Schiller v. Packaging Store, Inc.

• Decision Date: 03 August 1988
• Docket Number: No. 87 C 8562.,87 C 8562.
• Citation: 690 F. Supp. 711
• Court: U.S. District Court — Northern District of Illinois
• Parties: Charles V. SCHILLER, Patricia F. Katsenes, and Just Pack & Ship, Inc., Plaintiffs, v. The PACKAGING STORE, INC., Richard T. Godwin, Richard F. Swider and Debra Swider, Defendants.

690 F. Supp. 711

Charles V. SCHILLER, Patricia F. Katsenes, and Just Pack & Ship, Inc., Plaintiffs, v. The PACKAGING STORE, INC., Richard T. Godwin, Richard F. Swider and Debra Swider, Defendants.

No. 87 C 8562.

United States District Court, N.D. Illinois, E.D.

August 3, 1988.

Robert R. Benjamin, Chicago, Ill., for plaintiffs.

James J. Hill, Emrich & Dithmar, Jeffrey S. Heller, Seyfarth, Shaw, Fairweather & Geraldson, Chicago, Ill., Denis H. Mark, Denver, Colo., William Callahan, David & Kuelthau, Milwaukee, Wis., for defendants.

MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

Plaintiffs Charles Schiller, Patricia Katsenes and Just Pack & Ship, Inc. bring this action charging breach of a franchise agreement and violations of the Illinois Franchise Disclosure Act. Defendants The Packaging Store, Inc. ("Store") and Richard T. Godwin have filed a motion to dismiss which, for the reasons set forth below, is granted.¹

Factual Background and Procedural History

Our jurisdiction over this action is founded on the diversity of citizenship of the parties. Plaintiffs are citizens of Illinois.² Godwin and the Store are citizens of Colorado.³ The Swiders are citizens of Wisconsin. On September 14, 1986, plaintiffs purchased a franchise from the Store for purposes of providing packaging and freight services and selling packaging materials. The deal was governed by a franchise agreement ("Agreement"). After giving written notice to plaintiffs that they had defaulted by failing to follow certain terms of the Agreement, the Store terminated the Agreement. The parties dispute the precise timing of the notice.

On August 26, 1987, the Store filed an action in a Colorado state court against Schiller and Katsenes charging breach of the Agreement by, inter alia, their failure to pay advertising and royalty fees and to submit certain transmittal forms and their assigning an interest in the Agreement to Just Pack & Ship. The Store prayed for damages and an order disenfranchising Schiller and Katsenes. The Packaging Store, Inc. v. Charles V. Schiller and Patricia F. Katsenes, No. 87 CV 16800, District Court, City and County of Denver, State of Colorado. In September, Schiller and Katsenes moved to dismiss the action for lack of jurisdiction and venue and to quash the summons on the grounds that the forum selection clause of the Agreement was invalid and unenforceable under Illinois law.

While awaiting resolution of their motion to dismiss in the Colorado court, plaintiffs filed this two-count action on October 1, 1987, seeking damages and rescission of the Agreement and charging breach of the Agreement and violations of Illinois law by defendants' failure to provide thirty days for curing the alleged breaches prior to termination and failure to use the franchise fee in certain ways. Additionally, plaintiffs charge fraud in certain representations. The Store and Godwin answered and counterclaimed with a claim virtually identical to their claim in the Colorado action. Schiller and Katsenes filed their answer to the counterclaim.

On December 9, the Colorado court denied Schiller and Katsenes' motion to dismiss, finding the forum selection clause valid and enforceable. Schiller and Katsenes answered the Colorado complaint on December 29 (with pleadings identical to their answer to defendants' counterclaim in this action) and additionally pled a counterclaim identical to their complaint in this action.⁴ The Colorado state court has set the case for trial on February 6, 1989. The Store and Godwin have filed motions for summary judgment in both actions.

On January 15, 1988, the plaintiffs filed a motion for preliminary injunction in this Court, seeking to enjoin defendants from taking any further action in the Colorado action. Magistrate W. Thomas Rosemond, Jr., on referral, recommended that the motion be denied and that we assess sanctions under Fed.R.Civ.P. 11 on the grounds that the preliminary injunction request was unsupported by the law and not brought in good faith. We adopted the Magistrate's Report and Recommendation, denying the injunction and assessing sanctions. The defendants now move to dismiss this action under § 2-619(a)(3) of the Illinois Code of Civil Procedure on the grounds that we should refrain from exercising our jurisdiction when a state court is litigating identical claims. We agree and accordingly dismiss.

Discussion

Section 2-619(a)(3) of Illinois Code of Civil Procedure provides

§ 2-619. Involuntary dismissal based upon certain defects or defenses. (a) Defendant may, within the time for pleading, file a motion for dismissal of the action or for other appropriate relief upon any of the following grounds. If the grounds do not appear on the face of the pleading attacked the motion shall be supported by affidavit:

* * * * * *

(3) That there is another action pending between the same parties for the same cause.

Ill.Rev.Stat. ch. 110 ¶ 2-619(a)(3) (1983).⁵

In deciding whether to dismiss a diversity action on the basis of § 2-619, we apply the analysis 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) ("Colorado River"), and its progeny. Byer Museum of Arts v. North River Ins. Co., 622 F.Supp. 1381, 1384-85 (N.D.Ill.1985). In Colorado River, the Supreme Court held that, despite a federal court's "virtually unflagging obligation" to exercise its jurisdiction, "considerations of `wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation'" may in certain instances justify a court's dismissing or staying an action when there is an ongoing parallel action in state court. 96 S.Ct. at 1246, quoting Kerotest Mfg. Co. v. C-O-Two Fire Equipment Co., 342 U.S. 180, 72 S.Ct. 219, 221, 96 L.Ed. 200 (1952). The Court listed a number of factors, no one factor being determinative, that a district court should carefully consider in deciding whether to refrain from exercising jurisdiction. Since Colorado River, the Supreme Court and Seventh Circuit have extended and refined these factors to include:

(1) inconvenience of simultaneously litigating in the state and federal forums, id., 96 S.Ct. at 1247;

(2) likelihood of piecemeal litigation, id.; (3) order in which the concurrent forums first exercised jurisdiction, id. (although by itself, this factor is not given much weight, Evans Transp. Co. v. Scullin Steel Co., 693 F.2d 715, 718 (7th Cir.1982);

(4) source of governing law, state or federal, Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983);

(5) ability of the state court to protect the asserted rights of the federal plaintiff, id., 103 S.Ct. at 942;

(6) relative progress of the state and federal proceedings, id. at 939;

(7) the ability of the federal plaintiff to remove the state court action to federal court, Microsoftware Computer Systems, Inc. v. Ontel Corp., 686 F.2d 531, 537 (7th Cir.1982), overruled on other grounds, Gulf Stream Aerospace Corp. v. Mayacamas Corp., ___ U.S. ___, 108 S.Ct. 1133, 99 L.Ed.2d 296 (1988); and

(8) the vexatious or contrived nature of the federal claim, Calvert Fire Ins. Co. v. American Mut. Reinsurance Co., 600 F.2d 1228, 1234 (7th Cir. 1979).

See generally, Interstate Material Corporation v. Chicago, 847 F.2d 1285 (7th Cir. 1988). Balancing the factors relevant to this case, we conclude that they weigh heavily in favor of dismissal.

At the outset, we observe that this and the Colorado action are "the same" for purposes of § 2-615 and "parallel" for purposes of the Colorado River doctrine. The only requirement to trigger application of the doctrine is that "substantially the same parties are contemporaneously litigating substantially the same issues in another forum." Calvert Fire Ins. Co., 600 F.2d at 1229 n. 1. The parties in both actions are identical, with their alignment constituting the only difference. Cf., Microsoftware, 686 F.2d 531. The Store filed the Colorado action whereas Schiller and Kastenes filed this action. The claims and issues are also identical. Both parties, in their respective complaints and counterclaims, charge breach of the Agreement and base their claims in both courts on the same acts of their adversaries. Schiller and Katsenes maintain the same fraud claim in both courts. Additionally, the defenses that each party raises are identical in both actions. It is instructive that the parties use verbatim language in their pleadings in both actions.

The following factors weigh heavily in favor of dismissing this action: the order of filing, the potential for piecemeal litigation and the inconvenience of simultaneously litigating these claims in Colorado and Illinois. The Colorado action was filed first, over a month before this action. As to the potential for piecemeal litigation, it is clear from the identity of claims that the parties are litigating the same issues in both courts. Fully-briefed summary judgment motions are currently pending in this action and the parties briefed similar motions in the Colorado action.⁶ Under principles of res judicata, it is possible that an early decision by one court will bind the other court. This presents a strong motivation for either party to accelerate or stall proceedings in the appropriate court in order to make certain that the court most likely to resolve an issue in its favor rules first. "The result would be quite similar to forum shopping, and is just as unseemly." Microsoftware, 686 F.2d at 538. Further, we cannot ignore the real possibility that one court, unaware of the most recent decisions of the other court, will resolve an issue differently and thereby create conflicting results on the same issue of fact or law.

Simultaneously litigating this action in Illinois and Colorado inconveniences both parties. In Microsoftware, the Seventh Circuit ordered a federal action in Illinois stayed⁷ pending...