United States District Court, Northern District of Illinois, E.D
June 28, 1983
MECHANICAL SYSTEMS, INC., PLAINTIFF,
THE CADRE CORPORATION, DEFENDANT.
The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
Mechanical Systems, Inc. ("MSI") brings this diversity action
against The Cadre Corporation ("Cadre") asserting
misrepresentations and inadequate performance by Cadre in
connection with a construction project on which both parties
were subcontractors. Cadre has now moved alternatively (1) to
stay further proceedings in this action
pending resolution of a virtually identical Delaware state
court case, Cadre Corporation v. Mechanical Systems, Inc.,
No. 83 C-AP-26, or (2) to transfer this action to the District
Court for the District of Delaware pursuant to 28 U.S.C. § 1404(a)
("Section 1404(a)"). For the reasons stated in this
memorandum opinion and order Cadre's motion is denied entirely.
MSI is a Delaware corporation with its principal place of
business in Illinois. Cadre is a Georgia-based corporation (as
to both its place of incorporation and its principal place of
business). In 1980 MSI and Cadre, working closely together,
submitted complementary bids for construction and installation
of an emission control system (the "System") at the East
Moline, Illinois foundry owned by John Deere & Company
("Deere"). Those bids contemplated MSI would install equipment
and component parts furnished by Cadre and would supply and
install other parts of the System as designed and engineered by
Cadre. Deere's general contractor, Blount Brothers Corporation
("Blount"), accepted the bids and the parties completed the
work. According to MSI's Complaint, Cadre forced MSI to incur
financial losses by (1) performing its project responsibilities
in a deficient and untimely manner and (2) making
misrepresentations that induced MSI to tender a
In a February 11, 1982 letter to Cadre, MSI had demanded
payment for substantially the same claims presented in its
Complaint. MSI later decided to defer any legal action against
Cadre, preferring instead to seek recovery from Blount and
Deere via arbitration proceedings. Then Cadre's February 23,
1983 letter for the first time asserted MSI owed Cadre
approximately $12,-000 for certain design work. On March
29,1983 — shortly after the arbitration proceedings had ended —
both Cadre and MSI sent letters threatening legal action if the
other did not pay the requested amount. Cadre was the first to
carry out its threat, filing the Delaware state court action
April 6, 1983 — approximately two weeks before MSI brought this
lawsuit. Cadre's Complaint there raises substantially the same
issues as are involved here: It seeks (1) reimbursement for the
allegedly unpaid design work*fn1 and (2) a declaration as to
its liability to MSI.
Motion To Stay
Over the past few years our Court of Appeals has issued at
least four opinions as to a federal court's power to refrain
from exercising its jurisdiction pending the outcome of a
parallel state proceeding. Evans Transportation Co. v. Scullin
Steel Co., 693 F.2d 715 (7th Cir. 1982); Voktas, Inc. v.
Central Soya Co., Inc., 689 F.2d 103 (7th Cir. 1982);
Microsoftware Computer Systems, Inc. v. Ontel Corp.,
686 F.2d 531 (7th Cir. 1982); Calvert Fire Insurance Co. v. American
Mutual Reinsurance Co., 600 F.2d 1228 (7th Cir. 1979). Though
its initial stabs at this elusive issue were somewhat
inconsistent, Evans (its most recent decision) provides a
coherent analytical framework that reconciles those
discrepancies with a heavy application of judicial gloss.
Evans (693 F.2d at 717) reaffirmed the Court's adherence to
the "exceptional circumstances" formulation of Colorado River
Water Conservation District v. United States, 424 U.S. 800, 96
S.Ct. 1236, 47 L.Ed.2d 483 (1976):
Although Colorado River involved special factors that
warranted abstention in favor of the parallel state action, the
Court formulated the issue in general terms: "In assessing the
appropriateness of dismissal in the event of an exercise of
concurrent jurisdiction, a federal court may also consider [in
addition to whether
the state court has assumed jurisdiction over property, see
id. at 818, 96 S.Ct. at 1246-1247] such factors as the
inconvenience of the federal forum, the desirability of
avoiding piecemeal litigation, and the order in which
jurisdiction was obtained by the concurrent forums. No one
factor is necessarily determinative. . . . Only the clearest of
justifications will warrant dismissal. Id. at 818-19, 96
S.Ct. at 1247 (citations omitted).
Evans also reviewed several important ramifications of the
Colorado River doctrine:
1. Satisfaction of the Colorado River test warrants a stay,
not outright dismissal, of the federal action (even though
Colorado River spoke in terms of dismissal). 693 F.2d at
2. Colorado River demands the same showing of judicial
economy regardless of the jurisdictional predicate (diversity
or federal-question) of the federal proceeding. Id. at 717.
3. Parallel federal actions require a lesser showing of
judicial economy to justify suspension of proceedings.
Microsoftware had prescribed those liberal abstention
standards and confirmed their applicability to situations
where the plaintiff in the later-filed federal action fails
to exercise its right to remove the parallel state suit to a
federal forum (as actually occurred in Microsoftware). Id.
4. Abstention is not justified by the mere fact the state
suit was filed before the federal one. Id. at 720.
5. "Inconvenience of the federal forum" requires a
balancing of the relative convenience of the two courts
involved, embracing such factors as convenience to the
witnesses and parties and each court's familiarity with the
applicable substantive law. Id. at 720.*fn2
Cadre can find no comfort in the Colorado River abstention
1. Delaware jurisdiction has not been assumed over any
2. While the Delaware suit was brought first, that factor
alone is not determinative. Indeed it hardly carries any
weight at all given (a) the threshold status of both
proceedings and (b) the proximity of their filing dates. See
Evans, 693 F.2d at 720.
3. Considerations of convenience overwhelmingly favor
resolution of the parties' dispute in this forum rather than
in the Delaware state court:
(a) Convenience of the witnesses is particularly well served
by adjudicating the controversy here, for the witnesses each
side expects to call include:
(1) MSI personnel in Illinois who worked on the System,
prepared and negotiated the MSI-Blount subcontract or
communicated with Cadre employees in coordinating the two
subcontracts involving MSI and Cadre,
(2) Cadre personnel in Atlanta, Georgia who ordered and
supervised delivery of materials to the project, performed
design work or prepared and negotiated the Cadre-Blount
(3) Blount employees in Illinois and Dayton, Ohio and
(4) perhaps employees of Cadre's and MSI's subcontractors who
reside in Georgia, Illinois or other states bordering on
Illinois (e.g., Michigan).
While it is unclear how many witnesses in Illinois and the
neighboring states can be reached by this Court's subpoena
power, there can be no doubt those witnesses would find this
forum much more convenient than the distant Delaware forum. And
as for the Atlanta witnesses, neither forum offers
significantly more convenience.
(b) Much the same may be said as to convenience of the
parties. MSI not only conducts most of its business in
Illinois, but also has its offices in this District. It has
never had an office or transacted any business in Delaware.
Its only connection with that state is indeed attenuated: It
has appointed a registered agent there, as Delaware requires
of any corporation organized under its laws. As for Cadre,
both forums are relatively distant from its Atlanta offices.
Thus the substantial convenience of an Illinois forum to MSI
greatly outweighs whatever marginal convenience (if any) a
Delaware forum holds for Cadre.
(c) Though not a critical factor, the costs of transporting
documents will also be minimized by litigation here rather
than in Delaware. Relevant documents possessed by MSI, Deere
and Blount are located in Illinois (in Rock Island and Cook
Counties). Location of Cadre's documentation — Atlanta,
Georgia — is neutral in terms of convenience.
(d) Finally this Court is a more convenient forum because
Illinois law is likely to apply to virtually all aspects of
(1) Count I involves alleged misrepresentations made by Cadre
during negotiations held in Illinois.
(2) Count IV asserts Cadre's contractual obligation to pay
for work performed by MSI at the Illinois construction site.
(3) Counts II and III attack Cadre's performance of its
obligations under its subcontract and a purported agreement
with MSI — actions that arguably took place at its Atlanta
offices. Nevertheless because those actions related to an
Illinois construction project, the breach of contract
components of those counts may well be controlled by Illinois
law. Moreover the Illinois choice of law provision in Cadre's
proposal to Blount (which became part of its subcontract)
reinforces that conclusion. As for the negligence components
of those counts, Illinois or Georgia — but certainly not
Delaware — is the state with "the most significant contacts."
In short, all conceivable aspects of the convenience inquiry
point decidedly towards this federal forum — so much so that
this Court has not really had to engage in the "balancing"
process ordinarily required by that abstention criterion.
4. Colorado River's final factor (424 U.S. at 800, 96 S.Ct.
1236) — "desirability of avoiding piecemeal litigation" — has
no relevance in this case, for the Delaware lawsuit and this
action involve essentially the same issues. And as Evans
made clear, the judicial diseconomies of having two parallel
lawsuits instead of one do not counsel abstention. Even were
that prospect a relevant concern, its weight is considerably
diminished by the very real possibility the Delaware state
court will grant MSI's pending motion for dismissal on forum
non conveniens grounds in light of that lawsuit's tenuous
connections with Delaware.
In sum, Colorado River's nonexhaustive list of abstention
considerations does not support deferral to the Delaware state
court. And because Cadre has not identified any other "special
factors counseling . . . against the exercise of jurisdiction,"
Voktas, 689 F.2d at 107 (quoting Calvert Fire, 600 F.2d at
1234), this Court must deny Cadre's motion to stay.*fn4
Section 1404(a) Motion To Transfer
As an alternative to a stay, Cadre seeks to transfer this
action to the District of Delaware under Section 1404(a):
For the convenience of the parties and witnesses, in the
interest of justice, a district court may transfer any civil
action to any other district or division where it might have
That too must be denied.
Of course the Colorado River doctrine obviously differs from
the Section 1404(a) inquiry in important respects. But this
Court's earlier analysis of relative convenience leaves
absolutely no doubt that transfer is unwarranted under Section
1404(a)'s substantive criteria — even assuming the Delaware
court continues to adjudicate the state action.
Cadre advances two additional arguments for transfer not
addressed in connection with its motion to stay:
1. Having both the federal and state actions in Delaware
obviates the need for two sets of attorneys and documents.
2. Management Statistics for 1981 for the District Courts
indicate the average time from issue to trial in civil cases
is 11 months in the District of Delaware and 17 months in the
Northern District of Illinois. Threedy Aff. Ex. A.
This Court is not very sympathetic to the first contention, for
the wound of the Delaware action is self-inflicted by Cadre and
could be healed simply by abandoning that inconvenient forum.
As for the second, any pair of litigants that addresses the
issues and concludes discovery with dispatch can go to trial in
this Court's courtroom too in less than a year.*fn5
important, even if accepted both arguments pale in comparison
to the factors that overwhelmingly favor retention.
Cadre's motion to stay or transfer this action is denied. Cadre
is directed to answer the Complaint on or before July 8,1983.