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ARCHITECTURAL FLOOR PRODUCTS v. DON BRANN & ASSOC.

October 26, 1982

ARCHITECTURAL FLOOR PRODUCTS.C.OMPANY, PLAINTIFF-COUNTERDEFENDANT,
v.
DON BRANN & ASSOCIATES, INC., DEFENDANT-COUNTERPLAINTIFF, AND DON BRANN, DEFENDANT.



The opinion of the court was delivered by: Getzendanner, District Judge:

MEMORANDUM OPINION AND ORDER

Architectural Floor Products Company ("Architectural") is an Illinois corporation engaged in the business of importing floor and wall coverings. Don Brann & Associates, a Michigan corporation, has acted in the past as a distributor of Architectural's products. Don Brann is president of the corporation that bears his name. (Both Brann and his corporation will be referred to hereafter as "Brann.").

Presently before the court is Brann's motion to stay proceedings on Count I of Architectural's amended complaint, pending the outcome of a state suit previously filed by Brann. Brann has also moved to reconsider my previous decision granting Architectural summary judgment on Count II of the amended complaint. Architectural has moved for entry of final judgment on Count II. For the reasons to follow, all three motions are denied.

I

On February 5, 1976, Architectural appointed Brann its distributor in lower Michigan of "Tarkett sheet vinyl flooring and wall covering products." (Amended Complaint, Ex. A). The letter agreement executed by the parties stated that it was "cancellable by either party by giving the other party a 90 day notice in writing." (Id.) Over a year later, on May 15, 1977, Architectural further agreed in a separate contract to grant Brann an exclusive license to promote and sell a product known as "Court-Flor" throughout the state of Michigan. This contract also contained a termination clause specifying, in part, a 90 day notice period.

On August 12, 1981 Architectural notified Brann of its intent to terminate both the 1976 and the 1977 agreements in 90 days. Brann responded by filing suit in Michigan state court on September 2, 1981 seeking a declaratory judgment that the purported cancellation of the 1976 contract was invalid. Brann also sued two former employees, Anthony Britsky and Kristina Gates, both citizens of Michigan. In this part of its complaint, Brann alleged that Architectural, Britsky and Gates had conspired to interfere with the advantageous business relationship previously existing between Brann and Architectural. Such conspiratorial activity on the part of Britsky and Gates was further claimed to be in breach of the fiduciary obligations they owed Brann.

Settlement negotiations were then on-going, however, and Brann's Michigan counsel decided not to serve Architectural. He reasoned that "service of the Complaint may have had an adverse impact on the settlement negotiations." (Plunkett Aff. at ¶ 2). Service was eventually accomplished on November 4, 1981.

In the meantime, Architectural filed its own suit in this court on October 1, 1981. Count I seeks a declaratory judgment that Architectural's terminations of both contracts were proper. Count II (added by amendment) involves allegations that Brann failed to pay for various goods received. Jurisdiction over both counts exists solely by virtue of diversity.

Up until this time, the parties have litigated the present suit in the normal course. Brann moved initially to dismiss the action for want of proper service. This motion was denied on February 22, 1982. Brann then filed an answer containing both affirmative defenses and a counterclaim. The counterclaim was dismissed on Architectural's motion on April 28, 1982.*fn1 Architectural next moved for summary judgment on count II, receiving a decision in its favor for $38,179.64 on September 7, 1982. During this period, Architectural also submitted numerous interrogatories, many concerning the termination issue. Brann responded on August 16. Amended responses were filed on August 23 and September 27.

By contrast, little seems to have gone on in the state suit. Architectural had not even answered Brann's complaint when the instant motion to stay was filed. (Rashid Aff. at ¶ 2). Moreover, Brann did not file until May 5, 1982 a default or an affidavit of default. (Plunkett Aff. at ¶ 6). Both are prerequisites, under Michigan law, for the entry of a default judgment. (Plunkett Supp. Aff. at ¶ 6). Brann also did not inform Architectural of the above filings until September 8, 1982 — after Architectural had already filed its brief in opposition to the motion to stay. (Rashid Supp. Aff. at ¶ 2). Brann claims that no greater notice was required under the circumstances. (Plunkett Supp. Aff. at ¶¶ 5-6). This may be so, but it hardly appears that Brann has moved with dispatch in prosecuting its state suit.*fn2 A trial date of December 16, 1982 is currently set (letter of September 22, 1982 to the court from Alan S. Gilbert, attorney for Architectural),*fn3 but no discovery has yet gone forth. (Rashid Aff. at ¶ 3). I am more than a little dubious whether the parties will be prepared for trial by December 16.

II

Brann's argument for a stay is simple: judicial resources will be wasted if both this court and the Michigan court proceed to adjudicate the same dispute between the parties. Brann relies heavily on the Seventh Circuit's recent decision in Microsoftware Computer Systems v. Ontel Corp., 686 F.2d 531 (7th Cir. 1982) (hereafter cited as Ontel).

Ontel does not govern this case. As the statement just quoted reveals, the decision must be read in context; Ontel is not a case of wide-application. See Voktas, Inc. v. Central Soya Company, Inc., 689 F.2d 103 at 105 (7th Cir. 1982). Indeed, the present situation is far different. In Ontel, no federal interest was served by resolving the parties' dispute in federal court. No federal questions were presented, and even the traditional rationale for diversity jurisdiction — the prevention of bias against out-of-staters — could not be invoked: "If [Microsoftware] were concerned by prejudice in the New York state courts, it could have removed the state court action to a federal court in New York. Indeed, any interest [Microsoftware] had in a federal forum could have been satisfied by removing the one action instead of creating a second." Ontel, supra, 686 F.2d at 537. The same is simply not true here. Architectural could not have removed Brann's initial state suit for the simple reason that this action was not within the original jurisdiction of the federal courts; the presence of Britsky and Gates, both Michigan citizens, on the defendants' side of the ledger foreclosed any arguments based on diversity. Thus, the general federal interest underlying the diversity grant can be served in this dispute only by allowing Architectural's federal suit to proceed. This does not mean, of course, that stays are per se improper under these circumstances. See Bio-Analytical Services v. ...


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