Ryan v. Johnson, 96-5419

• Citation: 115 F.3d 193
• Decision Date: 30 May 1997
• Docket Number: No. 96-5419,96-5419
• Parties: Tara RYAN, Appellant, v. Charles V. JOHNSON; LouAnn Johnson, h/w; Ted Cam, Jr.; Melanie Weiss; Gregory Kieser; Samuel D. Hewins; Marian Pauza; Laura Elizabeth Preng; Omer C. Marion; Kristin Paulick; Jennifer Radar; Matthew McCabe; Michael J. Lang. Charles V. JOHNSON; LouAnn Johnson, Third-Party Plaintiffs, v. Theodore CAM, Jr.; Gregory Kieser; Samuel D. Hewins; Marian Pauza; Laura E. Preng; Michael J. Lang; Omer C. Marion; Kristin Paulick; Jennifer Radar; Matthew McCabe; Melanie Weiss, Third-Party Defendants.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 193

115 F.3d 193

Tara RYAN, Appellant, v. Charles V. JOHNSON; LouAnn Johnson, h/w; Ted Cam, Jr.;

Melanie Weiss; Gregory Kieser; Samuel D. Hewins; Marian

Pauza; Laura Elizabeth Preng; Omer C. Marion; Kristin

Paulick; Jennifer Radar; Matthew McCabe; Michael J. Lang.

Charles V. JOHNSON; LouAnn Johnson, Third-Party Plaintiffs, v. Theodore CAM, Jr.; Gregory Kieser; Samuel D. Hewins;

Marian Pauza; Laura E. Preng; Michael J. Lang; Omer C.

Marion; Kristin Paulick; Jennifer Radar; Matthew McCabe;

Melanie Weiss, Third-Party Defendants.

No. 96-5419.

United States Court of Appeals,

Third Circuit.

Argued April 15, 1997.

Decided May 30, 1997.

Michael D. Shaffer (Argued), Philadelphia, PA, for Appellant.

Lewis B. April, Cooper, Perskie, April, Niedelman, Wagenheim & Levenson, Atlantic City, NJ, Thomas F. Bradley (Argued), Hankin, Sandson & Sandman, Atlantic City John R. Moeller, Jr., Law Offices of Stephen E. Gertler, Wall Township, NJ, for Appellee Ted Cam, Jr.

NJ, for Appellees Charles V. Johnson and LouAnn Johnson.

Michael B. Oropollo, Harwood Lloyd, East Brunswick, NJ, for Appellee Kristin Paulick.

Before: SCIRICA, COWEN and NYGAARD, Circuit Judges.

OPINION OF THE COURT

NYGAARD, Circuit Judge.

Tara Ryan appeals from the district court's decision to dismiss her diversity action under the doctrine set forth in Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), and subsequent cases. Because the district court applied Colorado River abstention incorrectly, we will reverse.

I.

In 1995, Ryan attended a party at a beach house owned by Charles and LouAnn Johnson and rented for the summer to the remaining defendants. The exterior, second-floor deck of the house suddenly collapsed, injuring at least thirty-three persons, including Ryan, who suffered a serious spinal injury. To date, seventeen of these persons have filed suit.

Ryan filed this diversity action in federal district court, alleging that the defendants negligently caused her injuries. The remaining sixteen plaintiffs, however, were nondiverse from the defendants and filed their suits in the New Jersey Superior Court. In that state court action, twenty-two other parties have been joined as third-party defendants, including contractors, realtors and predecessors in title.

Defendants in the federal action moved the district court to abstain from exercising its jurisdiction under Colorado River, arguing that the presence of parallel state and federal proceedings involving the same issues counseled in favor of abstention. The district court, in an unreported opinion, agreed and granted the motion, primarily to avoid "piecemeal litigation" and because the case was likely to involve complex state law issues. This appeal followed.

II.

It is axiomatic that federal courts have a "virtually unflagging obligation... to exercise the jurisdiction given them" by Congress. Colorado River, 424 U.S. at 817, 96 S.Ct. at 1246. This precept can be traced at least as far back as Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 404, 5 L.Ed. 257 (1821), where the Supreme Court, speaking through Chief Justice Marshall, stated:

It is most true that this Court will not take jurisdiction if it should not: but it is equally true, that it must take jurisdiction if it should.... We have no more right to decline the exercise of jurisdiction which is given, than to usurp that which is not given. The one or the other would be treason to the constitution.

This principle is no less true in cases where, as here, there is a parallel litigation in a state court. "The rule is well recognized that the pendency of an action in the state court is no bar to proceedings concerning the same matter in the Federal court having jurisdiction...." Colorado River, 424 U.S. at 817, 96 S.Ct. at 1246 (quoting McClellan v. Carland, 217 U.S. 268, 282, 30 S.Ct. 501, 505, 54 L.Ed. 762 (1910)); accord Chicot County v. Sherwood, 148 U.S. 529, 534, 13 S.Ct. 695, 697-98, 37 L.Ed. 546 (1893); University of Maryland v. Peat Marwick Main & Co., 923 F.2d 265, 275-76 (3d Cir.1991) ("The general rule regarding simultaneous litigation of similar issues in both state and federal courts is that both actions may proceed until one has come to judgment, at which point that judgment may create a res judicata or collateral estoppel effect on the other action.") (citing McClellan ).

Nevertheless, in Colorado River, the Supreme Court recognized that there are certain extremely limited circumstances in which a federal court may defer to pending state court proceedings based on considerations of "wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation." 424 U.S. at 817, 96 S.Ct. at 1246. It emphasized that "[a]bdication of the obligation to decide cases can be justified ... only in the exceptional circumstances where the order to the parties to repair to the state court would clearly serve an important countervailing interest." Id. at 813, 96 S.Ct. at 1244.

The Court then set forth several factors which can support this type of abstention, after cautioning that no one factor is determinative and "[o]nly the clearest of justifications will warrant dismissal." Id. at 818-19, 96 S.Ct. at 1247. Those factors included: (1) whether the state court assumed in rem jurisdiction over property; (2) the inconvenience of the federal forum; (3) the desirability of avoiding piecemeal litigation; and (4) the order in which jurisdiction was obtained by the concurrent forums. Id. at 818, 96 S.Ct. at 1246-47. The issue before us is whether the district court properly applied this narrow exception to jurisdiction on the facts of the present case.

A.

A threshold issue that must be decided in any Colorado River abstention case is whether the two actions are "parallel." If they are not, then the district court lacks the power to abstain. This is a legal issue over which we exercise plenary review. See Trent v. Dial Medical of Florida, Inc., 33 F.3d 217, 223 (3d Cir.1994). Generally, cases are parallel when they involve the same parties and claims. Id. at 224.

Appellant argues that the state and federal actions are not sufficiently parallel to justify Colorado River abstention. She avers that the state court defendants have joined the architects and builders of the beach house as third-party defendants, and that such joinder might not be possible in the federal litigation because one of those parties might successfully avoid service of process. She also asserts that "John Doe" defendants have been joined in state court, tolling the statute of limitations, but that this joinder is likely to be impossible in federal court because the statute of limitations will have run by the time these defendants' true identities are discovered. This is far too speculative a basis on which to conclude that the two actions are not parallel. ¹ We reject appellant's argument.

B.

1.

Once the state and federal cases are found to be parallel, the next inquiry is whether the district court abused its discretion when it decided to abstain, an inquiry which is conducted under the factors set forth in Colorado River and its progeny. See Trent, 33 F.3d at 225. Of course, to the extent the district court evaluated a factor based on an erroneous view of the law, it necessarily abused its discretion and our review becomes plenary. See, e.g., United States v. Romualdi, 101 F.3d 971, 973 (3d Cir.1996); Hanover Potato Prods., Inc. v. Shalala, 989 F.2d 123, 127 (3d Cir.1993).

In Colorado River, the United States filed suit in federal district court against a large group of water users in Water Division 7. The government sought a declaratory judgment of its water rights in that region. Shortly thereafter, one of the federal defendants filed an action in state court, seeking to join the United States as a party under the McCarran Amendment, 43 U.S.C. § 666, which allows such joinder in water rights cases, and asked the federal court to abstain. The district court granted the motions.

In upholding the district court's decision to dismiss the federal action, the Supreme Court focused its attention on what it considered the most important factor on the record before it: avoiding piecemeal litigation. The extraordinary nature of the McCarran Amendment, which allows the United States to be deprived of its right to adjudication in a federal forum, see 28 U.S.C. § 1346, was evidence of a clear federal policy that the state court systems were the preferred means for avoiding the piecemeal adjudication of water disputes. Colorado River, 424 U.S. at 819, 96 S.Ct. at 1247. ²

Several years later, the Supreme Court further refined the Colorado River doctrine in Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), a case involving concurrent state and federal proceedings arising out of a building construction dispute in which a hospital sued a contractor in state court and the contractor sought enforcement of a contractual arbitration clause against the hospital in federal district court. There, the Court reiterated the narrowness of the Colorado River exception and held that abstention was improper on the facts before it.

The Cone Court emphasized that the most important--indeed "paramount"--factor justifying abstention in Colorado River was the McCarran Amendment and its policy against piecemeal litigation. 460 U.S. at 20, 103 S.Ct. at 939. In contrast, the Cone case involved the Federal Arbitration Act, which the Court noted expressly requires piecemeal adjudication of certain disputes when necessary to enforce an agreement to arbitrate. Id.

The Court then set forth another factor relevant to the abstention calculus under Colorado River: whether state or federal law provided the rule of decision. With respect to that issue, the court noted that the Arbitration Act, unlike the McCarran Amendment, did not...