Commercial Forged Products, A Division of Wozniak Industries, Inc. v. Best Swivel Joints, L.P.

Filing 22

MEMORANDUM Opinion and Order Signed by the Honorable John J. Tharp, Jr on 9/13/2013:Mailed notice(air, )

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
COMMERCIAL FORGED PRODUCTS,
Plaintiff,
v.
BEST SWIVEL JOINTS, L.P.,
Defendant.

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No. 12 C 10250
Judge John J. Tharp, Jr.

MEMORANDUM OPINION AND ORDER
Before the Court is the Defendant’s motion to stay this case pending the outcome of
related state-court proceedings. See Colorado River Water Conservation Dist. v. United States,
424 U.S. 800 (1976). Having considered all of the parties’ original and supplemental
submissions, this Court concludes that this is one of the “exceptional” situations in which it is
appropriate to stay a pending federal case pursuant to the Colorado River abstention doctrine.
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25-26 (1983); see Colorado
River, 424 U.S. at 813.
BACKGROUND
Commercial Forged Products (“CFP”) and Best Swivel Joints (“Best”) are both
manufacturers in the petroleum industry. This dispute arises from Best’s purchase of pup joints1
from CFP, which contracted with Best to manufacture the parts according to Best’s
specifications. According to Best, CFP supplied defective products, and after having them
inspected, Best rejected them and did not pay. CFP invoiced Best for the parts anyway. Best then
sued CFP in Texas state court for negligence and breach of contract. CFP answered the
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A pup joint is “a pipe of varying length with a machined end and a union nut end for assembly
in the field.” Memorandum, Dkt. # 7 at 3.

complaint and then removed the case to the Southern District of Texas based up the parties’
diversity of citizenship. The case, which was filed on September 25, 2012, and removed on
November 8, 2012, proceeded to discovery, and on May 1, 2013, Best amended its complaint to
add a new defendant, Bodycote Thermal Processing, a Delaware corporation with its principal
place of business in Texas. This destroyed complete diversity of citizenship among the parties,
and the case was remanded to state court on August 24, 2013.
In the meantime, on November 20, 2012, CFP (an Illinois corporation) had sued Best in
Illinois state court, and Best removed that case to the Northern District on December 21, 2012.
Best then moved almost immediately to transfer this case to the Southern District of Texas to be
handled in conjunction with the pending action there, or, alternatively, to stay this action pending
the outcome of the federal case in Texas. When the Texas case was remanded to state court, Best
appropriately dropped its request to transfer the case—as this Court cannot transfer a federal case
to a state court—but renewed its request for a stay of this litigation. CFP opposes the request.
DISCUSSION
The threshold question in applying Colorado River abstention is whether the state and
federal cases are parallel; that is, whether substantially the same parties are contemporaneously
litigating substantially the same issues in another forum. Huon v. Johnson & Bell Ltd., 657 F.3d
641, 646 (7th Cir. 2011) (quotation marks and citations omitted). The critical question is whether
there is a substantial likelihood that the state litigation will dispose of all claims presented in the
federal case. Id. It is not necessary that there be “formal symmetry between the two actions,” but
the Court must compare the federal and state complaints and determine, among other things,
whether the suits “involve the same parties, arise out of the same facts, and raise similar factual

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and legal issues.” Tyrer v. City of South Beloit, 456 F.3d 744, 752 (7th Cir. 2006) (citing Clark v.
Lacy, 376 F.3d 682, 686 (7th Cir. 2004).
In the Texas case, Best brought claims of negligence and breach of contract against CFP
in connection with the delivery of faulty pup joints pursuant to certain purchase orders. In its
amended complaint, Best reprised its original claims and added as defendants Wozniak
Industries (CFP’s parent company), and Bodycote, as well as claims of negligent
misrepresentation, deceptive trade practices (pursuant to Texas statute), and breach of warranty
pursuant to the Uniform Commercial Code and its Texas equivalent. BodyCote answered and
cross-claimed against CFP/Wozniak for negligence, defamation, and contribution. CFP/Wozniak
answered and counter-claimed against Best for a “declaratory judgment of non-liability.” In this
Court, the operative complaint remains CFP’s Illinois state-court complaint for breach of
contract and unjust enrichment, relating to five purchase orders originating between August and
December 2011. There is no dispute that these are the very same orders that precipitated Best’s
Texas lawsuit. CFP alleges that it completed the orders, which Best improperly refused and
failed to pay for. Best has not answered the complaint.
The Court easily concludes after its review of the pleadings that substantially the same
parties are contemporaneously litigating substantially the same issues in another forum, and
therefore, that the cases are parallel. See Huon, 657 F.3d at 646. The Texas case and this one are
parallel; indeed, they are mirror images, with some adornment in the Texas case in the nature of
additional claims and parties. There is no question that the state and federal claims involve the
same parties, arise out of the same facts, and raise similar factual and legal issues.
CFP’s very brief argument to the contrary is unpersuasive. It ignores the crucial
questions of whether the same factual and legal issues are present in both cases, whether they

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arise out of the same facts, and whether the parties are the same. Instead, it argues, colorfully,
that in contrast to its simple claim here based on an “unpaid tab,” the Texas case “involves more
parties and will devolve into a convoluted, expert-laden game of finger-pointing with no end in
sight.” Memorandum, Dkt. # 20 at 4. At present the Texas case is broader, to be sure, but at its
core is the contractual liability of Best and CFP and that is, for now, the only question presented
in this case. But Best has not answered or filed any counterclaims in this case yet; it could wind
up just as expansive as the Texas case once it gets underway. 2 Most importantly, though, every
claim that exists in this case (or that is likely to be added) is already part of the Texas case,
creating a substantial likelihood that the state litigation will dispose of all of the claims presented
in the federal case.
After determining that the cases are parallel, the Court must next determine whether
“exceptional circumstances” make abstention appropriate. See Tyrer, 456 F.3d at 754. To aid this
inquiry, Colorado River set forth four factors, see 424 U.S. at 818-19; the Supreme Court then
recognized another in Moses H. Cone Memorial Hospital, 460 U.S. at 24; and the Seventh
Circuit has since brought the list up to an even ten. Tyrer, 456 F.3d at 754. They are: “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
by 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 concurrent jurisdiction; 9) the availability of
removal; and 10) the vexatious or contrived nature of the federal claim.” Id. (quoting Caminiti &

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Best represents that if it must defend the suit in this Court, it will assert defenses and
counterclaims that parallel its affirmative claims in the Texas case, including claims under Texas
statutes. Indeed, it seems likely that joinder of those claims would be required under Rule 13(a).
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Iatarola, Ltd. v. Behnke Warehousing, Inc., 962 F.2d 698, 701 (7th Cir. 1992). Although the
factors provide guidance, the decision to abstain “does not rest on a mechanical checklist, but on
a careful balancing of the important factors as they apply in a given case, with the balance
heavily weighted in favor of the exercise of jurisdiction.” Moses H. Cone, 460 U.S. at 16.
In this case, a few of the factors are inapplicable or neutral. First, the state has not
assumed jurisdiction over property. Second and third, as to the presence or absence of concurrent
jurisdiction and the ability of the state court to protect the federal plaintiff’s rights, both courts
can hear the claims brought in these cases, all of which are grounded in state law, and no one
would be without a remedy in Texas. Fourth, regarding “the vexatious or contrived nature of the
federal claim,” the Court notes that CFP’s complaint perhaps oversells the extent to which the
underlying occurrence took place in Illinois, but Best has not shown grounds for concluding that
CFP’s claims here were not brought in good faith. Indeed, CFP did not intend to bring this action
as “federal” case; it is at Best’s behest that the case is now in federal court.
CFP argues that the concurrent jurisdiction factor, which it agrees is neutral, actually
weighs against abstention because where concurrent jurisdiction exists, the federal court has a
duty to exercise its jurisdiction where a plaintiff chooses to litigate its claim in the federal forum.
Memorandum, Dkt. # 20 at 10. Indeed, the Seventh Circuit reaffirmed this principle in Huon as
to any factor that weighs neutrally: “because of the presumption against abstention, absent or
neutral factors weigh in favor of exercising jurisdiction.” 657 F.3d at 648. The Court defaults to
that position and therefore counts in the pro-CFP column the factors of whether the state court
assumed jurisdiction over property and whether the federal litigation is vexatious. However, the
Court does not find it appropriate to do the same with respect to the concurrent jurisdiction
factor. CFP, the plaintiff, filed suit in Illinois state court, deliberately eschewing a federal forum;

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it would be incongruous to pretend that CFP cared about accessing a federal forum. See Tyrer,
456 F.3d at 757 (noting that plaintiff opposing abstention initially “chose to bring his federal
claims first in a state forum”). CFP makes a similarly disingenuous argument as to the factor
examining the availability of removal, lamenting that if this Court abstains, it “will be deprived
of its opportunity to litigate its claim in federal court.” Again, CFP did not choose federal court
as the forum for its claims, so its complaint that abstention would make it “a second class
litigant” because this is a diversity case is utterly unavailing. That neutral factor therefore should
not weigh against abstention under the circumstances of this case.
The only other factors that even possibly weigh against abstention are the availability of
removal and the adequacy of the Texas forum. As already discussed, the removal option is
unavailable in Texas because the district court remanded the Texas case once non-diverse
Bodycote became a defendant in the case. But CFP should not be heard to complain about the
unavailability of a federal forum when its own choice for this action was an Illinois state court,
not federal court. As for the adequacy of the Texas forum, even if, as CFG asserts, Illinois law
governs the contract, the Texas court is perfectly equipped to adjudicate the straightforward
claims of nonpayment that CFP brought here. As Best points out, CFP filed affirmative defenses
of breach of contract and unjust enrichment in the Texas litigation, so it has already put its
arguments before the Texas court. And as noted above, it is likely that if this case were to go
forward here, Best would likely assert claims and defenses under Texas statutory law, with
which the Texas state court is, of course, better acquainted than a federal district court in Illinois.
On the other side of the scale, several of the factors favor abstention. In the Court’s view,
the strongest reasons for abstention are that (1) state law governs the claims, and therefore there
is no federal interest and no particular expertise for this Court to apply; (2) the Texas case was

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filed first; and (3) the Texas case is farther along than this one, 3 with the parties already having
engaged in substantial discovery and brought all necessary parties into the case. The Court
further concludes that Texas is at least a marginally more convenient forum for the parties and
witnesses in this case. CFP is an Illinois company that understandably prefers to litigate here, but
it appeared in the Texas case, with local Texas attorneys, and it never argued that Texas was an
inconvenient or improper forum. And Texas is where Best ordered the products and where they
were shipped, inspected, and rejected; it is also where Bodycote did most of the heat-treating that
might be the source of the defect in the pup joints. Best and Bodycote are both based in Texas.
Finally, the policy against piecemeal litigation certainly favors staying this case in favor of the
one that is more advanced and was filed first. It is not an effective use of judicial resources to
have courts in two jurisdictions examining the same legal and factual issues arising from the
same contract.
Having balanced all the relevant factors, this Court concludes that abstention is
appropriate. The factors that favor abstention do so strongly, while the factors weighing against
abstention do so weakly. See Tyrer, 456 F.3d at 755 (no abuse of discretion to abstain where
“several of the relevant factors strongly support” decision not to exercise jurisdiction). It is really
only the presumption that makes it a discussion. But that presumption has been overcome by the
exceptional circumstances present here.
The final question is the proper disposition. Colorado River abstention “can take the form
either of a stay or of a dismissal.” R.C. Wegman Const. Co. v. Admiral Ins. Co., 687 F.3d 362,

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Having reviewed the Southern District of Texas docket sheet, the Court rejects CFP’s assertion
(see Memorandum, Dkt. # 20 at 9) that the parties are “not yet truly at issue” in the Texas
litigation. They are. And the fact that Best has not even answered in this case yet, let alone
brought in other parties (which will further delay the proceedings here), positions this case
substantially behind the one in Texas.
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364 (7th Cir. 2012). However, if the condition for abstention is met—“that the parties' dispute
should be litigated to judgment in the state court, obviating further proceedings in federal
court”—the distinction between a stay and dismissal is illusory. Id. at 364, 365. In cases where
abstention is appropriate, the state court judgment “would be res judicata in the federal court and
thus end the federal suit, making the stay the practical equivalent of a dismissal with prejudice.”
Id. at 364. This Court sees no reason to retain jurisdiction over this case only so that the party
who succeeds on the breach-of-contract claim in state court can rush back with a res judicata
argument. Accordingly, the Court grants Best’s motion for abstention and dismisses this case.
The dismissal is without prejudice, of course, to the parties’ claims and defenses in the Texas
proceeding, but it is with prejudice to their ability to litigate in this Court and so constitutes a
final, appealable, order.

John J. Tharp, Jr.
United States District Judge

Date: September 13, 2013

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