Carey v. Yarmuth et al

Filing 27

MEMORANDUM OPINION AND ORDER Signed by Judge John G. Heyburn, II on 8/24/11. sustaining 17 Motion for abstention; this case is STAYED until the date of a conference to be set by this Court or until further order of this court cc:counsel (JSS)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
CIVIL ACTION NO. 3:11-CV-163-H
RICHARD W. CAREY, derivatively and
on behalf of ALMOST FAMILY, INC.

PLAINTIFF

v.
WILLIAM B. YARMUTH, STEVEN B. BING,
DONALD G. McCLINTON, TYREE G. WILBURN,
JONATHAN D. GOLDBERG, W. EARL REED, III,
and HENRY M. ALTMAN, JR.

DEFENDANTS

MEMORANDUM OPINION AND ORDER

Defendants, William B. Yarmuth and others, have moved to dismiss or stay this federal
action on the grounds that the same claims have been asserted in four previously filed state court
cases. Defendants argue that this Court should abstain under the rule in Colorado River Water
Conservation District v. United States, 424 U.S. 800 (1976).
These lawsuits have their origin with the Wall Street Journal article in April 2010 which
raised questions about Almost Family’s reimbursement practices. Subsequently, in July the
same year, the Securities and Exchange Commission began an investigation. In July 2010, four
state court actions were filed in Jefferson Circuit Court. In August these cases were
consolidated. However, thus far it appears that little else has occurred. In November 2010,
counsel in this case and other counsel filed four cases in this Court, some of which allege federal
securities violations and one of which alleges state law claims similar to those here. The lawsuit
filed by instant counsel was subsequently dismissed based on the absence of diversity
jurisdiction. The federal security cases were consolidated and continue in this Court. In March

2011, the instant counsel filed this action in federal court.
Under Colorado River, a federal court may decline to exercise jurisdiction or postpone
the exercise of it where parallel federal and non-federal proceedings exercise contemporaneous
jurisdiction and where considerations of judicial administration, use of judicial resources and
federal-state comity balance in favor of abstention. Id. at 817-18; Romine v. Compuserve Corp.,
160 F.3d 337, 339 (6th Cir. 1998).1
Both the federal and state actions allege identical state law claims for breach of fiduciary
duty, unjust enrichment and waste of corporate assets. Although the federal complaint in this
Court does contain more specific factual allegations supporting these claims, the legal
allegations are identical. They cover the same time period, involve precisely the same types of
Plaintiffs and would require precisely the same discovery. The Court concludes, therefore, that
these are parallel actions.
Where parallel actions are proceeding in state and federal court, this Court should review
the following factors to determine whether abstention is warranted:
(1) whether the state court has assumed jurisdiction over any res or
property; (2) whether the federal forum is less convenient to the
parties; (3) avoidance of piecemeal litigation; and (4) the order in
which jurisdiction was obtained . . . . (5) whether the source of
governing law is state or federal; (6) the adequacy of the state
court action to protect the federal plaintiff’s rights; (7) the relative
progress of the state and federal proceedings; and, (8) the presence
or absence of concurrent jurisdiction.
See Romine, 160 F.3d at 340-41 (citing Colorado River, 424 U.S. at 818-19; Moses H. Cone

1

The Romine case is somewhat similar to ours. The district granted defendant’s motion to stay the federal
action pending resolution of a state court action which alleged identical federal claims as well as additional state law
claims. The Court of Appeals held that the cases were sufficiently parallel to warrant abstention analysis and that
abstention was not an abuse of discretion.

2

Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 21-28 (1983); and Will v. Calvert Fire
Ins. Co., 437 U.S. 655 (1978).)
The first two factors marginally counsel against abstention. There is no special property
over which the state court might assume jurisdiction. In addition, the federal forum is no less
convenient for the parties than a state forum. The remainder of the analysis, however, strongly
supports abstention. No doubt some overlap and piecemeal litigation could be avoided by this
Court declining to pursue the same claims already at issue in the state courts. This is particularly
true where the state law claims were asserted first in state court and all the claims are entirely
based on state law. These are two important factors in the abstention analysis. Id. at 342.
Moreover, it is important that no federal claims are pending in the federal case in which
Defendants seek abstention. See Moses H. Cone, 460 U.S. at 26.2 Even though the state court
cases do not appear to have progressed far, there is no reason why the state courts cannot handle
this matter and adequately protect a non-resident plaintiff.3 The state law claims involve similar
facts and vastly different legal issues than the federal securities cases already proceeding this
Court. Regardless of the current motions, cases will proceed in several courts.
The decision here may be somewhat closer than that in Romine. On balance, however,
the Court is persuaded that it should abstain from the state law claims in this Court for the time
being. However, because the Court cannot determine whether the state court claims will proceed
expeditiously, the appropriate remedy is to stay, rather than to dismiss.

2

In Romine, federal claims were pending in the case which defendants sought abstention.

3

In Romine, the court considered the more advanced progression of the state cases to “weigh strongly in
favor” of abstention. Romine, 160 F.3d at 342.

3

Being otherwise sufficiently advised,
IT IS HEREBY ORDERED that Defendants’ motion for abstention is SUSTAINED and
this case is STAYED until the date of a conference to be set by this Court or until further order
of this Court.

August 24, 2011

cc:

Counsel of Record

4