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GREEN v. INDAL

June 8, 1983

ROBERT L. GREEN, ROBERT L. EASTON, JOYCE A. REED, VALERIE HERRING, DEBRA L. PIERSON, WILLIAM R. LONG, CARL R. CHILDERS, PAUL R. CAMPBELL, RICHARD MILLER, SYLVESTER P. SCHNEIDER, ANNA MARIE ALMS, RONALD LARSON, AND B. RICHARD CRAIN, PLAINTIFFS,
v.
INDAL, INC., A VIRGINIA CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Foreman, Chief Judge:

MEMORANDUM AND ORDER

Before the Court is defendant's Motion for Stay of Proceedings Pending Termination of State Proceedings. It should be denied.

The instant case was filed on April 14, 1983, alleging violations of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. (ERISA). Specifically, plaintiffs allege that defendant failed to follow through on a plan guaranteeing employee severance pay. Count I seeks to enforce plaintiffs' alleged rights under the plan, 29 U.S.C. § 1132(a), and Count II is for breach of fiduciary duty, 29 U.S.C. § 1109, 1132(a)(2).

In its motion, defendant reports that an identical action was filed in the Circuit Court for Jackson County, Illinois, on August 19, 1982, nearly eight months before the instant action was filed.*fn1 Actually, the state action is identical only to Count I of this suit. Defendant argues that interests of judicial economy militate in favor of staying this action pending resolution of the same issues in state court. Defendant submits that the only difference between the two pending actions — that costs and attorney's fees are demanded here — provides no obstacle to staying this action because plaintiffs can amend the state complaint. Finally, defendant argues that by virtue of 29 U.S.C. § 1132(e)(1), which furnishes the jurisdictional basis for suits "to enforce . . . rights under the terms of the plan . . ." Section 1132(a)(1)(B), the state has concurrent jurisdiction to adjudicate the issues pending before this Court.

Defendant's perception of the instant case in light of the applicable jurisdictional provision is erroneous. As noted, Count II charges breach of fiduciary duty — a claim that is committed to the exclusive jurisdiction of the federal district courts. 29 U.S.C. § 1132(e)(1); Levy v. Lewis, 635 F.2d 960, 967 (2d Cir. 1980); Central States, Southeast and Southwest Areas Health and Welfare Fund v. Old Security Life Insurance Company, 600 F.2d 671, 676 (7th Cir. 1979); Morrissey v. Curran, 567 F.2d 546, 549 (2d Cir. 1977); Marshall v. Chase Manhattan Bank National Association, 558 F.2d 680, 682 (2d Cir. 1977). "Exclusive federal jurisdiction being present, only the federal courts have power to provide that affirmative relief." Central States, supra, 600 F.2d at 676. Accord, McGough v. First Arlington National Bank, 519 F.2d 552, 555 (7th Cir. 1975). This factor renders abstention as to Count II inappropriate. Levy, supra, 635 F.2d at 967. Whether to stay Count I, the substance of which is within the concurrent jurisdiction of the state and federal courts, provides a more difficult issue.

Whether to stay a federal action in deference to a parallel state action is committed to the district court's discretion. Will v. Calvert Fire Insurance Co., 437 U.S. 655, 664, 98 S.Ct. 2552, 2558, 57 L.Ed.2d 504 (1978); Microsoftware Computer Systems v. Ontel Corporation, 686 F.2d 531, 537 (7th Cir. 1982). Federal Courts have a "virtually unflagging obligation . . . to exercise the jurisdiction given them." Colorado River Water Conservation District v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 1246, 47 L.Ed.2d 483 (1976). "[T]he pendency of an action in the state court [by itself] is no bar to proceedings concerning the same manner in the Federal court having jurisdiction. . . ." Microsoftware, supra, 686 F.2d at 537, quoting McClellan v. Carland, 217 U.S. 268, 30 S.Ct. 501, 54 L.Ed. 762 (1910). However, "[i]t is equally well settled that a district court is `under no compulsion to exercise that jurisdiction,' Brillhart v. Excess Insurance Company, 316 U.S. 491, 494, 62 S.Ct. 1173, 1175, 86 L.Ed. 1620 (1942), where the controversy may be settled more expeditiously in the state court." Will, supra, 437 U.S. at 662-63, 98 S.Ct. at 2557. Microsoftware, supra, 686 F.2d at 537. But see 17 Wright, Miller & Cooper, Federal Practice and Procedure, Section 4247 at 114 (Supp. 1983). Part and parcel of the "unflagging obligation" to exercise federal jurisdiction is the threshold requirement of showing "exceptional circumstances" warranting a stay of federal proceedings. Colorado River, supra, 424 U.S. at 818, 96 S.Ct. at 1246. Voktas, Inc. v. Central Soya Company, Inc., 689 F.2d 103 (7th Cir. 1982).

In Colorado River, the Supreme Court fashioned a "fourth class" of abstention, premised on the rationale of judicial economy.*fn2 In that case, "exceptional circumstances" existed warranting abstention. The Court considered a suit brought by the United States on behalf of Indian tribes and owners of non-Indian claims, to determine water rights in the Colorado River. In justifying abstention, the Court relied on: (1) the McCarren Amendment, 43 U.S.C. § 666, which evinced a clear federal policy of "avoidance of piecemeal adjudication of water rights in a river system." 424 U.S. at 819, 96 S.Ct. at 1247; (2) the existence of state adjudicatory procedures for such matters; (3) the fact that the federal suit had just been initiated; (4) the large number of defendants in the state proceeding, demonstrating that a more comprehensive adjudication would occur there; (5) convenience of the location of the federal court; and (6) contemporaneous participation of the United States in the state proceeding. In recent opinions, the Seventh Circuit relied on the judicial economy rationale of Colorado River and also recognized several factors *fn3: (1) the desirability of avoiding piecemeal litigation; (2) which suit was filed first; (3) the inconvenience of the federal forum; (4) which court assumed jurisdiction over the res involved; Calvert Fire Ins. Co. v. American Mutual Reinsurance Company, 600 F.2d 1228 (7th Cir. 1979); (5) whether the federal suit is for delay or vexatious, Id.; (6) whether federal interests or questions are at stake in the dispute; (7) whether there is any indication the state court can fully and fairly litigate the dispute; (8) whether there would be a waste of efforts by both courts in litigating the same issues in two forums at once, Microsoftware, supra, 686 F.2d at 537-38; and (9) whether the claimant would be deprived of a federal forum if the stay is granted, Evans Transportation Company v. Scullin Steel Company, 693 F.2d 715, 718, 719 (7th Cir. 1982). This list is not exhaustive, the district court's task is to exercise discretion based on "weighing . . . a combination of factors." Calvert, supra, 600 F.2d at 1234. Despite the panoply of guideposts generated by these recent opinions, it is not completely clear how discretion is to be used.

First, although Microsoftware Court found the existence of federal questions to be a relevant factor, the more recent Evans opinion seriously undercut that notion:

  [U]ntil Congress decides to alter or eliminate the
  diversity jurisdiction we are not free to treat the
  diversity litigant as a second-class litigant, and we
  would be doing just that if we allowed a weaker
  showing of judicial economy to justify abstention in
  a diversity case than in a federal question case.

693 F.2d at 717. The inescapable conclusion from this language is that the existence of federal questions is entirely irrelevant to the question of whether to defer to a pending parallel state case.*fn4 Accordingly, that Count I of plaintiff's complaint involves construction of ERISA is inconsequential. Second, and far less clear, is the required showing for abstention where staying the federal suit would not necessarily deprive the claimant of a federal forum. Again, contradictory signals are sent from the Seventh Circuit.

In Burrows v. Sebastian, 448 F. Supp. 51 (N.D.Ill. 1978), the Court considered a situation where staying the federal action pending the outcome of an identical state action would not necessarily deprive the plaintiff of his federal forum. In ordering a stay, Judge Bua distinguished Colorado River, which involved facts requiring "exceptional circumstances" before a stay could be granted:

  The present situation . . . involves a "repetitive"
  rather than a "reactive" suit; both the state and
  parallel federal actions have been brought by the
  same plaintiffs. In such a situation, the federal
  court, by staying its proceeding pending the
  disposition or voluntary dismissal of the state court
  action, simply places the plaintiff in the position
  of having to decide in which of the two forums to
  pursue his claims. . . . Where an order of stay or
  dismissal in no way infringes on a plaintiff's right
  to have his claims adjudicated in federal court it
  cannot be said that there has been any abrogation,
  justified or otherwise, of the court's "duty" to
  exercise its jurisdiction. Hence, such an order does
  not require "exceptional circumstances" in order to
  be warranted.

448 F. Supp. at 53 (emphasis supplied).*fn5 Relying on the reasoning of Colorado River, Judge Bua went on to find that when the claimant's right to a federal forum would not be foreclosed regardless of what the federal court decided*fn6, the "unflagging duty" to exercise jurisdiction is no longer present "mak[ing] for a much more liberal granting of stays or dismissals in order to `avoid duplicative litigation'." 448 F. Supp. at 53-54.

In the instant case, defendant relies strongly on Burrows, arguing that "exceptional circumstances" need not be demonstrated and that principles of judicial economy should be singularly sufficient. However, when confronted with a procedurally identical situation, the Seventh Circuit unequivocally rejected the Burrows approach on the ground that its reasoning represented a wholesale abandonment of the Colorado River "exceptional circumstances" criterion: "In the final analysis, the approach of the Burrows court must be rejected because it inadequately provides for the special obligation of the federal courts to exercise their jurisdiction." Voktas, Inc., supra, 689 F.2d at 102. But then two months later, the Seventh Circuit in Evans, supra, apparently adopted the Burrows approach in toto. The Court held that "[w]hen [a stay] operates to deny a litigant a federal forum to which the jurisdiction statutes appear to entitle him it should not be granted unless there are reasons going beyond the interest of judicial economy, an interest engaged whenever they are parallel suits." 693 F.2d at 718. The Court continued: "If . . . the question is not whether the federal claimant shall have access to a federal court but which federal court he shall have access to, considerations of judicial economy become decisive, for there is no question of depriving a litigant of his right to litigate in federal court." 693 F.2d at 719 (emphasis supplied).*fn7 ...


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