In re: Landlocked v.

F I L E D
United States Court of Appeals
Tenth Circuit

DEC 29 2000
PUBLISH

UNITED STATES COURT OF APPEALS PATRICK FISHER
Clerk
FOR THE TENTH CIRCUIT

In re:

VIKTOR KOZENY; LANDLOCKED
SHIPPING COMPANY; PEAK No. 00-1465
HOUSE CORPORATION; (D.C. No. 00-B-383)
TURNSTAR LIMITED, (D. Colo.)

Petitioners.

ORDER

Before TACHA and BRORBY , Circuit Judges.

This matter comes before the court on petitioners’ petition for a writ of

mandamus. The request for mandamus arises from a Colorado district court case

in which the plaintiffs allege that Viktor Kozeny and corporations either owned or

controlled by him engaged in an extensive pattern of fraudulent conduct while

entering into investment and custodian contracts that resulted in plaintiffs’ loss of

more than $140 million. See Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v.

Kozeny, 115 F. Supp. 2d 1243 (D. Colo. 2000) [hereinafter Kozeny II].
 I. Facts and prior proceedings

The operative contracts are expressly governed by English law and

contained a London forum selection clause. In December 1999, plaintiffs brought

an action in London against Mr. Kozeny and two of his corporations pursuant to

English common law. The London court entered a “freezing” order for Mr.

Kozeny’s assets in December 1999, specifically naming property located in

Aspen, Colorado, that plaintiffs alleged was obtained, furnished, and/or

maintained with funds Mr. Kozeny fraudulently diverted from them.

The three corporate defendants in the Colorado case are either the title

owners of the real property (a house worth $30 million in Aspen), the managers of

that real property, or the title owners of personal property located inside the

Aspen house. Plaintiffs brought the action at bar under the Colorado Organized

Crime Control Act (COCCA), Colo. Rev. Stat. §§ 18-17-101 to -109, and then

amended their complaint to add federal RICO and securities act claims, although

the district court stated that the plaintiffs’ real objective was to maintain the

status quo of the Colorado assets in the event they prevailed in the London case.

See Pet. Ex. F. at 3.

In June 2000, the Colorado district court entered preliminary injunctions

pursuant to § 18-17-106(6). Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v.

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Kozeny, 115 F. Supp. 2d 1231 (D. Colo. 2000). The injunctions prohibit the sale

or transfer of the Colorado assets but allow defendants to lease the Aspen house

and use the proceeds from the lease to maintain it. Defendants have appealed

from that order to this court in a separate appeal.

In June 2000, Mr. Kozeny filed applications to stay the London proceeding

pending resolution of the Colorado case on the grounds that defending in two

jurisdictions would be burdensome and Colorado was a more convenient forum.

The London court denied the application and found that London is a convenient

forum. Immediately after the London court’s ruling, plaintiffs moved to stay the

Colorado action pending the disposition of the London proceedings. After a

hearing, the district court concluded that it had inherent authority to grant the

stay. In a careful analysis of the exercise of this power, the court recognized that

the mere fact that there are parallel proceedings in a foreign jurisdiction does not

by itself constitute an exceptional circumstance justifying a stay. Kozeny II, 115

F. Supp. 2d at 1246. The court then analyzed six factors that other circuits have

developed in determining the propriety of a stay when there are foreign parallel

proceedings and concluded that all of them weighed in favor of staying the

Colorado proceedings pending the outcome of the London case. Id. at 1247-49.

Defendants appealed from this order, stating in the docketing statement that the

basis of their appeal was 28 U.S.C. § 1651 (the “all writs” statute); that they were

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going to petition for mandamus; and that they had appealed to preserve their

rights. We ordered briefing on why the appeal should not be dismissed for lack of

a final, appealable order. Plaintiffs then moved for dismissal for lack of appellate

jurisdiction, arguing that the order was not final under United States v. Section 17

Township 23 North, Range 22 East of the IBM, Delaware County, Oklahoma, 40

F.3d 320 (10th Cir. 1994). Defendants did not respond to the motion. Defendants

then filed this petition for mandamus relief.

II. Discussion

Defendants seek an order mandating the district court to lift the stay and

proceed to determine the case before it. They first argue that the district court

had no authority to order a stay because COCCA requires that “[i]n any action

brought under this section, the district court shall proceed as soon as practicable

to the hearing and determination.” § 18-17-106(5). They next argue that, if the

court had authority to issue a stay, it abused its discretion by doing so.

A. Whether the stay order is a final, appealable order. As a threshold

matter, this court must be satisfied that mandamus, as opposed to appeal, is the

proper vehicle for review of the stay order. Defendants have not addressed this

issue in their petition. In State Farm Mutual Automobile Insurance Co. v.

Scholes, 601 F.2d 1151 (10th Cir. 1979), the court noted that, because a district

court’s decision to defer proceedings is generally committed to the court’s

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discretion and is not a final order for purposes of appeal, mandamus is the only

available means to review the grant or refusal of a stay of proceedings. Id. at

1153-54. In 1983, however, the Supreme Court in Moses H. Cone Memorial

Hospital v. Mercury Construction Corp., 460 U.S. 1, 10-11 (1983), held that when

a federal court has predicated a stay order on the exceptional circumstances test

enunciated in Colorado River Water Conservation District v. United States, 424

U.S. 800 (1976), it may be immediately appealable either as a final order or under

the collateral order exception to the finality rule defined in Cohen v. Beneficial

Industrial Loan Corp., 337 U.S. 541 (1949). If the court has before it both an

appeal and a petition for mandamus, as in this case, and the order is properly

reviewable by way of appeal, the court must review the stay order through appeal

rather than mandamus. Moses H. Cone, 460 U.S. at 8 n.6 (“[A] court of appeals

has no occasion to engage in extraordinary review by mandamus . . . when it can

exercise the same review by a contemporaneous ordinary appeal.”).

Although Moses H. Cone was factually based on parallel federal and state

court proceedings, we believe that the same principles govern parallel federal and

international court proceedings. Thus, if the stay rests on a conclusion that the

federal and international actions involve identical claims and parties and the

resolution of the international suit would thereby end the litigation in the federal

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forum because of the res judicata effect of the international judgment, the stay is

a final order for purposes of appeal. Cf. id. at 10.

Citing Colorado River, which was an abstention case, the district court

noted that federal courts have shown reluctance to decline jurisdiction in the face

of their obligation to do so. Kozeny II, 115 F. Supp. 2d at 1246. The court found

that the Colorado and London cases were “substantially similar” in that they both

alleged fraud in the sale of privatization vouchers and options arising out of

agreements between the plaintiffs and Mr. Kozeny. Id. at 1247. The court had

previously preliminarily found that the three corporate defendants not named in

the London action were “shell corporations controlled by Mr. Kozeny through

which he shelters fraudulently obtained assets.” Id. Thus, even though the

corporate defendants were not named in the London action, because they were so

connected to Mr. Kozeny, the court believed they were sufficiently related to the

action for the stay to be fair. The court found that a stay would promote judicial

efficiency by reducing duplicative discovery and that “simultaneous adjudications

regarding identical facts and highly similar legal issues creates the risk of

inconsistent judgments.” Id. at 1247-48. In this regard, the case is factually

similar to the one in Colorado River. The court recognized, however, that

plaintiffs were requesting a type of relief in Colorado not available in London, id.

at 1248, and that, although the central issue of fraud would be finally decided, the

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parties would return to Colorado to litigate the remaining issues and causes of

action, id. at 1249. Defendants concede that “[t]he COCCA, RICO, and federal

securities claims have not and cannot be brought in the London actions.” Pet. at

8. Thus, termination of the London case will not necessarily end the litigation in

Colorado, and it appears that the stay order is therefore not final under Moses H.

Cone. See Boushel v. Toro Co., 985 F.2d 406, 408 (8th Cir. 1993) (holding that

because resolution of foreign action would not effectively end federal action even

though the actions “overlap[ped] to a large degree,” stay order was not final,

appealable order under Moses H. Cone).

B. Whether the stay order is an appealable collateral order. Our

inquiry does not end here, however, for we must next answer the question whether

the stay is an appealable collateral order. To qualify as a reviewable collateral

order under Cohen, “the order must conclusively determine the disputed question,

resolve an important issue completely separate from the merits of the action, and

be effectively unreviewable on appeal from a final judgment.” Moses H. Cone,

460 U.S. at 11 (quotation omitted). If the stay order “amounts to a refusal to

adjudicate the merits,” it “plainly presents an important issue separate from the

merits,” thereby satisfying the second prong of the Cohen doctrine. Id. In

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Moses H. Cone, because the stay order effectively would result in the defendants

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losing their federal forum, the Court found that all three prongs were met. See id.

In 1994 the Supreme Court held that the Cohen doctrine requirements are

stringent and apply to only certain classes of cases. Digital Equip. Corp. v.

Desktop Direct, Inc., 511 U.S. 863, 868 (1994). In Section 17 Township 23

North, our court applied Digital Equipment to stay orders and concluded that, in

determining whether the second prong of Cohen is met, the reviewing court must

“focus on the right at stake and the loss to the [party seeking to reverse a stay] if

review is denied.” 40 F.3d at 322. The defendants in Section 17 Township 23

North sought to immediately defend a federal forfeiture action rather than to wait

until criminal proceedings against them in state court were concluded. This court

held that “this is not the type of ‘important’ right which the Supreme Court

contemplated as requiring immediate review in Digital,” and therefore did not

“come within the collateral order doctrine.” Id. We hold that the case before us

is factually closer to Section 17 Township 23 North than it is to Moses H. Cone

precisely because the stay order does not foreclose the defendants’ opportunity to

have the controversy settled in the federal forum--it simply delays it. Further, the

district court did not expressly rely on the Colorado River doctrine as the basis

for its stay, which was a key factor in Moses H. Cone. See 460 U.S. at 28 (“[T]he

decision to invoke Colorado River necessarily contemplates that the federal court

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will have nothing further to do in resolving any substantive part of the case,

whether it stays or dismisses.”).

In collecting cases that deal with appellate jurisdiction over stay orders, the

Third Circuit noted that the distinction between the cases that find a stay order to

be final and appealable and those that do not is whether the essential elements of

the Colorado River doctrine were present--parallel parties, parallel claims, and a

“realistic possibility that the federal action would thereafter be precluded.”

Michelson v. Citicorp Nat’l Servs., Inc., 138 F.3d 508, 515 (3d Cir. 1998). If the

stay merely delays the federal litigation, courts have generally held the stay orders

not to be appealable. See id. Because this stay order is neither a final, appealable

order under Moses H. Cone nor an appealable collateral order under Section 17

Township 23 North, we hold that the review of the district court’s stay order is

properly before us on mandamus.

C. Whether the stay order is prohibited by COCCA. In their brief

supporting the petition for mandamus, defendants strenuously argue the merits of

the injunction, see Pet. at 18-28, which is the subject of a separate appeal. Their

major thrust is that a court’s inherent power to order stays is interdicted by the

COCCA’s requirement that the court proceed on the merits as soon as practicable.

The district court disagreed, concluding that (1) the COCCA does not absolutely

bar a stay; (2) § 18-17-106(5) reflects a legislative intent to afford courts

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discretion to assess each circumstance; and (3) staying the proceedings actually

satisfies the Act’s speedy trial requirement because “the London case likely will

proceed to trial a good deal sooner than the Colorado action.” Kozeny II, 115 F.

Supp. 2d at 1249. Contrary to defendants’ assertion that the district court stayed

the Colorado action “indefinitely,” the court stayed it only until resolution of the

London proceedings and subject to the court’s continuing jurisdiction to approve

and supervise the lease and/or sale of the Aspen house and the disbursements of

the lease proceeds. Defendants cite no case law or other authority to support their

proposition that COCCA absolutely proscribes a federal court’s inherent

discretion to order a stay. See Landis v. N. Am. Co., 299 U.S. 248, 254 (1936)

(“the power to stay proceedings is incidental to the power inherent in every court

to control the disposition of the causes on its docket with economy of time and

effort for itself, for counsel, and for litigants”). We conclude that COCCA does

not interdict the court’s authority to order a stay, but that its requirement that a

court proceed to the merits “as soon as practicable” is a factor that the court

should consider in deciding whether to grant the stay. We further hold that the

district court properly considered COCCA’s requirements in determining whether

to grant the stay.

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 D. Whether defendants have established a clear and indisputable

right to proceed in federal court. Defendants’ alternate contention that, if the

district court had authority to grant the stay, it abused its discretion such that

mandamus is proper, is also poorly supported in fact and law. Defendants cite no

controlling Tenth Circuit law and did not challenge the district court’s use of

Boushel, 985 F.2d 406, as the proper basis for its analysis. We note, however,

that defendants’ burden is to show that the district court so grossly abused its

discretion that their right to proceed is “clear and indisputable”--not simply that

the court may have erred in balancing the factors it considered. Will v. Calvert

Fire Ins. Co., 437 U.S. 655, 662 (1978).

In reversing the Seventh Circuit, the Court in Will first focused on the

nature of mandamus relief as opposed to direct appeal. Id. at 661. “Whereas a

simple showing of error may suffice to obtain a reversal on direct appeal, to issue

a writ of mandamus under such circumstances would undermine the settled

limitations upon the power of an appellate court to review interlocutory orders.”

Id. (quotation omitted). The court then noted that a federal court is under no

compulsion to exercise jurisdiction over a case that may be settled more

expeditiously in another court. Id. at 662-63. Whether to do so was a decision

“largely committed to the carefully considered judgment of the district court.” Id.

at 663 (quotation and citation omitted). The Court stated that “[n]o one can

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seriously contend that a busy federal trial judge, confronted both with competing

demands on his time for matters properly within his jurisdiction and with

inevitable scheduling difficulties . . . is not entrusted with a wide latitude in

setting his own calendar.” Id. at 665. Another important factor was that, because

the district court had not dismissed the action, the court’s decision was not final,

and the plaintiff could urge reconsideration of the decision to defer. Id. When a

matter is committed to the discretion of a court, it cannot be said that the

petitioner’s right to a particular result is “clear and indisputable,” thus the Court

held that the court’s decision to stay the action “ought not to be overridden by a

writ of mandamus.” Id. at 665-66.

The district court gave cogent reasons for granting a limited stay,

considering all the relevant factors and balancing them against defendants’ right

to immediately proceed to trial. Cf. Michelson, 138 F.3d at 518 (stating that

mandamus may be proper when “an indefinite stay entered for no supportable

reason” has been issued). Because defendants have not established that their right

to immediately proceed is clear and indisputable under Will, we deny their

petition for mandamus.

Entered for the Court
PATRICK FISHER, Clerk

By:
Keith Nelson
Deputy Clerk

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