Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-00583/USCOURTS-caed-2_05-cv-00583-8/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Contract Dispute

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UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

FRU-CON CONSTRUCTION

CORPORATION,

NO. CIV. S-05-583 LKK/GGH

Plaintiff,

v.

SACRAMENTO MUNICIPAL O R D E R

UTILITY DISTRICT, a municipal

utility district; and UTILITY

ENGINEERING CORPORATION, a

Texas corporation,

Defendants.

 /

On February 28, 2005, the Sacramento Municipal Utility 

District (“SMUD”) filed an action in the Superior Court of the

State of California. It named as defendants Fru-Con Construction

Corp. (“Fru-Con”), a foreign corporation, and A. Teichert & Son,

Inc. (“Teichert”), a California corporation. Fru-Con removed and,

on May 26, 2005, this court remanded.

 On March 24, 2005, Fru-Con filed this diversity action

against SMUD, alleging various state law based claims including

breach of contract and negligence. SMUD contends that this action

Case 2:05-cv-00583-LKK -GGH Document 95 Filed 08/11/05 Page 1 of 9
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1 If Colorado River deference is found to be appropriate, a

district court must stay rather than dismiss an action so that the

federal forum remains open if the state forum proves inadequate.

Coopers & Lybrand v. Sun-Diamond Growers of Calif., 912 F.2d 1135,

1137 (9th Cir. 1990); Attwood v. Mendocino Coast District Hospital,

886 F.2d 241 (9th Cir. 1988).

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should be stayed in favor of its first-filed state court action

pursuant to Colorado River Water Conservation Dist v. United

States, 424 U.S. 800 (1976). I decide the motion based on the

papers and pleadings filed herein and after oral argument. 

 I.

STANDARDS

Abstention from the exercise of federal jurisdiction is a

narrow exception to the general rule that federal courts must

exercise the jurisdiction given them. Colorado River Water

Conservation District, 424 U.S. at 813. In cases where state

and federal courts contemporaneously exercise jurisdiction,

considerations of wise judicial administration including

conservation of judicial resources and comprehensive disposition

of litigation may lead a court to dismiss a federal action. Id. 

This so-called "Colorado River abstention" is not an actual form

of "abstention," but rather a form of deference to state court

jurisdiction. Coopers & Lybrand v. Sun-Diamond Growers of

Calif., 912 F.2d 1135, 1137 (9th Cir. 1990).1

The court must examine six factors to determine whether a

stay is appropriate under Colorado River: (1) whether either

court has assumed jurisdiction over a res;(2) the convenience of

the forum; (3) the desirability of avoiding piecemeal

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litigation; (4) the chronological order in which the state and

federal courts obtained jurisdiction; (5) whether state or

federal law controls; and (6) whether the state proceedings are

adequate to protect the parties' rights. Moses H. Cone Memorial

Hospital v. Mercury Construction Corp., 460 U.S. 1, 25-26

(1983); Colorado River Conservation District, 424 U.S. at 818. 

The Ninth Circuit has identified an additional factor: whether

the suit in federal court is an attempt to forum shop or to

avoid an adverse ruling in the state court. Nakash v. Marciano,

882 F.2d 1411, 1417 (9th Cir. 1989). These factors "are not to

be applied in a checklist fashion[,] [r]ather they are to be

applied pragmatically and flexibly as part of a balancing

process." American Int'l Underwriters (Phillipines), Inc. v.

Continental Ins. Co., 843 F.2d 1253, 1257 (9th Cir. 1988). 

 II.

ANALYSIS

Although a checklist process is not appropriate, each

factor must be considered. Below, I undertake that task.

A. PIECEMEAL LITIGATION

Generally, “the pendency of an action in the state court is

no bar to proceedings concerning the same matter in the Federal

court having jurisdiction.” Colorado River, 424 U.S. at 817.

Nonetheless, when different tribunals consider the same issue,

the likelihood increases that efforts will be duplicated and

different outcomes may be reached. These are the very vice of

piecemeal litigation. American Int’l Underwriters, 843 F.2d at

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1258. Nonetheless, the court must determine whether exceptional

circumstances exist that justify a special concern about

piecemeal litigation. Travelers Indemnity Co. v. Madonna, 914

F.2d 1364, 1369. 

SMUD first asserts that, absent a stay of this action, the

state and federal courts could rule differently on the viability

of certain claims, discovery obligations, and summary

adjudication of the issues. Again this mere possibility has been

held not to be a “special concern” over piecemeal litigation.

The Circuit has said that the fact that a state and federal

court might resolve a matter differently does not amount to such

a special concern, at least in the absence of a “vastly more

comprehensive state action that can adjudicate the rights of

many parties or the disposition of much property.” Travelers,

914 F.2d at 1369. 

During oral argument, SMUD alerted the court of the

likelihood that the state action may very well develop into a

more complex action with many parties. According to SMUD, and

as conceded by Fru-Con, multiple subcontractors have served SMUD

with stop notices, thus making it very likely that these

subcontractors will be joined in the pending state action, thus

making it a “vastly more comprehensive” state action. 

Accordingly, this factor weighs in favor of staying this action.

B. ORDER IN WHICH JURISDICTION WAS OBTAINED

SMUD notes that the state suit was filed first. That fact,

in itself, does not weigh heavily in the movant’s favor. In

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2 SMUD served Fru-Con with a set of document requests but no

exchange of documents or further discovery took place before FruCon removed the action to federal court. See Ex. A to Becker Decl.

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considering the order in which jurisdiction was obtained,

“priority 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 Memorial Hospital,

460 U.S. at 21. Accordingly, courts have found this factor to

be significant only where the state court has made multiple

rulings and the parties have engaged in significant discovery. 

See American Int’l Underwriters, 843 F.2d at 1258 (finding

substantive progress had been made after seven motions and

substantial discovery within two-and-a-half years of litigation

in state court); Nakash, 882 F.2d at 1413 (finding significant

progress after 70 hearings and nearly 100 depositions within

five years of state litigation before the federal suit was

filed). 

This federal action was filed within one month of the state

action, and as Fru-Con argues no substantial progress has

occurred in either action.2 SMUD protests that proceedings in

the state action were halted by Fru-Con’s removal. While I find

no case dealing with such circumstances, it appears to this

court that in making a pragmatic judgment of the propriety of a

stay, Fru-Con ought not to be able to take advantage of its

improvident removal. Accordingly, I conclude that this factor

bears somewhat in favor of SMUD’s motion.

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C. WHETHER STATE OR FEDERAL LAW CONTROLS

The parties agree that both the state and federal action

involve pure issues of state law. Fru-Con’s Opp’n at 8; SMUD’s

Repl. at 6. “The ‘presence of state-law issues may weigh in

favor of [a stay]’ only ‘in some rare circumstances.’” 

Travelers, 914 F.2d at 1370 (quoting and citing Cone, 460 U.S.

at 26). No such rare circumstances exist where the case deals

with “routine issues of state law –- misrepresentation, breach

of fiduciary duty, and breach of contract –- which the District

court is fully capable of deciding . . . .” Id. Such appears to

be the case here. Therefore, SMUD cannot show that this factor

weighs in its favor.

D. FORUM SHOPPING

The Colorado River analysis in the Ninth Circuit includes 

whether the federal action is an attempt to forum shop or to

avoid an adverse ruling in the state court. Nakash, 882 F.2d at

1417. 

As noted above, SMUD’s reliance on Fru-Con’s improvident

removal bears somewhat in its favor. On the other hand, as

noted in the remand order, this court concluded that Fru-Con’s

removal was not frivolous or made in bad faith. See Sacramento

Municipal Utilities District v. FRU-CON Constr. Corp., et al.,

No. Civ. S-05-617, slip op. at 11 (May 26, 2005). 

SMUD contends that Fru-Con’s filing here within one month

of the state proceeding amounts to forum shopping because it

ignored Fru-Con’s ability to cross-complain in that forum.

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3 Indeed, from all that appears, the decision to file in this

court is based on the very reason diversity jurisdiction exists,

a fear of local bias in favor of a popular local institution.

Whether such fear is justified is quite beside the point. 

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Indeed, as noted, Fru-Con did just that upon removal. 

“Forum shopping weighs in favor of a stay when the party

opposing the stay seeks to avoid adverse rulings made by the

state court or to gain a tactical advantage from the application

of federal court rules.” Travelers, 914 F.2d at 1371; and see

Nakash, 882 F.2d at 1417 (finding that plaintiff’s filing in

federal court after three and one-half years was based on

dissatisfaction with state proceedings and amounted to forum

shopping); Amer. Int’l Underwriters, 843 F.2d at 1259 (forum

shopping factor weighed in favor of a stay when plaintiff who

filed in federal court after two-and-a-half years was trying to

take advantage of the Federal Rules of Evidence). Here, there

is nothing to indicate that Fru-Con filed in federal court to

avoid adverse rulings in state court or to take advantage of a

federal rule inapplicable in state court.3 Nonetheless, the fact

that the state proceedings now includes a cross-complaint

apparently alleging the very same matters involved in the

instant suit, and that that was the result of Fru-Con’s own

conduct, raises some question about its motive. Again then,

this factor may be thought to lend some weight to staying this

action. 

The parties concede that the remainder of the Colorado

River factors, jurisdiction over a res, convenience of the

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forum, and the adequacy of the state proceedings, are either

irrelevant or neutral in this case. 

To determine whether a stay is warranted, the court must

balance the Colorado River factors “with the balance heavily

weighted in favor of the exercise of jurisdiction.” Travelers,

914 F.2d at 1372 (quoting Cone, 460 U.S. at 16). Here, some

factors warrant special consideration. In that regard, the 

concern that the state action will likely become more

comprehensive and involve many parties seems a serious practical

consideration. Fru-Con, however, points out that such an

expansion is presently only a possibility and thus should not

deprive it of a federal forum.

Given the presumption against Colorado River stays, I

conclude that SMUD’s motion cannot be granted at this time. 

Travelers, 914 F.2d at 1369. However, in light of the concern

regarding piecemeal litigation, this order is without prejudice

to renewal should the scope of the state court action change

significantly.

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III.

CONCLUSION

For all the foregoing reasons, the court hereby ORDERS that

defendant’s motion to stay this case is DENIED without

prejudice.

IT IS SO ORDERED.

DATED: August 10, 2005.

/s/Lawrence K. Karlton

LAWRENCE K. KARLTON

SENIOR JUDGE

UNITED STATES DISTRICT COURT

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