The opinion of the court was delivered by: Elaine E. Bucklo United States District Judge
MEMORANDUM OPINION AND ORDER
Lead Plaintiffs Oakland County Employees' Retirement System ("Oakland County"), Philip R. Wilmore ("Wilmore"), and Lawrence J. Goelz ("Goelz") have brought this shareholder derivative action on behalf of nominal defendant Huron Consulting Group Inc. ("Huron") against members of Huron's Board of Directors and a number of its current and former executive officers.*fn1 Plaintiffs allege that the defendants overstated Huron's revenue for a period of several years, causing Huron's stock to trade at artificially inflated prices. Defendants have moved to stay the proceedings in this action pending the resolution of a separate action in Illinois state court based on the same underlying facts. For the reasons explained below, I deny the motion to stay.
On August 17, 2009, Huron restated its financial results for fiscal years 2006, 2007, and 2008, and for the first quarter of 2009. The restatement was related to Huron's accounting for its acquisition of several businesses between 2005 and 2007. In a July 31, 2009 press release, Huron explained:
The restatement relates to four businesses that the Company acquired between 2005 and 2007 (the "Acquired Businesses"). Pursuant to the purchase agreements for each of these acquisitions, payments were made by the Company to the selling shareholders upon closing of the transaction and also, in some cases, upon the Acquired Businesses achieving specific financial performance targets over a number of years ("earn-outs"). These payments are collectively referred to as "acquisition-related payments."
It recently came to the attention of the Audit Committee of the Board of Directors that, in connection with one of these acquisitions, the selling shareholders had an agreement among themselves to reallocate a portion of the earn-out payments to an employee of the Company who was not a selling shareholder.
Compl. ¶ 82 (emphasis omitted). Huron further acknowledged that the failure to account for these "earn-out" payments as non-cash compensation expenses constituted a violation of Generally Accepted Accounting Principles ("GAAP"). Compl. ¶ 83. As a result, plaintiffs' claim, Huron overstated its income by approximately $57 million during the years in question. Compl. ¶ 80.
On August 28, 2009, two separate suits were filed in the Circuit Court of Cook County, Illinois, alleging various causes of action in connection with Huron's restatement. One suit, brought by Brian Hacias ("Hacias") asserted eight claims: breach of fiduciary duty (Count I); gross negligence (Count II); abuse of control (Count III); gross mismanagement (Count IV); breach of contract (Count V); waste of corporate assets (Count VI); contribution and indemnification (Count VII); and insider trading (Count VIII).
The second suit, brought by Curtis Peters ("Peters"), asserted nine claims: breach of fiduciary duty for disseminating false and misleading information (Count I); breach of fiduciary duty for failing to maintain internal controls (Count II); breach of fiduciary duty for failing to properly oversee and manage the company (Count III); unjust enrichment (Count IV); abuse of control (Count V); gross negligence (Count VI); waste of corporate assets (Count VII); breach of the fiduciary duties of loyalty and good faith by several of the individual defendants (Count VIII); and professional negligence against PricewaterhouseCoopers ("PwC") (Count IX), Huron's auditor.
On October 7, 2009, Oakland County Employees' Retirement System ("Oakland County") filed suit in the Northern District of Illinois based on Huron's restatement. On October 12, 2009, two additional complaints were filed, one by Wilmore, see Wilmore v. Holdren et al., 09 C 6395 (N.D. Ill. filed Oct. 12, 2009), and one by Goelz, see Goelz v. Holdren et al., No. 09 C 6396 (N.D. Ill. filed Oct. 12, 2009). On November 23, 2009, the actions were consolidated and Oakland County, Wilmore, and Goelz were appointed Lead Plaintiffs. A consolidated complaint was filed on January 15, 2010, which asserts four causes of action: violation of section 14(a) of the Securities Exchange Act of 1934 ("the Exchange Act"), 15 U.S.C. § 78n(a) (Count I); breach of fiduciary duty (Count II); waste of corporate assets (Count III); and unjust enrichment (Count IV).
The defendants argue that proceedings in this action should be stayed pursuant to the abstention doctrine articulated by the Supreme Court in Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976). "Under the rule of [Colorado River], when the proper exceptional circumstances exist, a federal court can abstain from exercising its jurisdiction and defer to the concurrent jurisdiction of a state court when there is a parallel state court action pending." Rosser v. Chrysler Corp., 864 F.2d 1299, 1306 (7th Cir. 1988). The Seventh Circuit has emphasized that Colorado River abstention is appropriate only in the narrowest of circumstances. See, e.g., Tyrer v. City of South Beloit, Ill., 456 F.3d 744, 751 (7th Cir. 2006) ("The doctrine of abstention . . . is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it.") (quotation marks omitted). "Federal courts have a virtually unflagging obligation to exercise the jurisdiction conferred on them by Congress." AAR Intern., Inc. v. Nimelias Enters. S.A., 250 F.3d 510, 517 (7th Cir. 2001) (quotation marks omitted). "[B]ecause the federal courts have a heavy obligation to exercise jurisdiction, only the clearest of justifications will warrant dismissal of the federal action in deference to a concurrent state proceeding in the name of wise judicial administration." Id. (quotation marks omitted).
In order to determine whether Colorado River abstention is appropriate, the court must engage in a two-part inquiry. "First, the court considers whether the state and federal suits are parallel." Id. Suits are parallel where "substantially the same parties are contemporaneously litigating substantially the same issues in another forum." AXA Corp. Solutions v. Underwriters Reinsurance Corp., 347 F.3d 272, 278 (7th Cir. 2003) (quotation marks omitted). If the suits are parallel, "the court then considers several non-exclusive factors to determine if exceptional circumstances exist to justify abstention." Id. Ten such factors have been enumerated:
(1) whether the state has assumed jurisdiction over property; (2) the inconvenience of the federal forum; (3) the desirability of avoiding piecemeal litigation; (4) the order in which jurisdiction was obtained in the concurrent forums; (5) the source of governing law, state or federal; (6) the adequacy of state-court action to protect the federal plaintiff's rights; (7) the relative progress of state and federal proceedings; (8) the presence or absence of ...