Court Opinion

ID: 9600241
Source: CourtListenerOpinion
Date Created: 2023-08-22 01:25:17.577915+00
Date Added: 2024-06-11T09:04:42.671824
License: Public Domain

SHEPHERD, Circuit Judge,
dissenting.
Because I believe we should affirm the judgment of the district court, I respectfully dissent. This appeal presents two issues: (1) Are the Nebraska and federal actions “parallel proceedings”? (2) If so, did the district court abuse its discretion by abstaining under Colorado River? On the first issue, I disagree with Judge Beam’s conclusion in Part II.B.l of his *541opinion that the Nebraska and federal suits are not parallel. See ante at 534-38. On the second issue, I disagree with the majority’s conclusion that the district court abused its discretion by abstaining. See id. at 538-40.
I.
The Nebraska and federal actions are “parallel proceedings.” Judge Beam contends the cases are not parallel because Controlled Air’s lien foreclosure suit and the Joint Venture’s action for breach of contract involve different “sources of law, remedies sought, elements of proof, review on appeal, and events giving rise to each cause of action.... ” Ante at 537. I agree that a construction lien foreclosure action and a suit for breach of contract do not involve “substantially similar issues” and, thus, are not “parallel proceedings” for purposes of Colorado River abstention. See Gannett Co., Inc. v. Clark Constr. Group, Inc., 286 F.3d 737, 743 (4th Cir.2002). However, on October 22, 2007, four months before the district court abstained, the Joint Venture filed a counterclaim in the Nebraska suit asserting the same cause of action for breach of contract that it asserted in federal court.9 The Fourth Circuit recognized the possibility of this scenario in Gannett. Id. at 742 n. 4 (“We note 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 Contract Action, but neither Clark nor Gannett has sought such relief in the State Lien Action.”). As a result of the Joint Venture’s counterclaim, the state and federal proceedings in this case involve substantially similar issues, and the state action will undoubtedly dispose of the federal suit for breach of contract.10 Therefore, the actions are parallel. See *542TruServ Corp. v. Flegles, Inc., 419 F.3d 584, 592 (7th Cir.2005).
Judge Beam asserts that the filing of the counterclaim for breach of contract “did not trigger parallelism between the proceedings pending in the two courts.” Ante at 537. He asserts that we are bound by Scottsdale Insurance Co. v. Detco Industries, Inc., 426 F.3d 994 (8th Cir.2005). In Scottsdale, this court held that multiple state tort suits and a federal declaratory judgment action11 were not parallel because they did not involve “substantially the same issues” and because Scottsdale was not a party to the state actions. Id. at 997. In so holding, the court characterized the issue as “whether parallel proceedings were pending in state court at the time Scottsdale brought its ifederal] declaratory judgment action.” Id. at 996 (emphasis added). Judge Beam refers to this language in arguing that we must view the proceedings in this case as they existed when the Nebraska lien suit and federal contract action were originally filed, not as they actually existed when the district court abstained. Therefore, according to this view, we cannot consider the breach-of-contract counterclaim the Joint Venture filed five months after the Nebraska suit commenced.
Contrary to this belief, Scottsdale does not mandate an “originally filed” approach. At best, the language in Scottsdale is dicta and, therefore, does not bind this panel’s decision. See Passmore v. Astrue, 533 F.3d 658, 661 (8th Cir.2008) (“[w]e need not follow dicta” (quotation omitted)); John Morrell & Co. v. Local Union 304A of United Food & Commercial Workers, 913 F.2d 544, 550 (8th Cir.1990) (“[w]e need not follow dicta,” which is “language ... in [an] earlier [ ] opinion [that] was not essential to the judgment in that case”). Unlike in the present case, the parties in Scottsdale never filed counterclaims or otherwise altered the parties or issues involved in their state and federal actions. See Scottsdale, 426 F.3d at 996-97. Because the suits were never altered, it was not essential to the Scottsdale court’s judgment to determine that we must view the proceedings as they existed when originally filed, as opposed to some other point in time.
Our recent decision in Royal Indemnity Co. v. Apex Oil Co., Inc., 511 F.3d 788 (8th Cir.2008), further proves that we do not *543follow an “originally filed” approach in this circuit. In Royal Indemnity, Apex Oil filed suit in state court against multiple insurance companies (the “state insurers”) on August 5, 2005, seeking a declaration of the parties’ rights and responsibilities under policies the state insurers had issued Apex Oil. Id. at 791. On March 22, 2006, Royal Indemnity brought a declaratory judgment action in federal court against Apex Oil that named several other insurance companies (the “federal insurers”) and sought an adjudication of the parties’ rights and obligations under policies that Royal Indemnity and the federal insurers had issued Apex Oil. Id. Two months later, on May 19, 2006, Apex Oil amended its state-court complaint to name Royal Indemnity and the federal insurers as defendants in the state lawsuit. Id. at 791-92. The district court found that the state and federal proceedings were parallel and, therefore, exercised its broad discretion to abstain in a declaratory judgment action under Wilton. Id. at 792. We agreed that the state action was parallel and affirmed the district court’s decision to abstain under the broad Wilton standard. Id. at 797. Thus, in Royal Indemnity, the amended state-court complaint, filed two months after the federal lawsuit commenced and nine months after the state lawsuit commenced, made the proceedings parallel.
Under Judge Beam’s approach, the Eighth Circuit panel in Royal Indemnity necessarily erred. As the state and federal suits existed when they were originally filed, Apex Oil was the only party common to both actions, which involved different insurers and different policies. Id. at 791. Because Apex Oil’s state lawsuit against the state insurers would not have disposed of the federal action against Royal Indemnity and the federal insurers, the proceedings were not parallel as they existed when originally filed. See TruServ, 419 F.3d at 592. Only after Apex Oil added Royal Indemnity and the federal insurers as defendants in the state action did the proceedings become parallel because the state action would have disposed of the entire federal case. See id. Under the “originally filed” approach, because the suits were not parallel as originally filed, the district court could not have had broad discretion to abstain under Wilton; it could only have had limited discretion to abstain under Aetna. Contra Royal Indemnity, 511 F.3d at 797 (“[W]e affirm the district court’s decision to apply the Wilton ... abstention standard, and ... we hold that the district court did not abuse its discretion in abstaining from this lawsuit to allow the parallel state court action to proceed.” (emphasis added)).
The fact that we clearly did not view the state and federal proceedings as they existed when originally filed was essential to our reasoning and judgment in Royal Indemnity and is binding on this panel. See Passmore, 533 F.3d at 660 (we “cannot overrule an earlier decision by another panel”). In both Royal Indemnity and the present case, the proceedings were not parallel as they existed when originally filed, but they became parallel before the district court issued its abstention order. Therefore, Judge Beam’s approach in the present case impermissibly ignores our recent decision in Royal Indemnity.12
*544Moving beyond issues of stare decisis, the principles underlying Colorado River abstention also counsel against adopting an “originally filed” approach to determine whether state and federal actions are parallel. Those principles “rest on considerations of wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.” Colorado River Conservation Dist. v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976) (quotation omitted). Put another way, “[allowing the litigation to proceed simultaneously in federal and state courts is wasteful because ultimately only one of the jurisdictions will actually decide the case. Once one court renders a ruling, the other court will be obliged to halt its proceedings and give res judicata effect to the decision.” Erwin Chemerinsky, Federal Jurisdiction 867 (5th ed.2007). Thus, Colorado River asks, if the district court exercises its discretion to abstain now, will it conserve judicial resources and promote comprehensive disposition of the litigation in the future?
The presence of parallel proceedings is a prerequisite for the application of Colorado River abstention because, unless “a parallel state-court action exists, [ ] the [federal] district court would have nothing in favor of which to abstain.” Baskin v. Bath Twp. Bd. of Zoning Appeals, 15 F.3d 569, 571 (6th Cir.1994). Thus, the existence of parallel proceedings triggers the district court’s discretion to abstain under Colorado River. Under the approach advanced by Judge Beam, to determine whether its discretion to abstain is triggered, the district court must take a snapshot of the state and federal suits as they existed when originally filed.
If, as in the present case, the parties or issues involved in the proceedings have changed since the suits were originally filed, then taking a snapshot of the proceedings as they existed in the past says nothing about whether abstention will conserve judicial resources and promote comprehensive disposition of the litigation in the future. If, as in Scottsdale, the parties and issues have never changed, then there is no difference between taking a snapshot of the proceedings as they existed in the past and taking a snapshot of the proceedings as they currently exist. The snapshots look the same, and the answer to the parallel proceedings inquiry is the same. Therefore, in light of the principles underlying Colorado River abstention, it only makes sense for the district court to view *545the state and federal- proceedings as they currently exist to determine whether its discretion to abstain is triggered. See, e.g., Baskin, 15 F.3d at 572 (“The issue is whether the state court proceeding, as it currently exists, is a parallel, state-court proceeding.” (quotation and alteration omitted)).
Finally, and most importantly, if state and federal proceedings are parallel as originally filed but become unparallel before the district court issues its abstention order, an “originally filed” approach would still trigger the district court’s discretion to abstain solely because the actions were parallel at some point in the past. Under this approach, the district court would have discretion to abstain under Colorado River even though there would no longer be a parallel action in favor of which to abstain. Consequently, such an approach runs afoul of the Colorado River doctrine and should be rejected. As a result of the Joint Venture’s counterclaim, the Nebraska and federal actions are “parallel proceedings” as they actually existed when the district court abstained. See TruServ, 419 F.3d at 592; Gannett, 286 F.3d at 742 n. 4; Baskin, 15 F.3d at 572.
II.
Because the proceedings are parallel, we “must consider whether the district court abused its discretion in finding that ‘exceptional circumstances’ warranted abstention.” Gannett, 286 F.3d at 744. Determining whether exceptional circumstances exist requires evaluating the factors outlined in Colorado River and Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).13 Federated Rural Elec. Ins. Corp. v. Ark. Elec. Coops., Inc., 48 F.3d 294, 297 (8th Cir.1995). I believe the first and third factors weigh in favor of abstention. All other factors are neutral and, as such, are “irrelevant to the existence of exceptional circumstances.” Federated Rural, 48 F.3d at 297. The district court did not abuse its discretion when it decided that this case presents the type of exceptional circumstances that warrant abstention “in order to advance the ‘clear federal policy’ of avoiding piecemeal adjudication.” Federated Rural, 48 F.3d at 297 (quoting Moses H. Cone, 460 U.S. at 16, 103 S.Ct. 927). Therefore, the judgment of the district court should be affirmed.
Even though the majority will not affirm, outright reversal is not appropriate in this case. As Judge Beam acknowledges, “although there has been a purported Colorado River analysis of non-parallel filings of the parties by the district court, the court has never undertaken a review of the contract pleadings under that case’s doctrine. So, at the very least, there must be a remand to the district court for that purpose.” Ante at 540 (emphasis added). For example, when Judge Beam finds that “there will be no piecemeal litigation,” ante at 539, his analysis — like the district court’s — is potentially flawed because he fails to consider the breach-of-contract counterclaim as part of the Nebraska ac*546tion. Nonetheless, he finds that “[u]nder the uncontested circumstances of. this case, abstention is unsupportable as a matter of law” and that “it is more than obvious that no such [exceptional] circumstances or justifications exist under any acceptable analysis of any of the causes of action.” Id. at 540. I believe that, “at the very least,” id., we should remand so the district court will have an opportunity to consider the Joint Venture’s Nebraska counterclaim for breach of contract in deciding whether abstention is appropriate.

. Judge Beam contends that, because "there is nothing in the district court record concerning the breach of contract counterclaim,” this fact "foreclose[s] any newly minted argument that the Nebraska and federal contract actions are parallel for purposes of our consideration of the issues in this appeal.” Ante at 537 n. 8. However, "we may take judicial notice of proceedings in other courts that relate to matters at issue.” Great Plains Trust Co. v. Union Pacific R.R. Co., 492 F.3d 986, 996 (8th Cir.2007). Further, the Joint Venture and Controlled Air have conceded, both in the district court and on appeal, that the proceedings are parallel. See Fru-Con Constr. Corp. v. Controlled Air, Inc., No. 4:07CV00495, slip op. at 11 n. 5, 12, 2007 WL 4683316 (E.D.Mo. Feb.26, 2008) ("Where is no dispute that both cases involve the same contract” and “[bjoth actions involve the same construction contract”); (Appellee's Br. 12 ("The federal and Nebraska cases clearly are parallel proceedings. [The Joint Venture] has acknowledged the cases are parallel and has not raised this as an issue before the District Court or this Court.”)); Audio Recording of Oral Argument at 2:28, 10:41, 16:30, Fru-Con Constr. Corp. v. Controlled Air, Inc., No. 08-1712, 2008 WL 4929985 (8th Cir. Sept. 26, 2008) (the Joint Venture and Controlled Air conceded that the suits are parallel and referenced the filing of the counterclaim). In light of the parties’ mutual and repeated concessions, taking judicial notice of the Joint Venture’s counterclaim is appropriate in this case. We should not fault the litigants for failing to introduce evidence concerning a legal issue that they have never contested.

. To constitute "parallel proceedings,” state and federal actions need not be mirror images. As Judge Beam acknowledges, "a substantial similarity must exist between the state and federal proceedings, which similarity occurs when there is a substantial likelihood that the state proceeding will fully dispose of the claims presented in the federal court.” Ante at 535 (citing TruServ Corp. v. Flegles, Inc., 419 F.3d 584, 592 (7th Cir.2005)). In the present case, it is virtually certain that the Nebraska action, which includes both Controlled Air's lien foreclosure claim and the Joint Venture's counterclaim for breach of contract, will fully dispose of the Joint Venture's singular breach-of-contract claim in federal court.

. The "exceptional circumstances” test from Colorado River does not apply to actions for declaratory judgment. Prudential Ins. Co. of Am. v. Doe, 140 F.3d 785, 789 (8th Cir.1998); see also Wilton v. Seven Falls Co., 515 U.S. 277, 286, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995) ("Distinct features of the Declaratory Judgment Act ... justify a standard vesting district courts with greater discretion in declaratory judgment actions than that permitted under the 'exceptional circumstances’ test of Colorado River and Moses H. Cone."). Despite this distinction, the threshold question of whether parallel proceedings exist remains a necessary inquiry in declaratory judgment actions to determine the extent of the district court’s discretion. If parallel proceedings exist, we review the abstention decision under the lenient test expressed in Wilton. Prudential Ins. Co., 140 F.3d at 788-89. If the proceedings are not parallel, the district court still has some discretion to abstain; however, it does not have the broad discretion outlined in Wilton. Scottsdale, 426 F.3d at 999. Instead, we review the court’s abstention decision under a more stringent six-factor test. Id. at 998-99 (adopting the six-factor test from Aetna Cas. & Sur. Co. v. Ind-Com Elec. Co., 139 F.3d 419 (4th Cir.1998) (per curiam)). However, we use the same test to determine whether cases are parallel in declaratory judgment and non-declaratory judgment actions. See id. at 997 ("Suits are parallel if substantially the same parties litigate substantially the same issues in different forums.” (quotation omitted)). Therefore, declaratory judgment abstention cases are applicable to the present case insofar as they concern the threshold question of whether parallel proceedings exist.

. Judge Beam states that "[wjhile Royal Indemnity might be read to provide a different result based strictly upon a filing time, it otherwise demands that the state court proceeding must present [to the federal court] the same issues, not governed by federal law, between the same parties.” Ante at 538 (quotation omitted). He further opines that "enforcement, or not, of the contractual forum selection clause was a federal court procedural matter governed by federal law” ... [and][t]his, of course, "defeats parallelism un*544der Royal Indemnity precedent.” Id. at 538. In my view, such an interpretation of the cited language from Royal Indemnity would give those words unwarranted meaning. If a difference between state and federal procedural law governing the two actions necessarily defeats parallelism, then there will be few, if any, situations in which Colorado River abstention is permissible because all procedural matters in federal court are governed by federal law. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Moreover, contrary to Judge Beam's contention, see ante at 537-38, Servewell Plumbing and Rainforest Café make clear that we have not yet decided whether enforcement of a contract's forum selection clause is governed by state substantive or federal procedural law, see Servewell Plumbing, 439 F.3d at 789 (“Because the enforceability of a forum selection clause concerns both the substantive law of contracts and the procedural law of venue, there is some disagreement among the circuits over whether state or federal law applies, and we have yet to adopt a definitive position on the issue. Nor must we do so here ...(quotation and citations omitted)); Rainforest Café, 340 F.3d at 546 (“we indulge their suggestion that we interpret the forum selection clause under federal law” only "[b]ecause the parties have not argued that state law would result in a materially different outcome”).

. The Colorado River and Moses H. Cone factors are: "(1) whether there is a res over which one court has established jurisdiction, (2) the inconvenience of the federal forum, (3) whether maintaining separate actions may result in piecemeal litigation, unless the relevant law would require piecemeal litigation and the federal court issue is easily severed, (4) which case has priority — not necessarily which case was filed first but a greater emphasis on the relative progress made in the cases, (5) whether state or federal law controls, especially favoring the exercise of jurisdiction where federal law controls, and (6) the adequacy of the state forum to protect the federal plaintiffs rights.” Federated Rural, 48 F.3d at 297 (quotation omitted).