Universal Gypsum of Ga., Inc. v. American Cyanamid Co., 74 Civ. 425 (JMC).

• Decision Date: 25 February 1975
• Docket Number: No. 74 Civ. 425 (JMC).,74 Civ. 425 (JMC).
• Parties: UNIVERSAL GYPSUM OF GEORGIA, INC., Plaintiff, v. AMERICAN CYANAMID COMPANY, Defendant.
• Court: U.S. District Court — Southern District of New York

390 F. Supp. 824

UNIVERSAL GYPSUM OF GEORGIA, INC., Plaintiff, v. AMERICAN CYANAMID COMPANY, Defendant.

No. 74 Civ. 425 (JMC).

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

February 25, 1975.

Javits & Javits, New York City (Harold J. Smith, New York City, of counsel), for plaintiff.

Paul, Weiss, Rifkind, Wharton & Garrison, New York City (Edward N. Costikyan, Anthony M. Radice and Susan P. Carr, New York City, of counsel) for defendant.

MEMORANDUM DECISION AND ORDER

CANNELLA, District Judge.

The defendant, American Cyanamid Company, seeks the entry of a stay of this action, which arises under our diversity of citizenship jurisdiction, pending the presentation and determination of a "simultaneously" commenced action involving the same facts and state law issues in the New York Supreme Court, New York County. As the Court finds that the interests of judicial economy, comity and federalism are best advanced by the entry of such a stay, the motion is hereby granted.

The power of the district court to enter a stay of its proceedings in favor of litigation pending in other forums has been settled beyond peradventure ever since Mr. Justice Cardozo declared in Landis v. North American Co., 299 U.S. 248, 254-55, 57 S.Ct. 163, 166, 81 L.Ed. 153 (1936), that

the power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants. How this can best be done calls for the exercise of judgment, which must weigh competing interests and maintain an even balance (citations omitted). True, the suppliant for a stay must make out a clear case of hardship or inequity in being required to go forward, if there is even a fair possibility that the stay for which he prays will work damage to someone else. . . . Considerations such as these, however, are counsels of moderation rather than limitations upon power.

The existence of this authority notwithstanding, the entry of the requested stay requires this Court to refrain from exercising its otherwise valid in personam jurisdiction and to defer to another court the resolution of a controversy which is otherwise properly within the ambit of its adjudicative powers. Thus, our deferral of the resolution of the instant controversy to the New York state court requires the invocation of one of the abstention doctrines—one which is not uniformly recognized, namely, that of "abstaining" in a run-of-the-mill diversity action where a state court action raising the same issues is simultaneously pending.¹ As was recently stated by one appellate court:

Some courts of appeals allow a federal district court the discretion to stay its proceedings in deference to a pending state court action. See Aetna State Bank v. Altheimer, 430 F.2d 750, 755-56 (7th Cir. 1970); Amdur v. Lizars, 372 F.2d 103, 106-07 (4th Cir. 1967). (Citation omitted). Other federal appellate courts, however, express the view that a federal district court should not stay its hand in deference to a pending state court action except in exceptional circumstances where resort to state court serves an important interest in the orderly administration of justice. See Mach-Tronics, Inc. v. Zirpoli, 316 F.2d 820, 826-28 (9th Cir. 1963); Ermentrout v. Commonwealth Oil Co., 220 F.2d 527, 530 (5th Cir. 1955). See generally 7A C. Wright & A. Miller, Federal Practice & Procedure § 1838 (1972).

Applegate v. Devitt, 509 F.2d 106, 108-09 (8 Cir. 1975). See also PPG Industries, Inc. v. Continental Oil Co., 478 F. 2d 674 (5 Cir. 1973) (recognizing the propriety of a stay of the nature here sought); Nigro v. Blumberg, 373 F. Supp. 1206 (E.D. Pa. 1974) (granting stay); Crawford v. Seaboard Coast Line R.R. Co., 286 F.Supp. 556, 557-58 (S.D. Ga.1968);² but see, England v. Board of Medical Examiners, 375 U.S. 411, 430 n. 2, 84 S.Ct. 461, 11 L.Ed.2d 440 (1964) (Douglas, J. concurring);³ C. Wright, Law of Federal Courts § 52 at 205 (2d ed. 1970);⁴ Note, 51 Tex.L.Rev. 1252 (1973). See generally, H.M. Hart & H. Wechsler, The Federal Courts and The Federal System 1257-61 (2 ed. P. Bator, P. Mishkin, D. Shapiro and H. Wechsler 1973); Annot., 5 ALR Fed. 10 (1970); Note, Stays of Federal Proceedings in Deference to Concurrently Pending State Court Suits, 60 Colum.L.Rev. 684 (1960); Note, Power to Decline the Exercise of Federal Jurisdiction, 37 Minn. L.Rev. 46 (1952); Note, Power to Stay Federal Proceedings Pending Termination of Concurrent State Litigation, 59 Yale L. J. 978 (1950).

In this Circuit, at least since 1949, the law has been clear. In Mottolese v. Kaufman, 176 F.2d 301, 302 (2 Cir. 1949), Judge Learned Hand declared:

It is probably true that originally the statutory privilege of access to a federal court was regarded as absolute and indefeasible, no matter whether its exercise resulted in inconvenience, delay and expense to the defendant. There can be no doubt, however, that this is no longer true. (Footnote omitted).

Hence, the district court is possessed of the power to stay its proceedings when there exists a simultaneously pending state court action in which the same dispute is being litigated by the same parties—a power which may be exercised in the court's sound discretion. See, e. g., Simmons v. Wetherell, 472 F.2d 509, 512 (2 Cir.), cert. denied, 412 U.S. 940, 93 S.Ct. 2777, 37 L.Ed.2d 399 (1973); Nederlandse Erts-Tankersmaatschappij N. V. v. Isbrandtsen Co., 339 F.2d 440, 441 (2 Cir. 1964); Milk Drivers & Dairy Employees Union Local No. 338 v. Dairymen's League Cooperative Association, Inc., 304 F.2d 913, 915 (2 Cir. 1962); P. Beiersdorf & Co. v. McGohey, 187 F.2d 14 (2 Cir. 1951); Loeb v. Whittaker Corp., 333 F.Supp. 484, 489 (S.D.N.Y.1971); Assmann v. Treglia, 318 F.Supp. 1040 (D.Conn.1970); Witmar Salvage Corp. v. C. W. Blakeslee & Sons, Inc., 308 F.Supp. 395 (S.D.N.Y. 1969); Rosenfeld v. Schwitzer Corp., 251 F.Supp. 758, 763-64 (S.D.N.Y. 1966); Mitter v. Massa, 237 F.Supp. 915, 918 (S.D.N.Y.1965); Weiss v. Doyle, 178 F.Supp. 566, 569-70 (S.D.N. Y.1959); Kamen Soap Products Co. v. Struthers Wells Corp., 159 F.Supp. 706, 712 (S.D.N.Y.1959); Weisfeld v. Spartans Industries, Inc., 58 F.R.D. 570, 575-77 (S.D.N.Y.1972); cf., Finkelstein v. Wolf, 73 Civ. 5150 (MEF) (S.D.N.Y. Nov. 27, 1974) (noted in Current CCH Fed.Sec.L.Rep. ¶ 94,885).

In his recent, well-reasoned decision in Nigro v. Blumberg, 373 F.Supp. 1206, 1212-13 (E.D.Pa.1974), Judge Fogel listed seven factors pertaining to the determination of an application for a stay in a case such as this.

We believe . . . that the following factors are pertinent to a district court's decision to exercise its discretion in favor of staying proceedings before it: (1) considerations of comity; (2) promotion of judicial efficiency; (3) adequacy and extent of relief available in the alternative forum; (4) identity of parties and issues in both actions; (5) likelihood of prompt disposition in the alternative forum; (6) convenience of parties, counsel and witnesses; and (7) possibility of prejudice to a party as a result of the stay.

We find such criteria to present an appropriate standard of analysis and, keeping them in mind, we turn to consider the matter at bar.

The instant case and that commenced by Cyanamid in the state court both concern the same dispute arising out of a contract pursuant to which Universal Gypsum was to construct a waste treatment facility at Cyanamid's titanium dioxide plant in Savannah, Georgia. Both turn upon the same corpus of New York contract law. Although Cyanamid's state court action was initially removed to this Court by Universal Gypsum, this Court, on July 8, 1974, remanded that proceeding to the state court upon a finding that Gypsum was a citizen of New York for purposes of the diversity statute and, hence, was barred from removing the action to federal court. American Cyanamid Co. v. Universal Gypsum of Georgia, Inc., 74 Civ. 798 (JMC) (S.D.N.Y. July 8, 1974) (Endorsement). The complaint and the answer and counterclaim herein are the mirror images of the pleadings interposed by the parties in the state court.⁵ Clearly, both this action and that now pending in the New York Supreme Court involve the same legal and factual issues. Their resolution will be controlled by the applicable precedents of New York contract law whether the trial is had in this courthouse or across the street.

While the present action might otherwise be regarded as a rather run-of-the-mill diversity action properly subject to adjudication in the federal court, the existence of numerous factors fully warrant the entry of the requested stay in the instant case. The movant has suggested seven factors favoring the entry of a stay (see, Costikyan Affidavit at 6-7), however, only several need be discussed at length. First, the actions both here and in the state court turn exclusively upon issues of New York law. While federal courts are not unadept nor untrained in dealing with state law problems and in resolving state law controversies, such issues are more appropriately litigated in the New York courts where an authoritative construction of New York law can be obtained. Cf., Tobin v. Slutsky, 506 F.2d 1097, 1098 (2 Cir. 1974) (compare, the opinion of Oakes, J., concurring. Id. at 1103.). Second, the unimpaired continuation of this litigation will unnecessarily duplicate the parallel proceedings in the state court. This Court has not, to this point in time, invested any substantial judicial energy with regard to the merits of this litigation and both the state and federal actions stand in identical procedural positions. We cannot perceive how Gypsum might be prejudiced by the entry of the requested stay —it will be afforded a full and fair opportunity to litigate all issues before a highly competent tribunal whose expertise in New York law must be regarded as equal to, if not greater than that of this Court.

The third (and perhaps most...