Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ared-2_05-cv-00328/USCOURTS-ared-2_05-cv-00328-0/pdf.json

Nature of Suit Code: 380
Nature of Suit: Other Personal Property Damage
Cause of Action: 28:1332 Diversity-Property Damage

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IN THE UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF ARKANSAS

EASTERN DIVISION

RABO AGRIFINANCE, INC.

And AG ACCEPTANCE CORPORATION PLAINTIFF

V. 2:05CV00328 JMM

FIRST BANK OF THE DELTA, N.A. DEFENDANT

ORDER

Pending is Defendant’s motion to stay proceedings pending resolution of a state court action.

For the reasons set forth herein, Plaintiffs’ motion to stay is DENIED.

Plaintiffs Rabo Agrifinance, Inc. and Ag Acceptance Corporation (hereinafter “Rabo”) filed

a conversion action against the Defendant First Bank of the Delta (“First Bank”) on December 19,

2005. Rabo alleges that as a result of a transaction between Rabo and Richmond Farming Rabo had

a security interest in certain government crop disaster payments which were owed to Richmond

Farming. However, Richmond Farming allegedly assigned the crop disaster payments to First Bank

in an attempt to defeat the prior interest of Rabo in the payments. 

Prior to filing the conversion action in this Court, Plaintiff also filed suit in the Circuit Court

of Jefferson County, Arkansas against Richmond Farming and others. The state court action deals

with a failed loan transaction between Rabo (formerly Ag Acceptance Corporation or “AAC”) and

Richmond Farming. Rabo alleges that Richmond Farming is in default on two promissory notes

which are secured by security agreements entitling Rabo to government agricultural subsidy, among

other things. Richmond Farming subsequently filed a counterclaim in the state court action against

Rabo, AAC, and First Bank of the Delta. In the counterclaim, Richmond Farming alleges that Rabo

breached the loan contracts between the parties, engaged in fraud, deceit, and various other state law

causes of action. As a result, Richmond Farming claims that Rabo does not have a perfected

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security interest in the government disaster payment and that First Bank has a perfected security

interest in the payment pursuant to an Assignment of Payment executed by Richmond Farming. The

promissory notes and security instruments executed between Rabo and Richmond Farming are the

same instruments at issue in this federal action. 

Defendant First Bank argues that the state court action filed by Rabo is a parallel court

proceeding which involves the same parties and same issues as this federal case. Indeed, the state

court action involves Rabo as the plaintiff, Richmond Farming as the defendant and counterplaintiff, and First Bank of the Delta as a counter-defendant. Defendant contends that a

determination of the issues in the state court proceeding will determine the liabilities of the parties

in this case and requests the Court stay this proceeding pending the outcome of the state court action.

Rabo objects and argues that the two actions are not parallel proceedings. Rabo alleges that Rabo

and First Bank have no claims against each other in the state court action and, therefore, the state

court action lacks identity of the issues and identical claims for relief. 

Federal courts have a “virtually unflagging obligation ··· to exercise the jurisdiction given

them.” Colorado River Water Conserv. Dist. v. United States, 424 U.S. 800, 817 (1976). 

“Abdication of the obligation to decide cases can be justified under [the abstention] doctrine[s] only

in the exceptional circumstances where the order to the parties to repair to the State court would

clearly serve an important countervailing interest.” Federated Rural Elec. Ins. Corp. v. Arkansas

Elec. Coops., 48 F. 3d 294, 297 (8th Cir. 1995)(citing Moses H. Cone Memorial Hosp. v. Mercury

Constr., 460 U.S. 1, 14 (1983)). “The policies underlying Colorado River abstention are

considerations of wise judicial administration, giving regard to conservation of judicial resources

and comprehensive disposition of litigation.” Federated Rural Elec. Ins. Corp., 48 F. 3d at 297-

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298. The determination of the existence of “exceptional circumstances” requires an evaluation

of several factors as follows:

(1) whether there is a res over which one court has established jurisdiction,

(2) the inconvenience of the federal forum,

(3) whether maintaining separate actions may result in piecemeal litigation, unless the

relevant law would require piecemeal litigation and the federal court issue is easily severed,

(4) which case has priority-not necessarily which case was filed first but a greater emphasis

on the relative progress made in the cases,

(5) whether state or federal law controls, especially favoring the exercise of jurisdiction

where federal law controls, and

(6) the adequacy of the state forum to protect the federal plaintiff's rights.

Id. These factors are not intended to be exhaustive, but are to be pragmatically applied in order to

advance the “clear federal policy” of avoiding piecemeal adjudication. And, in examining these

factors “the balance [is] heavily weighted in favor of the exercise of jurisdiction.” Id. 

The initial determination in this case is whether the state and federal cases are parallel. Suits

are parallel if “substantially the same parties litigate substantially the same issues in different

forums.” Scottsdale Ins. Co. v. Detco Ind., Inc., 426 F.3d 994 (8th Cir. 2005)(internal quotations

omitted). The Court finds that the pending state and federal actions are not parallel. The federal

court action involves Rabo seeking to recover Richmond Farming’s crop disaster payments assigned

and paid to First Bank by way of a conversion cause of action. The state court action involves the

determination as to whether Richmond Farming defaulted on the loans made by Rabo and whether

Rabo or First Bank is entitled to Richmond Farming’s crop disaster payments, i.e. the collateral

securing the defaulted loans. There is no claim made by Rabo against First Bank in the state court

action. Although the issues in the two proceedings may depend on some of the same facts, this does

not “compel a conclusion that the suits are parallel.” Scottsdale Ins. Co. v. Detco Industries, Inc.,

426 F.3d 994, 997 (8th Cir. 2005). 

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Assuming the prerequisite of “parallel” actions is satisfied, the Court finds that the Colorado

River factor analysis favors the exercise of jurisdiction. First, there is no res over which one court

has exercised jurisdiction. See, McKnight v. Bank of America, 2006 WL 151916 ( E. D. Ark. 2006).

Second, the federal and the state forums are equally convenient for the parties. Third, the issuance

of a stay in the federal action will do nothing to avoid piecemeal litigation. Fourth, the federal suit

has progressed further than the state case. In the instant case, the discovery process has been

concluded and is set for trial in April, 2003. According to the parties, the state case has not been

set for trial and discovery has not yet concluded. Fifth, although the federal action involves only

state law issues, “[t]here is nothing about this case which makes it unusual from similar diversity

cases handled by federal courts everyday.” Mountain Pure, LLC v. Turner Holdings, LLC, 439 F.3d

920, 927 (8th Cir. 2006).

Based upon this analysis, the Court finds that exceptional circumstances do not exist which

would justify the Court staying this action in favor of the state court action. Accordingly, Plaintiffs’

motion to stay (Docket # 15) is DENIED. 

IT IS SO ORDERED this 5th day of February, 2007.

_______________________________

James M. Moody

United States District Judge

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