Opinion ID: 613119
Heading Depth: 3
Heading Rank: 2

Heading: Colorado River

Text: As we noted above, courts do not possess the same discretion over actions for damages that they possess over declaratory judgment actions. See Wilton, 515 U.S. at 286, 115 S.Ct. 2137. Indeed, when it comes to non-discretionary actions for damages, such as the Federal Action, federal courts possess a virtually unflagging obligation ... to exercise the jurisdiction given them. Colorado River, 424 U.S. at 817, 96 S.Ct. 1236. Only in rare cases will the presence of a concurrent state proceeding permit the district court to dismiss a concurrent federal suit for reasons of wise judicial administration. Id. at 818, 96 S.Ct. 1236. The Supreme Court recognized such a rare case in Colorado River. There, the federal government brought suit against water users in federal court, seeking a declaration of water rights in certain rivers and tributaries in Colorado. Id. at 805, 96 S.Ct. 1236. Colorado had previously established seven water districts to adjudicate water rights in ongoing state court proceedings. Id. at 804, 96 S.Ct. 1236. After the government filed its suit in federal court, several of the defendants in that case filed an application joining the government as a party in the state court proceedings for the relevant water district. Id. at 806, 96 S.Ct. 1236. The district court then dismissed the government's federal suit in light of the ongoing state court proceedings. On appeal, the Supreme Court held that although none of the traditional abstention doctrines applied, considerations of [w]ise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation, justified dismissal of the federal suit. Id. at 817, 96 S.Ct. 1236 (alternation in original) (internal quotation marks omitted). The Court noted several factors that supported dismissal, relying particularly on the highly interdependent relationship between the claims in the state and federal proceedings and the federal policy, embodied in the McCarran Amendment, of avoiding piecemeal adjudication of water rights. Id. at 819-20, 96 S.Ct. 1236. The Court has carefully limited Colorado River, emphasizing that courts may refrain from deciding an action for damages only in exceptional cases, and only the clearest of justifications support dismissal. Id. at 818-19, 96 S.Ct. 1236. In Moses H. Cone Memorial Hospital v. Mercury Construction Corp., the Court held that no exceptional circumstances justified the district court's stay of an action to compel arbitration under the Federal Arbitration Act. 460 U.S. 1, 19, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). The Court noted that although a state court suit involving the underlying claims was pending when the federal suit was filed, the federal suit did not increase the risk of piecemeal litigation; substantial progress had already been made in the federal suit; federal law provided the rule of decision on the merits of the case; and there was substantial doubt as to whether the state court could issue the remedy sought in federal court. Id. at 19-26, 103 S.Ct. 927. To decide whether a particular case presents the exceptional circumstances that warrant a Colorado River stay or dismissal, the district court must carefully consider both the obligation to exercise jurisdiction and the combination of factors counseling against that exercise. Colorado River, 424 U.S. at 818, 96 S.Ct. 1236. Drawing from Colorado River, Moses H. Cone and subsequent Ninth Circuit cases, we have recognized eight factors for assessing the appropriateness of a Colorado River stay or dismissal: [8] (1) which court first assumed jurisdiction over any property at stake; (2) the inconvenience of the federal forum; (3) the desire to avoid piecemeal litigation; (4) the order in which the forums obtained jurisdiction; (5) whether federal law or state law provides the rule of decision on the merits; (6) whether the state court proceedings can adequately protect the rights of the federal litigants; (7) the desire to avoid forum shopping; and (8) whether the state court proceedings will resolve all issues before the federal court. Holder, 305 F.3d at 870. [9] The first two factors in Holder are irrelevant in this case because the dispute does not involve a specific piece of property, and both the federal and state forums are located in Los Angeles. We discuss each of the remaining six factors below, mindful that [a]ny doubt as to whether a factor exists should be resolved against a stay or dismissal. Travelers, 914 F.2d at 1369. As indicated below, some factors may weigh for or against the exercise of jurisdiction while others primarily serve as a bar to stay or dismissal.
Piecemeal litigation occurs when different tribunals consider the same issue, thereby duplicating efforts and possibly reaching different results. Am. Int'l Underwriters, (Philippines), Inc. v. Cont'l Ins. Co., 843 F.2d 1253, 1258 (9th Cir.1988). The mere possibility of piecemeal litigation does not constitute an exceptional circumstance. See Travelers, 914 F.2d at 1369. Instead, the case must raise a special concern about piecemeal litigation, id., which can be remedied by staying or dismissing the federal proceeding. See Moses H. Cone, 460 U.S. at 20-21, 103 S.Ct. 927 (noting that a stay of the federal suit would not alleviate the possibility that some claims would be subject to arbitration while others were decided in court). With the Removed Action in state court, there is no question that maintaining the Federal Action would result in piecemeal litigation. But it would be improper for a court to stay or dismiss a case based on a possibility of piecemeal adjudication that the court could have avoided by other means. Because the district court could have retained jurisdiction over the Removed Action, the proper inquiry in this case is whether maintaining jurisdiction over the Federal Action would result in piecemeal litigation even if the Removed Action were not in state court. Like the district court, we conclude that it would. Even if the district court had stayed the Removed Action, deciding the Federal Action and the Vulcan Action in separate courts would result in duplication of efforts. Both the Vulcan Action and the Federal Action are centered on whether the 1981 Policy obligates Transport to cover damages and defense costs in the Tort Actions. In Colorado River, the Court noted that the McCarran Amendment evidenced a clear policy of avoiding piecemeal adjudication of water rights in a river system. 424 U.S. at 819, 96 S.Ct. 1236. Here, there is no explicit policy of avoiding piecemeal adjudication, but like the government in Colorado River, Street asks the district court to adjudicate rights that are implicated in a `vastly more comprehensive' state action. Travelers, 914 F.2d at 1369. The state court consolidated multiple cases to create a comprehensive scheme for deciding coverage in the Tort Actions. There was a highly interdependent relationship between the claims in the Federal Action and the claims in the Vulcan Action, Colorado River, 424 U.S. at 819, 96 S.Ct. 1236, and although Street/National Union had not yet brought their claims, the state court contemplated these claims in its plans for proceeding in the Vulcan Action. The district court did not err by concluding that avoidance of piecemeal litigation weighs significantly against jurisdiction, particularly in light of the next factor. See Am. Int'l Underwriters, 843 F.2d at 1258 (upholding a Colorado River dismissal, in part to avoid piecemeal litigation).
We next consider the order in which the forums obtained jurisdiction. As a technical matter, Street is correct that the district court was the first to exercise jurisdiction over the specific claims in the Federal Action. Prior to the Federal Action, Vulcan had filed claims against Street/National Union in the Vulcan Action, but no claims had been asserted between Transport and Street/National Union. Our analysis does not end here, however. The Supreme Court has instructed that instead of taking a mechanical approach, courts must apply this factor in a pragmatic, flexible manner with a view to the realities of the case at hand. Moses H. Cone, 460 U.S. at 21, 103 S.Ct. 927 (giving little weight to the dates of filing when the same relative progress had been made in the state and federal proceedings). Here, the state court was the first to exercise jurisdiction over the subject matter involved in the Federal Action. Although this might not be relevant in every case, the progress of the Vulcan Action and Street/National Union's involvement in the Vulcan Action make this an important consideration in this case. Between the filing of the Vulcan Action in 2005 and the filing of the Federal Action in 2009, the state court made significant progress in the Vulcan Action. The court already interpreted the relevant provisions of the 1981 Policy and was positioned to fully adjudicate the broader coverage dispute between Vulcan and Transport. The court had conducted discovery, initiated a phased approach to the litigation and issued an order concerning foundational legal matters. In fact, much of this progress occurred after Vulcan brought Street/National Union into the action in 2008. Cf. Colorado River, 424 U.S. at 820, 96 S.Ct. 1236 (noting the existing participation by the Government in similar state court proceedings). Additionally, both the parties and the court acknowledged Street/National Union's unlitigated claims against Transport, and the state court expressly reserved any decisions regarding these claims for a later phase of the litigation. Considering the realities of this case, the district court properly concluded that the state court's progress in the Vulcan Action weighs against jurisdiction.
As with most insurance coverage disputes, state law provides the rules of decision for all of Street/National Union's claims, but we consider this a neutral factor here. [A]lthough `the presence of federal-law issues must always be a major consideration weighing against surrender' [of jurisdiction], the `presence of state-law issues may weigh in favor of that surrender' only `in some rare circumstances.' Travelers, 914 F.2d at 1370 (quoting Moses H. Cone, 460 U.S. at 26, 103 S.Ct. 927). This case does not present such rare circumstances. The complexity of the Vulcan Action and related matters stems from the number of policies and insurers, not from the type of law involved in the action. Because the cases here involve routine issues of state law, such as breach of contract, indemnification and subrogation, this factor does not weigh against jurisdiction. See id. (concluding the same where the cases involved state law claims for misrepresentation, breach of fiduciary duty and breach of contract).
A district court may not stay or dismiss the federal proceeding if the state proceeding cannot adequately protect the rights of the federal litigants. For example, if there is a possibility that the parties will not be able to raise their claims in the state proceeding, a stay or dismissal is inappropriate. See Moses H. Cone, 460 U.S. at 26, 103 S.Ct. 927 (emphasizing that the state court might lack the power to enter the order that the plaintiff was seeking in federal court); Holder, 305 F.3d at 869 n. 5 (noting that the state court probably lacked jurisdiction to hear the plaintiff's federal ICARA claim). Here, there is no question that the state court has authority to address the rights and remedies at issue in this case. In fact, Street/National Union concede that the state court can adequately resolve the parties' claims. Like source of law, however, this factor is more important when it weighs in favor of federal jurisdiction. Travelers, 914 F.2d at 1370 (internal quotation marks omitted).
Forum shopping refers to [t]he practice of choosing the most favorable jurisdiction or court in which a claim might be heard. BLACK'S LAW DICTIONARY 726 (9th ed. 2009). To avoid forum shopping, courts may consider the vexatious or reactive nature of either the federal or the state litigation. Moses H. Cone, 460 U.S. at 17 n. 20, 103 S.Ct. 927. We have affirmed a Colorado River stay or dismissal when it was readily apparent that the federal plaintiff was engaged in forum shopping. See Nakash v. Marciano, 882 F.2d 1411, 1417 (9th Cir. 1989) (plaintiff brought claims in federal court after three and a half years of litigating in state court); Am. Int'l Underwriters, 843 F.2d at 1255-56 (after filing in state court, plaintiff brought suit in federal court to avoid the state court's unfavorable evidentiary rules). The district court did not expressly rely on this factor in its brief Colorado River analysis, and given the circumstances of this case, we do not believe this factor weighs significantly for or against jurisdiction. Each party contends that the other engaged in forum shopping. Transport argues that Street engaged in forum shopping by filing the Federal Action instead of filing its claims in the Vulcan Action. Indeed, Street/National Union had been third parties in the Vulcan Action since April 2008, but they filed the Federal Action only after the superior court's April 2009 order, which favored Transport, and only after convincing Vulcan to dismiss Street/National Union from the Vulcan Action. On the other hand, as of at least March 2009, Transport knew that Street was a defendant in the Tort Actions and was listed as an additional insured on the 1981 Policy, yet Transport never filed any claims for declaratory relief against Street until after Street filed the Federal Action. We decline the parties' invitation to referee their finger-pointing match. The chronology of events suggests that both parties took a somewhat opportunistic approach to this litigation, but we cannot classify either party's actions as mere forum shopping. As we noted in our Brillhart discussion above, Transport sought a comprehensive forum, not merely a favorable one. In this sense, Transport's attempt to consolidate Street/National Union's claims with the Vulcan Action is no different than the application by the defendants in Colorado River to join the government as a party to state water district proceedings. See Colorado River, 424 U.S. at 820 n. 25, 96 S.Ct. 1236. Neither can we say that Street/National Union were merely forum shopping by filing the Federal Action. Prior to filing the Federal Action, Street/National Union had not previously asserted their claims against Transport, and we are cautious about labeling as forum shopping a plaintiff's desire to bring previously unasserted claims in federal court. [T]he desire for a federal forum is assured by the constitutional provision for diversity jurisdiction and the congressional statute implementing Article III. First State Ins. Co. v. Callan Assocs., Inc., 113 F.3d 161, 162 (9th Cir.1997). In this particular case, we cannot say that forum shopping weighs significantly for or against jurisdiction.
The final factor, and one that features prominently in this appeal, is whether the state court proceeding sufficiently parallels the federal proceeding. Although we have not always required exact parallelism, the two actions must be substantially similar. Nakash, 882 F.2d at 1416. We have held that `the existence of a substantial doubt as to whether the state proceedings will resolve the federal action precludes' a Colorado River stay or dismissal. Smith, 418 F.3d at 1033 (quoting Intel Corp. v. Advanced Micro Devices, Inc., 12 F.3d 908, 913 (9th Cir.1993)). As Street/National Union note, prior to the cases on appeal, there was doubt about whether the Vulcan Action would resolve Street/National Union's claims against Transport. No claims had been filed between Transport and Street/National Union, and the state court had expressly reserved the question of whether collateral estoppel would apply to these claims once the court entered a judgment concerning Vulcan's claims. See Intel Corp., 12 F.3d at 913 (concluding that there was no parallel proceeding where the state court proceeding would resolve all issues only if the state courts confirmed the arbitration award and collateral estoppel applied to all other claims based on that award). Nevertheless, even Street/National Union concede that the Removed Action will resolve all issues raised in the Federal Action. The question for us is whether the district court abused its discretion by considering the Removed Action in its Colorado River analysis. According to Street/National Union, the district court erred by considering the Removed Action because the action was not in state court at the time of the district court's decision. We disagree. Courts generally rely on the state of affairs at the time of the Colorado River analysis. See Moses H. Cone, 460 U.S. at 21-22, 103 S.Ct. 927 (considering the existence of a state court action that was filed after the federal court proceeding). We think this state of affairs includes the court's discretion to remand the Removed Action. To say that the district court could not consider the Removed Action because it was not pending in state court at the specific moment the court dismissed the Federal Action would be contrary to the Court's instruction that the Colorado River factors are to be applied in a pragmatic, flexible manner with a view to the realities of the case at hand. Id. at 20, 103 S.Ct. 927. It would also ignore the underlying purpose of the Colorado River doctrine. The Colorado River doctrine promotes wise judicial administration. Colorado River, 424 U.S. at 817, 96 S.Ct. 1236. We require a parallel suit to ensure comprehensive disposition of litigation. See id. Otherwise, a stay or dismissal will neither conserve judicial resources nor prevent duplicative litigation. For example, in Holder, we reversed a Colorado River stay because the plaintiff likely could not have brought his federal claim in the state court proceeding. 305 F.3d at 868-70. Similarly, in Intel Corp., we concluded that a stay is inappropriate when there is a good chance that the federal court would have to decide the case eventually because the state proceeding will not resolve all of the issues in the federal case. 12 F.3d at 913. Here, there is no question that with the Removed Action in state court, the state proceedings will resolve all issues, and the goal of comprehensive disposition of litigation will be met. Street/National Union compare this case to Kirkbride v. Continental Casualty Co., 933 F.2d 729 (9th Cir.1991), but the facts distinguish this case from Kirkbride. In Kirkbride, we held that Colorado River did not support the district court's remand of a case because there was no concurrent or pending state court proceeding when the appellees moved for remand since the entire case had been removed to federal court. Id. at 734. In Kirkbride, there was only one action, and the court relied on Colorado River to remand that action. Id. There was no equivalent of the Vulcan Action and therefore no concern about piecemeal adjudication. All related claims were in a single proceeding that would be completely resolved in either state or federal court. Id. As we noted above when examining the risk of piecemeal litigation, the Removed Action alone cannot justify dismissal of the Federal Action. Nevertheless, because other factors affirmatively support dismissal, we do not think it was improper for the court to consider its discretion to remand the Removed Action for the limited purpose of determining whether the Vulcan Action would resolve all claims between the parties. Like the source of law and the adequacy of state court proceedings, this factor may weigh in favor of jurisdiction, but it does not in itself weigh against it. Because the combined Vulcan Action and Removed Action would resolve all of the parties' claims, this factor does not bar dismissal. [10] Ultimately, the decision whether to dismiss a federal action because of parallel state-court litigation hinges on a careful balancing of the [relevant] factors ... with the balance heavily weighted in favor of the exercise of jurisdiction. Moses H. Cone, 460 U.S. at 16, 103 S.Ct. 927. Although Street/National Union's right to a federal forum for their unasserted claims weighs in favor of jurisdiction, we conclude that the district court did not err by declining jurisdiction over the Federal Action. None of the factors that would preclude a Colorado River stay or dismissal  issues of federal law, inadequacy of the state court forum, or a possibility that the state court proceeding will not resolve the dispute  are concerns in this case. Because the avoidance of piecemeal litigation and the progress made in the Vulcan Action strongly weigh against jurisdiction, we conclude that the district court did not err by dismissing the Federal Action as an exceptional case under Colorado River.