Amerisourcebergen Corp. v. Roden

Decision Date13 August 2007
Docket NumberNo. 05-55349.,05-55349.
Citation495 F.3d 1143
PartiesAMERISOURCEBERGEN CORPORATION, Plaintiff-Appellant, v. Donald R. RODEN, Defendant-Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

Gordon E. Krischer (argued) and Larry A. Walraven (briefed), O'Melveny & Myers, Newport Beach, CA, for the plaintiff-appellant.

William E. Johnson (briefed and argued), Law Offices of Richard E. Hodge, Inc., Malibu, CA, for the defendant-appellee.

Appeal from the United States District Court for the Central District of California; Alicemarie H. Stotler, District Judge, Presiding. D.C. No. CV-04-01061-AHS.

Before: WARREN J. FERGUSON, EUGENE E. SILER, JR.,* and HAWKINS, Circuit Judges.

Opinion by Judge HAWKINS; Concurrence by Judge FERGUSON.

MICHAEL DALY HAWKINS, Circuit Judge:

We explore once again the sometimes complex relationship between state and federal civil proceedings when parties in the midst of litigation on one side of the divide file factually related proceedings on the other. Understandably concerned with judicial economy and respect for ongoing state proceedings, the district court dismissed the federal suit under the Younger abstention doctrine. Determining that abstention was not required, we return the matter to district court to allow appellant's diversity action to proceed.

FACTS AND PROCEDURAL HISTORY

In 1995, Donald R. Roden ("Roden") was hired as President and Chief Operating Officer of Bergen Brunswig Corporation ("BBC"), the predecessor company to AmerisourceBergen Corporation ("ABC"). At this time, Roden and BBC entered into an employment agreement (the "Agreement") providing that Roden would have his employment with BBC consistently extended monthly on a rolling three-year basis1 and would not be fired except for "cause," as defined in the Agreement. Additionally, the Agreement provided that Roden was entitled to participate in BBC's ERISA-governed2 Supplemental Executive Retirement Plan (the "SERP"), as well as its interest-free loan program (the "Loan Program").

Four years after he was hired and two years after being promoted to Chief Executive Officer ("CEO"), Roden was given written notice of BBC's intention to terminate his employment for a reason that apparently did not qualify as "cause" under the Agreement and on terms that may have conflicted with those provided for in the Agreement. Roden thereafter filed a complaint against BBC in the Superior Court in Orange County, California (the "California Superior Court") claiming that BBC breached the Agreement and that Roden was therefore entitled to his full salary for three years past his termination date and was, in all other respects, entitled to be treated as BBC's CEO until that date.3

Specifically, Roden claimed that he was entitled to "estimated future benefits under the SERP . . . of no less than $8,970,000" and a due date (and interest-accrual start-date) based on a November 30, 2002 termination date for the $337,500 loan he took out under the Loan Program.4

Shortly thereafter, Roden and BBC entered into a Settlement Agreement, and a judgment incorporating its terms was entered on July 27, 2000 ("the Judgment"), as follows:

1. In favor of [Roden] in the amount of $5,000,000, less legally required deductions;

2. Continuation of the benefits provided in Sections 5(d) [which includes participation in the SERP], (e) and (i) [which includes participation in the Loan Program] of [Roden's] employment contract; and

3. Reasonable attorney's fees and costs in an amount to be determined by the Court.

Believing BBC had not fully complied with this Judgment, Roden sought to force compliance in California Superior Court. After briefing and argument, that court ordered implementation of the Judgment ("First Order") finding, in relevant part, that Roden's entitlement to benefits under the SERP had "vested" and that "Roden's $337,500 loan was not absolved by the Judgment" but would not become due until November 30, 2002. The First Order continued (emphasis added):

[BBC] is required to accord Roden the same treatment as the other senior officers of [BBC] who received loans from this November 1998 loan program . . . with respect to . . . any forgiveness, extensions, payment of interest and the like.

BBC appealed the First Order to the California Court of Appeal, which unanimously affirmed. 107 Cal.App.4th 620, 132 Cal. Rptr.2d 549 (2003).

When Roden attempted to enforce the First Order and collect his SERP benefits, BBC opposed his request, claiming that Roden was entitled to a lesser sum under the SERP plan than he had alleged. Roden appealed this determination pursuant to company policy, and the final administrative review of the matter yielded a decision that Roden was entitled to $1,898,066 in SERP benefits. Apparently with an aim of pursuing his rights under ERISA—which allows an ERISA plan beneficiary to pursue court action if he is dissatisfied with an administrative determination of his ERISA benefits, 29 U.S.C. §§ 1132(a), 1133—Roden requested discovery from ABC (which, by this point, had stepped into BBC's shoes) regarding the amount of benefits he was entitled to receive under the SERP.

At this point, ABC sought to remove Roden v. BBC from the California courts to federal court claiming that Roden's discovery request had "transformed" the case into an ERISA action, which is removable to federal court at the defendant's request. See Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987). The district court rejected this argument and remanded the case back to the California courts.5

Undeterred, ABC filed its own action in federal district court, requesting both a judgment that Roden breached his contract with ABC by failing to repay his $337,500 loan ("Count I"), as well as a declaration of ABC's duties and obligations to Roden under the SERP—namely, for a proper calculation of Roden's SERP benefits ("Count II"). The district court dismissed ABC's two claims,6 relying on the basic premise that resolving ABC's claims at the federal level would interfere with ongoing state court proceedings regarding almost-entirely overlapping issues.7 ABC appealed to this court, arguing that the district court erred in dismissing its claims.

Shortly before oral argument took place in this case, the California Superior Court entered a second order implementing the Judgment ("Second Order"). The Second Order declared that Roden was entitled to $14,432,141.74 in SERP benefits but was not entitled to any forgiveness of the loans he had taken from ABC under the Loan Program. Both parties have appealed the Second Order to the California Court of Appeal.

In light of these recent developments— which ABC agrees will squarely resolve the issue of Roden's entitlement under the SERP—ABC concedes that the district court was within its discretion to decline to entertain Count II. See 28 U.S.C. § 2201 ("In a case of actual controversy within its jurisdiction, . . . any court of the United States . . . may declare the rights and other legal relations of any interested party. . . ." (emphasis added)); Gov't Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir.1998) (en banc) ("If there are parallel state proceedings involving the same issues and parties pending at the time the federal declaratory action is filed, there is a presumption that the entire suit should be heard in state court."). We are thus called upon to decide only whether the district court properly dismissed Count I.

DISCUSSION

If the district court had the same discretion to decline to hear claims for monetary damages as it does to decline to hear claims for declaratory relief, we would surely uphold the dismissal of Count I. Parties should be strongly discouraged from attempting to drag federal courts into disputes already significantly underway in state courts.

Moreover, we regret the significant expense—both to the parties and to the two already overburdened court systems— caused by ABC's decision to file its state-law-governed breach of contract claim in federal court when it could have just as easily filed the very same claim in the California courts, which have been competently handling these matters for over six years.

Nevertheless, we are aware of the "virtually unflagging obligation of the federal courts to exercise the jurisdiction given them," Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), and must decide whether the district court properly understood the scope of this obligation when it dismissed Count I under the doctrine announced in Younger v. Harris, 401 U.S. 37, 41, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971). We conclude that it did not and that Count I was improperly dismissed under Younger. We also conclude that dismissal of Count I cannot be affirmed under either the Anti-Injunction Act, 28 U.S.C. § 2283, or the Rooker-Feldman doctrine. We therefore reverse the dismissal of Count I and remand to the district court for further proceedings.

I. Younger Abstention

The Younger abstention doctrine, as originally articulated by the Supreme Court, "forbid[s] federal courts [from] stay[ing] or enjoin[ing] pending state court proceedings." Younger, 401 U.S. at 41, 91 S.Ct. 746. Roden argues that allowing ABC's breach of contract claim to proceed in federal court would be the functional equivalent of enjoining the ongoing post-judgment proceedings in Roden v. BBC and, thus, that the Younger doctrine required the federal court to abstain from considering, and thereby dismiss, Count I.

ABC counters that, although its breach of contract claim may create a potential for conflict with the enforcement of a single state court judgment, this is an insufficient basis for federal court abstention under Younger. Specifically, ABC argues that the district court incorrectly stated the Younger doctrine's elements and improperly expanded the ...

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