Bank One, N.A. v. Boyd, 00-60805.

• Decision Date: 05 April 2002
• Docket Number: No. 00-60807.,No. 00-60805.,No. 00-60806.,00-60805.,00-60806.,00-60807.
• Citation: 288 F.3d 181
• Parties: BANK ONE, N.A., Plaintiff-Appellant, v. Emma BOYD, Roscoe Shields, Stella Reeves, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

288 F.3d 181

BANK ONE, N.A., Plaintiff-Appellant, v. Emma BOYD, Roscoe Shields, Stella Reeves, Defendants-Appellees.

No. 00-60805.

No. 00-60806.

No. 00-60807.

United States Court of Appeals, Fifth Circuit.

April 5, 2002.

William Hollis Leech, Mark Herndon Tyson, McGlinchey Stafford, Jackson, MS, Michael H. Rubin, McGlinchey Stafford, Baton Rouge, LA, Jonathan Standish Massey, Washington, DC, Leonard A. Gail (argued), Chicago, IL, for Plaintiff-Appellant in all cases.

Suzanne Griggins Keys, Hiawatha Northington, II (argued), Byrd & Associates, Jackson, MS, for Boyd, Shields and Reeves.

Appeals from the United States District Court for the Northern District of Mississippi.

Before: REAVLEY, HIGGINBOTHAM and PARKER, Circuit Judges.

ROBERT M. PARKER, Circuit Judge:

Bank One appeals the district court's Orders of Abstention and Dismissal. Bank One contends that the district court abused its discretion in abstaining from exercising jurisdiction and declining to rule on their Motions for Summary Judgment to Compel Arbitration. For the reasons that follow, we agree. We therefore vacate the district court's November 7, 2000, Orders of Abstention and Dismissal and remand these cases to the district court for further proceedings consistent with this opinion.

BACKGROUND

These consolidated cases arise from the sale and financing of home satellite television systems. In the mid-1990s, Appellees purchased satellite television systems from door-to-door salesmen and telephone solicitors. Financing for the satellite systems was provided by Bank One in the form of a revolving credit card account. In conjunction with the sale, purchasers (hereinafter "Cardmembers") were required to complete and execute a Credit Application and Security Agreement. The Credit Application was accompanied by a Revolving Credit Card Plan and Disclosure Statement (collectively hereinafter "Cardmember Agreement"). The Cardmember Agreement also contained an amendment provision, permitting Bank One to change or amend the terms of the Cardmember Agreement "upon fifteen (15) days prior written notice if required by law."

In March 1998, Bank One notified its Cardmembers of a proposed modification to the Cardmember Agreement. The modification added an arbitration provision to the Cardmember Agreement requiring that all disputes, arising from or relating in any way to the Cardmember Agreement or the Cardmember's account, be resolved by binding arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1-16 (hereinafter "FAA"). Cardmembers who did not wish to accept the arbitration provision could opt out by notifying Bank One, in writing, on or before April 15, 1998, of their decision to reject the new terms. Cardmembers who opted out pursuant to the terms of the notice could maintain their accounts under the prior terms of the Cardmember Agreement. None of the Appellees notified Bank One, by the April 15, 1998 deadline, of their decision to reject the terms of the arbitration provision.

In October 1999, Appellees and a number of other plaintiffs filed suit in Mississippi state court against Bank One and at least thirteen other named defendants. Appellees' complaint asserted that they were misled as to the nature of the financing of their purchases of the satellite systems and claimed numerous causes of action including fraud, conspiracy, negligence, and intentional infliction of emotional distress. Sky Scanner Satellite, a co-defendant in the state court proceeding, removed the suit to federal district court where the action was remanded to the state court in August 2000. In September, immediately following the remand, Bank One filed individual suits against the Appellees in federal district court seeking to enforce the arbitration provision of the Cardmember Agreements pursuant to the FAA. On November 7, 2000, the district court issued a Memorandum Opinion and Orders of Abstention and Dismissal. The district court reasoned that abstention was warranted due to: 1) the state court's concurrent jurisdiction over the arbitration issue and ability to resolve contract disputes including the enforceability of the arbitration provision of the Cardmember Agreement; 2) the multiplicity of Bank One's related federal actions to compel arbitration; 3) the possibility of inconsistent rulings in federal court; and 4) the prior filing of the underlying state court action. Bank One now challenges the district court's ruling.

STANDARD OF REVIEW

We review a district court's decision not to exercise its jurisdiction for an abuse of discretion; its underlying legal conclusions, de novo. See Safety Nat'l Cas. Corp. v. Bristol-Myers Squibb Co., 214 F.3d 562, 564 (5th Cir.2000).

ANALYSIS

Bank One complains that the district court erred in abstaining from ruling on its motions to compel arbitration under the FAA. Specifically, Bank One asserts that the district court misapplied the abstention doctrine set forth in Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), and further elucidated in Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Bank One contends that the district court's abstention in favor of concurrent state court proceedings constitutes an abuse of discretion in light of the absence of exceptional circumstances warranting abstention and the FAA's liberal federal policy favoring arbitration agreements. Appellees maintain, however, that the district court's abstention was appropriate because: 1) the state court action was filed first; 2) Bank One raised arbitration as an affirmative defense in its answer in the state court action and has made no showing that the state court is reluctant to hear the matter; 3) abstention by the federal district court avoids piecemeal litigation resulting from the multiplicity of Bank One's federal court actions; 4) Bank One's filing of the federal actions is a vexatious attempt to harass Appellees and avoid proper state court jurisdiction; and 5) the interests of wise administration of judicial resources are best served by permitting one state court judge to determine the issue of arbitration for all plaintiffs in the single state court action.

The federal courts have a virtually unflagging obligation to exercise the jurisdiction conferred upon them. Colorado River, 424 U.S. at 817, 96 S.Ct. 1236. "Abstention from the exercise of federal jurisdiction is the exception, not the rule." Id. at 813, 96 S.Ct. 1236. Abdication of the obligation to decide cases under the doctrine of abstention can be justified "only in the exceptional circumstances where the order to the parties to repair to state court would clearly serve an important countervailing interest." Id. The doctrine of abstention generally applies only to cases involving "considerations of proper constitutional adjudication [or] regard for federal-state relations ... in situations involving the contemporaneous exercise of concurrent jurisdictions."¹ Id. at 817, 96 S.Ct. 1236. The present case, however, presents neither a federal constitutional question nor an issue of federal-state comity. Nevertheless, it may still be appropriate for a federal district court to refrain from exercising jurisdiction on considerations of wise administration of judicial resources.

"[T]he decision whether to dismiss a federal action because of parallel state-court litigation does not rest on a mechanical checklist, but on a careful balancing of the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction." Moses H. Cone, 460 U.S. at 16, 103 S.Ct. 927. Factors relevant to the decision include: 1) which court first assumed jurisdiction over the res; 2) the inconvenience of the federal forum; 3) the desirability of avoiding piecemeal litigation; 4) the order in which jurisdiction was obtained by the concurrent forums; 5) whether and to what extent federal law provides the rules of decision on the merits; and 6) the adequacy of the state proceedings in protecting the rights of the party invoking federal jurisdiction. See Colorado River, 424 U.S. at 818, 96 S.Ct. 1236; Moses H. Cone, 460 U.S. at 23, 26, 103 S.Ct. 927; Black Sea Inv., Ltd. v. United Heritage Corp., 204 F.3d 647, 650 (5th Cir.2000) (citation omitted).

The first factor is not relevant to the present case as neither the state nor federal district court have assumed jurisdiction over any res or property. Although the second factor is applicable to the case at bar, neither party has raised the inconvenience of the federal forum as an issue. Because the federal court and the state court are in the same geographic region, we find this factor weighing in favor of the district court exercising jurisdiction. The Appellees argue that the third factor, the desirability of avoiding piecemeal litigation, weighs in favor of the district court's surrender of jurisdiction. The district court acknowledged that the FAA "contemplates federal-state piecemeal litigation as a result of the filing of a federal petition to compel arbitration of issues raised in a state court proceeding," and found this factor weighing in support of refraining from exercising jurisdiction because of duplicative litigation. The FAA, however, not only contemplates piecemeal litigation, but "requires piecemeal resolution when necessary to give effect to an arbitration agreement." Moses H. Cone, 460 U.S. at 20, 103 S.Ct. 927. When concurrent jurisdictions exist between federal district courts, the general principle is to avoid duplicative litigation. Colorado River, 424 U.S. at 817, 96 S.Ct. 1236 (citations omitted). No such principle exists, however, as between state and federal courts. Rather, "[t]he rule is well recognized that the pendency of an action in the state court is no bar to proceedings concerning the same matter in the Federal court having jurisdiction...."...