Court Opinion

ID: 623527
Source: CourtListenerOpinion
Date Created: 2012-02-25 01:00:26+00
Date Added: 2024-06-11T17:51:04.123801
License: Public Domain

United States Court of Appeals
                        For the First Circuit

Nos. 10-1728; 10-1945

                         MAYDA NAZARIO-LUGO,

                        Plaintiff, Appellant,

                                 v.

                  CARIBEVISIÓN HOLDINGS, INC.,
  a/k/a C.V. Networks, a/k/a Caribe Vision Station Group, LLC,

                        Defendant, Appellee.

          APPEALS FROM THE UNITED STATES DISTRICT COURT

                 FOR THE DISTRICT OF PUERTO RICO

         [Hon. José Antonio Fusté,      U.S. District Judge]

                               Before

                      Lipez, Circuit Judge,
                   Souter, Associate Justice,*
                   and Howard, Circuit Judge.

     Judith Berkan, with whom Mary Jo Méndez was on brief, for
appellant.
     Ineabelle Santiago Camacho, with whom Rafael Escalera
Rodriguez, Amelia Caicedo Santiago, Viviana Berrios Gonzalez and
Reichard & Escalera were on brief, for appellee.

                          February 24, 2012

    *
      The Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
           HOWARD, Circuit Judge. This diversity action involves an

ordinary contract dispute between the appellant, Mayda Nazario-Lugo

("Nazario"),     and   her   former    employer,   appellee    Caribevisión

Holdings, Inc. Nazario challenges the district court's decision to

dismiss without prejudice her federal complaint in deference to

litigation pending in the Commonwealth of Puerto Rico.            See Colo.

River Water Conservation Dist. v. United States, 424 U.S. 800

(1976).   We hold that this case does not present the extraordinary

circumstances required under the Colorado River doctrine to clearly

justify the surrender of federal jurisdiction.                Therefore, we

reverse the judgment dismissing the action, and remand for further

proceedings.

                               I. Background

           The    facts,     which    are   undisputed   unless   otherwise

indicated, may be sketched from the district court's order, the

parties' pleadings, and other documents in the record.

           Caribevisión operates several television broadcasting

stations in Puerto Rico.        In February 2008, Caribevisión entered

into a five-year contract with Nazario, employing her as president,

general manager, and sales director for its Puerto Rico operations.

Article 3 of the contract sets forth Nazario's compensation and

benefits, including details of her salary, bonus, commission,

health insurance and expense allowance.

                                      -2-
              Article 4 of the contract governs several scenarios for

early      termination.      For   instance,      it   identifies    the   monies

Caribevisión would be bound to pay Nazario if it terminated the

agreement     "for cause"     or, by     contrast,     if Nazario      ended   her

employment "for good reason," as defined in the contract.                  Article

4 also establishes procedures that each party is bound to follow in

a    given   termination    scenario.        Pertinent    here,     Article    4.05

entitled "General Release" provides: "Except where the termination

is    the    result   of   [Nazario's]    death    and   notwithstanding        the

foregoing, no payment shall be made by the Company to [Nazario]

under this Section 4 unless otherwise required by state, local or

federal law, until [Nazario] executes a general release of all

claims in a form reasonably approved by the Company."1

              The parties' relationship began to deteriorate in 2009,

at least from Nazario's perspective. After on-going disagreements,

Nazario notified the company in June through a letter from her

attorney that she intended to terminate the contract for "good

reason" if Caribevisión did not rectify certain breaching conduct.

Among the alleged breaches, Nazario pointed to the company's

       1
       Article 6.03 provides in part: "This Agreement supercedes
any and all other agreements, either oral or in writing, between
the parties . . . and contains all of the covenants and agreements
between the parties with respect to the employment. . . . Any
modification of this Agreement will be effective only if it is in
writing and signed by the party to be charged." The parties later
altered some discrete terms of the contract by written agreement.

                                       -3-
failure to pay her commissions and work-related expenses to which

she was entitled.    She also identified several "good reasons"

unrelated to Article 3 financial obligations, such as the company

taking actions that diminished her effective authority and impeded

her ability to carry out her responsibilities.    She communicated

her intent to pursue litigation if the company did not honor its

contractual obligations.    In its response letter, Caribevisión

denied some of the allegations but agreed that it owed her certain

"accrued expenses and benefits." The letter conditioned payment of

the acknowledged claims on her execution of a release under Article

4.05.

          The parties scheduled a meeting for early September to

discuss their differences, but Caribevisión cancelled it.   Nazario

then notified the company in a letter dated September 11, that she

was terminating the contract "for good reason," and she identified

her last day of work as September 16.   In the letter, she disputed

the company's stance that she was required to sign a release prior

to collecting her Article 3 compensation pay.    Nazario expressed

her willingness, however, to sign a release to receive termination

pay under Article 4.04, the "good reason" termination section, and

requested that the company draft one. She invited a meeting within

a defined time frame, seeking resolution without litigation.

          Days later, the company notified Nazario that it was

terminating the contract "for cause," and filed a declaratory

                               -4-
judgment action in a Puerto Rico Commonwealth court.   It requested

that the local court declare the company's right, pursuant to

Article 4.05, to require Nazario to sign a release of liability

before it distributed any payment to her, and order her to do so.

It also averred that "it ha[d] always been willing to pay the

unpaid sums claim[ed] by Attorney Nazario" and deposited with the

court about $51,000 as the purported sum due.

          In her answer, Nazario distinguished between compensation

pay under Article 3 and termination pay under Article 4, and took

the position that only payment for the latter was conditioned on an

Article 4.05 release.     She requested that the court issue a

decision in line with this distinction.   The parties both sought

payment for costs, expenses and attorney's fees, as outlined under

the contract.

          In December 2009, while the Commonwealth court action was

pending, Nazario filed a breach of contract action in federal

court, invoking diversity jurisdiction.   Her suit sought payment

both for Article 3 compensation and for Article 4 termination pay,

as well as an award of costs, attorneys' fees and interest.     In

short order, she filed a motion for partial summary judgment to

establish, among other things, the company's liability for both

payment types -- about $57,500 for Article 3 compensation pay and

close to $730,000 for Article 4 "good reason" termination pay. For

purposes of the motion, she limited the "good reason" basis for her

                               -5-
contract termination to the company's breach of its Article 3

financial obligations, rather than any other company misconduct

identified in her federal complaint. The company objected and also

filed a motion to dismiss the federal action on abstention grounds

under Colorado River, to which Nazario timely objected.

          In April 2010, the district court granted the motion to

dismiss without prejudice while the local action was still pending.

It also denied as moot several pending motions, including Nazario's

motion for partial summary judgment.     The district court later

denied her motion for reconsideration.

          The following month, the Commonwealth court issued its

decision in the declaratory judgment action, concluding that "under

the clear terms of the agreement Caribevisión had no justification

whatsoever to demand that a release be signed under clause 4.05 of

the employment agreement, as a condition for [Nazario] receiving

the amounts owed [under Article 3]."2     Nazario, in turn, filed

another motion in federal court asking it to set aside its judgment

     2
       The local court awarded Nazario $500.00 for costs and
attorneys' fees pursuant to a contract term requiring such expenses
in the event litigation was necessary to enforce or interpret the
parties' agreement. It also remarked: "It is the court's view
that Ms. Nazario complied with the provisions of clause 4.04 of the
employment agreement, so that her request for termination of the
agreement for 'good reason' or just cause is valid." While the
parties have indicated that Caribevisión has appealed the
Commonwealth decision, we have received no further information on
the status of that appeal.

                                -6-
of dismissal in light of the local court judgment.                      The district

court denied this motion as well.                  This appeal followed.3

                                  II. Governing Law

              We have explored the contours of the Colorado River

abstention doctrine before and need not survey its full terrain

here. See Jiménez v. Rodríguez-Pagan, 597 F.3d 18, 27-30 (1st Cir.

2010).    Instead, we underscore a few central points before turning

to the particulars at hand.

              To       begin,   there   is    nothing    unusual     about    parallel

litigation     resolving        similar      controversies     in    both    state   and

federal court.            Admittedly, twin litigation may result in some

measure of inefficiency and wasted resources, and there is some

risk of inconsistent decisions from different courts on the same or

similar issues.           See id. at 29; KPS & Assocs., Inc. v. Designs by

FMC, Inc., 318 F.3d 1, 10 (1st Cir. 2003).                  Nevertheless, federal

courts must abide by their "virtually unflagging obligation" to

exercise their lawful jurisdiction and resolve the matters properly

before them.           Colo. River, 424 U.S. at 817; see Burns v. Watler,

931 F.2d 140, 145 (1st Cir. 1991) (relying on Cohens v. Virginia,

19 U.S. 264 (1821) to emphasize the longstanding federal court duty

to   decide        a    controversy     properly      within   its    jurisdictional

      3
       The appellant separately appealed both the court's original
dismissal order and its decision rejecting her motion to set aside
the dismissal judgment.     This opinion primarily involves the
dismissal judgment.

                                             -7-
authority).     This duty, however, is not absolute, and departure

from it is permitted "in otherwise exceptional circumstances, where

denying   a   federal      forum    would   clearly     serve    an    important

countervailing interest."          Quackenbush v. Allstate Ins. Co., 517

U.S. 706, 716 (1996) (internal quotation marks omitted).

           Over time, categories of cases have emerged illustrating

when abstention may be appropriate.          See id. at 716-19 (reviewing

various types of special circumstances that justify deference to

state   court);    Colo.    River,    424   U.S.   at   813-19    (outlining

circumstances that warrant federal abstention).            These include the

traditional categories of abstention known as Pullman-, Burford-

and Younger-type cases.        See Jiménez, 597 F.3d at 27 n.4; see also

Rio Grande Cmty. Health Ctr., Inc. v. Rullan, 397 F.3d 56, 68 (1st

Cir. 2005) (remarking that while the categories of special cases

are not hard and fast, their boundaries "do matter").                  This case

involves a fourth circumscribed category of cases, those falling

under the Colorado River doctrine.           This doctrine is to be used

sparingly and approached with great caution.            See Colo. River, 424

U.S. at 817-18; Jiménez, 597 F.3d at 27; Elmendorf Grafica, Inc. v.

D.S. Am. (East), Inc., 48 F.3d 46, 50 (1st Cir. 1995).                The crux of

the Colorado River doctrine is the presence of "exceptional"

circumstances     displaying    "the clearest      of   justifications"      for

federal deference to the local forum in the interest of "wise

judicial administration, giving regard to conservation of judicial

                                      -8-
resources and comprehensive disposition of litigation."      Colo.

River, 424 U.S. at 817-19.4

          An evolving list of factors exists to aid in discerning

whether a particular case involves exceptional circumstances that

tip a scale heavily weighted in favor of the exercise of federal

jurisdiction.   See Moses H. Cone Mem'l Hosp. v. Mercury Const.

Corp., 460 U.S. 1, 15-16 (1983); Jiménez, 597 F.3d at 27-28.    So

far, the list includes:

          (1)   whether   either   court   has   assumed
          jurisdiction over a res; (2) the geographical
          inconvenience of the federal forum; (3) the
          desirability of avoiding piecemeal litigation;
          (4) the order in which the forums obtained
          jurisdiction; (5) whether state or federal law
          controls; (6) the adequacy of the state forum
          to protect the parties' interests; (7) the
          vexatious or contrived nature of the federal
          claim; and (8) respect for the principles
          underlying removal jurisdiction.

Jiménez, 597 F.3d at 27-28 (brackets omitted); see Currie v. Grp.

Ins. Comm'n, 290 F.3d 1, 10 (1st Cir. 2002) (remarking that the

non-exhaustive list is not a "litmus test" and "must remain a

     4
       Relying on the Colorado River doctrine to dismiss a federal
action seeking contract damages may be questionable.          See
Quackenbush, 517 U.S. at 730 (holding that the district court erred
in remanding to state court, under Burford, a common-law suit for
contract and tort damages, in part because an abstention-based
dismissal historically has been appropriate only where a federal
court was sitting in equity; the Supreme Court declined to consider
whether an abstention-based stay order would have been proper). We
need not consider the implications of Quackenbush here because the
parties do not raise any law versus equity distinction, and this
case does not present the extraordinary circumstances necessary to
justify application of the Colorado River doctrine in any event.

                               -9-
discretionary tool").   The weight to be given any given factor

depends on the circumstances at hand.   See Moses H. Cone, 460 U.S.

at 16.

          In the end, we must determine whether the district court

abused its discretion. "[T]he decision whether to defer to the

state courts is necessarily left to the discretion of the district

court in the first instance.   Yet to say that the district court

has discretion is not to say that its decision is unreviewable;

such discretion must be exercised under the relevant" exceptional

circumstances test enunciated in Colorado River.    Id. at 19; see

United States v. Fairway Capital Corp., 483 F.3d 34, 40 (1st Cir.

2007); cf. Sevigny v. Employers Ins. of Wausau, 411 F.3d 24, 26-27

(1st Cir. 2005) (noting that "decisions on abstract issues of law

are always reviewed de novo; and the extent of deference on 'law

application' issues tends to vary with the circumstances" (internal

quotation marks and brackets omitted)).5     It is enough here to

underscore that a decision to yield federal jurisdiction under the

Colorado River doctrine must rest on the clearest of justifications

     5
       See, e.g. Elmendorf Grafica, Inc., 48 F.3d at 50 (explaining
constraints of the district court's discretionary judgment in
applying the Colorado River doctrine); Villa Marina Yacht Sales,
Inc. v. Hatteras Yachts, 947 F.2d 529, 533-34 (1st Cir.
1991)(reviewing the vexatious litigation factor under the Colorado
River doctrine for clear error); Villa Marina Yacht Sales, Inc. v.
Hatteras Yachts, 915 F.2d 7, 13 (1st Cir. 1990) (vacating the
district court's Colorado River abstention decision because it
failed to apply the proper balancing test, and remanding for a new
decision).

                               -10-
displayed by exceptional circumstances.                   See Moses H. Cone, 460

U.S. at 25; Colo. River, 424 U.S. at 818-19.                 Now, we turn to the

merits.

                                   III. Analysis

            The district court rested its dismissal order primarily

on three abstention factors:             the interest in avoiding piecemeal

litigation;    the    progress      of     the   Commonwealth     case;    and   the

governance of local law over the parties' contract dispute.                      The

court gave some additional weight to the local court's receipt of

monies accompanying the declaratory judgment action, but deemed the

remaining     factors    neutral      to     its   analysis      --   namely,    the

geographical inconvenience of the federal forum, the adequacy of

the protection afforded by the local forum, the vexatious or

contrived    nature     of   the    federal      claim,    and   respect   for   the

principles underlying removal jurisdiction.

            Nazario argues that the district court exceeded its

discretion in its application of the Colorado River factors to this

case.     We agree, and our analysis of the factors can be fairly

swift.

Piecemeal Litigation

            The district court weighted the piecemeal litigation

factor heavily in favor of abstention.                In its view, the local

court's resolution of Caribevisión's declaratory judgment action

would render moot Nazario's federally filed breach of contract

                                         -11-
claim because of the identity of the issues in the two actions.

Relying on our decision in Currie, 290 F.3d 1, the court concluded

that resolution of the federal action would be akin to rendering an

advisory opinion, a circumstance favoring the yield of federal

jurisdiction in deference to the Commonwealth court.                          Currie,

however, has little bearing on this case.

            Weight may be afforded to the piecemeal litigation factor

only where the implications and practical effects of litigating the

parallel actions provide an exceptional basis for surrendering

federal jurisdiction, such as a clear competing policy or some

special complication.         See Jiménez, 597 F.3d at 29 (collecting

cases illustrating sufficient exceptional basis to give weight to

the piecemeal litigation factor).               In Currie, for example, we

stayed resolution of the federal appeal in deference to a parallel

case pending in the state court system partly to avoid rendering an

advisory    opinion.        See   Currie,    290   F.3d    at    9-13.       But     the

extraordinary circumstances there differed greatly from those in

this case.

            Briefly    summarized,        Currie involved        (1)   two    federal

constitutional claims which the court was not inclined to resolve

if   the    federal    statutory      claim     was   dispositive,           (2)     the

entanglement of the federal statutory claim with a complex issue of

unsettled    state    law    that   was     pending   in   the    parallel         local

litigation, and (3) an underlying subject matter in which the state

                                      -12-
had unusually strong interests, namely, state-provided insurance

benefits.     See id. at 10.   In stark contrast, Nazario's federal

action involves a simple contract dispute requiring application of

settled local law.     The parallel actions here trigger, at most,

only routine risks presenting no occasion to animate the piecemeal

litigation factor.    See, e.g., KPS & Assocs. , Inc., 318 F.3d at 11

(holding that    parallel   litigation   on   straightforward   contract

dispute with primary importance only to the immediate parties did

not provide any weight for the piecemeal litigation factor).6

Progress of Litigation

            The district court also determined that the progress of

the litigation in the Commonwealth court counseled in favor of

abstention.     The court stated that it was "satisfied that the

parties have proceeded in the earlier case to the point where the

Commonwealth court can disburse proceeds upon adjudication on the

merits," and that "[t]he Commonwealth court already has in its

possession the means to resolve a substantial portion of the relief

[Nazario] demands."    Setting aside the court's view of the relief

available to Nazario in the local forum, it also was required to

     6
        We are doubtful that the issues in the two courts
necessarily were identical. In any event, the district court took
a somewhat different approach in its subsequent orders rejecting
Nazario's motions for reconsideration and to set aside the
dismissal order. There, it emphasized Nazario's fair opportunity
to raise her side of the contract dispute in the local forum.
Whether or not the availability of the local venue may be relevant
to the exceptional-circumstances mix, mere availability, standing
alone, does not tip the scale. See Colo. River, 424 U.S. at 814.

                                 -13-
consider the comparable progress of the federal litigation.    See

Moses H. Cone, 460 U.S. at 21-22 (holding that the chronology

factor focuses not only on the order in which the suits were filed,

but also on the comparable progress of the litigation in each

forum); Jiménez, 597 F.3d at 30 (discerning the procedural status

of each suit in order to compare their relative progress).

Engaging in this exercise demonstrates that the progress of the

litigation factor is a neutral one.

           The federal docket shows that by the time that the

district court dismissed the federal action on April 15, 2010, it

had before it Nazario's motions for partial summary judgment and

for default.   These two dispositive motions were essentially ripe

for decision, and granting either of them would have resolved

liability and potentially some of the damages issues.

           Meanwhile, the local docket was advancing at a similar

pace.   In March, the Commonwealth court had conducted a hearing on

the declaratory judgment action -- at a time when the federal court

was awaiting Caribevisión's English translation documents on the

summary judgment issues, and also had received Nazario's motion for

default.   After the local hearing, that court awaited the parties'

submission of additional documents in order to adjudicate the

declaratory judgment action. By early April, Nazario had submitted

a motion for judgment on the pleadings in the local forum.

                                -14-
           At bottom, the local court was about as equally poised to

resolve the action before it -- the release question -- as the

federal court was to hear nearly the entirety of the parties'

contract dispute.   See Moses H. Cone, 460 U.S. at 21 (holding that

measuring the comparable progress of the parallel suits is done in

a "pragmatic, flexible manner, with a view to the realities of the

case at hand"). The progress of litigation factor therefore points

in neither direction.

Source-of-Law

           The district court found that the source-of-law factor

strongly favored abstention solely because the contract dispute was

governed   by   Puerto   Rico   law.      It   did   so    despite   readily

acknowledging that its task in determining the parties' respective

contractual obligations "appear[ed] simple enough."           Agreeing that

neither complex nor novel issues of local law are apparent, we

conclude that no weight should have been given to the source-of-law

factor.

           It is only in "rare instances" that the presence of state-

law issues creates any momentum toward deferring to pending local

litigation under the Colorado River doctrine.             See Moses H. Cone,

460 U.S. at 26; Villa Marina Yacht Sales, Inc. v. Hatteras Yachts,

915 F.2d 7, 15 (1st Cir. 1990).        Such a rarity may arise where the

state-law issues "present particularly novel, unusual or difficult

questions of legal interpretation" that are best left to state court

                                  -15-
resolution.      Elmendorf Grafica, Inc., 48 F.3d at 52; see, e.g.,

Jiménez,   597   F.3d   at   30;   Currie,   290   F.3d   at   9-13.   It   is

appropriate that the rule is narrow; after all, there is nothing

extraordinary about federal courts being called upon to analyze the

law of different jurisdictions.

           Here, the district court did not suggest that this simple

contract case involving settled local law constituted such a rarity,

and the appellee has not persuaded us. Compare Rojas-Hernandez, 925

F.2d at 496 (holding that "a relatively straightforward claim for

damages under Puerto Rico tort law [which was] neither unsettled nor

complex" did not display a "rare" circumstance weighing toward

surrendering federal jurisdiction), with Jiménez, 597 F.3d at 30

(concluding that source-of-law factor heavily weighed in favor of

abstention where the state law "issues that would inform [the

federal court's] jurisdictional analysis remain[ed] unsettled" and

could not be "intelligently answer[ed]" by the federal court absent

some clear indication from the local forum).

Res and the Remainder

           With respect to the final factor relied on by the district

court -- whether either court has assumed jurisdiction over a res --

the court acknowledged that the contract claim involved "no tangible

assets per se." The court nevertheless appeared to give this factor

some weight.     It concluded that, because Caribevisión deposited a

"considerable sum of money" with the state court and the dollar

                                     -16-
amount was a "subject of contention," the "prudential policy under

Colorado River favors abstention."         We must take a different view.

            In Jiménez, we likened the res factor to a "prudential"

lens that may focus more on avoiding the inconsistent disposition

of property, and less on in rem jurisdiction.            597 F.3d at 28 n.6;

cf. Fairway Capital Corp., 483 F.3d at 41 (examining relative

importance of state court's quasi in rem jurisdiction). We ascribed

some weight to the res factor because the parallel litigation there

involved the enforcement of an option contract to purchase a

penthouse apartment.      See Jimenez, 597 F.3d at 28.       Here, there is

simply no res involved at all, and, thus, no force animating this

factor.

            As to the remaining factors, the district court found them

to   be   neutral   and   the   appellee   offers   no   argument   that   any

particular one weighs toward abstention.            Nor does the appellee

argue that the district court's orders rejecting Nazario's motions

to reconsider and to set aside the dismissal include any other

grounds to support the district court's Colorado River analysis.

And although the appellant Nazario challenges the neutrality finding

of one factor and dismissal as the relief afforded, we need not

address either argument in light of our conclusion that none of the

factors that were relied upon by the district court create any

momentum toward abstention.

                                    -17-
           In the end, Nazario's federal action is a garden variety

federal diversity case requiring only the application of settled

principles of state law to an ordinary contract dispute.             The

parallel litigation, though giving rise to some normal risks of

inexpediency,   does   not   display   exceptional   circumstances   that

clearly justify departure from the federal court's obligation to

exercise jurisdiction in this contract damages case.

           We note an additional aspect of this case.      In her brief,

the appellant suggests that the company's filing of the local

declaratory judgment was based on what she asserts is an improper

motive.    This accusation raises the question of whether a party's

motivation in pursuing parallel state litigation may be a relevant

ingredient in the exceptional-circumstances mix.       The Supreme Court

has remarked that such an angle has "considerable merit." See Moses

H. Cone, 460 U.S. at 17-18 n.20; see also Villa Marina Yacht Sales,

Inc., 915 F.2d at 15 (indicating approval for reviewing vexatious

or contrived nature of both the federal and state court litigation).

We need not consider this aspect further, though, because even if

the company filed the local action in good faith, no exceptional

circumstances exist in this case warranting dismissal on abstention

grounds.

           Finally, our decision revives at least Nazario's motions

for partial summary judgment and for default, and perhaps other

related pleadings.     While the appellant urges us to resolve her

                                  -18-
motion for partial summary judgment, we decline to do so in the

first instance.   Additionally, we leave it for the district court

to consider on remand the extent to which the local court's merits

decision on the release question impacts the issues pending in the

federal action.

                          IV. Conclusion

          The judgment is reversed and the case is remanded to the

district court for further proceedings consistent with this opinion.

Costs to appellant.

                                -19-