Ibc Advanced Techs., Inc. v. Ucore Rare Metals Inc., Case No. 2:19-cv-00222-HCN

• Decision Date: 25 October 2019
• Docket Number: Case No. 2:19-cv-00222-HCN
• Parties: IBC ADVANCED TECHNOLOGIES, INC., and Steven R. Izatt, Plaintiffs, v. UCORE RARE METALS INC., Jim McKenzie, and Peter Manuel, Defendants.
• Court: U.S. District Court — District of Utah

415 F.Supp.3d 1028

IBC ADVANCED TECHNOLOGIES, INC., and Steven R. Izatt, Plaintiffs,

v.UCORE RARE METALS INC., Jim McKenzie, and Peter Manuel, Defendants.

Case No. 2:19-cv-00222-HCN

United States District Court, D. Utah.

Signed October 25, 2019

Andrew G. Deiss, Brenda E. Weinberg, John Robinson, Jr., Deiss Law PC, Salt Lake City, UT, for Plaintiffs.

Adam C. Buck, Ashley Walker, Christopher J. Martinez, Dorsey & Whitney LLP, Salt Lake City, UT, for Defendants.

MEMORANDUM DECISION AND ORDER DENYING DEFENDANT'S MOTION TO DISMISS OR, IN THE ALTERNATIVE, TO STAY

Howard C. Nielson, Jr., United States District Judge

Plaintiff IBC Advanced Technologies, Inc. ("IBC") and Defendant Ucore Rare Metals Inc. ("Ucore") are currently litigating similar claims in two different venues—in this court and in the Supreme Court of Nova Scotia, Canada. Although it does not dispute that this case falls within the court's subject matter jurisdiction, Ucore argues that this court should abstain from exercising that jurisdiction as a matter of comity to the Canadian court. Relying on the Colorado River abstention doctrine, as extended by many lower courts to apply in the international context, Ucore moves to dismiss or, in the alternative, to stay proceedings in this court. Dkt. No. 8; Dkt. No. 9 (Sealed). Because the dual litigation at issue here does not present the sort of exceptional circumstances that would justify application of Colorado River , the court denies Ucore's motion.

I.

Ucore and IBC are parties to several agreements and now find themselves, along with IBC's President and CEO Mr. Steven R. Izatt, litigating claims relating to these agreements both here and in Canada. Ucore filed the first of these lawsuits against Plaintiffs in the Supreme Court of Nova Scotia on December 11, 2018. See Dkt. No. 8-1. In its initial complaint, Ucore alleged libel, injurious falsehood, and unlawful interference with economic relations—all of which stemmed from a press release issued by IBC. See Dkt. No. 8-1.

On February 19, 2019, Plaintiffs filed this lawsuit in Utah state court, alleging that Ucore and two of its officers—Mr. Jim McKenzie, Ucore's President and CEO, and Mr. Peter Manuel, Ucore's Vice President and CFO—breached various agreements between the parties and engaged in related tortious conduct. See Dkt. No. 4 (Sealed). Plaintiffs' claims include breach of contract, breach of the implied covenant of good faith and fair dealing, negligent misrepresentation, fraudulent concealment or fraudulent nondisclosure, breach of fiduciary duty, unjust enrichment, and fraudulent inducement. See Dkt. No. 4 (Sealed) at 26–36. Ucore filed a notice of removal on April 3, 2019. See Dkt. No. 2. Plaintiffs have not yet served the individual defendants, Mr. McKenzie and Mr. Manuel. See Dkt. No. 29 at 5.

Ucore also amended its Canadian complaint the day before it removed the Utah case to this court. See Dkt. No. 8-2. Included in Ucore's amended complaint is a request to declare valid and enforceable one of its agreements with IBC—the "Option Agreement." See Dkt. No. 8-2 ¶ 2. Ucore also seeks from the Canadian Court a declaration that "IBC breached the Option Agreement and its duty of good faith performance." Dkt. No. 8-2 ¶ 4. In light of these additional contract claims, Ucore contends that Plaintiffs' "numerous claims" that IBC "was defrauded into entering the Option Agreement"—which Ucore asserts form the gravamen of Plaintiffs' lawsuit in the District of Utah—"will be fully litigated in the Canadian proceedings as either a defense or counterclaim." Dkt. No. 8 at 5; see also Dkt. No. 29 at 1 ("The suits include the same parties, controversy, and basic claims and there is nothing barring Plaintiffs from asserting the claims they raise here as counterclaims in Canada.").

For now, however, Plaintiffs have "not brought any claims in the Canadian action and remain[ ] purely [ ] defendant[s] there." Dkt. No. 18 at 4–5.

On April 10, 2019, Ucore filed a motion to dismiss or, in the alternative, to stay. See Dkt. No. 8; Dkt. No. 9 (Sealed). Ucore argues that such relief is warranted under international abstention principles developed in other circuits and followed by the District of Colorado. See Dkt. No. 29 at 3–4. Among other things, Ucore stresses that "[t]his case presents the sort of extraordinary circumstances that require abstention because Ucore would be substantially prejudiced by having to litigate in Utah, where its primary witnesses [i.e. , the individual defendants, Mr. McKenzie and Mr. Manuel] cannot travel without submitting to personal jurisdiction here." Dkt. No. 29 at 5.

II.

The Supreme Court has repeatedly emphasized "the virtually unflagging obligation of the federal courts to exercise the jurisdiction given them." Colorado River Water Conservation Dist. v. United States , 424 U.S. 800, 817, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976) ; accord Mata v. Lynch , ––– U.S. ––––, 135 S. Ct. 2150, 2156, 192 L.Ed.2d 225 (2015) ; Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 15, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). "The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, 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. 1236 (citation omitted).

In Colorado River , the Supreme Court recognized that a federal court faced with parallel state proceedings may in "exceptional" circumstances abstain "for reasons of wise judicial administration." Id. at 818, 96 S.Ct. 1236. Although neither the Supreme Court nor the Tenth Circuit has applied the Colorado River abstention doctrine in a case involving parallel proceedings in a foreign court, See National Union Fire Ins. Co of Pittsburgh, PA v. Kozeny , 115 F. Supp. 2d 1243, 1247 (D. Colo. 2000), other circuits have extended this doctrine to such cases. See Royal and Sun Alliance Ins. Co. of Canada v. Century Intern. Arms, Inc. , 466 F.3d 88, 93–94 (2nd Cir. 2006) (collecting cases).

To determine whether parallel judicial proceedings present exceptional circumstances warranting abstention under Colorado River , a court must weigh several factors, including (1) "whether either court has assumed jurisdiction over property," (2) "the inconvenience of the federal forum," (3) "the desirability of avoiding piecemeal litigation," (4) "the order in which the courts obtained jurisdiction," (5) "the vexatious or reactive nature of either the federal or the state action," (6) "whether federal law provides the rule of decision," and (7) "the adequacy of the state court action to protect the federal plaintiff's rights," Fox v. Maulding , 16 F.3d 1079, 1082 (10th Cir. 1994) (citing Colorado River , 424 U.S. at 818, 96 S.Ct. 1236, and Moses H. Cone , 460 U.S. at 18 nn.20, 23, 28, 103 S.Ct. 927 (1983) ); see also Fox , 16 F.3d at 1082 (noting that "[o]ther courts also have considered whether the party opposing abstention has engaged in impermissible forum-shopping"). The court's determination, however, "does not rest on a mechanical checklist, but a careful balancing of the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction." Moses H. Cone , 460 U.S. at 16, 103 S.Ct. 927. As the D.C. Circuit has explained, because "only truly exceptional circumstances will allow a federal to stay or dismiss a federal action in favor of a concurrent action before state court ..., it is not enough that the factors favoring deferral outnumber those opposed (or neutral). Rather, the factors favoring deferral must themselves be exceptional." Edge Investment, LLC v. District of Columbia , 927 F.3d 549, 554 (D.C. Cir. 2019) (citation and internal quotation marks omitted).

In extending the Colorado River doctrine to the international context, courts have modified or reformulated some of these factors. See, e.g. , Royal and Sun Alliance , 466 F.3d at 94. The parties agree that the court should decide this case using modified Colorado River factors as articulated by the District of Colorado in National Union Fire Ins. Co. of Pittsburgh, PA v. Kozeny : (1) "similarity of parties and issues involved in foreign litigation"; (2) "the promotion of judicial efficiency"; (3) "adequacy of relief available in the alternative forum"; (4) "issues of fairness to and convenience of the parties, counsel, and witnesses"; (5) "the possibility of prejudice to any of the parties"; and (6) "the temporal sequence of the filing of the actions." 115 F. Supp. 2d 1243, 1247 (D. Colo. 2000). The court will do so given that these factors are similar to those articulated by other courts applying the Colorado River doctrine in the international context, see, e.g. , Royal and Sun Alliance , 466 F.3d at 94, and because application of this doctrine does not turn "on a mechanical checklist" in all events, Moses H. Cone , 460 U.S. at 16, 103 S.Ct. 927.¹

The Supreme Court has made clear that courts engaging in a Colorado River analysis should not set out to "find some substantial reason for the exercise of federal jurisdiction" but should instead "ascertain whether there exist ‘exceptional’ circumstances, the ‘clearest of justifications,’ that can suffice under Colorado River to justify the surrender of that jurisdiction." Moses H. Cone , 460 U.S. at 25–26, 103 S.Ct. 927. Thus, as the Tenth Circuit has explained, "any doubt should be resolved in favor of exercising federal jurisdiction." Fox , 16 F.3d at 1082. The court finds these admonitions fully applicable in the international context presented here.

III.

In this case, the court finds neither sufficiently "exceptional" circumstances nor the "clearest of justifications" that would warrant the "surrender" of this court's jurisdiction to resolve a case properly before it. To be sure, the first, second, and third Kozeny factors do appear to weigh in favor of Ucore....