Smehlik v. Athletes and Artists, Inc.

• Decision Date: 24 August 1994
• Docket Number: No. 93-CV-0510C.,93-CV-0510C.
• Citation: 861 F. Supp. 1162
• Parties: Richard SMEHLIK, Plaintiff, v. ATHLETES AND ARTISTS, INC., Defendant.
• Court: U.S. District Court — Western District of New York

861 F. Supp. 1162

Richard SMEHLIK, Plaintiff, v. ATHLETES AND ARTISTS, INC., Defendant.

No. 93-CV-0510C.

United States District Court, W.D. New York.

August 24, 1994.

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Cohen, Swados, Wright, Hanifin, Bradford & Brett (Larry Kerman, of counsel), Buffalo, NY, for plaintiff.

Brown & Fox, P.C. (Eileen Fox, of counsel), New York City, for defendant.

DECISION and ORDER

CURTIN, District Judge.

Plaintiff Richard Smehlik, a Czechoslovakian hockey player now under contract with the Buffalo Sabres hockey club ("the Sabres"), brought this action against defendant Athletes and Artists ("A & A"), a New York corporation retained by Smehlik to act as his representative in negotiating professional hockey contracts with the Sabres or with other National Hockey League ("NHL") teams. Smehlik's original 3-count complaint alleged breach of contract (Count I), negligent performance of contract (Count II) and fraudulent misrepresentation (Count III).

On July 22, 1993, A & A filed a motion to dismiss the action on three grounds, (i) that the court should abstain from hearing the case in view of a prior state court action brought by A & A against Smehlik concerning the same contract dispute; (ii) failure to state a claim; and (iii) improper venue. On November 2, 1993, I issued an order:

(1) dismissing Counts II and III of the complaint, but granting Smehlik leave to replead Count III;

(2) withholding ruling on the question of abstention; and

(3) withholding ruling on the question of venue, but

(a) granting Smehlik leave to conduct limited discovery to determine the extent of A & A's contacts with this district, and

(b) ordering both parties to further brief the venue issue.

Smehlik has filed an amended complaint, repleading the original Count III as Count II. A & A has filed an answer, and moved to dismiss Count II pursuant to Fed.R.Civ.P. 12(b)(6). Smehlik has conducted discovery on A & A's contacts with this district, and both sides have rebriefed the issue of venue. Both parties have also advised the court as to the current status of the state court action. This decision will address A & A's motion to dismiss Count II of Smehlik's amended complaint, and the questions of venue and abstention.

BACKGROUND

Smehlik was drafted by the Sabres in the 1990 NHL draft. On August 28, 1990, while still in Czechoslovakia, he signed an agreement with A & A under which, inter alia, A & A was to act as his exclusive representative in the negotiation of professional hockey contracts with the Sabres, or with whichever team held his rights. The agreement had an initial term of two years, or until such time as A & A had completed the negotiation of Smehlik's next professional hockey contract, whichever was longer.

A & A, a New York corporation whose principal place of business is in New York, New York, claims that it commenced contract negotiations with the Sabres on behalf of Smehlik in the summer of 1990. The negotiations, which were conducted entirely via telephone and fax, continued periodically until about April 1992. At that time, A & A received a letter from Smehlik stating that he was terminating his agreement with A & A, and/or that he believed the agreement to be invalid. Subsequently, in August 1992, Smehlik entered into a contract with the Sabres. That contract was negotiated by Rich Winter of The Entertainment & Sports Corporation, Smehlik's current agent.

On May 10, 1993, A & A commenced an action for breach of contract against Smehlik in New York State Supreme Court in New York County, seeking declaratory relief, damages, restitution, and attorneys' fees. Smehlik's answer, dated June 15, 1993, contained four affirmative defenses: (i) breach of contract by A & A, (ii) negligent performance of the agreement by A & A, (iii) misrepresentation by A & A of its ability to perform under the contract, and (iv) indefiniteness or unconscionability of various terms of the agreement. On the same day that Smehlik served his answer in the state court action, he commenced this lawsuit.

DISCUSSION

1. Abstention

In Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), the Supreme Court recognized that in "exceptional circumstances," district courts have discretion to dismiss lawsuits, for reasons of "wise judicial administration," when there are concurrent state court proceedings addressing the same issues. Id. at 817-19, 96 S.Ct. at 1246-47. A & A urges that I exercise my discretion under Colorado River to dismiss this case because there is a pending state court action involving issues identical to those presented here.

Indisputably, the issues raised here are the same as those being litigated in the state court action—whether or not there was a valid contract between the parties, and if so, which side breached. However, the existence of a state proceeding involving the same issues is not by itself sufficient to justify dismissal. Colorado River Water Conservation District v. United States, 424 U.S. at 817, 96 S.Ct. at 1246. As the Second Circuit has recognized, the Colorado River Court:

identified several factors to be considered by district courts in applying the exceptional circumstances test: the assumption by either court of jurisdiction over any res or property, the inconvenience of the federal forum, the avoidance of piecemeal litigation, and the order in which jurisdiction was obtained. 424 U.S. at 818, 96 S.Ct. at 1246-47.

Bethlehem Contracting Co. v. Lehrer/McGovern, Inc., 800 F.2d 325, 327 (2d Cir.1986). Further, in Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), the Supreme Court:

elaborated upon this test and added two new considerations: whether state or federal law supplies the rule of decision, and whether the state court proceeding will adequately protect the rights of the party seeking to invoke federal jurisdiction. 460 U.S. at 23-27, 103 S.Ct. at 941-43.

Bethlehem Contracting Co. v. Lehrer/McGovern, Inc., 800 F.2d at 327. The determination of whether or not to defer to the state court "`does not rest on a mechanical checklist, but on a careful balancing of the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction.'" Id. (quoting Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. at 16, 103 S.Ct. at 937); see also, De Cisneros v. Younger, 871 F.2d 305, 307 (2d Cir.1989).

The first factor—assumption of jurisdiction over a res or property—is not implicated here. The absence of any jurisdiction over a res or property weighs in favor of the exercise of federal jurisdiction. De Cisneros v. Younger, 871 F.2d at 307.

The second factor—the inconvenience of the federal forum—does not weigh in favor of abstention in this case. Although the Western District of New York may be a less convenient forum than New York County for A & A, whose offices are in New York City, New York County would be just as inconvenient for Smehlik, who resides (at least during the hockey season) in Western New York.

Similarly, the third factor—avoidance of piecemeal litigation—does not weigh significantly in favor of abstention here. Since the pendency of an action in state court is, generally, no bar to proceedings concerning the same matter in federal court, courts must consider, in weighing this factor, whether there is some exceptional circumstance— for example, where there is a clearly stated federal policy of avoidance of piecemeal adjudication of interdependent property rights, and there is a substantial danger of inconsistent judgments, as in Colorado River—justifying a particular concern over piecemeal litigation. See Travelers Indemnity Co. v. Madonna, 914 F.2d 1364, 1368-1369 (9th Cir. 1990). There is no such exceptional circumstance here.¹, ²

The fourth factor—the order in which jurisdiction was obtained—also does not weigh significantly in favor of abstention. The Supreme Court has indicated that "priority should not be measured exclusively by which complaint was filed first, but rather in terms of how much progress has been made in the two actions." Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. at 21, 103 S.Ct. at 940. Smehlik's complaint in this action was filed on the same day as his answer in the state court action. No significant progress had been made in state court at the time the present action was filed.³

The fifth factor—whether federal or state law provides the rule of decision— again fails to favor abstention. The presence of state law issues may weigh in favor of abstention only "in some rare circumstances." Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. at 26, 103 S.Ct. at 942. In cases involving only routine issues of state law, which federal district courts are fully capable of deciding, there are no such "rare circumstances." Travelers Indemnity Co. v. Madonna, 914 F.2d at 1370. The state law issues that may be raised in the present case are routine issues of breach of contract and misrepresentation that do not require the special attention of a state court.⁴

The sixth factor—whether the state court proceeding will adequately protect the rights of the party seeking to avail itself of federal jurisdiction—also does not support abstention here. A & A argues that Smehlik's rights would be fully protected in state court, since there are only state law questions presented. The Second Circuit, however, has stated that "the possibility that the state court proceeding might adequately protect the interests of the parties is not enough to justify the district court's deference to the state action. This factor, like choice of law, is more important when it weighs in favor of federal jurisdiction." Bethlehem Contracting Co. v. Lehrer/McGovern, Inc., 800 F.2d at 328. Smehlik contends that the state court...