IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

COMMERCE COMMERCIAL LEASING, LLC, :

as assignee of NorVergence, Inc., :

:

Plaintiff, :

v. : No. 04-CV-04280

:

BROWARD TITLE COMPANY, a Florida :

corporation, :

:

Defendant. :

Green, S.J. May 25, 2005

MEMORANDUM

Presently before the court are Defendant’s Motion to Stay Action pending

resolution of related suits and Motion for Sanctions under Rule 11. For the reasons set forth

below, Defendant’s motions will be DENIED. 

I. FACTUAL AND PROCEDURAL BACKGROUND

Although the facts of this matter are made more complex by an assignment and

the use of an alias by the Plaintiff, this case is essentially a simple breach of contract suit

involving the leasing of telephone equipment. On September 25, 2003, Defendant Broward

Title Company, Inc. (“Broward”) entered into a lease agreement with NorVergence, Inc.

(“NorVergence”), a provider of local and unlimited, toll-free long distance telephone services. 

Pursuant to this agreement, Broward was required to make sixty (60) consecutive, monthly

payments in the amount of $1,352.62 to NorVergence for telephone equipment. Plaintiff,

assignee of NorVergence, contends that Broward breached the lease agreement when it

discontinued its payments. 

Case 2:04-cv-04280-CG Document 37 Filed 05/25/05 Page 1 of 8
1 The terms of this assignment allowed Commerce to

institute legal proceedings to enforce the lease agreement. 

2

On December 1, 2003, NorVergence assigned the lease to Commerce

Commercial Leasing, LLC, (“Commerce”).1 At the same time, Commerce notified Broward of

the assignment and informed Broward that it should make all future payments to Commerce at

a Pennsylvania address. Defendant started making payments to Plaintiff’s Pennsylvania

address in February 2004. Thereafter, Commerce entered into an operating agreement with

Partners Equity Capital Company, LLC (“Partners”) involving lease agreements that had been

assigned to Commerce from NorVergence. This operating agreement authorized Partners to

use the Commerce name for business related to the NorVergence lease agreements.

On August 11, 2004, Partners, using the name Commerce, filed a complaint in

the Court of Common Pleas, Montgomery County, Pennsylvania. In its complaint, Plaintiff

claimed that Broward ceased making its monthly payment in June 2004 and therefore, under

the terms of the lease agreement, was liable for the remaining payments. On September 9,

2004, Defendant removed this action to this court based on diversity of citizenship. 

Broward now brings a Motion to Stay Action pending resolution of related suits

and Motion for Sanctions under Rule 11. Defendant claims that this court should stay this

matter until the resolution of: 1) Florida’s state court action regarding deceptive and unfair trade

practices; 2) the outcome of the adversary proceeding in the NorVergence bankruptcy; 3) the

outcome of a contemplated Federal Trade Commission suit ; 4) a putative class action suit in

New Jersey state court; and 5) a putative class action in the Southern District of Florida. In

Defendant’s Motion For Sanctions, Defendant contends that Plaintiff falsely claimed that it was

a Pennsylvania corporation in order to obtain jurisdiction. 

II. MOTION TO STAY ACTION PENDING RESOLUTION OF RELATED SUITS 

Case 2:04-cv-04280-CG Document 37 Filed 05/25/05 Page 2 of 8
3

A. Legal Standard 

In Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct 1098 (1943), the Supreme Court

held that federal courts should refrain from reviewing state issues involving a complex

regulatory scheme and sensitive areas of state concern. The doctrine provides that when statecourt review is available, a federal court should decline to interfere with the state proceedings:

1) when there are difficult questions of state law bearing on policy problems of substantial

public importance; or 2) where the exercise of federal review of the question would be

disruptive of state efforts to establish a coherent policy with respect to a matter of substantial

public concern. See Fiege v. Sechrest, 90 F.3d 846, 847 (3d Cir. 1996). Burford abstention is

generally applied to state regulatory matters such as establishing rates for natural gas or

transportation.

Colorado River abstention also allows federal courts to stay actions in favor of

state court proceedings. See Colorado River Water Conservation Dist. v. United States, 424

U.S. 800. 96 S.Ct. 1236 (1976). This doctrine permits a federal court not to exercise its

jurisdiction when litigation would be duplicative of a state proceeding. See Hawaii Housing

Auth. v. Midkiff, 467 U.S. 229, 104 S. Ct. 2321 (1984). Colorado River abstention should only

be granted in exceptional circumstances, such as the resolution of water rights. See Grode v.

Mutual Fire, Marine, and Inland Ins. Co., 8 F.3d 953, 956 (3d Cir. 1993). Factors used by

courts to determine if Colorado River abstention is applicable include: avoidance of piecemeal

litigation; the order in which the courts obtain jurisdiction; inconvenience of the federal forum;

whether either court has assumed jurisdiction over property; whether federal or state law

provides the substantive rule to determine the merits; the source of governing law; and the

probable inadequacy of the state court proceedings to protect the plaintiff’s rights. See Moses

H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 2, 103 S.Ct. 927, 930 (1983),

Case 2:04-cv-04280-CG Document 37 Filed 05/25/05 Page 3 of 8
4

Will v. Calvert Fire Ins. Co., 437 U.S. 655, 98 S.Ct. 2552, Colorado River, 424 U.S. at 818. No

one factor is dispositive. A balancing test is required, with the balancing weighted in favor of

the exercise of jurisdiction. See Moses, 460 U.S. at 16. Consequently, the Third Circuit has

held that in cases of parallel litigation, generally both state and federal actions should proceed

until one of them results in a judgment that may be asserted as res judicata. See NYLife

Distributors, Inc. v. Adherence Group, Inc., 72 F.3d 371, 376 (3d Cir. 1995). 

B. This Court Will Not Stay This Matter

Defendant contends that this matter should be stayed under Burford and

Colorado River abstention doctrines. This motion fails, however, because the facts of this

matter do not satisfy the requirements necessary to obtain Burford or Colorado River

abstention. Specifically, the case does not meet the substantial importance requirement of

Burford nor the exceptional circumstances requirement of Colorado River.

Defendant argues that abstention is proper under Burford pending the outcome

of: 1) Florida’s state court action regarding deceptive and unfair trade practices; 2) the

adversary proceeding in the NorVergence bankruptcy; 3) the contemplated Federal Trade

Commission suit; 4) a putative class action suit in New Jersey state court; and 5) a putative

class action in the Southern District of Florida. However, to qualify for Burford abstention, a

case needs to be either a complex state law matter concerning problems of substantial public

importance or federal review would have to be disruptive of state efforts to establish a coherent

policy concerning substantial public concern. See Kentucky W. Va. Gas Co. v. Pennsylvania

Public Util. Comm’n, 791 F.2d 1111, 1114 (3d Cir. 1986). Examples of matters of substantial

public important or substantial public concern which have qualified for Burford abstention

include establishing rates for natural gas or transportation, discontinuing railroad passenger

services, discontinuing intrastate air service, or applying state eminent domain procedures. 

Case 2:04-cv-04280-CG Document 37 Filed 05/25/05 Page 4 of 8
5

See Grode v. The Mutual, Fire, Marine and Inland, 8 F.3d 953 (3d Cir. 1993). Here, the instant

matter is a breach of contract claim over telephone equipment which generally only affects the

parties. As such, this matter does not meet the substantial public importance requirement.

Moreover, since this matter only affects the parties, federal review would not be disruptive of

state efforts to establish a coherent policy concerning a matter of public concern. Since

Defendant has not demonstrated that this contract dispute arises to the level of state

importance or public concern, Defendant’s Burford abstention is inapplicable.

Broward also argues that abstention is proper under Colorado River abstention

doctrine because: 1) staying the action would avoid piecemeal and potentially contrary results;

2) the Florida proceeding has advanced further than this claim; 3) state law controls this case;

and 4) comity dictates that this court respects the Florida decision. However, Colorado River

abstention is inapplicable because Defendant has not established that this matter satisfies the

exceptional circumstances requirement. See Spring City Corp. v. American Building Co., 193

F.3d 165, 171-72 (3d Cir. 1999). To meet this requirement, the matter must be grounded in

more than just the interest in avoiding duplicative litigation. Additionally, Colorado River

abstention is not proper just to avoid piecemeal litigation. See id. at 172. An example of

exceptional circumstances occurred in Colorado River, when the Supreme Court held that water

rights in Colorado, one of the most important issues of the Southwest constituted substantial

public concern. See Spring City, 193 F.3d at 172. 

Here, Broward has not demonstrated that Colorado River abstention is required. 

The instant matter is a common breach of contract suit between two parties. Broward argues

that the avoidance of piecemeal litigation and contrary results is one of the reasons why this

matter should be stayed. Although this bolsters Broward’s abstention argument, piecemeal

litigation and the potential for contrary results, by themselves, are not sufficient to stay the

Case 2:04-cv-04280-CG Document 37 Filed 05/25/05 Page 5 of 8
6

action. See Spring City, 193 F.3d 172 (“even though it is important to prevent ‘piecemeal

litigation,’ a stay is appropriate only when there is a "strong federal policy against [such]

litigation."); see NYLife, 72 F.3d at 376 (“the mere pendency of a similar action in a state court

does not require, nor even permit, a federal court to refuse to hear or to stay an action that is

properly within its jurisdiction, and that both state and federal actions should go forward until

one of them results in a judgment that may be asserted as res judicata in the other.”). 

Additionally, the fact that state law controls this breach of contract matter is not dispositive. If

this were the case, most diversity of citizenship matters with parallel actions in state court would

be stayed. Besides the weakness of Broward’s argument, the fact that this court had

jurisdiction before the other courts also undermines Defendant’s motion for sanctions. Upon

consideration of the Colorado River doctrine balancing test and the fact that Broward has not

demonstrated that this matter satisfies the exceptional circumstances requirement, Defendant’s

motion to stay will be denied. 

III MOTION FOR SANCTIONS UNDER RULE 11

A. Legal Standard

Fed. R. Civ. P. 11 imposes the duty on attorneys to certify that they have

conducted reasonable inquiry and have determined that any papers filed with the court are well

grounded, legally tenable, and not made for any improper purpose. See Cooter & Gell v.

Hartmax Corp., 496 U.S. 384, 393, 110 S.Ct. 2447, 2454 (1990). The court may sanction an

attorney who violates this rule. See id. The primary purpose of this rule is to deter baseless

filings in district court. See id. 

“The standard for testing conduct under Rule 11 is reasonableness under the

circumstances.” Teamsters Local Union No. 430 v. Cement Express, Inc., 841 F.2d 66, 68 (3d

Cir. 1988). If an attorney reasonably believes that his complaint or motion comports with the

Case 2:04-cv-04280-CG Document 37 Filed 05/25/05 Page 6 of 8
7

requirements of Rule 11, at the time he files the document, the court should not grant

sanctions. See id. Generally, sanctions are only imposed when a pleading or motion is

patently unmeritorious or frivolous. See Ford Motor Co. v. Summit Motor, 930 F.2d 277 (3d Cir.

1991).

B. Defendant’s Rule 11 Motion for Sanctions will be denied

Broward’s motion will be denied because this matter does not arise to the

patently unmeritorious or frivolous standard required by the Third Circuit. Moreover, Defendant

has not demonstrated that Plaintiff falsely declared to obtain jurisdiction.

Here, Plaintiff has provided evidence that the error was not only unintentional but

does not interfere with the jurisdiction of this court over this matter. Specifically, Plaintiff claims

that it inadvertently referred to Commerce as a Pennsylvania corporation because: 1) Partners

sued Defendant using the Commerce name; 2) Partners was authorized by Commerce to do

so; 3) Partners has its principal place of business in Pennsylvania; and 4) Defendant has had

many contacts with Plaintiff in the state of Pennsylvania to maintain jurisdiction. To support its

claim, Plaintiff provided Defendant with a copy of the agreement authorizing it to use the

Commerce name and noted that Defendant sent its payments to Partners’ Pennsylvania

address. Defendant does not dispute the authentication of Plaintiff’s documents or the fact that

Defendant has had repeated contacts with Partners as Commerce in Pennsylvania. Since

Defendant has not demonstrated that Plaintiff showed bad faith in filing its complaint or that this

error affects the jurisdiction of this matter, Defendant’s motion for sanctions will be denied and

this court will maintain jurisdiction. 

The Third Circuit holds that Rule 11 sanctions are reserved for claims or motions

that are patently unmeritorious or frivolous. See Arab African Intern. Bank v. Epstein, 10 F.3d

168, 175 (3d Cir. 1993). In Defendant’s Motion For Sanctions, Broward contends that Plaintiff’s

Case 2:04-cv-04280-CG Document 37 Filed 05/25/05 Page 7 of 8
8

claim arises to this standard and that Plaintiff improperly stated that it was a Pennsylvania

corporation in its complaint to obtain jurisdiction. 

This matter is a breach of contract claim. Here, Plaintiff stated a cause of action

by alleging that a lease agreement existed and that the Defendant breached this agreement by

discontinuing its payments. While this court does not address the ultimate merits of the case at

this time, Plaintiff has made a sufficient showing that its complaint is not baseless.

IV. CONCLUSION

For the above-stated reasons, the Defendant’s Motions to Stay Action pending

resolution of related suits and for Sanctions under Rule 11 will be denied in their entirety. 

Case 2:04-cv-04280-CG Document 37 Filed 05/25/05 Page 8 of 8