Handy v. Shaw, Bransford, Veilleux & Roth, 01-7129.

• Decision Date: 18 April 2003
• Docket Number: No. 01-7129.,01-7129.
• Citation: 325 F.3d 346
• Parties: Dorothy HANDY, Appellant, v. SHAW, BRANSFORD, VEILLEUX & ROTH, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

325 F.3d 346

Dorothy HANDY, Appellant, v. SHAW, BRANSFORD, VEILLEUX & ROTH, Appellee.

No. 01-7129.

United States Court of Appeals, District of Columbia Circuit.

Argued January 13, 2003.

Decided April 18, 2003.

Appeal from the United States District Court for the District of Columbia (No. 00cv02336).

Dorothy Handy argued the cause pro se.

Aaron L. Handleman argued the cause for the appellee. George S. Mahaffey, Jr. was on brief for the appellee.

Before: HENDERSON, RANDOLPH and GARLAND, Circuit Judges.

Opinion for the court filed by Circuit Judge KAREN LeCRAFT HENDERSON.

KAREN LeCRAFT HENDERSON, Circuit Judge:

Dorothy Handy appeals pro se the dismissal of her malpractice lawsuit against the law firm of Shaw, Bransford, Veilleux & Roth (Shaw). She asserts that the district court erred in ruling that Rule 13 of the Federal Rules of Civil Procedure required her to file her malpractice claim against Shaw in a lawsuit already pending in the District of Columbia Superior Court (Superior Court) brought by Shaw against Handy to recover legal fees allegedly owing. A district court's authority to dismiss a case within its jurisdiction in favor of parallel local court proceedings is limited, however, and here the court overlooked both United States Supreme Court and Circuit precedent to that effect. See, e.g., Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 813-19, 96 S.Ct. 1236, 1244-47, 47 L.Ed.2d 483 (1976); Reiman v. Smith, 12 F.3d 222, 223-24 (D.C.Cir.1993); Hoai v. Sun Refining & Mktg. Co., Inc., 866 F.2d 1515, 1518, 1520 (D.C.Cir.1989).

I.

Handy's malpractice claim against Shaw arose as a result of Shaw's representation of Handy in another case — Handy had hired Shaw to represent her in an employment discrimination suit against the United States Department of Transportation. The Department successfully defended against that claim and, subsequently, Shaw attempted to recover legal fees from Handy. Handy, in turn, alleged that Shaw's representation of her in that case constituted malpractice.

Shaw filed its original complaint on September 26, 2000 in Superior Court, seeking the recovery of fees allegedly owed by Handy. Shaw, however, failed to serve Handy before she filed pro se her malpractice complaint against Shaw in district court on September 29, 2000. Shaw's failure to serve Handy ultimately resulted in the Superior Court's dismissal of Shaw's claim on December 7, 2000. Shaw, Bransford, Veilleux & Roth v. Handy, Civ. No. 00-7138 (D.C.Super. Ct. Dec. 7, 2000). Handy, on the other hand, did successfully serve Shaw, which on November 21, 2000 moved to dismiss her complaint for failure to state a claim upon which relief could be granted, namely, her alleged malpractice claim was required under FED.R.CIV.P. 13(a) to be brought as a compulsory counterclaim in the then-pending Superior Court litigation.

More than six months later, the district court granted Shaw's still-pending dismissal motion, dismissing without prejudice Handy's suit. Handy v. Shaw, Bransford, Veilleux & Roth, Civ. A. No. 00-2336 (D.D.C. June 5, 2001) (mem.) [hereinafter Mem. Op.].¹ It reasoned that Rule 13(a)'s requirement that "[a] pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim," compels a litigant to bring all claims arising out of the same transaction or occurrence in a single forum. Mem. Op. at 3-5. It first determined that Handy's malpractice claim "bears a clear, logical relationship" to Shaw's claim for unpaid legal fees, id. at 5, and, then, based on that determination, treated Handy's claim as a compulsory counterclaim under Rule 13(a). Because Shaw's lawsuit was filed three days before Handy's, the court said, Handy must file her claim there,² declaring that "to permit both claims to proceed in separate forums would thwart the intent behind Rule 13." Id. at 7. The district court concluded that "`the fairest and most efficient course would be to permit the parties to litigate all aspects of the dispute in the forum in which the controversy was first raised.'" Id. at 6-8 (quoting Pumpelly v. Cook, 106 F.R.D. 238, 240 (D.D.C.1985)) (citing Coates v. Ellis, 61 A.2d 28, 30 (D.C.1948)).

II.

The district court based its Rule 12(b)(6) dismissal without prejudice on the compulsory counterclaim provision of FED. R.CIV.P. 13(a) and notions of judicial efficiency.³ Generally, the district court's decision to decline jurisdiction in favor of an ongoing proceeding is reviewed for abuse of discretion. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 19, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Whether the lower court applied the proper legal standard in exercising that discretion, however, is a question of law reviewed de novo. Id.; Reiman, 12 F.3d at 223-24; Wash. Metro. Area Transit Auth. (WMATA) v. Ragonese, 617 F.2d 828, 830 (D.C.Cir.1980). As the district court noted, parallel litigation of factually related cases in separate fora is inefficient. Mem. Op. at 7 (use of Rule 13 to consolidate factually related cases justified because it is the resolution that "will best serve the interests of justice, as well as judicial economy"). Indeed, separate parallel proceedings have long been recognized as a judicial inconvenience. Columbia Plaza Corp. v. Sec. Nat'l Bank, 525 F.2d 620, 626 (D.C.Cir.1975) ("Sound judicial administration counsels against separate proceedings, and the wasteful expenditure of energy and money incidental to separate litigation of identical issues should be avoided.") (footnotes omitted). For "reasons of wise judicial administration," Colo. River, 424 U.S. at 818, 96 S.Ct. 1236, 1247, the district court is given discretion to dismiss or stay a pending suit in favor of a consolidated action in another forum but it is a discretion both the Supreme Court and our court have limited. Moses H. Cone, 460 U.S. at 19, 103 S.Ct. at 938-39 ("[T]o say that the district court has discretion is not to say that its decision is unreviewable; such discretion must be exercised under the relevant standard prescribed by this Court [viz.] Colorado River's exceptional-circumstances test...."); Reiman, 12 F.3d at 224; Columbia Plaza, 525 F.2d at 627-28. In the case of parallel litigation in two federal district courts, the "general principle is to avoid duplicative litigation." Colo. River, 424 U.S. at 817, 96 S.Ct. at 1246 (citing Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co., 342 U.S. 180, 183, 72 S.Ct. 219, 221, 96 L.Ed. 200 (1952)). So long as the parallel cases involve the same subject matter, the district court should — for judicial economy — resolve both suits in a single forum. If there is a question whether the two cases involve the same subject matter, and hence, should be litigated in a single forum, we use Rule 13(a)⁴ to answer the question. Columbia Plaza, 525 F.2d at 626-27 (using Rule 13(a) to conclude that ongoing suit in another district to recover on certain notes and suit filed in district court here challenging entire transaction — of which notes were part — were "of a single controversy"). Where the issues arise out of the same "transaction," as they do here, the district court next decides which district court should adjudicate the case. Id. at 626-28. Although some courts make this determination by using the so-called "first-to-file" rule, e.g., Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d 599, 606 (5th Cir. 1999); Alltrade, Inc. v. Uniweld Products, Inc., 946 F.2d 622, 625 (9th Cir.1991), we have emphasized that the district court must balance equitable considerations rather than using a "a mechanical `rule of thumb.'" Columbia Plaza, 525 F.2d at 628 (quotations omitted); id. ("It is not enough to undertake merely the task of inquiring into the applicability of relevant provisions of the Civil Rules and end the effort at that point."); see also WMATA, 617 F.2d at 830.

The district court determined that the two suits involved the same subject matter, relying on Pumpelly v. Cook, 106 F.R.D. 238, 239-40 (D.D.C.1985), where the district court considered two factually related cases (one brought in our district court and the other in the Eastern District of Virginia) and, using its discretion, dismissed the case in favor of the parallel Virginia litigation. Mem. Op. at 4. Here, however, the district court determined that Rule 13(a) mandated the dismissal of Handy's action. Id. at 4 (Rule 13(a) imposes two-step inquiry to determine whether case should be dismissed in favor of alternative forum). While it is true that the purpose of Rule 13(a) is to consolidate logically related claims, it is usually applied in subsequent litigation on res judicata or estoppel principles. Asset Allocation & Mgmt. Co. v. W. Employers Ins. Co., 892 F.2d 566, 572-73 (7th Cir.1989) (rejecting FED.R.CIV.P. 13 as basis for enjoining federal district court from proceeding with parallel litigation) ("[T]he usual method by which [Rule 13] is enforced is simply by the plaintiff's pleading the judgment as res judicata in the defendant's suit.") (citing Baker v. Gold Seal Liquors, Inc., 417 U.S. 467, 469 n. 1, 94 S.Ct. 2504, 2506 n. 1, 41 L.Ed.2d 243 (1974); Fagnan v. Great Cent. Ins. Co., 577 F.2d 418, 420 (7th Cir.), cert. denied, 439 U.S. 1004, 99 S.Ct. 615, 58 L.Ed.2d 680 (1978)); Kane v. Magna Mixer Co., 71 F.3d 555, 562-63 (6th Cir.1995) (adopting waiver or estoppel theory for enforcing Rule 13(a) compulsory counter-claim requirement in subsequent litigation), cert. denied, 517 U.S. 1220 (1996); see generally 6 CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1417 (2d ed.1990 & Supp. 2002) (explaining that failure to plead compulsory counterclaim under Rule 13(a) bars later claim on res judicata or estoppel principles).

The parallel proceedings, as already noted, took place in district...