Austin Bldg. & Design v. Nelson Eng'g Constr.

• Decision Date: 23 May 2023
• Docket Number: 8:21-CV-471
• Parties: AUSTIN BUILDING & DESIGN, INC., Plaintiff, v. NELSON ENGINEERING CONSTRUCTION, INC., an Iowa corporation, Defendant.
• Court: U.S. District Court — District of Nebraska

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AUSTIN BUILDING & DESIGN, INC., Plaintiff, v. NELSON ENGINEERING CONSTRUCTION, INC., an Iowa corporation, Defendant.

No. 8:21-CV-471

United States District Court, D. Nebraska

May 23, 2023

MEMORANDUM AND ORDER ON APPLICATION OF THE COLORADO RIVER DOCTRINE

BRIAN C. BUESCHER, UNITED STATES DISTRICT JUDGE

This matter initially came before the Court on a Motion to Dismiss for lack of subject matter jurisdiction filed by defendant Nelson Engineering Construction, Inc. (Nelson). Filing 23 at 1. Nelson argued at the time that this Court lacked jurisdiction pursuant to the Rooker-Feldman doctrine. Filing 23 at 1. Plaintiff Austin Building &amp Design, Inc. (Austin), opposed the Motion, Filing 31 at 1 and the Court ultimately agreed with Austin that Rooker-Feldman did not apply to this case because that doctrine's timing requirement was not satisfied. See Filing 34 at 14. However, the Court directed the parties to brief whether the Colorado River doctrine nonetheless counseled against the exercise of jurisdiction. See Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976); Filing 34 at 15. The parties have now done so. Nelson argues that the Colorado River doctrine militates against the exercise of federal jurisdiction while Austin argues the opposite. See Filing 37; Filing 38; see also Filing 39-2; Filing 42. Having considered the parties' briefs, supplemental briefs, relevant portions of the record, and the governing law, the Court concludes that the Colorado River doctrine counsels against the exercise of federal jurisdiction under the circumstances presented in this case. Therefore, the Court will dismiss Austin's Petition Filing 1, without prejudice. This resolution necessarily moots Austin's Motion for Summary Judgement, Filing 24 as well.

I. BACKGROUND^[1]

The underlying dispute at issue in this case “arises from a contract between Austin and Ingredion Incorporated (‘Ingredion') for the conversion and construction of a pea protein production facility in South Sioux City, Nebraska[.]” Filing 1 at 1 (¶1); Filing 14 at 1 (¶1).^[2] “Austin entered into two subcontracts with Nelson for work on [this] [p]roject” Filing 1 at 1 (¶2); Filing 14 at 1 (¶2). Both subcontracts between Austin and Nelson included arbitration provisions. Filing 1 at 2 (¶5); Filing 14 at 1 (¶5). A series of litigation followed thereafter. See generally Filing 1 at 1-3 (¶¶1-9); Filing 14 at 1 (¶¶1-9); Filing 39-1.

A. Austin's Initiation of State Court Case CI No. 20-91

On or about April 8, 2020, Austin initiated suit against Ingredion in Nebraska state court. Filing 23-2 at 1, 3. The case was filed in the District Court for Dakota County Nebraska and was captioned CI No. 20-91. Filing 23-2 at 1; Filing 23-1 at 1; Filing 31 at 2. Austin later filed an Amended Complaint against Ingredion in CI No. 20-91 on June 11, 2020. Filing 23-2. The Amended Complaint alleged the following seven counts against Ingredion: breach of contract, unjust enrichment, promissory estoppel, fraudulent misrepresentation, negligent misrepresentation, breach of the implied covenant of good faith and fair dealing, and a violation of Nebraska's Deceptive Trade Practices Act. See Filing 23-2 at 30-37. On April 12, 2021, Nelson moved to intervene in CI No. 20-91. Filing 23-2 at 42. Along with its Motion to Intervene, Nelson submitted a “Complaint in Intervention” wherein it alleged two counts. Filing 23-2 at 46-47. The first count alleged a breach of contract claim against Austin. Filing 23-2 at 45. The second count alleged a quantum meruit claim against Ingredion. Filing 23-2 at 46.

Austin filed an objection to Nelson's Motion to Intervene on April 21, 2021. Filing 23-2 at 49. In its objection, Austin argued that “the subcontracts entered into between Austin and Nelson contain arbitration provisions which provide that any disputes between Austin and Nelson must be resolved exclusively through arbitration.” Filing 23-2 at 50. Over Austin's objection, the Nebraska state court granted Nelson's Motion to Intervene on May 7, 2021. Filing 23-2 at 61-62. In so doing, the Nebraska state court recognized that the “main question” was “whether the dispute between Nelson and Austin is bound by the arbitration clause in the subcontract.” Filing 23-2 at 60. Relying on Nebraska Supreme Court precedent, the court concluded that the arbitration clauses in the subcontracts conflicted with language in the primary contract. Filing 23-2 at 61. Therefore, because the court found that the primary contract controlled, it determined that Nelson was not bound by the arbitration clauses and granted Nelson's Motion to Intervene. Filing 23-2 at 61-62. However, on or about August 23, 2021, the Nebraska state court granted a joint motion to “dismiss Nelson's complaint in intervention without prejudice, permit a withdrawal of Nelson's motion to intervene, and vacate [its intervention order] dated May 7, 2021.” Filing 23-2 at 63-64.

B. Nelson's Initiation of State Court Case CI No. 21-277 and Austin's Later Initiation of this Case in Federal Court

Thereafter, “[o]n or about October 7, 2021, Nelson filed a Complaint against Austin, Ingredion[,] and Sioux City Foundry Company in Nebraska State court[.]” Filing 1 at 3 (¶6); Filing 14 at 1 (¶6). The case was filed in the District Court for Dakota County, Nebraska, and was captioned CI No. 21-277. Filing 1 at 3 (¶6); Filing 14 at 1 (¶6). Nelson's state court complaint in CI No. 21-277 alleges two counts: (1) an action to foreclose a construction lien, and (2) an action in quantum meruit. Filing 31-1 at 64-65. Austin is named as a defendant in the action to foreclose the lien, but not the quantum meruit claim. Filing 31-1 at 64-65. Nelson's state court complaint alleges as fact “that Austin failed to pay Nelson $2,565,142.91 owed to Nelson under the terms of the subcontracts[.]” Filing 1 at 5 (¶21); Filing 14 at 2 (¶21). However, Nelson did not bring a breach of contract action against Austin in CI No. 21-277. See Filing 31-1 at 64-65.

On December 20, 2021, a little over two months after Nelson initiated CI No. 21-277 in Nebraska state court, Austin filed suit in this Court against Nelson. See generally Filing 1. Austin styled this action as a “Petition Under Section 4 of the Federal Arbitration Act to Compel Arbitration.” Filing 1 at 1. According to Austin's “Petition,” the claims Nelson asserted in state court “fall within the scope of the subcontract arbitration clauses, which require any and all claims by Nelson related to payment of money for its work on the [p]roject to be resolved solely and exclusively through arbitration” meaning that “Nelson brought the Complaint in [CI No. 21-277] in contravention of the arbitration clauses in both subcontracts.” See Filing 1 at 6-7 (¶¶30-31). When Nelson answered Austin's Petition before this Court on March 21, 2022, it denied that its state court Complaint filed in CI No. 21-277 contravened the subcontract arbitration clauses. See Filing 14 at 3 (¶¶30-31). Specifically, Nelson said that its Complaint did “not involve a ‘Claim' as defined . . . [by the subcontracts] entered into between Nelson and Austin. Therefore, Nelson [wa]s not bound by any Arbitration Provision contained in the [subcontracts].” Filing 14 at 3 (¶31).

Meanwhile, on the same day Austin filed its Petition in this Court, it also filed a motion to stay CI No. 21-277 in Nebraska state court. Filing 23-2 at 78. In this motion, Austin noted that it had filed suit in federal court and argued that the state court should stay its proceedings in CI No. 21-277 “pending the determination by the Nebraska Federal District Court under the Federal Arbitration Act about whether the claims Nelson brings here must be arbitrated.” Filing 23-2 at 83. Nelson opposed this motion to stay on January 27, 2022. Filing 23-2 at 85. It supported its position by emphasizing that the state court had previously determined that Nelson was not bound by the subcontracts' arbitration provisions in its May 7, 2021, order in CI No. 20-91. Filing 23-2 at 89. After considering the parties' positions on Austin's motion to stay CI No. 21-277, the state court issued a written ruling on April 1, 2022. Filing 23-2 at 98.

The state court noted that once again, “[t]he main question here, as in CI 20-91, continues to be whether the dispute between the parties is bound by the arbitration clause in the subcontract between Nelson and Austin.” Filing 23-2 at 99. It then concluded that “[w]hile the Order in CI 2091 may have been mooted by Nelson's withdrawal in that matter, the [state court], having reviewed this matter and the argument of the parties, comes to the same conclusion that the prime contract controls here.” Filing 23-2 at 99. The state court declined to grant a stay and again concluded that the “the arbitration clause included in the subcontract between Nelson and Austin does not prevent Nelson from seeking recourse under the Nebraska Construction Lien Act[.]” Filing 23-2 at 101. Thus, Nelson prevailed on the arbitrability issue in state court after the lawsuit in this Court was filed but before this Court made any determination on the matter. See Filing 23-2 at 99-101.

C. Austin's Appeal before the Nebraska Court of Appeals

Austin appealed this ruling to the Nebraska Court of Appeals. See Filing 31 at 4 (noting the appeal is captioned “Nebraska Court of Appeals, Case No. A 22-000319”); Filing 39-2 at 4. Three issues were presented in this appeal: (1) whether the state court erred in “denying Austin's motion to stay pending the resolution of the petition to compel arbitration before the federal court”; (2) whether the state court erred in “basing its decision regarding Austin's motion to stay on an improper resolution of an issue not before it by failing to...