Peters v. Frontiere
| Citation | 568 F.Supp.3d 1205 |
| Decision Date | 15 October 2021 |
| Docket Number | 1:21-cv-00564 WJ/JHR |
| Parties | Gerald PETERS, Plaintiff, v. Joseph FRONTIERE, Nicholas Frontiere, Michael Ghiselli, Alexandra Aizenshtadt, Joseph Cellura, and Tarsin Mobile, Inc., Defendant, v. Joseph Frontiere, Cross-claimant, v. Michael Ghiselli, Joseph Cellura, and Tarsin Mobile, Inc., Cross-claim Defendant. |
| Court | U.S. District Court — District of New Mexico |
Benjamin W. Allison, Breanna Contreras, Bardacke Allison LLP, Santa Fe, NM, for Plaintiff Gerald Peters.
Julie Sakura, Michael Edmund Jacobs, Hinkle Hensley Shanor & Martin LLP, Santa Fe, NM, for Defendants/Cross-Claimants Joseph Frontiere, Nicholas Frontiere.
David Ketai, Marrs Griebel Law, Ltd., Robert Gentile, Guebert Bruckner PC, Albuquerque, NM, for Cross-Claim Defendant.
THIS MATTER comes before the Court upon the following:
In relevant part, Defendants Michael Ghiselli and Joseph Cellura request the Court to stay this federal lawsuit under the Colorado River doctrine1 until similar litigation in Nevada state court2 has been resolved. Conversely, Plaintiff Gerald Peters and Defendants Joseph and Nicholas Frontiere argue that the Court should not stay this federal lawsuit. Having considered the pleadings, the parties’ arguments and the applicable law, the Court finds that the Motion to Stay is not well-taken and is, therefore, DENIED .
This case is about an investment gone wrong. Years ago, Plaintiff Gerald Peters ("Plaintiff") invested $750,000 in a company named Tarsin Mobile before it was supposed to go public. Doc. 9 at 19. In convincing Plaintiff to make this investment, the collective Defendants allegedly made knowingly false representations, and thereafter "absconded" with his investment. Id. To recover damages, Plaintiff now asserts ten causes of action: Federal Securities Fraud in violation of the Federal Exchange Act of 1934 § 10(b), New Mexico Securities Fraud, Common Law Fraud, Negligent Misrepresentation, Breach of Contract, Breach of the Covenant of Good Faith and Fair Dealing, Civil Conspiracy, Accounting, Imposition of a Constructive Trust, and Promissory Estoppel. See generally id. The Court has yet to make any substantive rulings in this lawsuit.
Meanwhile, in the Eighth Judicial District Court of Nevada, a separate yet related matter (the "Nevada lawsuit") was filed about seven months before this suit and is set for trial in just a few months. According to Defendants Ghiselli and Cellura, the dispute in the Nevada lawsuit involves an investment dispute between Joseph Frontiere, Joseph Cellura (President and CEO of TMIX), and Michael Ghiselli (COO of TMIX). Doc. 16 at 2. With over thirty named parties, the Nevada lawsuit involves broad issues, such as "ownership of various entities, whether investment dollars were directed properly and who actually has control of Tarsin Mobile ... the money invested in Tarsin Mobile, and the ownership of Convertible Notes." Id. at 6. Because of the more comprehensive litigation of the Nevada lawsuit and its potential impact on the instant case, Defendants Ghiselli and Cellura argue this Court should stay this case pending resolution of the Nevada lawsuit. The Court now addresses whether these circumstances warrant such a remedy.
Federal courts have a "virtually unflagging obligation ... to exercise the jurisdiction given them." Colorado River Water Conservation District v. United States , 424 U.S. 800, 817–18, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). In rare circumstances, however, a district court may stay its proceedings in "situations involving the contemporaneous exercise of concurrent jurisdictions ... by state and federal courts." Id. at 817, 96 S.Ct. 1236. The underlying principles of such analysis are "wise judicial administration," "conservation of judicial resources and comprehensive disposition of litigation." Id. (citing Kerotest Mfg. Co. v. C-O-Two Fire Equipment Co. , 342 U.S. 180, 183, 72 S.Ct. 219, 96 L.Ed. 200 (1952) ).
In determining whether a stay is appropriate, the Court must engage in a three-step process. First, it must decide whether to apply the Colorado River factors (dealing with coercive relief) or the Brillhart factors (dealing with declaratory judgements). United States v. City of Las Cruces , 289 F.3d 1170, 1181 (10th Cir. 2002). Second, given the Court's ultimate determination that the Colorado River factors apply as discussed below, the Court must then determine whether the federal and Nevada lawsuits are "parallel" by evaluating whether "substantially the same parties litigate substantially the same issues in different forums." New Beckley Mining Corp. v. Int'l Union, United Mine Workers of America , 946 F.2d 1072, 1073 (4th Cir. 1991). Third, if the state and federal proceedings are parallel, the Court must balance the Colorado River factors to "ascertain whether there exist ‘exceptional ’ circumstances, the ‘clearest of justifications,’ that ... justify the surrender of jurisdiction." Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 25–26, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) (emphasis added).
As an initial matter, the Court must first determine the appropriate legal standard to apply. Defendants Ghiselli and Cellura cite both to Colorado River and Schering Corp. v. Griffo —a case in which the presiding judge stayed a declaratory judgement action pending resolution of a parallel state proceeding pursuant to the Brillhart factors. 872 F. Supp. 2d 1220, 1221 (D.N.M. 2012) (Browning, J.). In response, Plaintiff argues that the Brillhart five-factor test applies only to declaratory judgement actions, and since Plaintiff does not seek a declaration of rights, Colorado River applies. Thus, the Court must determine whether Colorado River or Brillhart governs the evaluation of Defendants’ motion to stay these proceedings.
The Tenth Circuit has explained that "the nature of the relief requested by the plaintiff, not the jurisdictional basis of the suit, is the touchstone" of whether to apply Colorado River or Brillhart. Las Cruces , 289 F.3d at 1181. "If the plaintiff only requests a declaration of its rights, not coercive relief, the suit is a declaratory judgement action for purposes of determining whether the district court has broad discretion under Brillhart to refuse to entertain the suit." Id. at 1180–1181 (). See generally Nautilus Ins. Co. v. Otero County Hosp. Ass'n , Civ. No. 2:11-00178, 2011 WL 12574962, at *3–5, 2011 U.S. Dist. LEXIS 158567, at *7–*14 (D.N.M. Nov. 4, 2011).
Here, Plaintiff alleges that the collective Defendants fraudulently induced Plaintiff to invest $750,000 in Tarsin Mobile, and thereafter absconded with his investment. Doc. 9 at 19. As a result, Plaintiff asserts ten causes of actions seeking recovery for damages—not a declaration of his rights. Therefore, recognizing the coercive nature of this federal suit, the Court will not apply Brillhart ’s discretionary standard and instead, finds that Colorado River supplies the proper legal standard for adjudicating Defendants’ motion to stay.
This federal lawsuit and the Nevada lawsuit are not parallel for purposes of the Colorado River doctrine. Therefore, there is no basis for the Court to stay these proceedings in favor of the Nevada lawsuit.
To grant a stay under Colorado River , the Court must first determine whether the state and federal proceedings are sufficiently "parallel." Fox v. Maulding , 16 F.3d 1079, 1081 (10th Cir. 1994). Suits are parallel for Colorado River purposes "if substantially the same parties litigate substantially the same issues in different forums." New Beckley Mining Corp. , 946 F.2d at 1073. The "exact identity of parties and issues is not required." Las Cruces , 289 F.3d at 1182. To determine whether state proceedings are parallel to federal proceedings, the Tenth Circuit has held that "the better approach is to examine the state proceedings as they actually exist ...." Fox , 16 F.3d at 1094 (emphasis added). Furthermore, the Supreme Court has commented that to grant a stay under Colorado River would be "a serious abuse of discretion" unless Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 28, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Any doubt regarding the parallel nature of the state suit should be resolved in favor of exercising jurisdiction. Id.
Turning to the question whether the Nevada lawsuit is parallel to this federal lawsuit, the Court finds that neither the parties nor the issues in both proceedings are substantially similar for the following reasons. First, the instant federal lawsuit and the Nevada lawsuit do not involve "substantially the same parties." The sole plaintiff in this case, Gerald Peters, appears in the Nevada lawsuit...
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