Fuller Co. v. Ramon I. Gil, Inc., 85-1566

Decision Date29 January 1986
Docket NumberNo. 85-1566,85-1566
PartiesFULLER COMPANY, Plaintiff, Appellant, v. RAMON I. GIL, INC., Defendant, Appellee.
CourtU.S. Court of Appeals — First Circuit

Maggie Correa-Aviles with whom Manuel A. Guzman and McConnell, Valdes, Kelley, Sifre, Griggs & Ruiz-Suria, San Juan, P.R., were on brief, for plaintiff, appellant.

Federico Ramirez Ros with whom Ramirez, Latimer & Biaggi, San Juan, P.R., was on brief, for defendant, appellee.

Before CAMPBELL, Chief Judge, BOWNES and BREYER, Circuit Judges.

LEVIN H. CAMPBELL, Chief Judge.

Plaintiff-appellant Fuller Company appeals from an order of the United States District Court for the District of Puerto Rico declining to exercise jurisdiction over a declaratory judgment action brought by Fuller against defendant-appellee Ramon I. Gil, Inc. We affirm.

I.

The facts necessary to the disposition of this appeal are as follows. Fuller, a manufacturer of pneumatic conveying systems and dust collectors, is a Delaware corporation with its principal office and place of business in Pennsylvania. Gil is a corporation organized under the laws of the Commonwealth of Puerto Rico with offices in Santurce, Puerto Rico. On March 17, 1981, Gil filed a suit against Fuller in the Superior Court of Puerto Rico, San Juan Part, alleging that Fuller had attempted to cancel its sales representative agreement with Gil without just cause and that Fuller owed Gil approximately $51,500 in unpaid sales commissions. Because the parties were diverse, Fuller could have removed Gil's action to federal district court under 28 U.S.C. Sec. 1441(a) (1982), 1 but Fuller chose instead to defend the suit in the commonwealth courts of Puerto Rico.

On April 6, 1981, the Puerto Rico court issued a preliminary injunction barring Fuller from terminating its sales representative agreement with Gil pendente lite. Thereafter, Fuller and Gil filed a battery of motions which accomplished little towards resolving their dispute. By Gil's count, there were at least 56 unadjudicated motions pending in the Puerto Rico court as of April 1982.

Apparently discouraged by the lack of progress in the Puerto Rico proceedings, on October 9, 1982, Fuller filed a declaratory judgment action against Gil in the Court of Common Pleas for Lehigh County, Pennsylvania. Fuller's complaint asked the Pennsylvania court to declare, inter alia, (1) that contrary to Gil's allegations Fuller had not attempted to terminate the parties' business relationship in March of 1981; (2) that, since the initiation of the Puerto Rico suit, Gil had given Fuller just cause to terminate Gil as its sales representative; and (3) that Fuller only owed Gil approximately $7,000 in unpaid commissions. Gil failed to enter an appearance or otherwise respond in the Pennsylvania action, and a default judgment was entered against it on December 2, 1982. On December 7, 1982, the Pennsylvania court entered a final decree against Gil adjudging, inter alia, that Fuller had not terminated its relationship with Gil in March of 1981, that Fuller had just cause to terminate the relationship between the parties, and that Fuller owed Gil $7,000 in unpaid commissions. Gil did not appeal from the final decree of the Pennsylvania court.

Subsequently, on December 14, 1982, Fuller filed a motion for summary judgment in the Puerto Rico Superior Court claiming that the Pennsylvania decree was entitled to full faith and credit, and that the decree rendered Gil's claims against Fuller res judicata. Gil opposed Fuller's motion. In a reply brief dated January 4, 1983, Fuller purported to reserve its right to federal review of the full faith and credit issue if the Puerto Rico court refused to recognize the preclusive effect of the Pennsylvania decree.

On December 7, 1983, the Puerto Rico court entered a decree stating that it would not recognize the preclusive effect of the Pennsylvania judgment because, inter alia, the Pennsylvania court's jurisdiction over Gil was "doubtful" or "dubious." The Puerto Rico court directed the parties to engage in discovery. On December 22, 1983, Fuller moved the Puerto Rico court to reconsider the full faith and credit issue and reiterated its assertion of the right to seek collateral review of this question in federal court, but Fuller's motion was not granted. Over the following two years, Fuller continued its efforts to secure enforcement of the Pennsylvania decree in the courts of Puerto Rico on the one hand, while purporting to reserve its right to federal review of the full faith and credit issue on the other. 2

Fuller's efforts to obtain enforcement of the Pennsylvania decree proved unavailing but, on February 7, 1985, in an interlocutory order issued in response to a petition for certiorari filed by Fuller, the Supreme Court of Puerto Rico directed

that upon request of any of the parties the issue referring to the full faith and credit clause be entertained and resolved as soon as possible before the case proceeds to trial on the merits.

Both Fuller and Gil were apparently of the view that the lower court had already expressed its opinion on the full faith and credit issue, but the Supreme Court denied their motions for reconsideration and for clarification of its February 7th order.

Instead of resubmitting the full faith and credit issue to the Puerto Rico Superior Court, Fuller took its dispute with Gil before a third tribunal by filing a declaratory judgment action against Gil in the United States District Court for the District of Puerto Rico on February 21, 1985. Fuller's federal complaint sought a declaration that the Pennsylvania decree was conclusive of any and all claims and controversies arising out of the commercial relationship between the parties, as well as a declaration of the Pennsylvania decree's preclusive effect with respect to Gil's action against Fuller in the commonwealth courts of Puerto Rico. On July 3, 1985, the federal district court dismissed Fuller's complaint. This appeal followed.

II.

The district court based its dismissal of Fuller's declaratory judgment action on the principles 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 reaffirmed in Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). We recently said,

In Colorado River, the Supreme Court identified several factors that counsel in favor of dismissal in situations involving the exercise of concurrent jurisdiction by federal or federal and state courts, and promote the public interest in " '[w]ise judicial administration, ... conservation of judicial resources and comprehensive disposition of litigation.' " 424 U.S. at 817 (quoting Kerotest Manufacturing Co. v. C-O-Two Fire Equipment Co., 342 U.S. 180, 183 [72 S.Ct. 219, 221, 96 L.Ed. 200] (1952)).

These factors include (1) which court first assumed jurisdiction over any res or property involved in the action; (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; and (5) whether federal law supplies the rule of decision. Moses H. Cone, 460 U.S. at 13-26 .

Bergeron v. Estate of Loeb, 777 F.2d 792, 798 (1st Cir.1985) (footnote omitted). 3 Fuller argues that the district court abused its discretion in concluding that the Colorado River factors favored dismissal of Fuller's declaratory judgment action against Gil. We disagree. The Supreme Court has cautioned that "the decision whether to dismiss a federal action because of parallel state-court litigation does not rest upon a mechanical checklist, but on a careful balancing of the important factors as they apply in a given case," and that "[t]he weight to be given to any one factor may vary greatly from case to case, depending upon the particular setting of the case." Moses H. Cone, 460 U.S. at 16, 103 S.Ct. at 937. Because Fuller's federal action is one for declaratory relief, we think that the third Colorado River factor--the desirability of avoiding piecemeal litigation--is entitled to great weight in assessing the propriety of the district court's dismissal. As an initial matter, 28 U.S.C. Sec. 2201 (1982), the statute which confers jurisdiction upon the federal courts to hear declaratory judgment suits, is worded in discretionary, not compulsory, terms. 4 Although a district court does not enjoy unbridled discretion to "decline to entertain such an action as a matter of whim or personal disinclination," Public Affairs Associates, Inc. v. Rickover, 369 U.S. 111, 112, 82 S.Ct. 580, 581, 7 L.Ed.2d 604 (1962) (per curiam), its determination is still entitled to substantial deference. See American Home Assurance Co. v. Insular Underwriters Corp., 494 F.2d 317, 320 (1st Cir.1974).

In our view, it would be unthinkable that every time a state (here, commonwealth) court defendant became dissatisfied with that court's provisional resolution of some issue and there was diversity of citizenship, it could rush over to the federal courthouse in the hope of obtaining a more favorable determination. Such a practice, if ordinarily permitted, would complicate and fragment the trial of cases, as well as cause friction between state and federal courts.

In Brillhart v. Excess Insurance Co., 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942), the Supreme Court discouraged the unnecessary fragmentation of litigation between state and federal courts through declaratory judgment actions. There, Excess brought a declaratory judgment action in federal district court in Kansas seeking a declaration of the parties' rights under a contract of reinsurance shortly before it was named a defendant in an ongoing garnishment proceeding brought by Brillhart in Missouri state court. In upholding the district court's discretionary refusal to exercise jurisdiction over...

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