Saucier v. Aviva Life & Annuity Co.

• Decision Date: 16 November 2012
• Docket Number: No. 11–60503.,11–60503.
• Parties: Benny Ray SAUCIER, Plaintiff–Counter Defendant–Appellee, v. AVIVA LIFE AND ANNUITY COMPANY, Defendant–Counter Claimant–Appellee, v. RSL Funding, L.L.C.; RSL–5B–IL, Limited, Counter Defendants–Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

701 F.3d 458

Benny Ray SAUCIER, Plaintiff–Counter Defendant–Appellee,

v.AVIVA LIFE AND ANNUITY COMPANY, Defendant–Counter Claimant–Appellee,

v.RSL Funding, L.L.C.; RSL–5B–IL, Limited, Counter Defendants–Appellants.

No. 11–60503.

United States Court of Appeals,Fifth Circuit.

Nov. 16, 2012.

Tamekia Rochelle Goliday, Goliday Law Firm, Jackson, MS, Shantrell H. Nicks, Gulfport, MS, for Plaintiff–Counter Defendant–Appellee.

William Frederick Ray, Watkins & Eager, P.L.L.C., Jackson, MS, for Defendant–Counter Claimant–Appellee.

Edward John Gorman, Feldman Law Firm, Houston, TX, Kenneth Stephen Womack, Anderson, Crawley & Burke, P.L.L.C., Ridgeland, MS, for Counter Defendants–Appellants.

Appeals from the United States District Court for the Southern District of Mississippi.

Before STEWART, Chief Judge, and DeMOSS and GRAVES, Circuit Judges.

GRAVES, Circuit Judge:

Counter Defendants–Appellants RSL Funding, L.L.C. and RSL–5B–IL Limited (collectively “RSL”) appeal the district court's decision to abstain based on the doctrine of Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), and to remand this case to the state court. For the following reasons, we REVERSE the decision of the district court and REMAND the case to the district court. The motion to dismiss filed by Plaintiff–Counter Defendant–Appellee Benny Ray Saucier (“Saucier”) is DENIED.

BACKGROUND

Because the factual background of this case is complex, disputed, and largely irrelevant to the analysis of the district court's abstention order, we provide only a general outline. In 1990, Saucier received an annuity in settlement of a personal injury lawsuit. The annuity provided Saucier with payments at five-year intervals until 2015. A payment of $150,000 was due on August 30, 2010, and a payment of $200,000 will be due on August 30, 2015. Defendant–Counter Plaintiff–Appellee Aviva Life and Annuity Company (“Aviva”) currently holds the annuity and is obligated to make these payments. Saucier entered into one or more agreements with RSL to sell his future payments in exchange for a lump sum. These agreements contained arbitration clauses in which the parties agreed that any dispute about the sale would be resolved through arbitration.

Under the Mississippi Structured Settlement Protection Act (“MSSPA”), no direct or indirect transfer of structured settlement payment rights is effective unless a court finds, among other things, that the transfer is in the best interest of the settlement payee. Miss.Code Ann. § 11–57–7. The MSSPA also requires the transferee to provide notice to all interested parties at least twenty days prior to any hearing on the transferee's application to transfer payment rights. Miss.Code Ann. § 11–57–11. The Chancery Court of Harrison County, Mississippi (the “state court”) initially approved the sale of Saucier's future payments to RSL. However, on Saucier's motion, the state court later set aside the approval order, apparently due to noncompliance with the MSSPA. The state court denied RSL's motion to reconsider this decision on January 15, 2010.

On March 12, 2010, RSL instituted an arbitration proceeding against Saucier seeking damages arising from Saucier's alleged breach of contract. On March 15, 2010, Saucier obtained an ex parte temporary restraining order from the state court prohibiting RSL from proceeding with arbitration. On June 22, 2010, the state court rejected RSL's request to lift the injunction and thereby extended the injunction.

Saucier learned in July 2010 that Aviva intended to defer payment of his $150,000 annuity payment, which was due on August 30, 2010, until the state court had resolved the issue of damages owed by Saucier to RSL due to the revoked sale agreement. On August 16, 2010, Saucier filed a state court action against Aviva seeking a declaration that he was entitled to timely payment of the $150,000. Aviva removed the action to the district court and filed a counterclaim for interpleader. Aviva claimed that it was a disinterested stakeholder, and requested that it be allowed to deposit the $150,000 into the court's registry and that RSL be joined to the action as a necessary party. Saucier filed a motion requesting that the district abstain from the case and remand the action to state court.

On November 18, 2010, the district court denied Saucier's motion to remand, finding that abstention was not warranted under the Burford, Younger, or Colorado River doctrines. The district court held that Colorado River abstention was not applicable because this case is not “parallel” to the state court litigation between Saucier and RSL. The district court noted that Aviva is a party to the present case but not to the state court action, and that Saucier had sought damages against Aviva in addition to a declaratory judgment. The district court also granted Aviva's request to join RSL and to deposit the $150,000 into the court's registry. Also, despite rejecting Saucier's request for abstention, the district court stayed the case pending “the final resolution of the state court litigation, at which time any party may move to lift the stay and seek disbursement of the funds in accordance with the state court's final judgment.” R. 433.

After RSL was joined as a party, it filed a motion to lift the stay so that it could move to compel arbitration of the dispute between Saucier and RSL. The district court denied this motion. On March 18, 2011, RSL filed a motion to compel arbitration. The district court entered an order stating that Saucier need not respond to this motion until after the stay was lifted. On April 7, 2011, RSL filed a motion requesting a formal ruling on its motion to compel arbitration, concerned that appeal based on the Federal Arbitration Act could be considered premature because the motion to compel had not been explicitly denied. On April 21, 2011, Aviva filed a motion to lift the stay for the limited purpose of dismissing Aviva from the lawsuit and a motion to dismiss.

Rather than rule on the pending motions, the district issued an order on June 17, 2011, reconsidering its ruling on Saucier's motion to remand sua sponte. The district court determined that it should abstain from hearing the case based on the Colorado River doctrine and that the case should be remanded to the state court. The district court explained that this case was now parallel to the pending state court because Saucier had agreed to drop his claims against Aviva and allow Aviva to be dismissed from the case. The district court discussed the six Colorado River factors and ultimately concluded that “[e]xceptional circumstances exist here justifying deference to the state court proceeding.” R. 892. RSL appealed the district court's order.

Also on June 17, 2011, the state court granted Saucier's motion for a permanent injunction prohibiting RSL from arbitrating its dispute with Saucier.

DISCUSSION

Under the Colorado River doctrine, a court may abstain from a case that is part of parallel, duplicative litigation under “exceptional circumstances.” Kelly Inv., Inc. v. Continental Common Corp., 315 F.3d 494, 497 (5th Cir.2002); see Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). In determining whether “exceptional circumstances” exist, the Supreme Court has identified six relevant factors: (1) assumption by either court of jurisdiction over a res; (2) relative inconvenience of the fora; (3) avoidance of piecemeal litigation; (4) the order in which jurisdiction was obtained by the concurrent forums; (5) the extent to which federal law provides the rules of decision on the merits; and (6) the adequacy of the state proceedings in protecting the rights of the party invoking federal jurisdiction. Kelly, 315 F.3d at 497. These factors are not applied mechanically, but carefully balanced “with the balance heavily weighted in favor of the exercise of jurisdiction.” Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 16, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).

A district court's abstention ruling is reviewed for abuse of discretion. Tex. Ass'n of Bus. v. Earle, 388 F.3d 515, 518 (5th Cir.2004). However, we review de novo whether the requirements of a particular abstention doctrine are satisfied. Id.

RSL argues that the Colorado River doctrine is not applicable because this case is not in fact “parallel” to the state court action. Because we find that abstention is not justified by “exceptional circumstances,”we do not address this argument further.

I. The Colorado River FactorsA. Assumption of Jurisdiction Over a Res

The district court found that “[t]he first factor seemingly weighs against abstention, as Aviva has deposited the res, the annuity proceeds, into the registry of this Court. However, the court can easily order repayment of these proceeds to Aviva.” R. 889–90. Although the district court did not explain further, it appears to have treated this factor as neutral. However, the fact that the district court had already assumed jurisdiction over a disputed res must surely weigh at least slightly in favor of retaining jurisdiction. Furthermore, even if no court had assumed jurisdiction over a disputed res, this factor would not be neutral—it would support the exercise of federal jurisdiction. Stewart v. Western Heritage Ins. Co., 438 F.3d 488, 492 (5th Cir.2006).

B. Relative Inconvenience of the Fora

The district court found that “[t]he second factor is not an issue here, as both courts are equally convenient for all parties. Both are physically located in Gulfport, Mississippi.” R. 890. However, this factor is not neutral; we have held that “[w]hen courts are in the same geographic location, the inconvenience factor weighs against abstention.” Stewart, 438 F.3d at 492 (emphasis added).

C. Avoidance of Piecemeal Litigation

The district court found that “the third factor weighs in favor of abstention,...