Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 95 C 4676--Suzanne B. Conlon, Judge.
Before POSNER, Chief Judge, and KANNE and EVANS, Circuit Judges.
The Vesting Clause of article III, U.S. CONST. art. III, sec. 1, and the statutory grants of original jurisdiction to the inferior federal courts, 28 U.S.C. sec. 1330 et seq., impose upon federal district courts the obligation to resolve disputes that satisfy constitutional, statutory, and prudential requirements for standing and justiciability. This duty may be discharged, however, in circumstances where it is appropriate for a district court to abstain from deciding a case or controversy in light of an ongoing or pending proceeding in state court.
The Supreme Court has fashioned several rationales justifying deference to state courts under this rubric of abstention. This case concerns the abstention doctrine emanating from the Court's decision in Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S. Ct. 1236 (1976). In this appeal, we are asked to decide whether dismissal or abstention--with its concomitant retention of jurisdiction--was the appropriate mechanism for the district court to use in implementing this doctrine. We find that the deference commanded by Colorado River required abstention by the district court.
Helena Samios owns a condominium unit located at 8306C Portsmouth Drive in Darien, Illinois, where she lives with Lisa Selmon. The condominium unit is part of the Portsmouth Drive Condominium Association (the "Association"), a not-for-profit Illinois corporation. On September 27, 1994, Samios entered into a contract to sell her unit to Artell Bates for $91,000. Pursuant to a rider to the contract that Samios and Bates executed two days later, Samios agreed to finance $88,500 of the purchase price in two loans.
The first loan had a balance of $33,500 and bore 9 percent simple interest over a five-year term with a maturity date of September 30, 1999. The second loan had a balance of $55,000 and bore the same interest rate over a thirty-year term. The second loan was to be paid in equal monthly installments, each of which would also include 8.33 percent of the annual taxes, insurance premiums, and condominium assessments. The terms of the rider contemplated that Bates would secure third-party financing and pay off the balance owed Samios on both loans prior to September 30, 1999. If he did not, then his obligation on the first loan would be extinguished.
On November 15, 1994, the Association filed a complaint against Samios, Selmon, and Bates in Illinois state court seeking declaratory relief and possession of the unit. The Association alleged that the rider to the contract between Samios and Bates effectively converted the contract into a five-year lease agreement. It also alleged that Selmon's continued occupancy of the unit as a leasehold tenant violated the Declaration of Condominium Ownership. On May 16, 1995, Samios, Selmon, and Bates filed a counterclaim against the Association in which they alleged that the Association had discriminated against them because of their race in violation of the Fair Housing Act, 42 U.S.C. sec. 3604, and had intimidated them based upon their assertion of rights under sec. 3604 in violation of 42 U.S.C. sec. 3617. They sought injunctive and declaratory relief, unspecified monetary damages, attorney fees, and costs.
Three months later, on August 14, Selmon, Samios, Bates, and other plaintiffs filed a lawsuit in the Northern District of Illinois against the Association, its board of directors, and several other persons, both individually and as agents of the Association. Their complaint echoed the state court counterclaim and added additional allegations; in all, they alleged eight counts of unlawful conduct in violation of 42 U.S.C. secs. 1981, 1982, 3604, 3617. On September 28, they moved the district court to stay the federal case pending the outcome of the parallel state court proceeding.
That same day, the district court held a hearing on the plaintiffs' motion. Counsel for the defendants requested that the district court dismiss the action. The district court then stated it would dismiss the action without prejudice and offered its reasons for doing so:
I am going to dismiss this case without prejudice. If you wish to reinstate it before the statute of limitations runs a year from now, please feel free to so move and then we will know more about what has happened or not happened in DuPage County. It is a waste of judicial resources and it could possibly lead to conflicts between my rulings and the DuPage County Judge's rulings if we proceed in this case. So the case is dismissed without prejudice.
Plaintiffs' counsel then referenced case law from this circuit to the effect that "the appropriate action would be to stay and not dismiss." ...