Gannett Co., Inc. v. Clark Const. Group, Inc., 01-2475.

CourtUnited States Courts of Appeals. United States Court of Appeals (4th Circuit)
Citation286 F.3d 737
Docket NumberNo. 01-2475.,01-2475.
PartiesGANNETT COMPANY, INCORPORATED, Plaintiff-Appellant, v. The CLARK CONSTRUCTION GROUP, INCORPORATED, Defendant-Appellee.
Decision Date18 April 2002
286 F.3d 737
GANNETT COMPANY, INCORPORATED, Plaintiff-Appellant,
v.
The CLARK CONSTRUCTION GROUP, INCORPORATED, Defendant-Appellee.
No. 01-2475.
United States Court of Appeals, Fourth Circuit.
Argued February 28, 2002.
Decided April 18, 2002.

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ARGUED: Philip John Harvey, Venable, Baetjer & Howard, L.L.P., McLean, Virginia, for Plaintiff-Appellant. Robert Milton Moore, Moore & Lee, L.L.P., McLean, Virginia, for Defendant-Appellee. ON BRIEF: David G. Lane, Christine M. McAnney, Venable, Baetjer & Howard, L.L.P., McLean, Virginia, for Plaintiff-Appellant. Charlie C.H. Lee, Richard O.

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Wolf, Moore & Lee, L.L.P., McLean, Virginia; E. Mabry Rogers, Walter J. Sears, Arlan D. Lewis, Bradley, Arant, Rose & White, L.L.P., Birmingham, Alabama, for Defendant-Appellee.

Before WILLIAMS and KING, Circuit Judges, and ANDRE M. DAVIS, United States District Judge for the District of Maryland, sitting by designation.

Reversed and remanded by published opinion. Judge WILLIAMS wrote the opinion, in which Judge KING and Judge DAVIS joined.

OPINION

WILLIAMS, Circuit Judge.


Gannett Company, Inc. (Gannett) filed this diversity jurisdiction action against Clark Construction Group, Inc. (Clark) in the United States District Court for the Eastern District of Virginia, alleging breach of contract. The district court abstained from exercising jurisdiction, applying the doctrine of Colorado River Water Consv. Dist. v. United States, 424 U.S. 800, 813, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), which allows a district court to abstain where parallel litigation exists in federal and state court and exceptional circumstances warrant abstention.1 Upon reviewing the district court's decision to abstain for abuse of discretion, we conclude that the district court misapplied several of the Colorado River factors and that exceptional circumstances do not justify abstention in this case. Accordingly, we reverse and remand.

I.

Clark entered into a contract with Gannett to build Gannett's new USA Today headquarters complex in McLean, Virginia. Under the terms of the contract, Clark was required to complete the project substantially by June 17, 2001, and to complete the project finally by August 8, 2001. Clark claims that it met these deadlines and that Gannett breached the contract by failing to pay Clark for its work. Gannett, by contrast, argues that Clark did not meet the deadlines and that Gannett has suffered damages as a result of Clark's failure to complete the work in a timely fashion.

In August 2001, Clark submitted to Gannett a request for payment for the work it had completed. The request included claims by eleven of Clark's subcontractors. Clark and Gannett were unable to reach an agreement as to the parties' respective obligations under the contract, and three separate proceedings followed.

On September 19, 2001, Gannett filed this federal action pursuant to diversity jurisdiction, alleging that Clark breached the contract (the Federal Contract Action). The next day, Clark filed a breach of contract action against Gannett in the Circuit Court for Fairfax County, Virginia (the State Contract Action). On October 10, 2001, Clark filed a bill of complaint against Gannett in the chancery division of the Circuit Court for Fairfax County, Virginia to enforce an earlier-obtained mechanic's lien on the property underlying the contract dispute, the USA Today headquarters complex (the State Lien Action).

On October 29, 2001, Gannett filed motions in the State Contract Action and the State Lien Action to abate, or, in the alternative, to stay those actions pending resolution of Gannett's breach of contract claim in the Federal Contract Action. Two days later, Clark filed a motion in the Federal Contract Action to dismiss or, in the alternative, to stay, arguing that the district

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court should abstain from exercising jurisdiction pursuant to Colorado River. The district court denied the motion to dismiss2 but granted the motion to stay.

Gannett filed a timely notice of appeal to this court. Thereafter, Clark amended its Bill of Complaint in the State Lien Action and joined as respondent-defendants in that action eleven subcontractors who had filed mechanic's liens against Gannett's property.

II.

We begin with the premise that "[a]bstention from the exercise of federal jurisdiction is the exception, not the rule." Colorado River, 424 U.S. at 813, 96 S.Ct. 1236. As has been reiterated time and again, the federal courts have a "virtually unflagging obligation ... to exercise the jurisdiction given them." Id. at 817, 96 S.Ct. 1236; Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996); Richmond, Fredericksburg & Potomac R.R. v. Forst, 4 F.3d 244, 251 (4th Cir.1993); Spann v. Martin, 963 F.2d 663, 673 (4th Cir.1992).

For a federal court to abstain under the Colorado River doctrine, two conditions must be satisfied. As a threshold requirement, there must be parallel proceedings in state and federal court. Colorado River, 424 U.S. at 813, 96 S.Ct. 1236. Second, "exceptional circumstances" warranting abstention must exist. Id. Without establishing a rigid test, the Supreme Court has recognized several factors that are relevant in determining whether a particular case presents such exceptional circumstances: (1) jurisdiction over the property; (2) inconvenience of the federal forum; (3) the desirability of avoiding piecemeal litigation; (4) the order in which jurisdiction was obtained; (5) whether federal law is implicated; and (6) whether the state court proceedings are adequate to protect the parties' rights. Id. at 818, 96 S.Ct. 1236; Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 23, 26, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).

We review a district court's decision to abstain under Colorado River for abuse of discretion. See New Beckley Mining Corp. v. Int'l Union, UMWA, 946 F.2d 1072, 1074 (4th Cir.1991). "Of course, an error of law by a district court is by definition an abuse of discretion." Hunter v. Earthgrains Co. Bakery, 281 F.3d 144, 150 (4th Cir.2002). "Further, even if a district court applies the correct legal principles to adequately supported facts," a reviewing court is obliged to reverse if the "court has a definite and firm conviction that the court below committed a clear error of judgment in the conclusion it reached upon a weighing of the relevant factors." Westberry v. Gislaved Gummi AB, 178 F.3d 257, 261 (4th Cir.1999) (citation omitted). Accordingly, we will reverse the district court for abuse of discretion if the district court fails to "exercise its discretion in accordance with the Colorado River `exceptional circumstances test.'" New Beckley, 946 F.2d at 1074 (citation omitted); see also Moses H. Cone, 460 U.S. at 19, 103 S.Ct. 927 ("Yet to say that the district court has discretion is not to say that its decision is unreviewable; such discretion must be exercised under... Colorado River's exceptional-circumstances test.").

A.

Gannett concedes that the district court correctly determined that the State Contract Action is parallel with the Federal Contract Action but argues that the State Lien Action is not parallel with the Federal Contract Action. The district court did not make any finding as to

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whether the State Lien Action and the Federal Contract Action were parallel.3 Thus, we must determine de novo whether the State Lien Action is parallel with the Federal Contract Action. See, e.g., Village of Westfield, N.Y. v. Welch's, 170 F.3d 116, 121-22 (2d Cir.1999) (recognizing that the appellate court has the authority to apply Colorado River test where the district court fails to do so in first instance).

"Suits are parallel if substantially the same parties litigate substantially the same issues in different forums." New Beckley, 946 F.2d at 1073. Clark and Gannett are both parties to the Federal Contract Action and the State Lien Action. The Federal Contract Action and the State Lien Action, however, involve different issues with different requisites of proof. For example, the State Lien Action requires the equity court to ascertain the validity and amount of the underlying debt, see, e.g., York Fed. Savings & Loan v. Hazel, 256 Va. 598, 506 S.E.2d 315, 317 (Va.1998), which involves demonstrating that a contract exists for the work performed. In this case, however, enforcement of the mechanic's lien is not dependent on questions of breach of contract, which will be resolved only through the separate breach of contract action, in that Clark and Gannett have not asserted their respective breach of contract claims in the State Lien Action.4 Cain v. Rea, 159 Va. 446, 166

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S.E. 478, 480 (Va.1932) ("[The mechanic's lien action] does not arise out of, nor is it the essence of the contract for labor, nor dependent on the motives which suggest its being enforced."); Va.Code Ann. § 43-3(a) (Michie 1999) (providing that all persons "performing labor or furnishing materials" for the "construction, removal, repair or improvement" of any building may perfect a mechanic's lien); Va.Code Ann. § 43-22 (Michie 1999) (providing that a lien is enforced by filing a bill with an "itemized statement of his account, showing the amount and character of the work done or materials furnished, the prices charged therefor, the payments made, if any, the balance due, and the time from which interest is claimed thereon, the correctness of which account shall be verified by the affidavit of himself, or his agent").

Moreover, the actions seek different remedies. In the State Lien Action, Clark seeks a lien and foreclosure on the property, whereas in the Federal Contract Action, Gannett seeks compensatory damages for the alleged breach of contract. Clark concedes that it would not be fully compensated for its asserted damages by recovery in the State Lien Action; thus, Clark has asserted its own breach of...

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