If a lawsuit in state court and a lawsuit in federal court arise out of the same cor of operative facts, should the federal court abstain from hearing the case? In
, ___ F.3d ___ (7th Cir. 2011), Case No. 10-3254, the Seventh Circuit held that it should not, because whether the cases arise from the same set of operative facts is not the test for federal abstention.
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In
Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976), the Supreme Court held that the pendency of an action in state court is generally no bar to proceedings concerning the same matter in the Federal court. The Court recognized an exception in "exceptional" cases for a federal court to defer to a concurrent state court case. Such deference is warranted if there is a "substantial likelihood that the state litigation will dispose of all claims presented in the federal case."
Clark v. Lacy, 376 F.3d 682, 686 (7th Cir. 2004).
In
Huon, the plaintiff was an attorney who sued attorneys in his former law firm in state court for defaming him in an annual performance review and intentionally inflicting emotional distress. The defendants moved to dismiss Huon's suit and that motion was granted. Huon appealed and that appeal is still pending in state court.
After the state court claim was dismissed, the EEOC issued Huon a right-to-sue letter and he filed a complaint in federal court, which asserted claims of discrimination based on race and national origin, as well as a state-law claim for tortious interference with a prospective business relationship. The defendants in the federal suit were all defendants in the state suit, except for one additional defendant, the president of the law firm. The defendants moved to stay under the
Colorado River doctrine and the district court granted that motion.
On appeal, the Court held that the district court erred when applying the
Colorado River doctrine to this case.
Given the rigorous standards for this form of abstention, the district court's explanation for its findings is insufficient to support a stay. The court was probably misled by the defendants' emphasis on the test for res judicata, under which the central question is whether the federal and state claims arise from the same core of operative facts. Colorado River abstention, in contrast, focuses on the more practical question whether the state case is likely to dispose of the discrimination and tortious interference claims that Huon brought in federal court.
...
Returning to the district court's actual rationale—Colorado River—we explain why this case is not a proper candidate for abstention. The first question, as we already have indicated, is whether the two suits are "parallel." One important factor is whether both cases would be resolved by examining largely the same evidence. ... Huon's discrimination claims likely would require depositions from other employees, evidence of a broader scope of alleged misconduct, and a showing that he was treated differently than similarly situated employees. None of this would necessarily bear on his defamation claim.
The Court also criticized the fact that the district court gave only "a one-sentence explanation" of the factors it should use to determine whether exceptional circumstances justified abstention. Therefore, the Court found that it was "missing the necessary explanation from the district court's decision justifying the relinquishment of its jurisdiction."
The Seventh Circuit's view of the
Colorado River doctrine was summed up at the conclusion of the opinion.
It may be that Huon eventually will face the possibility that his federal suit is barred by claim preclusion, if the dismissal of his state complaint is upheld on appeal. But when Huon chose to initiate separate suits in state and federal courts, he accepted the risk that an unfavorable judgment in the case that finished first might preclude his litigation in the other forum. Although at first blush it may seem inefficient to allow both cases to proceed, the Colorado River doctrine focuses on a federal court's obligation to exercise its jurisdiction, with preclusion doctrines operating as a backstop to ensure that the concurrent proceedings do not result in inconsistent judgments. The Colorado River doctrine is not intended to give defendants the upper hand by stalling the federal case to wait for a favorable final judgment in the state proceeding that then can be used to bar the plaintiff's claims in federal court.
This opinion is a strong affirmation that
Colorado River abstention will be rarely used in the Seventh Circuit. Moreover, this opinion places the burden on a district court which wishes to invoke this doctrine to state its reasons for doing so with sufficient specificity to convince the Court of Appeals that it has conducted the necessary analysis. Parties which ask a district court to apply
Colorado River should make sure to inform the district court of this responsibility.
