for the purpose of determining how much income
the Trust should have received for its interest in Green Isle, Ltd.
Count XV. Ambrosia seeks rescission of (or damages for) various “side
agreements” entered into by Pagés and individual defendants George Malizia and
Lenine Strollo.
Counts XVI-XIX. Ambrosia seeks damages against all defendants under
the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C.
§ 1964(c) for violations of 18 U.S.C. §§ 1962 (c), (a), (b), and (d), respectively.8
with good faith, use, and law.”
8
Section 1964(c) of title 18 provides, “Any person injured in his business or property by
reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United
States district court and shall recover threefold the damages he sustains and the cost of the suit,
including a reasonable attorney’s fee . . . .” Sections 1962 (a), (b), and (c), in turn, make
criminally liable those who engage in, or aid and abet another to engage in, a pattern of
racketeering activity or the collection of an unlawful debt if they also do the following: invest
income derived from the pattern of racketeering activity or the collection of an unlawful debt in
the operation of an enterprise engaged in interstate commerce (section 1962(a)); acquire or
maintain, through the pattern of racketeering activity or the collection of an unlawful debt, any
interest in or control over such an enterprise (§ 1962(b)); or conduct, or participate in the conduct
of, the affairs of such an enterprise, as a person employed by or associated with the enterprise,
through a pattern of racketeering activity or the collection of an unlawful debt (§ 1962(c)).
Section 1962(d) makes it a crime to conspire to violate sections 1962(a), (b), or (c).
7
From 1991 to 1999, the Green Isle defendants, the Isla Verde defendants, and
others allegedly formed an “enterprise” and conducted it through a pattern of
racketeering activity by engaging in mail and wire fraud, see 18 U.S.C. §§ 1341,
1343.
B.
In October 1999, after Ambrosia sent them a copy of the complaint it
intended to file (and did file in December 1999) in the United States District Court
for the Southern District of Florida, Pagés and the other Isla Verde defendants
filed a lawsuit against Ambrosia, Garita Corp., Garita Ltd., and others in the Court
of First Instance of the Commonwealth of Puerto Rico, Pagés v. Ambrosia Coal
and Constr. Co., Civil Case No. KAC 99-1548 (901) (Oct. 27, 1999) (the “Puerto
Rico Case”).9 As translated, the complaint in the Puerto Case seeks the following
seven declarations:
(i) that the Agreement is valid and is in effect;
(ii) that plaintiffs and defendants should conduct themselves pursuant
to the terms of the Agreement;
(iii) that plaintiffs have not breached their obligations under the
Agreement;
(iv) that . . . plaintiffs have complied with each and every one of their
obligations under the Agreement;
9
The other defendants Pagés sued in the Puerto Rico Case include Small Corporate
Services, Inc., and individuals Lenine Strollo, Pat Ferruccio, George Malizia, and Joseph
Seguellion. These parties are also defendants in the Federal Case.
8
(v) that plaintiffs have not committed any tortious act either in the
state of Florida or in any other jurisdiction;
(vi) that [except as stated in the Agreement], plaintiffs do not
owe . . . any of the defendants any sum of money; and
(vii) that plaintiffs are not obligated to issue any the five (5)
promissory notes as requested by [Ambrosia, Garita Corp., and Garita
Ltd.].10
C.
The Federal Case was filed in the Southern District of Florida before
Ambrosia had any notice of the filing of the Puerto Rico Case. Ambrosia received
such notice only in February 2000, when it was served with process.11 Meanwhile,
on January 19, 2000, Ambrosia served Pagés with process in the Federal Case.
The remaining defendants were served with process soon thereafter. The
defendants in the Federal Case moved the district court to dismiss Ambrosia’s
complaint on the grounds provided by Fed. R. Civ. P. 12(b)(1), (2), (3), and (6).12
On July 17, 2000, the district court entered an order directing the parties to
10
The five promissory notes mentioned here refer to notes that were allegedly given to
Garita Ltd. as partial consideration for the purchase of the Leasehold long before the parties
executed the Agreement at the center of this controversy. The Agreement provides that these
five notes would be replaced by the $3.25 million note, described above, that Pagés issued to
Ambrosia. In its complaint in the Federal Case, Ambrosia seeks rescission of the Agreement
and, therefore, requests that the five notes be reissued to restore Garita Ltd. to the status quo ante.
11
The record does not indicate when Ambrosia was served with process. Its brief to us
states that service occurred on February 7, 2000.
12
Some defendants answered the complaint and asserted as an affirmative defense that
the complaint failed to state a claim for relief, provided by Fed. R. Civ. P. 12(b)(6).
9
submit briefs on the question of whether the court should abstain from exercising
its jurisdiction in the Federal Case pending the completion of the litigation in the
Puerto Rico Case.13 On March 29, 2001, the district court held a hearing on the
defendant’s motions to dismiss and on the question of whether the court should
abstain. On April 11, 2001, the court entered the order that is the subject of this
appeal.
After reciting the standard for determining whether the allegations of a
complaint are sufficient to withstand a Rule 12(b)(6) motion to dismiss, the court
declined, albeit implicitly, to determine whether any of the nineteen counts of
Ambrosia’s complaint stated a claim upon which relief can be granted.14 The court
concluded that Ambrosia’s RICO claims gave it federal question jurisdiction. It
then took up the issue of abstention.
The court acknowledged that “[a]bstention from the exercise of federal
jurisdiction is the exception not the rule.” Nevertheless, drawing on the Supreme
Court’s opinion in Colorado River Water Conservation District v. United States,
13
None of the defendants initially moved the court to abstain; we, therefore, conclude
that the district court acted on its own initiative in ordering the parties to brief this issue.
14
The court also declined to pass on the merits of some of the defendants’ motions to
dismiss for lack of jurisdiction over their person. See Fed. R. Civ. P. 12(b)(2). Our reading of
the court’s order gives us the impression that the court felt that personal jurisdiction existed with
respect to all defendants.
10
424 U.S. 800, 96 S. Ct. 1236, 47 L. Ed. 2d 483 (1976), for guidance, the court
decided to abstain to allow the Puerto Rico Case to proceed to final judgment.
Ambrosia now appeals the district court’s decision. We have jurisdiction under 28
U.S.C. § 1291.15
III.
Colorado River addresses the circumstances in which federal courts should
abstain from exercising their jurisdiction because a parallel lawsuit is proceeding
in one or more state courts. In Colorado River, the United States brought suit in
the United States District for the District of Colorado.16
The suit, against some 1,000 water users, sought declaration of the
Government’s rights to waters in certain rivers and their tributaries
located in [Colorado]. In the suit, the Government asserted reserved
rights on its own behalf and on behalf of certain Indian tribes, as well
as rights based on state law. . . . Shortly after the federal suit was
commenced, one of the defendants in that suit filed an application in
the state court [for the area where the disputed water was located],
seeking an order directing service of process on the United States in
order to make it a party to proceedings in [that area] for the purpose
15
The Green Isle defendants, but no other defendants, question whether we have
jurisdiction to entertain this appeal. There can be no doubt that we have jurisdiction.
Abstention orders staying litigation under the Colorado River doctrine are final and, therefore,
appealable under 28 U.S.C. § 1291. Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp.,
460 U.S. 1, 9-10, 103 S. Ct. 927, 933-34, 74 L. Ed. 2d 765 (1983). Even if they are not final,
they are appealable under the Cohen collateral order doctrine. Id. at 11, 103 S. Ct. at 934. (citing
Cohen v. Beneficial Loan Corp., 337 U.S. 541, 69 S. Ct. 1221, 93 L. Ed. 1528 (1949)).
16
Pursuant to 28 U.S.C. § 1345, district courts have original jurisdiction over all civil
actions commenced by United States unless other federal statute provides otherwise.
11
of adjudicating all of the Government’s claims, both state and federal.
Id. at 805-06, 96 S. Ct. at 1240. The United States was served pursuant to 43
U.S.C. § 666, a federal statute known as the McCarran Amendment.17 Id. at 806,
96 S. Ct. at 1240. Several defendants and intervenors in the federal suit then
moved the district court to dismiss the case on the ground that “the McCarran
Amendment terminated jurisdiction of federal courts to adjudicate federal water
rights.” Id., 96 S. Ct. at 1241. Without reaching the jurisdictional question, the
district court granted the motion, holding “that the doctrine of abstention required
deference to the proceedings in [Colorado].” Id. The Supreme Court agreed.18
The Court found that abstention was not appropriate under the traditional
abstention doctrines, which involve “considerations of proper constitutional
adjudication and regard for federal-state relations . . . .”19 Id. at 817, 96 S. Ct. at
17
The McCarran Amendment permits litigants “to join the United States as a defendant
in any suit . . . for the adjudication of rights to the use of water of a river system or other
source . . . where it appears that the United States is the owner of or is in the process of acquiring
water rights by appropriation under State law . . . and the United States is a necessary party to
such suit.” 43 U.S.C. § 666(a).
18
The Supreme Court also addressed the argument that the McCarran Amendment limits
the jurisdiction of federal courts. Ultimately, the Court concluded that “the McCarran
Amendment in no way diminished federal-district-court jurisdiction under § 1345.” Colorado
River, 242 U.S. at 809, 96 S. Ct. at 1242. As this part of the Court’s holding has no bearing on
our abstention analysis, we make no further mention of it here.
19
In Colorado River, 424 U.S. at 814-16, 96 S. Ct. at 1244-46, the Court identified the
following circumstances in which the traditional abstention doctrines apply: (a) where cases
presenting a federal constitutional issue might be mooted or presented in a different posture by a
12
1246. Nevertheless, the Supreme Court acknowledged that principles other than
these traditional abstention doctrines might permit federal courts to abstain from
exercising otherwise proper jurisdiction “in situations involving the
contemporaneous exercise of concurrent jurisdictions . . . .” Id. “These
principles[,]” the Court explained, “rest on considerations of wise judicial
administration, giving regard to conservation of judicial resources and
comprehensive disposition of litigation.” Id. (quotation marks and alterations
omitted).
For example, when multiple federal district courts might contemporaneously
litigate concurrent jurisdictions, although “no precise rule has evolved, the general
principle is to avoid duplicative litigation.” Id.
This general principle does not apply, however, when the duplicative
litigation arises between state and federal courts. As the Supreme Court
recognized, “[g]enerally, as between state and federal courts, the rule is that the
pendency of an action in the state court is no bar to proceedings concerning the
state court determination of pertinent state law; (b) where there have been presented difficult
questions of state law bearing on policy problems of substantial public import and whose
importance transcends the result in the case then at bar; and (c) where, absent bad faith,
harassment, or a patently invalid state statute, federal jurisdiction has been invoked for the
purpose of restraining (1) state criminal proceedings, (2) state nuisance proceedings antecedent to
a criminal prosecution, which are directed at obtaining the closure of places exhibiting obscene
films, or (3) collection of state taxes. There is no contention that any of these categories of the
abstention doctrine apply to the case at bar.
13
same matter in the Federal court having jurisdiction . . . .” Id. (marks and citations
omitted). Federal courts have a “virtually unflagging obligation . . . to exercise the
jurisdiction given them.” Id. A policy permitting federal courts to yield
jurisdiction to state courts cavalierly would betray this obligation. Thus, federal
courts can abstain to avoid duplicative litigation with state courts only in
“exceptional” circumstances. Id. at 818, 96 S. Ct. at 1246.
Without fashioning a bright-line test for determining when the existence
concurrent state and federal cases warrants federal court abstention, the Supreme
Court discussed several circumstances that district courts may consider. It noted
that “the court first assuming jurisdiction over property may exercise that
jurisdiction to the exclusion of other courts.” Id. It further remarked that a federal
court may consider “the inconvenience of the federal forum, the desirability of
avoiding piecemeal litigation, and the order in which jurisdiction was obtained by
the concurrent forums.” Id., 96 S. Ct. at 1247 (citations omitted). Finally, the
Supreme Court cautioned that “[o]nly the clearest of justifications will warrant
dismissal” of the federal action. Id. at 819, 96 S. Ct. at 1247.
With these considerations in mind, the Court affirmed the district court’s
14
judgment dismissing the federal complaint in Colorado River.20 Id. at 821, 96 S.
Ct. 1248. The single most important factor in the Court’s decision to permit
abstention was that McCarran Amendment evinced a “clear federal policy” of
“avoid[ing the] piecemeal adjudication of water rights in a river system.” Id. at
819, 96 S. Ct. at 1247; see also Moses H. Cone Memorial Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 16, 103 S. Ct. 927, 937, 74 L. Ed. 2d 765 (1983)
(stating that this consideration was “[b]y far the most important factor” in deciding
Colorado River). The Court likened this policy to that of “avoiding the generation
of additional litigation through permitting inconsistent dispositions of property.”
Colorado River, 424 U.S. at 819, 96 S. Ct. at 1247. The Court emphasized that
“[t]his concern is heightened with respect to water rights, the relationships among
which are highly interdependent.” Id. It further reasserted its earlier recognition
“that actions seeking the allocation of water essentially involve the disposition of
property and are best conducted in unified proceedings.” Id. In the Court’s view,
the McCarran Amendment “bespeaks a policy that recognizes the availability of
comprehensive state systems for adjudication of water rights as the means for
achieving these goals.” Id. Colorado state law, the Court explained, provided “a
20
The Supreme Court reversed the Tenth Circuit’s judgment, which would have held that
abstention was inappropriate.
15
single continuous proceeding for water rights adjudication which antedated the
suit in District Court.” Id.
Beyond its important conclusion about the McCarren Amendment’s policy
objectives—particularly, of avoiding additional litigation and utilizing
comprehensive state systems for the adjudication of water rights—the Supreme
Court’s decision that abstention was proper was also influenced by:
(a) the apparent absence of any proceedings in the District Court,
other than the filing of the complaint, prior to the motion to dismiss,
(b) the extensive involvement of state water rights occasioned by this
suit naming 1,000 defendants, (c) the 300-mile distance between the
District Court in Denver and the [state] court in [the region containing
the disputed rivers and tributaries], and (d) the existing participation
by the Government in [state cases involving rights to waters in other
regions of Colorado].
Id. at 820, 96 S. Ct. 1248.
IV.
This appeal presents two issues: first, whether distinctions between the
Federal Case and the Puerto Rico Case foreclose any application of the Colorado
River principle as a threshold matter; and second, assuming that Colorado River is
applicable, whether the district court abused its discretion by abstaining.
A.
Ambrosia argues that Colorado River abstention is permissible only when
16
the relevant federal and state cases share identical parties, issues, and requests for
relief. Ambrosia contends that the absence of any of these elements precludes
application of Colorado River doctrine as a threshold matter. Ambrosia is wrong.
Such formalistic requirements would fly in the face of the Supreme Court’s clear
efforts to fashion a flexible and holistic test for applying for the Colorado River
abstention principle. See Moses H. Cone, 460 U.S. at 21, 103 S. Ct. at 940 (“[T]he
Colorado River factors [are] to be applied in a pragmatic, flexible manner with a
view to the realities of the case at hand.”). Under Ambrosia’s proposed rule, only
litigants bereft of imagination would ever face the possibility of an unwanted
abstention order, as virtually all cases could be framed to include additional issues
or parties. See Interstate Material Corp. v. City of Chicago, 847 F.2d 1285, 1288
(7th Cir. 1988) (“The addition of the federal defendants in the federal suit by itself
does not destroy the parallel nature of the case. If it did, parties could avoid the
doctrine of Colorado River by the simple expedient of naming additional
parties.”). On the other hand, litigants clearly should not invoke Colorado River
analysis to seek abstention based on wholly unrelated cases. Thus, we hold that
Colorado River analysis is applicable as a threshold matter when federal and state
proceedings involve substantially the same parties and substantially the same
17
issues.21
The Federal Case and the Puerto Rico Case involve substantially the same
parties, although some of the defendants in the Federal Case—in particular, the
Green Isle defendants—are not parties in the Puerto Rico Case. The two cases
involve substantially the same issues as they relate to the validity of the
Agreement and Pagés’s performance of his obligations thereunder. Whether the
remaining issues the cases present are substantially the same, however, is
problematic. We say this because the complaints in the two cases are
quintessential shotgun pleadings.22 In the Federal Case, the district court has not
21
Many of our sister circuits and one of our district courts have arrived at the same
conclusion. See, e.g., United States v. City of Las Cruces, 289 F.3d 1170, 1182 (10th Cir. 2002)
(“[S]tate and federal proceedings are sufficiently parallel if substantially the same parties litigate
substantially the same issues.” (marks and citation omitted)); AAR Int’l, Inc. v. Nimelias Enter.
S.A., 250 F.3d 510, 518 (7th Cir. 2001) (“Suits are parallel if substantially the same parties are
litigating substantially the same issues simultaneously in two fora.” (marks and citation
omitted)); Romine v. Compuserve Corp., 160 F.3d 337, 340 (6th Cir. 1998) (“Exact parallelism
is not required: it is enough if the two proceedings are substantially similar.”); Marcus v.
Township of Abington, 38 F.3d 1367, 1378 (3rd Cir. 1994) (“Although federal and state actions
need not be wholly identical in order for a district court to deem them ‘parallel,’ the two actions
will not be deemed parallel unless they are substantially similar.”); New Beckley Mining Corp. v.
Int’l Union, United Mine Workers of America, 946 F.2d 1072, 1073 (4th Cir. 1991) (“Suits are
parallel if substantially the same parties litigate substantially the same issues in different
forums.”); Bosdorf v. Beach, 79 F. Supp. 2d 1337, 1344 n.13 (S.D. Fla. 1999) (“[E]xact
parallelism is not required. It is sufficient if the two proceedings are substantially similar.”
(marks and citation omitted)).
22
After being amended twice, Ambrosia’s complaint asserts nineteen counts. Many
adopt the material allegations of the preceding counts or paragraphs such that some counts appear
to state more than one cause of action. Several counts appear to overlap; at least one seems to
involve a transaction that is entirely distinct from the Agreement and the conduct that followed it.
“This court has addressed the topic of shotgun pleadings on numerous occasions in the past,
18
stripped Ambrosia’s complaint to its bare bones. That it was faced with a shotgun
pleading may account for the court’s failure to rule on the defendants’ Rule
12(b)(6) motions prior to addressing the question of whether to abstain.23 Putting
aside the pleading problem, it is apparent that the Federal Case contains some
claims—in particular, the RICO counts—that are not present in the Puerto Rico
Case. Nonetheless, we will assume for purposes of our Colorado River discussion
that the cases are sufficiently similar to render the question of whether the district
court should have abstained a genuine issue.
B.
1.
“The doctrine of abstention, under which a District Court may decline to
exercise or postpone the exercise of its jurisdiction, is an extraordinary and narrow
exception to the duty of a District Court to adjudicate a controversy properly
before it.” Colorado River. 424 U.S. at 813, 96 S. Ct. at 1244 (quoting County of
often at great length and always with great dismay.” Strategic Income Fund, LLC v. Spear,
Leeds & Kellogg Corp., 305 F.3d 1293, 1296 n.9 (11th Cir. 2002). As we have explained,
“Experience teaches that, unless cases are pled clearly and precisely, issues are not joined,
discovery is not controlled, the trial court’s docket becomes unmanageable, the litigants suffer,
and society loses confidence in the court’s ability to administer justice.” Andersen v. District Bd.
of Trustees of Central Florida Community College, 77 F.3d 364, 367 (11th Cir. 1996).
23
We point out in passing that some of the defendants’ motions to dismiss are also
shotgun pleadings. They too need to be pared down before the court disposes of them.
19
Allegheny v. Frank Mashuda Co., 360 U.S. 185, 188-89, 79 S. Ct. 1060, 1063, 3
L. Ed. 2d 1163 (1959)). Although the Supreme Court has acknowledged several
distinct abstention doctrines,24 only the doctrine developed in Colorado River is
germane to this case. Considerations supporting the other abstention doctrines are
“weightier” than the considerations supporting Colorado River abstention. Id. at
818, 96 S. Ct. at 1246. Therefore, Colorado River abstention is permissible in
fewer circumstances than are the other abstention doctrines, which themselves
carve out only slender exceptions to the robust duty to exercise jurisdiction.
In interpreting Colorado River and its progeny, this court has catalogued six
factors that must be weighed in analyzing the permissibility of abstention, namely:
(1) whether one of the courts has assumed jurisdiction over property, (2) the
inconvenience of the federal forum, (3) the potential for piecemeal litigation, (4)
the order in which the fora obtained jurisdiction, (5) whether state or federal law
will be applied, and (6) the adequacy of the state court to protect the parties’
rights. Am. Bankers Ins. Co. of Fla. v. First State Ins. Co., 891 F.2d 882, 884
(11th Cir. 1990). Additionally, in Moses H. Cone, 460 U.S. at 17 n.20, 103 S. Ct.
at 937, the Supreme Court remarked that “the vexatious or reactive nature of either
the federal or the state litigation may influence the decision whether to defer to a
24
See supra note 19.
20
parallel state litigation under Colorado River.” Without question, the Supreme
Court has also emphasized the importance of considering whether the concurrent
cases involve a federal statute that evinces a policy favoring abstention. Colorado
River, 424 U.S. at 819, 96 S. Ct. at 1247 (noting that the “most important” factor
counseling in favor of abstention in that case was the policy underlying the
McCarran Amendment).
With regard to weighing these considerations, the Supreme Court explained
that “[n]o one factor is necessarily determinative,” Colorado River, 424 U.S. at
818, 96 S. Ct. at 1247, and that “[t]he weight to be given to any one factor may
vary greatly from case to case,” Moses H. Cone, 460 U.S. at 16, 103 S. Ct. at 937.
Furthermore, the factors must be considered flexibly and pragmatically, not as a
“mechanical checklist.” Id. Finally, the abstention inquiry must be “heavily
weighted in favor of the exercise of jurisdiction.” Id.
We review a district court’s order abstaining from the exercise of
jurisdiction on Colorado River grounds for an abuse of discretion. TranSouth Fin.
Corp. v. Bell, 149 F.3d 1292, 1294 (11th Cir. 1998). A district court abuses its
discretion if it misapplies the law, Delta Air Lines, Inc. v. Air Line Pilots Ass’n,
Int’l, 238 F.3d 1300, 1308 (11th Cir. 2001), or makes findings of fact that are
clearly erroneous, United States v. Jordan, 316 F.3d 1215, 1249 (11th Cir. 2003).
21
2.
After carefully weighing the Colorado River factors and extending, as we
must, a heavy bias in favor of exercising jurisdiction, we conclude that the district
court abused its discretion by abstaining in this case.
Although it acknowledged that neither it nor the Puerto Rico court assumed
jurisdiction over property, the district court intimated that the first Colorado River
factor favors abstention because the cases at issue involve the use and
development of land in Puerto Rico. This conclusion rests upon a clear
misapplication of Colorado River. The first factor looks not to the location of the
res, but the jurisdiction of the court. Because the relevant cases are not
proceedings in rem, neither court has jurisdiction over property, and the first
Colorado River factor does not favor abstention. Although the Supreme Court
noted that “actions seeking the allocation of water essentially involve the
disposition of property,” Colorado River, 424 U.S. at 819, 96 S. Ct. at 1247, it has
made no similar comparison to actions, like the one at bar, primarily seeking
damages and the equitable rescission of a contract.
The district court said that the second factor, which addresses the
convenience of the federal forum, favors abstention simply because “the plaintiff
is from Pennsylvania, and the majority of the defendants are residents of Puerto
22
Rico.” This factor should focus primarily on the physical proximity of the federal
forum to the evidence and witnesses, Am. Bankers, 891 F.2d at 885, but the
district court made no findings concerning the location of evidence and nonparty
witnesses. In fact, Ambrosia indicates that a substantial quantity of the relevant
evidence is located in Florida, the federal forum. Ambrosia alleges, for instance,
that most of the historical documents relating to the hotel and casino built on the
Leasehold are kept in Florida by Green Isle, Ltd., the Leasehold’s present owner.
Even if we could ignore the whereabouts of the documentary evidence, we would
find it difficult to understand how Ambrosia’s location in Pennsylvania makes
Florida less convenient than Puerto Rico. Finally, defendant Malizia resides in
Florida and many of the Green Isle defendants, including Green Isle, Ltd., are
organized and maintaining registered offices in Florida. Without additional
findings, we see no good reason to assume that the role of these defendants is
inferior to the combined roles of the defendants who reside in Puerto Rico. In
sum, the district court’s meager assertion about the residence of the parties sheds
little light on the convenience of the fora as that factor should be applied.
The third factor concerns the avoidance of piecemeal litigation. This factor
does not militate in favor of abstention here. The district court rested its contrary
conclusion on the assertion that inconsistent results or piecemeal litigation would
23
likely result simply because both cases deal with the validity of the Agreement.
On the district court’s misguided reasoning, the third Colorado River factor would
seemingly support abstention in every federal case that has a parallel state case. If
this mistaken approach were in fact the rule, defendants could always escape
federal courts simply by filing parallel state lawsuits. Thus, as it is properly
understood, Colorado River’s factor concerning the avoidance of piecemeal
litigation does not favor abstention unless the circumstances enveloping those
cases will likely lead to piecemeal litigation that is abnormally excessive or
deleterious. In Colorado River, for example, the Federal Government sued “some
1,000 water users,” seeking a declaration of the Government’s rights to waters in
certain rivers and their tributaries. 424 U.S. at 805, 96 S. Ct. at 1240. The single
most important factor in the Supreme Court’s decision to permit abstention was
that the federal statute upon which the lawsuit revolved evinced a clear federal
policy of avoiding the piecemeal adjudication of water rights in a river system. Id.
at 819, 96 S. Ct. at 1247. In stark contrast to Colorado River, this case neither
turns on a federal statute designed with the intent of avoiding piecemeal litigation
nor involves claims against 1,000 parties. Furthermore, as we note above, this
case boils down to a dispute over the validity of a contract that raises none of
Colorado River’s property-specific concerns. Although the dual proceedings in
24
this instance will likely result in some unremarkable repetition of efforts and
possibly some piece-by-piece decision-making, there is no indication that
piecemeal litigation poses any greater waste or danger here than it does in the vast
majority federal cases with concurrent state counterparts. As we have emphasized,
federal courts are almost invariably obligated to exercise otherwise valid
jurisdiction over such cases. See supra Part III.
A proper application of the fourth factor, namely the order in which the
parties obtained jurisdiction, belies the district court’s conclusion that this factor
supports abstention. The Supreme Court clarified that, despite somewhat
misleading phrasing in Colorado River, this factor “should not be measured
exclusively by which complaint was filed first, but rather in terms of how much
progress has been made in the two actions.” Moses H. Cone, 460 U.S. at 21, 103
S. Ct. at 940. Although the Puerto Rico Case was filed first, the parties ostensibly
concede that the federal case has progressed further. Some of the defendants
contend that we should ignore this fact because (1) the parties agreed to stay
proceedings in Puerto Rico pending the resolution of certain pretrial motions in
this Federal Case, and (2) the parties agreed that discovery conducted in the
Federal Case would be transferrable to the Puerto Rico Case when the stay
terminated. While these defendants might succeed in explaining why the federal
25
case is further along, they certainly do not succeed in showing that the relative
progress of the cases tends to justify abstention.
The fifth factor considers whether state or federal law applies. The district
court found that this factor supports abstention and was, indeed, the most
important consideration in its decision to abstain. The court reasoned that Puerto
Rico law applies because the Agreement so specifies. In the first place, this
conclusion is highly suspect because the validity of the Agreement is a core issue
in both cases. Assuming the applicability of the Agreement’s choice-of-law-
provision preassumes the validity of the Agreement, thereby thrusting the cart
before the horse.25 Secondly, the district court failed to comprehend that the
“question for [abstention] purposes is not which state law applies, but rather
whether federal or state law applies.” Am. Bankers, 891 F.2d at 886. Since
Ambrosia has asserted RICO claims, we must assume at present that this case
travels on both state and federal law. Significantly, the district court did not find
that this action involves complex questions of state law that a state court might be
best suited to resolve. See Noonan South, Inc. v. County of Volusia, 841 F.2d
380, 382 (11th Cir. 1988) (explaining that the application of Florida law alone in a
25
We are in no position to determine which body of law applies to this controversy if the
Agreement is invalid. Ambrosia does not allege where the Agreement was executed. The
document contains signatures notarized, at least, in Puerto Rico, Ohio, and Pennsylvania.
26
federal diversity case did not favor Colorado River abstention where no “complex
questions of state law” were at issue). Thus, no aspect of this case appears to
render the presence of state law, alongside federal claims, an arrow in the
defendants’ abstention quiver.
The district court suggested that the fifth factor favors abstention because
the Puerto Rico court would protect the rights of all the parties.26 The district
court, however, made no finding that it is incapable of doing the same, and there is
no force to any of the parties’ arguments suggesting as much. Consequently, the
sixth factor is neutral with regard to abstention. This factor will only weigh in
favor or against abstention when one of the fora is inadequate to protect a party’s
rights. Id. at 383.
Not surprisingly, Ambrosia and the defendants accuse one another of filing
vexatious and reactive lawsuits. The district court did not consider these
allegations in its order, and we must, therefore, assume that they did not influence
its decision to abstain.
Finally, it bears emphasis that no federal law implicated in the Federal Case
26
In that it was faced with a shotgun complaint in the Federal Case, and the complaint in
the Puerto Rico Case was a model of ambiguity, we are at a loss as to how the district court could
conclude, in its order of April 11, 2001 abstention order, “that Puerto Rico would protect the
rights of all parties.”
27
asserts a policy favoring resort to the Puerto Rico court.
In our view, the Colorado River factors, taken individually and together, do
not weigh strongly in favor of abstention. The district court reached its decision to
abstain by misapplying most or all of those factors and by failing to appreciate the
gravity of its duty to exercise jurisdiction. Its decision therefore constituted an
abuse of discretion.
V.
For the foregoing reasons, the order of the district court is reversed and the
case is remanded for further proceedings.
SO ORDERED.
28