Opinion ID: 2967593
Heading Depth: 1
Heading Rank: 1

Heading: jurisdiction

Text: action against Clark Construction Group, Inc. (Clark) in the United States District Court for the Eastern District of Virginia, alleging breach of contract. The district court abstained from exercising juris- diction, applying the doctrine of Colorado River Water Consv. Dist. v. United States, 424 U.S. 800, 813 (1976), which allows a district court to abstain where parallel litigation exists in federal and state court and exceptional circumstances warrant abstention.1 Upon reviewing the district court's decision to abstain for abuse of discre- tion, we conclude that the district court misapplied several of the Col- orado River factors and that exceptional circumstances do not justify abstention in this case. Accordingly, we reverse and remand.
Clark entered into a contract with Gannett to build Gannett's new USA Today headquarters complex in McLean, Virginia. Under the terms of the contract, Clark was required to complete the project sub- stantially by June 17, 2001, and to complete the project finally by August 8, 2001. Clark claims that it met these deadlines and that Gan- nett breached the contract by failing to pay Clark for its work. Gan- nett, by contrast, argues that Clark did not meet the deadlines and that Gannett has suffered damages as a result of Clark's failure to com- plete the work in a timely fashion. ____________________________________________________________ 1 Although not technically a doctrine of abstention, the Colorado River doctrine has become known as such. . . . Al-Abood v. ElShamari, 217 F.3d 225, 232 n.3 (4th Cir. 2000). 2 In August 2001, Clark submitted to Gannett a request for payment for the work it had completed. The request included claims by eleven of Clark's subcontractors. Clark and Gannett were unable to reach an agreement as to the parties' respective obligations under the contract, and three separate proceedings followed. On September 19, 2001, Gannett filed this federal action pursuant to diversity jurisdiction, alleging that Clark breached the contract (the Federal Contract Action). The next day, Clark filed a breach of con- tract action against Gannett in the Circuit Court for Fairfax County, Virginia (the State Contract Action). On October 10, 2001, Clark filed a bill of complaint against Gannett in the chancery division of the Cir- cuit Court for Fairfax County, Virginia to enforce an earlier-obtained mechanic's lien on the property underlying the contract dispute, the USA Today headquarters complex (the State Lien Action). On October 29, 2001, Gannett filed motions in the State Contract Action and the State Lien Action to abate, or, in the alternative, to stay those actions pending resolution of Gannett's breach of contract claim in the Federal Contract Action. Two days later, Clark filed a motion in the Federal Contract Action to dismiss or, in the alternative, to stay, arguing that the district court should abstain from exercising jurisdiction pursuant to Colorado River. The district court denied the motion to dismiss2 but granted the motion to stay. Gannett filed a timely notice of appeal to this court. Thereafter, Clark amended its Bill of Complaint in the State Lien Action and joined as respondent-defendants in that action eleven subcontractors who had filed mechanic's liens against Gannett's property.
We begin with the premise that [a]bstention from the exercise of federal jurisdiction is the exception, not the rule. Colorado River, 424 U.S. at 813. As has been reiterated time and again, the federal courts have a virtually unflagging obligation . . . to exercise the juris- diction given them. Id. at 817; Quackenbush v. Allstate Ins. Co., 517 ____________________________________________________________ 2 Clark has not cross-appealed the district court's denial of its motion to dismiss. 3 U.S. 706, 716 (1996); Richmond, Fredericksburg & Potomac R.R. v. Forst, 4 F.3d 244, 251 (4th Cir. 1993); Spann v. Martin, 963 F.2d 663, 673 (4th Cir. 1992). For a federal court to abstain under the Colorado River doctrine, two conditions must be satisfied. As a threshold requirement, there must be parallel proceedings in state and federal court. Colorado River, 424 U.S. at 813. Second, exceptional circumstances warrant- ing abstention must exist. Id. Without establishing a rigid test, the Supreme Court has recognized several factors that are relevant in determining whether a particular case presents such exceptional cir- cumstances: (1) jurisdiction over the property; (2) inconvenience of the federal forum; (3) the desirability of avoiding piecemeal litigation; (4) the order in which jurisdiction was obtained; (5) whether federal law is implicated; and (6) whether the state court proceedings are ade- quate to protect the parties' rights. Id. at 818; Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 23, 26 (1983). We review a district court's decision to abstain under Colorado River for abuse of discretion. See New Beckley Mining Corp. v. Int'l Union, UMWA, 946 F.2d 1072, 1074 (4th Cir. 1991). Of course, an error of law by a district court is by definition an abuse of discretion. Hunter v. Earthgrains Co. Bakery, 281 F.3d 144, 150 (4th Cir. 2002). Further, even if a district court applies the correct legal principles to adequately supported facts, a reviewing court is obliged to reverse if the court has a definite and firm conviction that the court below committed a clear error of judgment in the conclusion it reached upon a weighing of the relevant factors. Westberry v. Gislaved Gummi AB, 178 F.3d 257, 261 (4th Cir. 1999) (citation omitted). Accordingly, we will reverse the district court for abuse of discretion if the district court fails to exercise its discretion in accordance with the Colorado River `exceptional circumstances test.' New Beckley, 946 F.2d at 1074 (citation omitted); see also Moses H. Cone, 460 U.S. at 19 (Yet to say that the district court has discretion is not to say that its deci- sion is unreviewable; such discretion must be exercised under . . . Colorado River's exceptional-circumstances test.). 4
Gannett concedes that the district court correctly determined that the State Contract Action is parallel with the Federal Contract Action but argues that the State Lien Action is not parallel with the Federal Contract Action. The district court did not make any finding as to whether the State Lien Action and the Federal Contract Action were parallel.3 Thus, we must determine de novo whether the State Lien ____________________________________________________________ 3 Clark argues that the district court implicitly held that the State Lien Action is parallel to the Federal Contract Action and that this finding was not an abuse of discretion. For support, Clark notes that the district court's order reflects that the district court fully understood that there were three pending actions. (Appellee's Br. at 14.) While it is true that the district court clearly and fully understood that there were three pend- ing actions, this fact cuts against Clark's position because, while the dis- trict court noted all three actions, it discussed only two of them. The court defined the Federal Action as the federal breach of contract action, the State Action as the state breach of contract action, and the mechanic's lien action as the State Lien Action. (J.A. at 413-14.) When describing the issue presented by Clark, the district court stated that Clark claims that the State Action presents almost identical facts and claims as the Federal Action. (J.A. at 417.) The district court then stated that Clark asserts that the Court should dismiss or stay the instant action pending the outcome of the State Action. (J.A. at 417-18.) The district court ruled that the Federal Action and the State Action are duplicative. (J.A. at 420.) No mention is made regarding whether the State Lien Action is duplicative of the other proceedings, and no indication is given that the district court was considering the question of whether the State Lien Action was duplicative of the Federal Action. Thus, it is apparent that the district court failed to determine whether the State Lien Action is parallel to the Federal Contract Action. Clark also argues that Gannett is judicially estopped from asserting that the State Lien Action is not parallel to the Federal Contract Action, pointing to prior representations by Gannett in the state proceedings in which Gannett stated that the State Lien Action was parallel to the Fed- eral Contract Action. Even assuming that the question of whether pro- ceedings are parallel is subject to principles of estoppel or waiver, Clark has failed to demonstrate that any representations by Gannett regarding the parallel nature of the proceedings amounted to intentional deception for the purpose of gaining an unfair advantage. John S. Clark Co. v. Fag- gert & Frieden, P.C., 65 F.3d 26, 29 (4th Cir. 1995) (The `determina- tive factor' in the application of judicial estoppel is whether the party who is alleged to be estopped `intentionally misled the court to gain unfair advantage.' (quoting Tenneco Chems., Inc. v. William Burnett & Co., 691 F.2d 658, 665 (4th Cir. 1982)). 5 Action is parallel with the Federal Contract Action. See, e.g., Village of Westfield, N.Y. v. Welch's, 170 F.3d 116, 121-22 (2d Cir. 1999) (recognizing that the appellate court has the authority to apply Colo- rado River test where the district court fails to do so in first instance). Suits are parallel if substantially the same parties litigate substan- tially the same issues in different forums. New Beckley, 946 F.2d at 1073. Clark and Gannett are both parties to the Federal Contract Action and the State Lien Action. The Federal Contract Action and the State Lien Action, however, involve different issues with different requisites of proof. For example, the State Lien Action requires the equity court to ascertain the validity and amount of the underlying debt, see, e.g., York Fed. Savings & Loan v. Hazel, 506 S.E.2d 315, 317 (Va. 1998), which involves demonstrating that a contract exists for the work performed. In this case, however, enforcement of the mechanic's lien is not dependent on questions of breach of contract, which will be resolved only through the separate breach of contract action, in that Clark and Gannett have not asserted their respective breach of contract claims in the State Lien Action.4 Cain v. Rea, 166 ____________________________________________________________ 4 We note that it appears that the equity court in the State Lien Action possesses the power to resolve the breach of contract issues, in which case the State Lien Action arguably would be parallel to the Federal Con- tract Action, but neither Clark nor Gannett has sought such relief in the State Lien Action. Virginia recognizes a distinction between actions in equity and actions at law, see generally Meade v. Meade, 69 S.E. 330, 332 (Va. 1910) (discussing the division of law and equity), but the equity court may assume jurisdiction over all legal issues necessary to resolve a dispute. Johnston & Grommett Bros. v. Bunn & Monteiro, 62 S.E. 341, 342 (Va. 1908) ([I]f it appears that the complainants are entitled to recover . . ., the court can proceed to give judgment in their favor for the amount due, although they may have failed to establish their right to a lien; it being well settled that, when a court of equity has once acquired jurisdiction of a cause upon equitable grounds, it may go on to a com- plete adjudication, even to the extent of establishing legal rights and granting legal remedies which would otherwise be beyond the scope of its authority.); Nagle v. Newton, 63 Va. (22 Gratt.) 814, 825 (1872) ([I]t is competent for the court having possessed itself of the subject by proper exercise of its [equity] jurisdiction, to do complete justice between the parties; and as ancillary to that purpose, may ascertain dam- ages sustained by the defendant . . . .). 6 S.E. 478, 480 (Va. 1932) ([The mechanic's lien action] does not arise out of, nor is it the essence of the contract for labor, nor depen- dent on the motives which suggest its being enforced.); Va. Code Ann. § 43-3(a) (Michie 1999) (providing that all persons performing labor or furnishing materials for the construction, removal, repair or improvement of any building may perfect a mechanic's lien); Va. Code Ann. § 43-22 (Michie 1999) (providing that a lien is enforced by filing a bill with an itemized statement of his account, showing the amount and character of the work done or materials furnished, the prices charged therefor, the payments made, if any, the balance due, and the time from which interest is claimed thereon, the correctness of which account shall be verified by the affidavit of himself, or his agent). Moreover, the actions seek different remedies. In the State Lien Action, Clark seeks a lien and foreclosure on the property, whereas in the Federal Contract Action, Gannett seeks compensatory