Opinion
Civil Action No. 00-2386-KHV
November 28, 2000
MEMORANDUM AND ORDER
This action arises from a written contract under which Evolution, Inc. agreed to provide computer software and programming services to plaintiff, Insurance Finance Corporation. Plaintiff claims that defendant committed breach of contract (Count I), breach of express warranties (Count II) and breach of implied warranties (Count III), and engaged in fraudulent misrepresentation and inducement to contract (Count IV). Plaintiff also claims that it is entitled to relief under theories of promissory estoppel (Count V). This matter comes before the Court on defendant's Motion To Dismiss Or In The Alternative Stay Proceedings (Doc. #7) and defendant's Request For Oral Argument On Defendant's Motion To Dismiss Or In The Alternative Stay Proceedings (Doc. #6), both filed September 29, 2000. Defendant contends that the Court should abstain from exercising federal jurisdiction due to a pending state court action between the parties. Oral argument is not necessary in this matter, and for reasons set forth below, defendant's motion is sustained. The instant action will be stayed pending resolution of a parallel suit in state court. Factual Background
Plaintiff's complaint alleges the following facts, which the Court assumes to be true for purposes of this motion. In June 1999, plaintiff and defendant entered into an agreement for computer software and programming services. Pursuant to their agreement, plaintiff paid $49,455 for unmodified software, with the understanding that defendant would customize the software for an additional $12,500. Plaintiff received the software in June 1999, but defendant never fulfilled its duties to personalize the software. Because defendant did not reprogram the software, plaintiff has been unable to use the software in its business. In addition, plaintiff incurred $20,000 in damages due to additional software costs and increased employee wages in its attempt to integrate the software into its business.
On July 12, 2000, defendant filed suit against plaintiff in the District Court of Johnson County, Kansas for breach of contract. Plaintiff filed the instant action on August 28, 2000, seeking monetary compensation due to defendant's failure to fulfill its contractual duties. Defendant argues that the Court should stay or dismiss this action because of the pending state court suit. Plaintiff asserts that this Court should exercise jurisdiction over the matter because the state court suit will be dismissed.
Analysis
Defendant argues that the Colorado River doctrine dictates that this Court defer from exercising jurisdiction in this matter. Colorado River Water Conserv. Dist. v. United States, 424 U.S. 800 (1976). The Colorado River doctrine establishes certain factors for a district court to consider when deciding whether to stay or dismiss a federal suit that parallels a state court proceeding. See Rienhardt v. Kelly, 164 F.3d 1296, 1302 (10 th Cir. 1999). Only in certain limited exceptions should a federal court refrain from exercising the jurisdiction it is granted. See id. at 1303. In exceptional circumstances, the Colorado River doctrine allows a federal court to defer from exercising its jurisdiction. See Shadwick v. Butler Nat'l. Corp., 950 F. Supp. 302, 304 (D.Kan. 1996).
Before applying the Colorado River factors, the Court must first determine "whether the state and federal proceedings are parallel." Joseph Stowers Painting, Inc., v. A. Zahner Co., No. 99-2391-KHV, 2000 WL 210219 at *2 (D.Kan. Feb. 4, 2000) (quoting Allen v. Board of Educ., Unified Sch. Dist. 436, 68 F.3d 401, 402 (10th Cir. 1995)); see also Fox v. Maulding, 16 F.3d 1079, 1081 (10th Cir. 1994). If the proceedings are parallel, the Court applies six factors to determine whether to stay or dismiss a federal court action based on pending state court proceedings.
These factors are:
whether either court has assumed jurisdiction over property;
whether the federal forum is inconvenient to the parties;
the avoidance of piecemeal litigation;
the order in which the courts obtained jurisdiction;
which forum's substantive law governs the merits of the litigation; and
the adequacy of the state forum to protect the rights of the parties.
Joseph Stowers Painting, Inc., v. A. Zahner Co., 2000 WL 210219 at *1-2; see also Colorado River, 424 U.S. at 819; Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 23, 26 (1983). The test is to be applied in a pragmatic, flexible manner. See Shadwick, 950 F. Supp. at 304. In applying the test, no one factor is determinative and the weight to be given any one factor may vary from case to case. See Colorado River, 424 U.S. at 818-9.
The parties agree that the Colorado River doctrine applies to this matter because the factual and legal issues are similar in the state and federal actions and the suits are therefore parallel. Furthermore, the parties concur that neither court has assumed jurisdiction over any property in question and the federal forum is not inconvenient for the parties. Therefore the first two factors of the Colorado River doctrine are not instructive in this matter. The Court focuses on the remaining four factors.
The avoidance of piecemeal litigation is an important rationale behind the Colorado River doctrine. In this case, duplication of proceedings cannot be avoided unless this Court or the state court enters a stay, because plaintiff's state court answer and federal complaint rely on the same factual and legal assertions. If this Court does not stay or dismiss the federal action, it will adjudicate the case currently before the state court. Plaintiff asserts that the Court should not stay this action since the state court lacks personal jurisdiction over plaintiff and that matter will be dismissed. It is not certain, however, that this will be the Kansas state court holding. The most prudent course of action is for this Court to stay its proceedings. If the state court finds that it has jurisdiction over the parties, its ruling will resolve the case and the federal case will become moot. On the other hand, if the state court finds that it does not have jurisdiction, the parties can litigate in this Court. A federal action at this point could do nothing more than duplicate what is already in progress, wasting the resources of both the parties and the Court. See Joseph Stowers Painting, Inc., 2000 WL 210219 at 2. Therefore, this factor of the Colorado River doctrine cuts against plaintiff's position.
The remaining Colorado River factors do not weigh in plaintiff's favor. The state court action was filed first, on July 12, 2000, while the federal action was not filed until August 28, 2000, six weeks later. Discovery has begun in the state court case but not here. According to the parties' agreement, Kansas state law will govern the dispute. Even if the agreement is not valid, Kansas state law may still govern the dispute because defendant is located in Kansas. Further, plaintiff does not argue that the state forum is inadequate to protect the rights of the parties. In the final calculation, the four applicable Colorado River factors favor a stay of this case.
IT IS THEREFORE ORDERED that the Request For Oral Argument On Defendant's Motion To Dismiss Of In The Alternative Stay Proceedings (Doc. #6) which defendant filed September 29, 2000 be and hereby is OVERRULED. Defendant's Motion To Dismiss Or In The Alternative Stay Proceedings (Doc. #7) filed September 29, 2000 be and hereby is SUSTAINED and the action in this case is stayed pending the outcome of the state court proceedings. The parties are ordered to file a notice of the state court judgment with this Court within 30 days after it is entered.