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R & B GROUP v. BCI BURKE CO.

January 13, 1997

R & B GROUP, INC., an Illinois corporation, Plaintiff,
v.
BCI BURKE COMPANY, INC., a Wisconsin corporation; HANSON DODGE, INC., a Wisconsin corporation; and ALTERED IMAGES, INC., a Wisconsin corporation, Defendants.



The opinion of the court was delivered by: DENLOW

 I. BACKGROUND FACTS

 A. The Wisconsin Litigation.

 On April 11, 1996, BCI Burke Company, Inc. ("BCI"), a Wisconsin corporation with its principal place of business in Fond du Lac, Wisconsin filed an action in the Circuit Court of Fond du Lac County, Wisconsin, case number 96-CV-153, against R & B Group, Inc., ("R&B"), an Illinois corporation with its principal place of business in Chicago, Illinois and Altered Images Inc., ("AII"), a Wisconsin corporation with its principal place of business in Milwaukee, Wisconsin seeking a declaratory judgment and compensatory and consequential damages for breach of contract and conspiracy in connection with R&B's and AII's work on BCI's product catalog ("Wisconsin Litigation"). R&B was served with process on April 15, 1996.

 B. The Federal Litigation.

 On May 1, 1996, R&B filed this suit against BCI, AII and Hanson Dodge, Inc., ("Hanson"), a Wisconsin corporation with its principal place of business in Milwaukee, Wisconsin, alleging that BCI breached written and oral contracts to pay R&B for the work on BCI's 1996 product catalog (Counts I and III), and also asserts claims against BCI for account stated (Count VI) and unjust enrichment (Count VII) arising from R&B's work on said catalog ("Federal Litigation"). BCI timely filed a motion to stay these federal proceedings asserting that the Wisconsin Litigation is a previously-filed "parallel case." BCI's and co-defendant Hanson Dodge, Inc.'s time to answer or otherwise respond to R&B's complaint has been extended until after the Court rules on the pending motions. Defendant AII has been voluntarily dismissed from this case.

 C. Three Orders and Two Appeals in the Wisconsin Litigation.

 On May 6, 1996, R&B moved the Wisconsin Circuit Court to dismiss the Wisconsin Litigation for lack of personal jurisdiction. The Wisconsin court reviewed written submissions, conducted an evidentiary hearing and heard oral arguments on the motion to dismiss. The Wisconsin court determined that it had personal jurisdiction over R&B, denied R&B's motion to dismiss and issued its order on June 25, 1996. (See Ex. 2 to Certificate of Authentication filed 12/3/96). Not content with this ruling, R&B filed a petition for leave to appeal to the Wisconsin Court of Appeals. On July 31, 1996, the Wisconsin Court of Appeals denied R&B's petition. In the meantime, R&B failed to answer or otherwise plead to BCI's complaint.

 On August 1, 1996, BCI moved the Wisconsin court to enter a default judgment against R&B. On August 8, 1996, R&B moved for an extension of time to answer, having filed an answer, counterclaim and third party complaint on August 7, 1996, without leave of court. Thereafter, the parties presented briefs and oral argument to the Wisconsin court on both motions.

 On September 23, 1996, the Wisconsin court issued its opinion and order denying R&B's motion for an extension of time to answer and granting BCI's motion for entry of a default judgment against R&B concluding that the appeal did not act as a stay tolling R&B's obligation to file its answer no later than July 9, 1996. (Ex. 3 to Certificate of Authenticity).

 D. Three Motions Pending Before This Court.

 There are three pending motions. First, BCI has filed a renewed motion to stay proceedings predicated on the Colorado River doctrine. Second, BCI has filed a motion for summary judgment on the theory that the November 1, 1996 judgment entered in the Wisconsin Litigation is res judicata. Third, R&B has filed a motion for summary judgment on the underlying merits of the litigation contending that it is entitled to judgment as a matter of law against BCI on its breach of contract, account stated and unjust enrichment claims. The Court will address each motion separately.

 II. COLORADO RIVER ABSTENTION APPLIES

 Federal courts possess a "virtually unflagging obligation" to exercise their jurisdiction. Colorado River Water Conservation District v. United States, 424 U.S. 800, 817, 96 S. Ct. 1236, 1246, 47 L. Ed. 2d 483 (1976); Caminiti and Iatarola, Ltd v. Behnke Warehousing, Inc., 962 F.2d 698 (7th Cir. 1992). A federal court may stay or dismiss a suit in exceptional circumstances when there is a concurrent state ...


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