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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