Order Form (01/2005)

United States District Court, Northern District of Illinois

Name of Assigned Judge

or Magistrate Judge

Ronald A. Guzman Sitting Judge if Other

than Assigned Judge

CASE NUMBER 12 C 3055 DATE 9/17/2012

CASE

TITLE

Legal Helpers Debt Resolution, L.L.C. v. CDS Client Services, Inc. et al. 

DOCKET ENTRY TEXT

For the reasons stated below, the motion to stay [31] is granted. This action is stayed pending resolution of

the California Action and is placed on the Court’s suspense docket. The parties shall, within five days of any

relevant order, inform this Court of proceedings in the California court which will affect the stay issued by

this Court. Answers by CDS and GCS in the instant action are due within 14 days of the stay being lifted. 

O[ For further details see text below.] Docketing to mail notices.

STATEMENT

 CDS Client Services, Inc. (“CDS”) moves to stay the instant action in favor of a first-filed California

state court action. For the reasons stated below, the motion is granted.

Background

Legal Helpers Debt Resolution, LLC is a law firm that assists its clients with resolving their credit

card debt by negotiating with credit card companies and administering client debt settlement. (Verified

Compl., Dkt. # 10-2, ¶ 1.) Legal Helpers used CDS, an outside administrator, to assist it with marketing its

services and providing administrative servicing and support for the debt settlement clients. (Id. ¶ 3.) After a

dispute between Legal Helpers and CDS (as well as Legal Helpers’ other outside administrators) regarding

the payment for settlements in unrelated lawsuits, Legal Helpers terminated its contracts with its outside

administrators, including CDS. 

As part of its administrative function, CDS typically facilitated setting up the relationship between the

debt settlement clients and Legal Helpers. (Id. ¶ 4.) Legal Helpers alleges that CDS set up most of the client

accounts properly. (Id. ¶ 5.) According to Legal Helpers, however, for approximately 4,000 of its clients,

CDS did not set up the account properly because it failed to designate Legal Helpers as having control of

those accounts. (Id.) Legal Helpers alleges that state bar regulations governing attorney-client relationships

require Legal Helpers to control the debt settlement client accounts. Thus, it filed the instant suit (the

“Illinois Action”) on April 12, 2012, to correct the designation on these accounts to establish that Legal 1

Helpers, and not CDS, controls the accounts. (Id. ¶¶ 5-6.) In the instant case, Legal Helpers seeks a

declaration that it has control over the disputed debt settlement accounts, and further seeks temporary and

permanent injunctive relief to that effect. 

12C3055 Legal Helpers Debt Resolution, L.L.C. v. CDS Client Services, Inc., et al. Page 1 of 5
STATEMENT

In the California state court action (“the California Action”), filed on March 28, 2012, another of

Legal Helpers’ outside administrators brought suit to prevent Legal Helpers from terminating their

relationship. (Def.’s Motion Stay, Dkt. # 31, at 3.) On March 30, 2012, Legal Helpers sent a letter to all of

its outside administrators, including CDS, terminating their contracts on the ground of breach of contract. 

(Id.) On April 2, 2012, CDS joined the California Action. 

Analysis

The Court notes at the outset the Supreme Court’s admonishment that in addressing abstention, the

task of the district court “is not to find some substantial reason for the exercise of federal jurisdiction” but

instead “to ascertain whether there exist ‘exceptional’ circumstances, the ‘clearest of justifications,’ . . . to

justify the surrender of that jurisdiction.” Huon v. Johnson & Bell, Ltd., 657 F.3d 641, 646 (7th Cir. 2011)

(quoting Moses H. Cone Mem. Hosp. v. Mercury Const. Corp., 460 U.S. 1, 25-26 (1993) (emphasis in

original)). Abstention is appropriate under Colorado River if the state and federal actions are parallel,

exceptional circumstances warrant a stay and a stay would promote “wise judicial administration.” Colorado

River Water Conservation Dist. v. United States, 424 U.S. 800, 818 (1976). If the Court determines that the

actions are parallel, then it must weigh the following factors in deciding whether to abstain: 

(1) whether the state has assumed jurisdiction over property; (2) the inconvenience of the

federal forum; (3) the desirability of avoiding piecemeal litigation; (4) the order in which

jurisdiction was obtained by the concurrent forums; (5) the source of governing law, state or

federal; (6) the adequacy of state-court action to protect the federal plaintiff's rights; (7) the

relative progress of state and federal proceedings; (8) the presence or absence of concurrent

jurisdiction; (9) the availability of removal; and (10) the vexatious or contrived nature of the

federal claim.

Huon, 657 F.3d at 647-48 (citation omitted). 

A. Are the Suits Parallel?

Generally, two suits are parallel when they “involve the same parties, arise out of the same facts and

raise similar factual and legal issues.” Tyrer v. City of S. Beloit, 456 F.3d 744, 752 (7th Cir. 2006). Even if

they are not entirely symmetrical, cases are parallel if there is “a substantial likelihood that the state litigation

will dispose of all claims presented in the federal case.” Lumen Constr. v. Brant Constr., 780 F.2d 691, 695

(7th Cir. 1985). 

As noted above, on March 28, 2012, one of Legal Helpers’ administrators, JEM Group, Inc. (“JEM”),

filed the California Action in an attempt to prevent Legal Helpers from terminating their contractual

relationship and to have the court declare the rights and obligations of the parties. When Legal Helpers

terminated its contracts with all of its administrators (including JEM and CDS) on March 30, 2012, CDS

joined in the California Action on April 2, 2012 by filing a first amended complaint (“FAC”). (Dkt. # 12-7.) 

The FAC in the California state action seeks declaratory relief as to whether Legal Helpers’ termination of the

contracts with JEM and CDS was lawful and who had control over the client accounts. The FAC also seeks

injunctive relief prohibiting Legal Helpers from taking control over all of the client accounts. 

On April 23, 2012, Legal Helpers then filed the instant action in the Circuit Court of Cook County

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STATEMENT

seeking declaratory and injunctive relief regarding who has control over the client accounts. After the

California court denied the plaintiffs’ motion for a temporary restraining order and a preliminary injunction,

CDS filed a second amended complaint in the California state action on June 29, 2012. On July 23, 2012,

Legal Helpers filed a cross-complaint against CDS and others alleging that a “binding judicial declaration is

necessary and appropriate to determine the respective rights and interests of the parties under their respective

agreements.” (Dkt. # 31-1 ¶ 41.)

The suits involve the same parties, Legal Helpers and CDS. While the California action does not

name Global Client Solutions, LLC, which is named as a defendant in the instant case, the Court has already

concluded in denying Legal Helper’s motion to remand that GCS is a nominal party and its inclusion will not

affect the outcome of the case. Moreover, the “mere presence of additional parties or issues in one of the

cases will not necessarily preclude a finding that they are parallel.” AAR Int’l., Inc. v. Nimelias Enters., 250

F.3d 510, 518 (7th Cir. 2001). The requirement is that the parties be “substantially the same – not completely

identical.” Clark v. Lacy, 376 F.3d 682, 686 (7th Cir. 2004) (emphasis in original). 

In addition, both actions stem from the same facts–the contractual relationship between Legal Helpers

and its outside administrators. Specifically, in the California Action, CDS and JEM seek a judicial

declaration as to whether Legal Helpers can divert the debt settlement clients away from CDS and JEM (Dkt.

# 33-1, ¶ 70) as well as an injunction preventing Legal Helpers from transferring, moving or otherwise

interfering with certain debt settlement clients. (Id. ¶ 74i.) Similarly, in the instant action, Legal Helpers

alleges that “an actual controversy exists between Legal Helpers, CDS and Global regarding whether Legal

Helpers or CDS should direct, control and manage the Clients' accounts with [GCS].” (Dkt. # 1-1, ¶ 31.) It

seeks declaratory relief requiring GCS, which actually services certain client debt settlement accounts, to take

direction from Legal Helpers, and not CDS, regarding the disputed client accounts. (Id. ¶ 14, Prayers for

Relief, at 7-8.) Thus, resolution of the California Action will resolve the claims in the instant case. 

According to Legal Helpers, because the California court denied CDS’s motion for a temporary

restraining order on the ground that the California Civil Code forbids an injunction to prevent a breach of

contract, the California court will not address CDS’s claims for injunctive relief, and thus, the California

Action will not dispose of all claims presented in the instant case. But, as CDS notes, the California court

had set a date for CDS’s request for a preliminary injunction. (Dkt. #32-1 at 2). Although that date was

stricken, the claim remains pending. 

The Court concludes that the actions are parallel.

B. Do Circumstances Warrant a Stay?

Because the Court concludes that the actions are parallel, it moves on to address the list of nonexhaustive factors listed above. “No single factor is determinative, and the weight given to any particular

factor will vary depending on the circumstances of the case.” Corus Bank, N.A. v. de Guardiola, 593 F.

Supp. 2d 991, 994 (N.D. Ill. 2008). The factors are to be “‘applied in a pragmatic, flexible manner with a

view to the realities of the case at hand.’” Id. (citation omitted). Legal Helpers does not address these factors

in its response to the motion to stay. 

Whether the state has assumed jurisdiction over property. The California court has not assumed

jurisdiction over property, so this factor is neutral.

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STATEMENT

Inconvenience of the federal forum. The federal forum is inconvenient to CDS, which is organized

under the laws of California with its principal place of business located in California. (Dkt. #1, ¶ 5.) Thus,

this factor weighs in favor of abstention. 

Desirability of avoiding piecemeal litigation. “Piecemeal litigation occurs when different tribunals

consider the same issue, thereby duplicating efforts and possibly reaching different results.” LaDuke v.

Burlington N. R.R. Co., 879 F.2d 1556, 1560 (7th Cir. 1989) (citation and internal quotation marks omitted). 

As noted above, both this Court and the California court are considering the same issues. “[A]llowing the

two suits to proceed concurrently would waste the parties’ resources, risk duplicative rulings and reward a

strategic gamesmanship that has no place in a dual system of federal and state courts.” Tyrer, 456 F.3d at

756. Accordingly, this factor weighs in favor of abstention. 

Order in which jurisdiction was obtained. Because the California case was the first to be filed, this

factor also weighs in favor of a stay. 

Source of governing law. While Neither CDS nor Legal Helpers identifies specifically the source of

governing law, it is not federal. “Since there is no federal law at issue, the federal forum is no more

preferable for purposes of abstention.” Corus Bank, 593 F. Supp. 2d at 995. While Legal Helpers states in its

opposition to CDS’s motion for a temporary restraining order in the California Action that New York law

“arguably applies” to the contract claims (Dkt. #19-2, at 6), it does not contend that Illinois law applies. 

Thus, this factor too weighs in favor of a stay.

Adequacy of the state court action to protect federal plaintiff’s rights. Nothing suggests that the

California court is not adequate to protect Legal Helpers’ rights. Tyrer, 456 F.3d at 757 (the “insinuation that

[state court] will not live up to the standard of full and fair adjudication of the issues ‘is pure speculation that

we expressly disavow.’”) (citation omitted). This factor favors abstention. 

Relative progress of state and federal proceedings. In the California Action, the judge ruled on a

motion for a temporary restraining order, discovery is underway and the court set a March 2013 trial date. 

Here, a discovery schedule has not been set and the parties jointly requested permission to postpone discovery

until a ruling on the motion to stay. Because the California Action has progressed further than this one, this

factor weighs in favor of abstention.

Presence or absence of concurrent jurisdiction. Both this Court and the California court have

jurisdiction over the claims. Thus, staying the instant case will not leave Legal Helpers without a remedy. 

“[T]he availability of concurrent jurisdiction weigh[s] in favor of a stay.” Clark, 376 F.3d at 688. 

Availability of removal. The California Action cannot be removed to federal court because Legal

Helpers and CDS’ co-plaintiffs are both citizens of Nevada (Dkt. #12-7, ¶ 4), and thus are not diverse. 

Accordingly, this factor weighs in favor a stay because of the “policy against hearing a federal claim which is

related to ongoing non-removable state proceedings.” Day v. Union Mines Inc., 862 F.2d 652, 659-60 (7th

Cir. 1988). 

The vexatious or contrived nature of the federal claim. CDS does not contend that the claims

proceeding in this Court are either vexatious or contrived. Thus, this factor is neutral. 

Upon review of the factors, the majority of which favor abstention, the Court deems a stay appropriate

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STATEMENT

1. After Legal Helpers filed its complaint in the Circuit Court of Cook County, the defendants

timely removed it to this Court. 

in this case. This action is stayed pending resolution of the California Action and is placed on the Court’s

suspense docket. The parties shall, within five days of any relevant orders by the California court, inform this

Court of proceedings in the California court which will affect the stay issued by this Court. Answers by CDS

and GCS in the instant action are due within 14 days of the stay being lifted. 

 

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