Hoai v. Sun Refining and Marketing Co., Inc., 88-7136

• Decision Date: 07 February 1989
• Docket Number: No. 88-7136,88-7136
• Citation: 866 F.2d 1515
• Parties: Thanh Vong HOAI, Appellant, v. SUN REFINING AND MARKETING COMPANY, INC.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1515

866 F.2d 1515

275 U.S.App.D.C. 397

Thanh Vong HOAI, Appellant, v. SUN REFINING AND MARKETING COMPANY, INC.

No. 88-7136.

United States Court of Appeals District of Columbia Circuit.

Argued Dec. 12, 1988.

Decided Feb. 7, 1989.

Appeal from the United States District Court for the District of Columbia (Civil Action No. 87-02456).

Laurence A. Elgin, with whom John D. Hemenway, Washington, D.C., was on the brief, for appellant.

J. Gordon Forester, Jr., with whom Stephen H. Abraham, Washington, D.C., was on the brief, for appellee.

Before WALD, Chief Judge, and EDWARDS and D.H. GINSBURG, Circuit Judges.

Opinion for the Court filed by Circuit Judge HARRY T. EDWARDS.

HARRY T. EDWARDS, Circuit Judge:

This case arises out of a dispute between appellant Thanh Vong Hoai ("Hoai") and Thanh Van Vo ("Vo") regarding control of a gasoline station in the District of Columbia. Vo sued Hoai and the gasoline supplier, Sun Refining and Marketing Company ("Sunoco"), in D.C. Superior Court, and subsequently entered into a consent order with Sunoco under which Sunoco agreed to supply gasoline to Vo. Hoai then sued Sunoco in federal court, alleging that Sunoco had unlawfully terminated his gasoline franchise in violation of the Federal Petroleum Marketing Practices Act ("PMPA"). Hoai appeals from the District Court's order granting a stay of the federal action pending resolution of the Superior Court action. Because we find no basis for the District Court's refusal to allow Hoai to adjudicate his federal claims in federal court, we reverse.

I. BACKGROUND

Hoai had a franchise from appellee Sunoco to operate a Sunoco gasoline station in the District of Columbia. Hoai claims that he was threatened with murder and then "driven out" of his gas station by Vo, "with the help of other Vietnamese, a self-styled 'mafia.' " Brief of Appellant at 3. Hoai also claims that he informed Sunoco of the threats to kill him and of fraud perpetrated against him by the other Vietnamese.

After Hoai attempted to recover his station from Vo, Vo filed suit in D.C. Superior Court against Hoai, Sunoco and others on August 28, 1986. Following a hearing the next day, the court granted a temporary restraining order ("TRO") that reinstated Vo in the gas station, removed Hoai from the station, and directed Sunoco to continue supplying petroleum products to the station.

On September 8, 1986, the Superior Court ratified a consent order between Sunoco and Vo. The order extended the TRO for seven months as to Sunoco and Vo, and required Sunoco to continue to supply petroleum products to the station after the expiration of the TRO, until the dispute between Vo and Hoai was resolved or the franchise terminated. Civ. No. 7075-86, slip op. (D.C.Sup.Ct. Sept. 8, 1986). The effect of the consent order was specifically limited to Sunoco and Vo. See id., slip op. at 3.

Hoai was not informed about the consent order until after it was ratified. He then appealed the order to the D.C. Court of Appeals. The appeal was still pending on April 7, 1987, when Sunoco terminated the franchise. Neither Hoai nor Vo is now in possession of the station. On January 15, 1988, Sunoco was dismissed as a defendant in Superior Court. ¹ On March 14, 1988, the D.C. Court of Appeals ruled that Hoai's appeal of the consent order was moot, and the court remanded the case to the Superior Court for a trial on the merits of Vo's claim against Hoai.

Meanwhile, on September 8, 1987, Hoai filed suit in federal court against Sunoco, alleging that Sunoco had unlawfully terminated Hoai's franchise in violation of the PMPA by entering into the agreement with Vo embodied in the consent order. Hoai sought declaratory relief and $30 million in damages. Sunoco moved to dismiss the complaint on abstention grounds.

On May 26, 1988, the District Court denied the motion, but sua sponte stayed the proceedings pending resolution of the litigation in Superior Court. Civ. No. 87-2456-LFO, slip op. (D.D.C. May 26, 1988). The District Court agreed with Sunoco that "the general principles of [Pennzoil Co. v. Texaco, Inc., 481 U.S. 1, 107 S.Ct. 1519, 95 L.Ed.2d 1 (1987), and Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971),] may justify granting of the motion to dismiss." Id., slip op. at 3. However, noting that the abstention question was not clear cut and that it could consume years of litigation, the court ruled that "[t]he practical and fair solution at this stage is to stay proceedings in this Court without resolving exotic jurisdictional issues at the expense of these particular litigants." Id. at 3-4. Hoai appealed, and we now reverse.

II. THE LAW GOVERNING STAYS AND DISMISSALS OF FEDERAL ACTIONS IN FAVOR OF ONGOING PROCEEDINGS

The first question to be considered in this case is whether the district Court was correct in suggesting that a stay was an appropriate means of avoiding questions arguably posed by Younger and Pennzoil. Under the Younger/Pennzoil doctrine of abstention, or equitable restraint, a federal court may dismiss an action when there is a direct conflict between the exercise of federal and state jurisdiction and considerations of comity and federalism dictate that the federal court should defer to the state proceedings. See Younger, 401 U.S. at 43-45, 91 S.Ct. at 750-51; Pennzoil, 107 S.Ct. at 1525-26. By choosing to grant a "stay" rather than to dismiss the case, the District Court apparently believed that it could avoid deciding whether Younger abstention was proper. This position is mistaken as a matter of law. The Supreme Court has clearly held that "a stay is as much a refusal to exercise federal jurisdiction as a dismissal," because a decision to defer to proceedings in state court "necessarily contemplates that the federal court will have nothing further to do in resolving any substantive part of the case, whether it stays or dismisses." Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 28, 103 S.Ct. 927, 943, 74 L.Ed.2d 765 (1983).

Although Moses H. Cone involved a stay under the Colorado River doctrine, see Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), rather than equitable restraint under Younger or Pennzoil, the Court's reasoning is equally applicable here. Regardless of the theory invoked, both a stay and a dismissal operate to deny the plaintiff a federal forum. Consequently, while it might be appropriate to stay rather than dismiss a case if dismissal is otherwise justified, see Bledsoe v. Crowley, 849 F.2d 639, 645 (D.C.Cir.1988), the court must first determine that it is warranted in refusing to exercise its jurisdiction. The District Court, however, offered no justification for its denial of Hoai's federal forum, and we can find no basis to support the court's stay.

It is difficult to understand why the parties at trial looked solely to Younger/Pennzoil, with no apparent recognition of the possible applicability of Colorado River and Moses H. Cone. The Colorado River doctrine, which was amplified in Moses H. Cone, instructs that only truly "exceptional circumstances" will allow a federal court to stay or dismiss a federal action in favor of a concurrent action before a state court. The court in Colorado River noted that "the circumstances permitting the dismissal of a federal suit due to the presence of a concurrent state proceeding for reasons of wise judicial administration are considerably more limited than the circumstances appropriate for abstention." Colorado River, 424 U.S. at 818, 96 S.Ct. at 1246; accord Moses H. Cone, 460 U.S. at 15, 103 S.Ct. at 936. However, even though the Colorado River doctrine is narrower in application than the Younger doctrine, the Court has also pointed out that abstention itself " 'is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it.' " Colorado River, 424 U.S. at 813, 96 S.Ct. at 1244 (quoting County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 188-89, 79 S.Ct. 1060, 1062-63, 3 L.Ed.2d 1163 (1959)). ²

The policies underlying the Younger and Colorado River doctrines are somewhat different, with the latter focused principally on situations involving parallel or concurrent proceedings in federal and state courts. The main point here is that neither the Younger/Pennzoil doctrine nor the Colorado River/Moses H. Cone doctrine admits of a significant exception to the duty of a district court to adjudicate a controversy properly before it; and we can find no basis under either doctrine to justify a dismissal or stay of appellant's case.

III. THE YOUNGER/PENNZOIL DOCTRINE

Generally, it is understood that "Younger abstention," or equitable restraint, but see note 2 supra, is mandated only when state "proceedings are pending, if the State's interests in the proceeding are so important that the exercise of the federal judicial power would disregard the comity between the States and the National Government. E.g., Huffman v. Pursue, Ltd., 420 U.S. 592, 603-05 [95 S.Ct. 1200, 1207-09, 43 L.Ed.2d 482] ... (1975)." Pennzoil, 107 S.Ct. at 1526. Sunoco claims that such considerations of comity and federalism justify the District Court's stay in the instant case, because Hoai's claim is based on the legality of a consent order ratified by the Superior Court. Yet, there are several clear reasons why equitable restraint under Younger/Pennzoil was not proper here and why the adjudication of Hoai's claims in federal court will not unduly interfere with the proceedings in the Superior Court.

For Younger/Pennzoil to apply, a rigid three-prong test must be satisfied: first, a federal court may dismiss a federal claim only when there are ongoing state proceedings that are judicial in nature; second, the state proceedings must implicate important state interests; third, the proceedings must afford an adequate opportunity in which to raise the federal claims. See Middlesex County...