Court Opinion

ID: 1029082
Source: CourtListenerOpinion
Date Created: 2013-07-05 07:51:37.225675+00
Date Added: 2024-06-11T10:18:00.099272
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                            No. 08-1757

ROBERT A. MARTIN; THOMAS D. MORGAN; RAY JACKSON MEADOWS;
CHARLIE CONNER; STEPHEN KING; EDWARD RIDER; CHARLES MOONEY;
JOHNNY BURGESS; ROGER LEGG; JEFFREY HILL; GREG WRIGHT;
AARON SPRADLING; CRAIG ERVIN; RONNIE L. BARKER; DON
SPRADLING, on behalf of themselves and all others similarly
situated,

                Plaintiffs - Appellants,

           v.

GORDON BALL,

                Defendant - Appellee.

Appeal from the United States District Court for the Northern
District of West Virginia, at Wheeling.     Frederick P. Stamp,
Jr., Senior District Judge. (5:06-cv-00085-FPS)

Argued:   March 26, 2009                   Decided:   June 12, 2009

Before NIEMEYER and MICHAEL, Circuit Judges, and Eugene E.
SILER, Jr., Senior Circuit Judge of the United States Court of
Appeals for the Sixth Circuit, sitting by designation.

Reversed and remanded by unpublished per curiam opinion.

John Jacob Pentz, III, CLASS ACTION FAIRNESS GROUP, Maynard,
Massachusetts, for Appellants. William Gordon Ball, Knoxville,
Tennessee, for Appellee.
Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:

       Gordon Ball, as counsel on behalf of a plaintiff class in

Tennessee state court, settled a class action between consumer

class members and defendant United States Tobacco (UST).                            Some

of the members of the plaintiff class filed suit against Ball

alleging claims for breach of fiduciary duty, conversion, and

unjust enrichment relating to his conduct in settling the class

action.        The    district    court     dismissed     the     case.      For    the

following reasons, we reverse the order of the district court

and remand for further proceedings with respect to Plaintiffs’

claims against Ball.

                      I.      Factual and Procedural Background

       The Jefferson County Circuit Court in Tennessee approved a

class action settlement between chewing tobacco manufacturer UST

and consumers residing in thirteen different states (including

West    Virginia)       who     purchased       moist    snuff    tobacco.          The

settlement      agreement      awarded    the    class    $12.5    million     in   UST

coupons and contained two clauses relevant to this appeal: one

calling for the Tennessee court to retain jurisdiction over the

settlement and a “Most Favored Nations” (MFN) clause.                          The MFN

clause entitled class members to receive additional coupons in

the    event   that    pending    class     actions      in   other   jurisdictions

regarding      the   same     allegations     against     UST    yielded   a    higher

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settlement value.          Around the time such a class action was being

settled    for     a     much   higher       value,    class       counsel         (allegedly

without notice to the class) agreed to amend the settlement to

eliminate the MFN clause in exchange for $2.5 million in coupons

and    $500,000       attorneys’      fees    from    UST.     The      Tennessee         court

entered an order amending the settlement to that effect.                               Months

later,     members       of     the     class     residing         in    West        Virginia

(Plaintiffs) learned of the amendment and moved the Tennessee

court to vacate the order approving the amendment.                            That motion

was denied and no further state court litigation ensued.

       Plaintiffs       filed    suit    in    the    Northern      District         of    West

Virginia       against    UST    and    class     counsel      alleging        claims       for

breach    of     fiduciary      duty,    conversion,         and    unjust         enrichment

relating to the elimination of the MFN clause.                            Each defendant

(UST     and    two     class    counsel      defendants)          moved      to     dismiss,

asserting that the federal court lacked jurisdiction.                                     After

finding the Rooker-Feldman doctrine did not bar jurisdiction,

the    district        court    “declined”        jurisdiction          because      of    the

settlement agreement’s forum selection clause and the Tennessee

court’s        order    retaining       jurisdiction         over       the    settlement.

Plaintiffs appealed but subsequently settled with UST and all

but one of the class counsel defendants, Ball.

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                                  II.    Analysis

                               A. Rooker-Feldman

     “We review the court’s dismissal pursuant to the Rooker-

Feldman doctrine de novo.”              Burrell v. Virginia, 395 F.3d 508,

511 (4th Cir. 2005).         The Rooker-Feldman doctrine applies where

“the losing party in state court filed suit in federal court

after    the   state    proceedings      ended,    complaining     of    an   injury

caused    by    the    state-court      judgment    and   seeking       review   and

rejection of that judgment.”             Exxon Mobil Corp. v. Saudi Basic

Indus. Corp., 544 U.S. 280, 292 (2005).                   The district court

found Rooker-Feldman did not apply because the fourth factor

requiring      application   of    the     doctrine—that     the    state     court

action has become final before the federal court suit has been

brought—was not met. It found this because the Plaintiffs filed

their federal court suit before the Tennessee court had ruled on

their motion to vacate.           Plaintiffs urge that this finding be

affirmed and although Ball did not cross-appeal, he now argues

that the district court should have applied the doctrine.

     Reviewing this issue de novo, only with respect to Ball,

Rooker-Feldman does not apply because Plaintiffs’ injuries were

not caused by the state court judgment.                   Their injuries were

caused by Ball’s alleged malfeasance as class counsel, which is

distinct from the state court judgment.              “If a federal plaintiff

‘present[s] some independent claim, albeit one that denies a
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legal conclusion that a state court has reached in a case to

which he was a party . . . then there is jurisdiction and state

law determines whether the defendant prevails under principles

of preclusion.’”        Exxon Mobil, 544 U.S. at 293 (quoting GASH

Assocs. v. Rosemont, 995 F.2d 726, 728 (7th Cir. 1993)).                      Here,

Ball was not even a party to the state court action and the

claims    against     him   for     breach     of    fiduciary     duty,     unjust

enrichment, and conversion are independent of the state court

judgment.

     B. Forum Selection Clause and State Court Order Retaining
                             Jurisdiction

  To the extent the district court’s decision rested on the

forum selection clause, it is reviewed de novo.                   Pee Dee Health

Care, P.A. v. Sanford, 509 F.3d 204, 209 (4th Cir. 2007).                     “[A]

motion to dismiss based on a forum-selection clause should be

properly treated under Rule 12(b)(3) as a motion to dismiss on

the basis of improper venue.”            Sucampo Pharms., Inc. v. Astellas

Pharma, Inc., 471 F.3d 544, 550 (4th Cir. 2006).

    Plaintiffs argued to the district court that even if the

forum    selection    clause      were    valid     and   governed     the   claims

against   the   UST   defendants,        it   did   not   apply   to   the   claims

against the class counsel because they were not parties to the

settlement.     The court rejected this argument because the claims

against Ball related to the settlement.

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      Reviewing    this    conclusion     de   novo,   we    disagree.        In

analyzing the applicability of forum selection clauses, we use

general principles of contract interpretation.              Sucampo Pharms.,

Inc., 471 F.3d at 550. Although the claims against Ball may have

“related to” the settlement agreement, Ball was not a party to

that agreement and is not bound by its terms.                    For the same

reason, the state court order incorporating the jurisdiction-

retaining terms of the settlement agreement does not preclude

concurrent jurisdiction over Plaintiffs’ claims against Ball.

                                C. Abstention

  Finally, we consider the district court decision to “decline”

jurisdiction in its discretion.           A district court’s decision to

decline jurisdiction based on abstention principles is reviewed

for   an   abuse   of   discretion.       Vulcan   Chem.    Techs.,   Inc.    v.

Barker, 297 F.3d 332, 341 (4th Cir. 2002). The Supreme Court in

Colorado River recognized that federal courts have a “virtually

unflagging obligation” to exercise jurisdiction given to them.

Colo. River Water Conservation Dist. v. United States, 424 U.S.

800, 817 (1976).        After rejecting Pullman, Burford, and Younger

as bases for abstention, the Court noted that “the circumstances

permitting the dismissal of a federal suit due to the presence

of a concurrent state proceeding for reasons of wise judicial

administration      are     considerably       more    limited     than      the

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circumstances          appropriate        for       [the     three      other     types     of]

abstention.”          Id. at 814-17, 818.

       We have noted that, when faced with a possible application

of    Colorado        River    abstention,          the     court     must    first      decide

whether     a     parallel          duplicative           state       proceeding        exists.

McLaughlin v. United Virginia Bank, 955 F.2d 930, 935 (4th Cir.

1992).     “Suits are parallel if substantially the same parties

litigate    substantially           the    same     issues       in   different       forums.”

New Beckley Min. Corp. v. Int’l Union, United Mine Workers of

Am., 946 F.2d 1072, 1073 (4th Cir. 1991).                             In New Beckley, we

found the district court abused its discretion in abstaining

because    the    two    suits      posed     different          issues    and    the   remedy

sought was not the same.              Id.     at 1074.           The court noted “‘[T]he

Colorado    River       doctrine       does     not       give    federal     courts      carte

blanche    to     decline      to     hear    cases        within     their      jurisdiction

merely because issues or factual disputes in those cases may be

addressed        in     past     or       pending         proceedings         before      state

tribunals.’”           Id.    (quoting       United        States     v.   SCM    Corp.,   615

F.Supp. 411, 417 (D.Md. 1985)).

      Here, Ball was not a party to the state court settlement

and the claims against him—for breach of fiduciary duty, unjust

enrichment, and conversion—are                  new claims seeking new remedies.

The   motion     to     vacate      the    order      in    the     Tennessee      court   was

therefore not “duplicative” of Plaintiffs’ current claims.                                  In

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light   of   this,    the    district   court    erred    when   it   declined

jurisdiction.

     Neither    the    forum    selection       clause,   the    state   order

retaining    jurisdiction,      nor   abstention    under   Colorado     River

justifies dismissal.        The order of the district court is

                                                    REVERSED AND REMANDED.

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