Rackwise, Inc. v. Archbold

Filing 92

ORDER signed by Senior Judge William B. Shubb on 5/22/2018 DENYING 89 Defendant's Motion Requesting that the Court Abstain from Adjudicating the Present Litigation in Favor of the Nevada State Business Court Litigation. (Kirksey Smith, K)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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RACKWISE, INC., a Nevada
Corporation,

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Civ. No. 17-797 WBS CKD

Plaintiff,
v.
GUY ARCHBOLD, an individual, and
DOES 1 to 25, inclusive,

MEMORANDUM AND ORDER RE:
MOTION TO ABSTAIN HEARING THE
INSTANT CASE IN FAVOR OF THE
NEVADA STATE COURT LITIGATION

Defendants.

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On October 3, 2017 (“October 3 Order”), the court

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denied defendant’s Motion for leave of court to file an amended

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pleading to add counterclaims, and permitted defendant’s right to

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assert such claims in a separate action.

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(Docket No. 73).)1

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(October 3 Order

Then, on December 19, 2017, defendant filed

The court originally articulated that it would allow
defendant to assert new claims and join new parties in this
action, because it would be most efficient to allow one court to
rule on all the issues in this case. However, because
defendant’s counsel could not articulate any reason why defendant
wanted to bring new claims or join additional parties, the court
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a shareholder derivative complaint in Nevada state court.

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(Def.’s Mot. Ex. 1 (Docket No. 89-1).)

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court denied defendant’s Motion to Stay proceedings pending a

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determination of anticipated personal jurisdictional challenges

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by the diverse defendants in the Nevada litigation.

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77, 81.)

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stayed the state litigation pending settlement or trial and entry

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of a final judgment in the instant case.

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Noell (“Noell Decl.”) ¶¶ 10-11.)

On January 10, 2018, this

(Docket Nos.

On May 10, 2018 the judge in the Nevada litigation

(Declaration of William

Presently before the court is

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defendant’s Motion to Abstain Hearing the Instant Case in Favor

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of the Nevada State Court Litigation.

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No. 89).)

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(Def.’s Mot. at 1 (Docket

The power to stay proceedings “is incidental to the

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power inherent in every court to control the disposition of the

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cases on its docket with economy of time and effort for itself,

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for counsel, and for litigants.”

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248, 254 (1936).

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within the framework of the Colorado River2 doctrine.

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of courts to control their dockets by staying proceedings exists

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independently of whether the Colorado River factors weigh in

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favor of stay.”

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Supp. 2d 1206, 1208 (E.D. Cal. 2010) (Shubb, J.).

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the court considers the Colorado River factors in ruling on the

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motion.

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Landis v. N. Am. Co., 299 U.S.

Here, defendant analyzes the motion to stay
“The power

Tech. Licensing Corp. v. Thomson, Inc., 684 F.
Nevertheless,

In the Ninth Circuit, “even when a concurrent state
denied the motion.
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Colorado River Water Conservation Dist. v. United
States, 424 U.S. 800 (1976).
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proceeding might address issues relevant to a federal action, the

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rule is that the federal proceeding should go forward.”

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States v. Rubenstein, 971 F.2d 288, 293–94 (9th Cir. 1992).

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“Abstention from the exercise of federal jurisdiction is the

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exception, not the rule,” and “[a]bdication of the obligation [of

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a district court] to decide cases can be justified under th[e]

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[Colorado River] doctrine only in [] exceptional circumstances.”

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Colorado River, 424 U.S. at 813.

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require[s] a stay rather than a dismissal.”

United

The Ninth Circuit “generally
R.R. St. & Co.

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Transp. Ins. Co., 656 F.3d 966, 979 n. 8 (9th Cir. 2011).

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determining whether to stay or dismiss a case pursuant to

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Colorado River, the court considers eight factors:

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In

(1) which court first assumed jurisdiction over any
property at stake; (2) the inconvenience of the
federal forum; (3) the desire to avoid piecemeal
litigation; (4) the order in which the forums obtained
jurisdiction; (5) whether federal law or state law
provides the rule of decision on the merits; (6)
whether the state court proceedings can adequately
protect the rights of the federal litigants; (7) the
desire to avoid forum shopping; and (8) whether the
state court proceedings will resolve all issues before
the federal court.
Id. at 978–79.
Under any standard, the circumstances here weigh

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against a stay.

While this case and the Nevada litigation may

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involve substantially similar parties and claims which evolve

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from the same set of events and circumstances, this court does

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not have full confidence that the parallel state action will end

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the litigation.

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12 F.3d 908, 913 (9th Cir. 1993) (stating that under the Colorado

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River doctrine the “existence of a substantial doubt as to

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whether the state proceedings will resolve the federal action

See Intel Corp. v. Advanced Micro Devices, Inc.,

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precludes the granting of a stay.”).

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involve the corporate governance of Rackwise, “the mere

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possibility of piecemeal litigation does not constitute an

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exceptional circumstance.”

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Moreover, while both cases

See R.R. St. & Co., 656 F.3d at 979.

Defendant argues that this case is largely based on

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contractual issues that involve the interpretation and

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application of the laws of the state of Nevada, and thus Nevada

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is the appropriate jurisdiction to hear this case.

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at 4, 11.)

(Def.’s Mem.

While the instant case may involve issues of state

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law, the “presence of state-law issues may weigh in favor of []

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[abstention] only in some rare circumstances.”

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Inc., 656 F.3d at 980.

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no strangers to applying state substantive law.”

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Stockdale Office Ltd. P’ship v. Moreland, Civ. No. 1:13-294 LJO

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JLT, 2013 WL 1966566, at *5 (E.D. Cal. May 10, 2013) (denying

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motion to dismiss or to stay the proceedings on the basis of the

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Colorado River abstention doctrine even though state law provided

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the rule of decision on the merits.)

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obtained jurisdiction first.

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to grant defendant’s motion given that this court has already

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held multiple hearings and issued several orders.

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the state court has stayed defendant’s action pending a final

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resolution of this case.

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R.R. St. & Co.

“Federal courts sitting in diversity are
LBUBS 2004-ö

Moreover, this court

It would be inefficient and unwise

Additionally,

Furthermore, as discussed in the court’s January 1,

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2018 Order, a stay of this action would result in prejudice to

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plaintiff, in that it would result in vacating the quickly

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approaching trial date--now set for August 21, 2018--and prevent

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plaintiff from proceeding to trial first.
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The late stage of the

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litigation also weighs against granting defendant’s Motion to

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Stay.

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2397041, at *3 (E.D. Cal. Sept. 27, 2005) (Damrell, J.) (“Because

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this case is no longer in its incipient stages, the scales tip

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heavily in favor of denying plaintiff's motion to stay.”); Simon

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v. Healthways, Inc., Civ. No. 14-8022 BRO JCX, 2016 WL 6595131,

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at *2 (C.D. Cal. Feb. 1, 2016) (stating the stage of litigation

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weighed against finding a stay where the discovery deadline

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passed, and the trial date was roughly three months away).

See Jain v. Trimas Corp., Civ. No. 04-889 FCD PAN, 2005 WL

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For the foregoing reasons, this case is not the type of

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“rare,” “limited,” and “exceptional,” case with “only the

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clearest of justifications” that supports abstention.

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GrubHub, Inc., 171 F. Supp. 3d 998, 1014 (N.D. Cal. 2016)

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(quoting R.R. St. & Co., 656 F.3d at 977–78.)

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See Tan v.

IT IS THEREFORE ORDERED that defendant’s Motion to

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Abstain Hearing the Instant Case in Favor of the Nevada State

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Court Litigation (Docket No. 89) be, and the same hereby is,

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DENIED.

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Dated:

May 22, 2018

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