Paul Revere Variable Annuity Ins. Co. v. Thomas

• Decision Date: 13 September 1999
• Docket Number: Civil Action Nos. 98-40139-NMG to 98-40155-NMG.
• Citation: 66 F.Supp.2d 217
• Parties: The PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY, The Paul Revere Corporation, The Paul Revere Life Insurance Company, The Paul Revere Protective Life Insurance Co., Provident Companies, Inc., and Provident Life and Accident Company, Petitioners, v. Douglas E. THOMAS, et al., Respondents.
• Court: U.S. District Court — District of Massachusetts

66 F.Supp.2d 217

The PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY, The Paul Revere Corporation, The Paul Revere Life Insurance Company, The Paul Revere Protective Life Insurance Co., Provident Companies, Inc., and Provident Life and Accident Company, Petitioners, v. Douglas E. THOMAS, et al., Respondents.

Civil Action Nos. 98-40139-NMG to 98-40155-NMG.

United States District Court, D. Massachusetts.

September 13, 1999.

COPYRIGHT MATERIAL OMITTED

Bonnie Pierson-Murphy, Patrick W. Shea, Paul, Hastings, Janofsky & Walker, Stamford, CT, Joseph M. Hamilton, Mirick, O'Connell, DeMaiiie & Lougee, LLP, Worcester, MA, for Plaintiffs.

Francis A. Ford, Worcester, MA, Glen DeValerio, Michael G. Lange, Berman, DeValerio & Pease, Boston, MA, for Defendant.

MEMORANDUM & ORDER

GORTON, District Judge.

The six petitioner companies have filed 17 related cases in this Court seeking to compel arbitration of 17 actions brought against them in state court by former employees. Pending before this Court are the motions of the 17 individuals to dismiss the petitions to compel arbitration (Docket No. 3 in each of the above-captioned cases).

I. Background

The Petitioners consist of The Paul Revere Corporation and three of its wholly owned subsidiaries — The Paul Revere Variable Annuity Insurance Company ("Variable"), The Paul Revere Life Insurance Company and The Paul Revere Protective Life Insurance Co., — (collectively "Paul Revere") as well as Provident Companies, Inc. ("Provident") and its wholly owned subsidiary Provident Life and Accident Company. All six Petitioners were named as co-defendants in 41 separate cases filed by 41 former employees of Paul Revere in the Trial Court of Massachusetts, Superior Court Department for Worcester County on October 8, 1997 (the "State Cases"). The 41 plaintiffs, each of whom held the title of "General Manager," allege that their employment contracts were unlawfully terminated following a merger between Paul Revere and Provident. Specifically, they claim that the terminations constituted a breach of contract (both express and implied) and a violation of several Massachusetts statutes.¹

On January 15, 1998, the six defendant companies (the Petitioners in these instant cases) filed motions to dismiss in 40 of the 41 State Cases. In 18 instances, they joined their motions to dismiss with motions to compel arbitration, arguing that all of those 18 former employees, by virtue of their registrations with the National Association of Securities Dealers ("NASD"), entered into agreements requiring them to arbitrate their disputes.

Of the six defendants in the State Cases, Variable is the only one that is a member of the NASD and, according to the former employees, is therefore the only entity capable of enforcing those arbitration agreements. After the companies filed their motions to compel arbitration, 15 of the 18 former employees voluntarily dismissed their claims against Variable. The companies contend that those dismissals were deliberate attempts by the former employees to escape their arbitration obligations.

On July 17, 1998, the Petitioners filed the instant cases in this Court with respect to the 17 disputes in which they could meet the diversity jurisdiction requirements of this federal court. Their petitions, which are brought pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 3-4, seek orders that 1) compel arbitration and 2) stay the state court proceedings during the pendency of that particular arbitration. The 18th case remains pending in state court.

The 17 former employees named as defendants in the instant cases (the "Former Employees") have moved to dismiss the petitions. They argue that 1) this court should abstain pursuant to the principles announced in Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), 2) the petitioners lack standing to compel arbitration, 3) the dispute is not subject to arbitration and 4) the Federal Anti-Injunction Act, 28 U.S.C. § 2283, prohibits the issuance of stays in these cases.

II. Colorado River Abstention

A. Overview of the Doctrine

The Former Employees seek to have the federal cases against them dismissed pursuant to the abstention doctrine announced by the Supreme Court in Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). The so-called Colorado River doctrine establishes a narrow basis for the stay or dismissal of a federal lawsuit in deference to parallel state proceedings. The doctrine provides that in certain "exceptional circumstances," a federal court should decline jurisdiction based on "considerations of `wise judicial administration, giving regard to conservation of resources and comprehensive disposition of litigation.'" Moses H. Cone Memorial Hospital v. Mercury Const. Corp., 460 U.S. 1, 14-15, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) (quoting Colorado River, 424 U.S. at 817, 96 S.Ct. 1236).

In Colorado River, the Supreme Court described four illustrative factors for a court to consider in determining whether "exceptional circumstances" exist: 1) whether the state or federal court has assumed jurisdiction over a res, 2) the inconvenience of the federal forum, 3) the desirability of avoiding piecemeal litigation and 4) the order in which the concurrent forums obtained jurisdiction. Colorado River, 424 U.S. at 818-19, 96 S.Ct. 1236. In Moses H. Cone, the Supreme Court added two additional elements: 5) whether state or federal law controls and 6) the adequacy of the state forum to protect the parties' rights. Moses H. Cone, 460 U.S. at 23-26, 103 S.Ct. 927. Another factor considered by many courts, including those in the First Circuit, is 7) the vexatious or reactive nature of the federal lawsuit, in other words the plaintiff's motivation for bringing the federal case. Villa Marina Yacht Sales, Inc. v. Hatteras Yachts, 947 F.2d 529, 532 (1st Cir.1991) ("Villa Marina II").

The Supreme Court, in announcing the doctrine, took care to emphasize its narrowness. Because the federal courts have a "virtually unflagging obligation ... to exercise the jurisdiction given them," the Supreme Court cautioned that "[o]nly the clearest of justifications will warrant dismissal." Colorado River, 424 U.S. at 817, 96 S.Ct. 1236. A district court must therefore consider the relevant factors "with the balance heavily weighted in favor of the exercise of jurisdiction." Moses H. Cone, 460 U.S. at 16, 103 S.Ct. 927.

In sum, the party seeking to invoke the Colorado River abstention doctrine faces a heavy burden of proving the existence of "exceptional circumstances" which justify the surrender of jurisdiction by a federal court.

B. Analysis of the Factors

The parties agree that two of the factors —jurisdiction over the res and inconvenience of the federal forum — are inapplicable to this case. The Former Employees rely upon the third, fourth, sixth and seventh factors.² The Petitioners contend that the fifth factor counsels against abstention.

1. The Order in Which Jurisdiction was Obtained (The Fourth Factor)

In considering the order in which jurisdiction was obtained, the Court must look not only to the chronological order in which the proceedings were initiated, but also the progress of the respective cases. Moses H. Cone, 460 U.S. at 21-22, 103 S.Ct. 927. A district court should be inclined to abstain in favor of a previouslyfiled state case that has progressed substantially farther than the federal case.

Here, the State Cases were filed on October 8, 1997. On January 15, 1998, the defendant companies moved to dismiss those State Cases and, alternatively, to compel arbitration. The plaintiffs in the State Cases filed their opposition to those motions on April 30, 1998. The Petitioners filed the instant actions in this Court on July 17, 1998.

With respect to the arbitration issue, it appears that this Court and the state court have progressed at roughly the same pace. At a hearing on March 10, 1999, the parties informed this Court that the Superior Court had scheduled a hearing on the arbitration issue for sometime in May, 1999. This Court is unaware of 1) what transpired at that hearing, if any, and 2) any ruling by the state court. Therefore, the order in which the jurisdiction was acquired does not favor abstention.

Although the parties have engaged in discovery in the State Cases, the progress of that discovery is irrelevant to the abstention issue because it relates to the merits of the complaints, not to the specific issue of arbitration pending before both courts. It is only the status of the arbitration issue that counts under this factor.

2. Adequacy of the State Forum (The Sixth Factor)

The Former Employees contend that the sixth factor, the adequacy of the state forum, weighs heavily in favor of abstention. This factor addresses the competence of the state court and its ability to serve as a fair forum for resolving a dispute.

Under the FAA, state courts have concurrent jurisdiction to determine arbitration issues. There is no doubt that both state and federal courts are equally competent to resolve the pending arbitration questions.

The Former Employees argue that this Court should therefore defer to the state court. Their position, however, misinterprets the significance of this factor, which is usually implicated as a reason for a federal court to retain jurisdiction, rather than as a reason to abstain. For example, if for some reason a state forum would fail to protect the rights of one of the parties, a federal court would be more inclined to retain jurisdiction itself. In contrast, a determination that the state court is equally adequate does not provide a comparable policy reason for a federal court to abstain. Where, as here, the adequacy of the forums is not a concern, this factor is neutral in the Colorado River analysis.

3. Motivation for Filing the Federal Cases (The Seventh Factor)

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