Utility Lines Construction Services Inc. v. HOTI Inc. et al

Filing 19

MEMORANDUM OPINION. Signed by Judge Sue L. Robinson on 7/29/11. (fms)

THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
UTILITY LINES CONSTRUCTION
SERVICES INC.,

)
)
)
Plaintiff,
)
)
v.
)
)
HOTI, INC. f/kla HIGHLINES CONSTRUCTION )
COMPANY, INC., and DIVERSIFIED GROUP,
)
L.L.C.,
)
)
Defendants.
)

Civ. No. 11-93-SLR

Somers S. Price, Jr., Esquire of Potter Anderson & Correon, LLP, Wilmington,
Delaware. Counsel for Plaintiff. Of Counsel: Ben W. Subin, Esquire of Holland &
Knight, LLP.
Matt Neiderman, Esquire and Gary William Lipkin, Esquire of Duane Morris LLP,
Wilmington, Delaware. Counsel for Defendants. Of Counsel: Robert Redfearn, Jr.,
Esquire of Simon, Peragine, Smith & Readfearn, LLP.

MEMORANDUM OPINION

Dated: JulyJ-!\, 2011
Wilmington, Delaware

Rd'mdo~Udge
I. INTRODUCTION
Plaintiff Utility Lines Construction Service, Inc. {"ULCS"} brought claims against
defendants HOTI, Inc. ("HOTI") flk/a Highlines Construction Company, Inc.
(UHighlines"), and Diversified Group, L.L.C. ("Diversified") for fraud, fraudulent
misrepresentation, and breach of contract. (0.1. 1 at mI 30,40, 53) ULCS is also
seeking enforcement of a guaranty between ULCS and Diversified. (Id. at 1163) In the
complaint, ULCS alleges that defendants had knowledge about liabilities associated
with the sale of Highlines' material assets to ULCS, yet failed to disclose those liabilities
in compliance with the contracted terms of sale. (Id. at 1114) Presently before the court
is defendants' motion to dismiss or, in the alternative, transfer or stay the litigation to
allow a co-pending Louisiana suit (the "Louisiana lawsuit")1 to resolve before
proceeding. (0.1. 10) The court has jurisdiction pursuant to 28 U.S.C. § 1332 and §
1367. For the reasons that follow, the court denies defendants' motion.

II. BACKGROUND

A. The Parties
ULCS is in the business of providing maintenance and construction services to
the gas and electric utilities markets. (0.1. 15 at 115) It is a subsidiary of Utilicon
Solutions, LTD ("Utilicon") which, in turn, is a subsidiary of Asplundh Tree Expert Co.
("Asplundh"). (0.1. 13, ex. A at 1115) ULCS is incorporated under the laws of the
Commonwealth of Pennsylvania with its principal place of business in Willow Grove,

1The Louisiana lawsuit is Herbert D. Hughes, II, et al. v. Entergy Corp., et al., La.
Civ. Dist. Ct., Civ. No. 2010-2784.

Pennsylvania. (0.1. 1 at 4ff 1) HOTI, f/kla Highlines, is a wholly owned subsidiary of
Diversified. (ld. at 4ff 11) Both Highlines (a corporation) and Diversified (a limited liability
corporation) are incorporated under the laws of the State of Louisiana. 2 (ld. at 4ff4ff 2-3)
On December 14, 2009, ULCS and Highlines entered into an Asset Purchase
Agreement (the "APA")3 under which ULCS agreed to purchase Highlines' material
assets. (0.1. 1 at 4ff 50) In addition to the APA, ULCS and Diversified executed a written
Guaranty Agreement (the "Guaranty")4 under which Diversified promised Highlines full
performance of the APA. (ld. at 4ff 63) The APA and Guaranty contain choice of law
provisions designating Delaware as the proper venue for disputes relating to these
documents when the amount in controversy exceeds $175,000. 5 (0.1. 14 at 3)

B. The Louisiana Lawsuit
The Louisiana lawsuit was filed in Civil District Court for Orleans Parish,

2Highlines' principal place of business is specifically identified as Harahan,
Louisiana. (0.1. 15-3, ex. Cat 1) Diversified's principal place of business is broadly
identified as the State of Louisiana. (0.1. 1 at 4ff 3)
3The APA is docketed as exhibit A to 0.1. 15-2. The court hereinafter cites the
APA directly as "APA § _ n .
4The Guaranty is docketed as exhibit 0 to 0.1. 15-3. The court hereinafter cites
the Guaranty directly as "Guaranty § _".
5APA § 14.7 provides in relevant part: "[T]his Agreement and all documents to
be executed pursuant to this Agreement, including, but not limited to, the Guaranty, the
Non-Compete Agreement, and any assignments or bills of sale, shall be construed in
accordance with, and governed by, the laws of the State of Delaware without giving
effect to conflict of laws." Guaranty § 8 provides in relevant part: "In all respects,
including all matters of construction, validity and performance, this Guaranty and the
obligations arising hereunder shall be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware without giving effect to conflict of
laws."
2

Louisiana, by Herbert D. Hughes, II ("Hughes").6 See id. Hughes is the President, CEO
and sole shareholder of Diversified, which owned Highlines as a subsidiary. (0.1. 12 at
1f 2) Hughes alleges violation of the Louisiana Unfair Trade Practice Act, fraud,
detrimental reliance, tortious interference with a contract, civil conspiracy, and unjust
enrichment. (0.1. 13, ex. A at 1f1f 26-27,33,37-38,40-41,43-45,46-47) The Louisiana
lawsuit centers on the contractual relationship(s) between Highlines and Entergy. (0.1.
16at1f7)
For forty years, Highlines has been doing business with various Entergy entities?
(0.1. 13, ex. A at 1f 7) Highlines derived between 75-90% of its revenue from these
contracts. (0.1. 12 at 1f 4) In an effort to further their business relationship, and with
assurance of continued business from Entergy, Entergy requested that Highlines invest
$7 million in specialized equipment explicitly for use on Entergy contracts. (/d.)
Highlines obliged. (ld.)
In February 2009, Diversified sought buyers for Highlines' material assets.
Diversified entered negotiations with a few companies, including ULCS, an acquisition
arm of Asplundh. By May 2009, Highlines received two offers: a $32 million deal with
Mastec; and a deal valued at over $45 million from Asplundh. Highlines did not accept
either offer. (ld. at 1f 5)
In the spring of 2009, Highlines submitted bids for several Entergy entities'

6Hughes is a resident of Louisiana. (0.1. 13 at 1f 3)
7These Entergy entities include: the Entergy Corp.; Entergy Arkansas, Inc.;
Entergy Gulf States Louisiana, L.L.C.; Entergy Louisiana, L.L.C.; Entergy New Orleans,
Inc.; Entergy Operations, Inc.; Entergy Services, Inc.; and Entergy Texas, Inc. (0.1. 13,
ex. A at 1f 2)

3

projects. The bids had significant reductions in the allotted overhead expense to
secure the award of the Entergy contracts. (Id. at 11" 6) Despite having the lowest bid
and highest safety record of all the subcontractors bidding on the Entergy contracts,
Highlines was not awarded the contracts. (Id.)
During the summer of 2009, Cleco Power, L.L.C. ("Cleco"), which is not affiliated
with any Entergy entity, awarded Amperical Solutions, Inc. ("Amperical") its RichardHabetz 230 KV Electric Transmission Line 212 Project (the "Project"). (0.1. 1 at 11" 16)
Amperical sought a subcontractor for the Project. (Id. at 11" 17) Feeling pressure from
the lack of contract work from Entergy, Highlines produced an under-valued bid, and
won the Amperical subcontract ("Amperical subcontract"). (Id. at 11" 21)
According to ULCS' complaint, however, Highlines' bid calculation contained
errors and discrepancies including: improper estimation of foundation work; insufficient
allotment of labor and manpower; insufficient sequencing of work; insufficient delivery
methods; overhead miscalculations; and miscalculations for boring costs. (ld.)
Regardless of these errors, Highlines accepted the Amperical subcontract. (Id. at 11" 22)
In August 2009, Entergy's Director of Supply Chain Services, Donald J. Brignac,
Jr. ("Brignac"), informed Highlines that its contracts were being cancelled and the
business relationship was suspended, disallowing Highlines to submit bids on future
Entergy projects. (0.1. 12 at 11" 8) As the prospect of losing this business would
potentially bankrupt Highlines, Diversified requested 45 days to find a buyer for
Highlines, which Entergy allowed. (ld.)
With the Entergy contracts suspended, and in desperate need to be sold quickly,

4

Highlines positioned itself as an attractive acquisition target. Highlines toted its
Amperical subcontract as a "newly commenced, lump sum contract" despite the bid
miscalculations and losses associated with the Project. (0.1. 15 at 11 15) Asplundh, via
ULCS, again expressed an interest in acquiring Highlines and the parties entered new
negotiations. (0.1. 12 at 11 9) As part of its due diligence, Diversified introduced
Asplundh as the potential purchaser to Entergy. (ld.) Subsequently, and throughout
the acquisition negotiations, Asplundh and Entergy had meetings excluding Highlines
and Diversified. (ld.) As a result of the lost Entergy contracts, Highlines was valued by
Asplundh at less that it had been worth in May 2009; the final negotiations allowed
Asplundh to acquire Highlines' assets for $7 million plus other consideration. (ld. at 11
11) Once the sale was closed on December 26, 2009, Entergy allowed ULCS to
resume Highlines' cancelled and suspended contracts and to bid on new Entergy
contracts. (ld. at 11 12)
In March 2010, Hughes and Diversified brought the Louisiana lawsuit against the
Entergyentities, Brignac,8 as well as Asplundh and its subsidiaries (Utilicon and ULCS).
(0.1. 13, ex. A) Hughes alleged that Entergy, in a joint effort with Brignac and Asplundh,
devised a plan to falsely devalue Highlines in retaliation against Hughes because he
upset Entergy operations by engaging in disputes with Entergy and by notifying Entergy
"of concerns and issues in their professional relationship." (ld" Second Supplemental
and Amending Petition for Damages at 11 XIV) Hughes suggests that Entergy is a
8Brignac was brought into the Louisiana lawsuit as a defendant under
respondeat superior and vicarious liability as he was employed with and working in the
course and scope of his employment with Entergy during the relevant times. Brignac is
a resident of Louisiana. (0.1. 13, ex. A at 11 2)

5

monopoly in the region, putting Entergy in an advantageous position over its
contractors. (Id. at 11 IV)
The Louisiana lawsuit is presently underway in Louisiana Civil District Court
regarding whether the course of events leading up to the parties executing the APA and
Guaranty could constitute fraud (committed by the Entergy entities, Briganc, Asplundh
and its subsidaries Utilicon and ULCS), or a conspiracy between the Entergy entities,
Brignac, Asplundh and its subsidaries. HOTI also asserts a series of other allegations.
See Herbert D. Hughes, II, et al. v. Entergy Corp., et al., La. Civ. Dist. Ct., Civ. No.

2010-2784.
C. The Present Suit
The present litigation was brought by ULCS against HOTI and Diversified
regarding the terms of the APA and Guaranty. As noted supra, ULCS and HOTI are
the parties involved with the APA, and ULCS and Diversified are the parties named in
the Guaranty. The terms of the APA changed Highlines' name to HOTI. (0.1. 13, ex. A,
First Supplemental and Amending Petition for Damages at 1111) The APA further
stipulated that HOTI had an affirmative obligation to ULCS to maintain its books and
records in a materially complete and accurate way in compliance with good business
practice, and in accordance with generally accepted accounting principles ("GAAP").
(SeeAPA§§ 5.1.4,5.1.5.,5.1.27,7.1.3,7.1.7,8.1.1, and 8.1.4)
ULCS alleges that HOTI never disclosed, and actively concealed, liabilities
associated with the Amperical subcontract prior to the execution of the APA. (0.1. 1 at 11

14) ULCS further alleges that at closing, HOTI affirmatively certified in writing "that all

6

representations and warranties, including information in any document (which includes
the interim financials) provided by HOTI were true and correct in all material respects
and that HOTI complied with all of the covenants in the [APA]." (Id.)
ULCS alleges that HOTI committed fraud, made fraudulent misrepresentations
regarding the Amperical subcontract, and that those misrepresentations resulted in a
breach of the APA. (Id. at ml30, 40, 53) During the execution of the Amperical
subcontract, HOTI is alleged to have performed defective construction work on the
Project as a result of the erroneous bid calculations and in an effort to cut costs;
Ampirical and Cleco have demanded the replacement/remediation of that defective
work. (Id. at ~ 56) ULCS alleges that under the APA,
HOTI agreed to remain liable for any prior acts, which include but are not
limited to liabilities, obligations and claims whether known or unknown,
which exist on or arise after the Closing Date, and which arise or are
alleged to have arisen as a result of Seller's ownership, operation, and/or
conduct of the Business prior to the closing date.

(Id. at ~ 59) (citing APA §1.7) (internal quotations omitted) At present, HOTI has yet to
indemnify ULCS regarding the liabilities associated with the replacement/remediation
demanded by Amperical and Cleco. (0.1. 1 at ~ 56) To that end, ULCS is seeking
enforcement of the written Guaranty executed by Diversified to compel full performance
of the APA by HOTI. (Id. at ~ 63)
III. STANDARDS OF REVIEW

A. Motion for Transfer
Under 28 U.S.C. § 1404(a), a district court may transfer any civil action to any
other district where the action might have been brought for the convenience of parties

7

and witnesses and in the interests of justice. Congress intended through § 1404 to
place discretion in the district court to adjudicate motions to transfer according to an
individualized, case-by-case consideration of convenience and the interests of justice.
Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988); Affymetrix, Inc. v. Synteni,
Inc., 28 F. Supp. 2d 192,208 (D. Del. 1998).
The burden of establishing the need to transfer rests with the movant "to
establish that the balance of convenience of the parties and witnesses strongly favor
the defendants." Bergman v. Brainin, 512 F. Supp. 972, 973 (D. Del. 1981) (citing
Shutte v. Armco Steel Corp., 431 F.2d 22, 25 (3d Cir. 1970); Medicis Pharmaceutical
Corp. v. Nycomed U.S. Inc., Civ. No.1 0-41 9-SLR, 2011 WL 1230276, at *2 (D. Del.
Mar. 31, 2011). "Unless the balance is strongly in favor of a transfer, the plaintiffs
choice of forum should prevaiL" ADE Corp. v. KLA-TencorCorp., 138 F. SLipp. 2d 565,
567-68 (D. Del. 2001); Shutte, 431 F.2d at 25. The deference afforded plaintiffs choice
of forum will apply as long as a plaintiff has selected the forum for some legitimate
reason. C.R. Bard, Inc. v. Guidant Corp., 997 F. Supp. 556, 562 (D. Del. 1998);
Cypress Semiconductor Corp. v. Integrated Circuit Sys., Inc., Civ. No. 01-199,2001 WL
1617186, at *2 (D. Del. Nov. 28, 2001); Padcom, Inc. v. NetMotion Wireless, Inc., Civ.
No. 03-983-SLR, 2004 WL 1192641, at *7 (D. Del. May 24, 2004). Although transfer of
an action is usually considered as less inconvenient to a plaintiff if the plaintiff has not
chosen its '''home turf' or a forum where the alleged wrongful activity occurred, the
plaintiffs choice of forum is still of paramount consideration, and the burden remains at
all times on the defendants to show that the balance of convenience and the interests

8

of justice weigh strongly in favor of transfer." In re M.L.-Lee Acquisition Fund II, L.P.,
816 F. Supp. 973, 976 (D. Del. 1993).
The Third Circuit has indicated that the analysis for transfer is very broad.

Jumara v. State Farm Ins. Co., 55 F.3d 873,879 (1995). Although emphasizing that
"there is no definitive formula or list of factors to consider," id., the Third Circuit has
identified potential factors it characterized as either private or public interests. The
private interests include:
(1) plaintiff's forum preference as manifested in the original choice; (2)
defendant's preference; (3) whether the claim arose elsewhere; (4) the
convenience of the parties as indicated by their relative physical and
financial condition; (5) the convenience of the witnesses but only to the
extent that the witnesses may actually be unavailable for trail in one of the
fora; and (6) location of books and records (similarly limited to the extent
that the files could not be produced in the alternative forum).

Id. (citations omitted). The public interests include:
(1) the enforceability of the judgment; (2) practical considerations that
could make the trial easy, expeditious, or inexpensive; (3) the relative
administrative difficulty in the two fora resulting from court congestion; (4)
the local interest in deciding local controversies at home; (5) the public
policies of the fora; and (6) the familiarity of the trial judge with the
applicable state law in diversity cases.

Id. (citations omitted).
B. Failure to Join an Indispensable Party
Rule 12(b)(7) provides for the dismissal of a claim where the plaintiff has failed to
join a required party. Fed. R. Civ. P. 12(b)(7). For the purpose of Rule 12(b){7), the
court accepts as true the factual allegations of the complaint. See Jurimex Kommerz

Transit G.M.B.H. v. Case Corp., 65 Fed. Appx. 803, 805 (3d Cir. 2003). A court, in
evaluating such a motion, applies the two-part test found in Rule 19. The first part of
9

this test asks whether the absent party is necessary for adjudication of the issue. The
second part of the test is equitable in nature, and is directed to whether a necessary
party is indispensable to a fair resolution of the issues. Id. Rule 19(a) provides that an
absent person is a necessary party if he is subject to service of process and either: (1)
in his absence, complete relief cannot be accorded among the parties; or (2) the absent
person claims an interest in the subject matter and that his absence will, as a practical
matter, either prejudice his ability to protect that interest or result in multiple or
otherwise inconsistent obligations. Fed. R. Giv. P. 19(a).
If a person is deemed necessary under Rule 19(a) but cannot be joined, the
court must ascertain the extent to which prejudice will result to the non-party; the ability
of the court to shape relief to avoid prejudice to absent persons; the adequacy of relief
available to parties in the necessary party's absence; and the adequate remedy
available to the plaintiff if the action is dismissed for nonjoinder. Fed. R. Giv. P. 19(b).
Rule 19(b) only applies where a person should be made a party under Rule 19(a). See

Field v. Volkswagenwerk AG, 626 F.2d 293,300 (3d Gir. 1980). Thus, if a party is not
necessary under Rule 19(a), the court need not conduct an analysis under Rule 19(b).

C. Motion to Stay
"The rule is well recognized that the pendency of an action in the state court is
no bar to proceedings concerning the same matter in the Federal court having
jurisdiction." Colorado River Water Conservation Dist.

v. United States, 424 U.S. 800,

817 (1975) (hereinafter "Colorado River'); accord University of Maryland

v. Peat

Marwick Main & Co., 923 F.2d 265, 275-76 (3d Gir. 1991) (''The general rule regarding

10

simultaneous litigation of similar issues in both state and federal courts is that both
actions may proceed until one has come to judgment, at which point that judgment may
create a res judicata or collateral estoppel effect on the other action.") (citing McClellan
v. Car/and, 217 U.S. 268,282 (1910». Nevertheless, the Supreme Court has
recognized that there may be '''extremely limited circumstances' in which a federal court
may defer to pending state court proceedings based on considerations of 'wise judicial
administration, giving regard to conservation of judicial resources and comprehensive
disposition of litigation.'" Ryan v. Johnson, 115 F.3d 193, 195 (3d Cir. 1997) (citing
Colorado River, 424 U.S. at 813).
When a litigant urges abstention or dismissal under the Colorado River
abstention doctrine because of concurrent state and federal litigation, the Supreme
Court has identified several factors which should inform the determination of whether
exceptional circumstances exist: (1) "whether the state court assumed in rem
jurisdiction over property;" (2) "the inconvenience of the federal forum;" (3) "the
desirability of avoiding piecemeal litigation;" and (4) "the order in which jurisdiction was
obtained by the concurrent forums." Ryan, 115 F.3d at 196. In addition to the above, it
is appropriate to also consider "whether federal law provides the rule of decision on the
merits, ... inadequacy of the state court proceeding to protect the plaintiffs rights, ...
and whether 'either the state or federal suit was a contrived, defenslve reaction to the
other.'" Holland v. Hay, 840 F. Supp. 1091, 1099 (E. D. Va. 1994) (citing Moses H.
Cone Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 17-18 n. 23, 26 (1983». U[N]o one
factor is determinative and '[o]nly the clearest of justifications will warrant dismissal.'"

11

Ryan, 115 F.3d at 196 (citing Colorado River, 424 U.S. at 818-19).
IV. DISCUSSION
A. Motion to Transfer
Defendants HOTI and Diversified seek the grant of a transfer to Louisiana state
court on the basis of inconvenience. The court is not persuaded by defendants'
arguments regarding convenience and the need to transfer. First, transfer of this case
to Louisiana is not possible under 28 U.S.C. § 1404(a). See Pan Am Flight 73 Uason

Group v. Dave, 711 F. Supp. 2d 13,20 n.3 (D. D.C. 2010) (UA federal court cannot
transfer a case to state court pursuant to 28 U.S.C. § 1404(a)."). Second, analysis of
the private and public interest factors emphasized by defendants does not compel a
conclusion that this is an inconvenient forum. The parties in this case contracted that
all disputes arising out of the APA would be governed by Delaware law. It is a logical
assumption that this court has more experience applying Delaware state law than the
Louisiana state court. With respect to witnesses, generally the parties agree to take
depositions of witnesses where they are located (or the court can so order). Moreover,
for those cases that get to trial, only a handful of witnesses testify live, and only a very
small proportion of those documents produced during discovery are used as trial
exhibits. Regarding discovery, documents generally are stored, transferred, and
reviewed electronically. It would be surprising to the court to find that sophisticated
litigants, such as those at bar, still maintain their business records in hard copy, thus
requiring either travel to Louisiana for review of the documents or the copying and
transporting of documents.

12

Deference should be given to plaintiff's choice of forum so long as there is some
legitimate reason to bring suit in that forum. C.R. Bard, Inc., 997 F. Supp. at 562. In
this case, not only was it ULCS' choice to bring suit in Delaware, but the parties
selected Delaware as their preferred forum for litigation regarding the APA and the
Guaranty. (D.1. 15 at 1m 17-18) It is a rare occurrence when Delaware courts do not
honor the choice of law provisions agreed to by the parties in a binding contract. See
Abry Partners V, L.P. v. F & WAcquisition LLP, 891 A.2d 1032,1048 (Del. Ch. 2006)
("[w]hen parties have chosen a state's contract law to govern their contract, it is illogical
to assume that they wished to have the enforceability of that contract judged by another
state's law."). In conclusion, plaintiff's choice of forum is appropriate, and defendants'
motion to transfer is denied.

B. Motion to Dismiss
Defendants HOTI and Diversified argue that ULCS' complaint must be dismissed
for failure to join the Entergy entities, Asplundh, and Utilicon, which are all necessary
and indispensable parties to this action. In the case at bar, "ULCS alleges that
Diversified and HOTI committed fraud and misrepresentation in connection with the
sale of Highlines' material assets to ULCS." (D.1. 11 at 15-16) Furthermore, ULCS
claims that there was a breach of the APA and seeks enforcement of the Guaranty.
Under the first part of Rule 19's two-part test, there are two possible
circumstances warranting joinder of an absent party: "(1) [if] in his absence, complete
relief cannot be accorded among the parties; or (2) [if] the absent person claims an
interest in the subject matter and that his absence will, as a practical matter, either

13

prejudice his ability to protect that interest or result in multiple or otherwise inconsistent
obligations." Fed. R. Civ. P. 19(a).
Here, complete relief can be accorded between ULCS, HOTI, and Diversified.
Under Rule 19(a)(1 )(A), complete relief is possible where only the named parties to the
contract are party to the claim. The named parties in theAPA and Guaranty are HOTI,
Diversified and ULCS and, because the parties named in the contract are the named
parties in the claims, complete relief is possible. Additionally, in the present action,
ULCS is alleging that HOTI made fraudulent misrepresentations in violation of the APA.
"With respect to the joinder of nonparties, this court has previously held that in claims
for fraud and misrepresentation, while there may be some overlapping obligations, all
persons involved in the contract need not be parties to the action." See Kuhn Const.
Co. v. Ocean and Coastal Consultants, Inc., 723 F. Supp. 2d 676, 688 (D. Del. 2010)
(citing E.I. duPont de Nemours & Co. v. Rhodia Fiber and Resin Intermediates, S.A.S.,
197 F.R.D. 112, 124 (D. Del. 2000) rev'd on other grounds, 269 F.3d 187 (3d Cir.
2001 ». Litigation may proceed without the absent parties.
Furthermore, "Rule 19(a)(1 )(8) requires that the absent party 'claim [ ] an
interest relating to the subject matter of the action .. .' and, where there is no showing
that the absent party actually has claimed an interest relating to the subject of the
action, the court may deny a motion to dismiss." Kuhn, 723 F. Supp. 2d at 692; see
also Axis Specialty Ins. Co. v. Brickman Group Ltd., LLC, Civ. No. 09-3499, 2010 WL
376784, at *5 n.1 (E. D. Pa. Jan. 28, 2010).

In the present suit, none of the allegedly

absent parties has taken any action to assert that they have any interest in the subject

14

matter of this litigation. Neither the Entergy entities, Asplundh or Utilicon is a party to
the APA or Guaranty, nor is anyone of them involved with the Amperical subcontract.
Whether the named parties to this suit will face multiple or otherwise inconsistent
obligations as a result of this litigation proceeding without the absent parties is also a
factor to be considered when determining if joinder is necessary under 19(a)(1 )(8).
Comparing the two suits, it is for the Louisiana state court to decide if the Entergy
entities, Asplundh and Utilicon conspired to artificially devalue Highlines. In contrast,
the issues before this court involve HOTI's failure to disclose the liabilities associated
with the Amperical subcontract to ULCS in violation of the APA, and enforcement of the
Guaranty between ULCS and Diversified to ensure HOTl's performance of the APA. As
stated supra, the absent parties are not necessary parties to the case at bar.
Resolution of the two issues before this court would not lead to multiple or inconsistent
obligations for ULCS, HOTI or Diversified, because the APA and Guaranty are only at
issue in the instant case (they are not in dispute in the Louisiana litigation) and the
absent parties (the Entergy entities, Asplundh and Utilicon) have nothing to do with the
APA and Guaranty allegations in the present suit. Therefore, defendants' motion to
dismiss is denied.

C. Motion to Stay
Defendants HOTI and Diversified are seeking stay of the present litigation under
the Colorado River abstention doctrine. According to Colorado River, abstention is
appropriate when the circumstances fall into one of th ree general categories. 9 If the

9The three general categories warranting abstention include: (1) "cases
presenting a federal constitutional issue which might be mooted or presented in a

15

facts of a case do not fall within one of the three categories, as the facts presented in
the present litigation do not fall within any of the three categories, the Supreme Court
has provided an exceptional circumstances test which still allows for a federal court to
abstain under the Colorado River doctrine provided that there are parallel state and
federal proceedings occurring simultaneously. See Ryan, 115 F.3d at 195 (citing

Colorado River, 424 U.S. at 813). A determination must be made whether the
proceedings are parallel, and then an analysis of any exceptional circumstances must
weigh in favor of abstention in order for the court to find abstention appropriate under

Colorado River.

1. The Actions are Not Parallel
In order to make a determination regarding the abstention analysis, there must
first be a determination of whether the state and federal actions are parallel.

Nationwide Mut. Fire Ins. Co. v. George V. Hamilton, Inc., 571 F.3d 299,307 (3d Cir.
2009). "If the actions are not parallel, then the court lacks the power to address
abstention." American General Life Ins. Co. v. Mann, Civ. No. 09-434, 2011 WL
446048, at *4 (D. Del. Feb. 3, 2011) (citing Ryan, 115 F.3d at 196). Generally, a
parallel action involves the same parties and the same claims. Ryan, 115 F.3d at 196.
The actions, however, are not required to be identical, but they must be "substantially
similar." Sea Colony, Inc. v. Alcan Aluminum Corp., 653 F. Supp. 1323, 1326 (D. Del.

different posture by a state court determination of pertinent state law"; (2) cases where
there are "difficult questions of state law bearing on policy problems of substantial
public import whose importance transcends the result in the case then at bar"; and (3)
cases "where, absent bad faith, harassment, or a patently invalid state statute, federal
jurisdiction has been invoked for the purpose of restraining state criminal proceedings."
Colorado River, 424 U.S. at 816 (internal citation omitted).
16

1987}.
As an initial matter, the parties in the Louisiana lawsuit are different from those in
the present litigation. Diversified, Hughes, Asplundh, and Utilicon have all been
dismissed with prejudice from the Louisiana lawsuit, leaving only the Entergyentities,
Brignac, ULCS, and HOTI as parties to that litigation. (0.1. 16 at 1J9) Conversely, the
parties at bar are ULCS, HOTI and Diversified. Diversified's dismissal from the
Louisiana lawsuit no longer makes Diversified a party common to both suits.
Furthermore, the specific counts alleged are unique to each case. The present
action focuses on ULCS' claims against HOTI and Diversified, consisting of (1) fraud;
(2) fraudulent misrepresentation; (3) breach of the APA; and (4) enforcement of the
Guaranty. ULCS alleges that HOTI committed fraud and fraudulent misrepresentation
when HOTI had knowledge of the losses associated with the Amperical subcontract, yet
failed to disclose said knowledge to ULCS despite HOTl's contractual obligation to do
so under the APA. (0.1. 1 at 1J14) ULCS asserts that HOTl's failure to disclose the
Amperical subcontract liabilities was a breach of the APA and, thus, is seeking
enforcement of the Guaranty by Diversity to force HOTI into complying with the APA.

(Id. at 1J63)
On the other hand, as described supra, the counts in the Louisiana lawsuit
include: (1) violation of the Louisiana Unfair Trade Practices Act; (2) fraud; (3)
detrimental reliance; (4) tortious interference with contract; (5) civil conspiracy; and (6)
unjust enrichment. (0.1. 16 at 1J6) While fraud is a count shared between the two
cases, they are distinct claims. The fraud in Louisiana concerns Entergy and ULCS'
collusion efforts to devalue HOTI, while the fraud in the case at bar centers on HOTI's

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misrepresentation of the Amperical subcontract. (D.I. 13, ex. A at 1{1{34-36; D.I. 1 at 1{1{
28-30)
Moreover, each case involves distinct contracts. The Louisiana lawsuit is
focused on HOTI's Entergy contracts and misrepresentations made therewith. (D.I. 16
at 1{7) Neither the APA or the Guaranty is directly at issue in that case. (Id. at 1{8)
Instead, breach of the APA and enforcement of the Guaranty are the primary focus of
the instant action.
Comparing the two cases, the parties are not the same, nor are the claims. The
present action will not be resolved through resolution of the Louisiana lawsuit.
Therefore, the court will not abstain from hearing this case.

2. Exceptional Circumstances
Although the court determined that the proceedings are not parallel, it will
nonetheless address the exceptional circumstances doctrine. In determining whether
an action presents exceptional circumstances, the court considers six factors: "(1) [in
an in rem case,] which court first assumed jurisdiction over [the] property; (2) the
inconvenience of the federal forum; (3) the desirability of avoiding piecemeal litigation;
(4) the order in which jurisdiction was obtained; (5) whether federal or state law
controls; and (6) whether the state court will adequately protect the interests of the
parties." lO Spring City Corp. v. American Bldgs. Co., 193 F.3d 165, 171 (3d Cir. 1999).

100 nly the first four of these factors were delineated in Colorado River, the last
two are drawn from Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S.
1,23 (1983) ("Besides the four factors expressly discussed in Colorado River, there is
another that emerges ... the fact that federal law provides the rule of decision on the
merits"; "an important reason against allowing a stay is the probable inadequacy of the
state-court proceeding to protect Mercury's rights.").
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"[N]o one factor is determinative and '[o]nly the clearest of justifications will warrant
dismissal.'" Ryan, 115 F.3d at 196 (citing Colorado River, 424 U.S. at 818-19).
Given the specific case facts, the first factor is inapplicable as this is not an in
rem case. The second factor concerns the inconvenience of the forum. As discussed
supra, the forum is not inconvenient. The third factor involves the desirability of
avoiding piecemeal litigation when there are two parallel proceedings under way, one in
federal court, and one in state court. Piecemeal litigation can be cause for abstention
"when there is evidence of a strong federal policy that all claims should be tried in the
state courts." Ryan, 115 F.3d at 197-98 (citations omitted). The Third Circuit has
stated that "[t]he presence of garden-variety state law issues has not, in this circuit,
been considered sufficient evidence of a congressional policy to consolidate multiple
lawsuits for unified resolution in the state courts." Id. at 198. In the past, this court has
held that "breach of contract and fraud claims asserted here can be fairly characterized
as garden-variety state law issues," which leads the court to conclude that the third
Colorado Riverfactor also weighs against abstention. Nihon Tsushin Kabushiki Kaisha
v. Davidson, 595 F. Supp. 2d 363 (D. Del. 2009).
The fourth Colorado River factor concerns which court first obtained jurisdiction
over the parties. Not only does consideration of which action was filed first matter when
analyzing this factor, but how much progress has been made in each action also is
significant. In the present situation, the Louisiana lawsuit was filed in March 2010, ten
months before this action. (0.1. 11 at 7) Progress in the Louisiana case has been
minimal, giving this court no reason to pause while the Louisiana litigation is underway.

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Accordingly, the court concludes that this factor does not weigh in favor of abstention.
The fifth factor considers whether state or federal law governs. In the present
action, the parties explicitly contracted for the state laws of Delaware to govern over
disputes regarding the APA or the Guaranty, which causes this factor to weigh against
abstention. The sixth factor considers whether the state court will adequately protect
the interests of all the parties, if the federal case were stayed. Since the court has
already determined that the proceedings are not parallel, this factor is moot.
After careful assessment, the court concludes that the two proceedings are not
parallel, nor is there an exceptional circumstance that would warrant the abstention.
Accordingly, the court agrees with the plaintiff that a stay is not warranted. Defendants'
request to stay the instant action until the pending Louisiana litigation has been
completed is denied.

V. CONCLUSION
For the aforementioned reasons, the court denies defendants' motion to dismiss,
transfer or stay. An order shall issue.

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