Cass River Farms, LLC v. Hausbeck Pickle Company et al
ORDER Granting in Part 6 MOTION to Dismiss, Staying and Administratively Closing Case. Signed by District Judge Thomas L. Ludington. (KWin)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
CASS RIVER FARMS, LLC,
Case No. 16-cv-12269
Honorable Thomas L. Ludington
HAUSBECK PICKLE COMPANY and
PRESIDENT TIMOTHY A HAUSBECK,
ORDER GRANTING IN PART MOTION TO DISMISS, STAYING AND
ADMINISTRATIVELY CLOSING CASE
On June 20, 2016, Plaintiff Cass River Farms, LLC, (“Cass”) filed a complaint against
Defendants Hausbeck Pickle Co. (“Hausbeck”) and Timothy A. Hausbeck, the president of the
company. ECF No. 1. The complaint asserts five counts, all related to a contractual dispute
between the parties over the delivery of and payment for several large shipments of banana and
jalapeño peppers. Compl. at 5–10, ECF No. 1. Counts One, Two, and Three assert that
Defendants’ rejection of delivery and underpayment under the relevant contracts violated the
Perishable Agricultural Commodities Act (PACA), 7 U.S.C. 499(e). Counts Four and Five assert
standard breach of contract claims based on the same refusal to accept the deliveries.
Prior to Cass’s filing of this suit, Hausbeck filed a complaint on April 21, 2016, in
Saginaw County Circuit Court which named Cass as a defendant and alleged three counts of
breach of contract, one count of tortious interference with a business relationship or expectancy,
and one count of defamation. Compl. at 11, ECF No. 1. On June 21, 2016, Cass removed that
action to federal court. See Hausbeck Pickle Co. v. Cass River Farms, LLC, No. 1:16-cv-12281.
On July 21, 2016, Hausbeck filed a motion to remand its suit to state court. On September 3,
2016, this Court granted that motion and remanded the suit to state court.
On July 22, 2016, Hausbeck filed a motion to dismiss this action, arguing that abstention
pursuant to Colorado River Water Conservation Dist. v. United States is appropriate given the
separate suit currently pending in state court. 424 U.S. 800 (1976). Because the state court
action brought by Hausbeck contests the same material issues as this suit, the Court will stay this
This case arises out of a series of contracts the parties entered into regarding the sale of
large quantities of banana and jalapeño peppers. Cass is a Michigan company that both grows
peppers and enters into purchase contracts with peppers grows all over the world. Compl. at 1, 3.
Hausbeck is another Michigan company that purchases peppers and then resells them to largevolume consumers, like restaurant chains. Id. at 1, 3. Hausbeck and Cass have a longstanding
relationship and have entered into many contracts for the sale of peppers. Id. at 3. Both parties
are suing the other in separate actions, each alleging that the other breached several contracts.
Cass’s claims arise out of alleged breaches of two contracts the parties entered into,
Contract 35 and Contract 1019. Id. Cass represents that those contracts created an obligation for
Cass to deliver 10.5 million peppers to Hausbeck. Id. Pursuant to Contract 35, Cass contracted to
deliver 2 million peppers to Hausbeck at $0.45 per pound. Id. at 4. Under Contract 1019, Cass
agreed to provide 8.5 million pounds of peppers to Hausbeck at $0.42 per pound. Id. According
to Cass, delivery on Contract 35 was not to begin until after April 1, 2016. Id. On June 9, 2016,
Timothy Hausbeck emailed Cass and indicated that Hausbeck would accept only 8.5 million
pounds of peppers. Id. at 6. This email reflected Hausbeck’s theory that Cass had breached
Contract 35 by failing to timely deliver. See Hausbeck Email, ECF No. 1, Ex. 5. Cass argues that
the email constituted an anticipatory repudiation of Contracts 35 and 1019. Id. Cass immediately
responded, requesting that Hausbeck meet its contractual obligations under both contracts and
accept delivery. Id. Cass also notified Hausbeck that it was asserting a claim to full payment
under the contracts pursuant to the PACA. Id. When Cass began delivering peppers, Hausbeck
accepted only 8.5 million pounds of peppers. Id. at 5–7. Further, Hausbeck paid only $0.42 per
pound of peppers that were delivered, consistent with its obligations under Contract 1019 and not
Contract 35. Id. Cass is now suing Hausbeck for rejecting delivery and underpaying pursuant to
Contracts 35 and 1019 in violation of the PACA. Cass is also bringing common law breach of
contract claims against Hausbeck.
In the complaint filed in state court, Hausbeck alleges that Cass is the party who breached
the contracts between them. Hausbeck Compl., ECF No. 1, Ex. 1. According to Hausbeck,
delivery under Contract 35 was to occur during the winter 2016 season. Id. at 3. Delivery under
Contract 1019 was to occur between April 20, 2016, and July 7, 2016. Id. at 4. Hausbeck alleges
that Cass dramatically undersupplied Hausbeck during the winter 2016 season, which Hausbeck
alleges ended on April 30, 2016. Id. at 7. Because Cass breached Contract 35, Hausbeck brought
suit in state court on April 21, 2016. Id. at 1, 8–12. Hausbeck alleges that Cass’s failure to timely
deliver the peppers under Contract 35 resulted in Hausbeck losing a contract with Subway. Id. at
7. Hausbeck argues that it accepted pepper deliveries during the summer of 2016 pursuant only
to Contract 1019.
Hausbeck has filed a motion to dismiss in this case which asserts that because Cass’s
claims could be raised in the currently pending state court action, this Court should decline to
exercise jurisdiction over this case. The general rule is 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.” McClellan v. Carland, 217 U.S. 268, 282 (1910). See also RSM Richter, Inc. v.
Behr Am., Inc., 729 F.3d 553, 557 (6th Cir. 2013) (“The Supreme Court has repeatedly held . . .
that the mere pendency of a state-court case concerning the same subject matter as a federal case
is not reason enough to abstain.”). However, in Colorado River, the Supreme Court held that
abstention by federal courts was justified by the need for judicial efficiency and federal-state
comity in some limited circumstances where there was a “contemporaneous exercise of
concurrent” jurisdiction by state and federal courts. 424 U.S. at 817. Still, because federal courts
have a “virtually unflagging obligation . . . to exercise the jurisdiction given them,” id.,
abstention is disfavored. Federal courts should decline to hear a case over which they have
jurisdiction only in extraordinary and narrow circumstances where the justification for abstention
is clear. Colorado River, 424 U.S. at 813; RSM Richter, Inc., 729 F.3d at 557.
In order to determine whether the exceptional circumstances necessary to justify
Colorado River abstention are present, a court must engage in a two-step inquiry. First, the court
must determine whether the state proceeding is truly parallel to the federal case. Crawley v.
Hamilton Cty. Comm’rs, 744 F.2d 28, 31 (6th Cir. 1984). The relevant question is not whether
the state claim could “be modified so as to make it identical to the current federal claim.” Id.
Rather, the issue is whether the cases are currently parallel. Id. “[E]xact parallelism . . . is not
required.” Nakash v. Marciano, 882 F.2d 1411, 1416 (9th Cir. 1989). Rather, the two
proceedings need only be “substantially similar.” Id. (omitting citations). The parties in the two
cases need not be identical.
Bates v. Van Buren Twp., 122 F. App’x 803, 806 (6th Cir. 2004). If the state action is broader
than the federal action, that only makes it “more likely that it will not be necessary for the federal
courts to determine the federal question. Id. at 807. Broadly, the relevant inquiry is whether
resolution of the state court action will resolve the contested issues in the federal action. See
Baskin v. Bath Twp. Bd. of Zoning Appeals, 15 F.3d 569, 572 (6th Cir. 1994); Wright v.
Linebarger Googan Blair & Sampson, LLP, 782 F. Supp. 2d 593, 603 (W.D. Tenn. 2011).
Second, the court must determine whether “judicial economy warrants abstention.” Blake
v. Wells Fargo Bank, NA, 917 F. Supp. 2d 732, 737 (S.D. Ohio 2013). The “decision whether to
dismiss a federal action because of parallel state-court litigation 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 Mem’l
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 16 (1983). The factors to be considered include:
(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
Romine v. Compuserve Corp., 160 F.3d 337, 340–41 (6th Cir. 1998) (citations omitted).
The state court action and federal court action are parallel. Further, a proper balancing of
the factors outlined in Colorado Water and Moses H. Cone indicate that judicial economy
warrants abstention. Accordingly, the Court will stay this case.
To begin with, both suits involve the same parties. Although the plaintiff in the state
court action is the defendant in the federal action, parallelism is present as long as the parties are
“substantially similar.” Romine, 160 F.3d at 340. Cass and Hausbeck are contesting the same
dispute, albeit from slightly different perspectives, and thus the parties are substantially similar.
See CLT Logistics v. River W. Brands, 777 F. Supp. 2d 1052, 1057 (E.D. Mich. 2011) (finding
parallelism despite the plaintiffs in the federal case being defendants in the state court action).
Because the state court suit will resolve all contested legal and factual issues in both
cases, the two cases are parallel. The basic dispute between the parties is as follows: Hausbeck
argues that Cass did not fulfill its obligations under Contract 35 for peppers which were to be
delivered in the winter and spring of 2016. Because of that breach, Hausbeck lost a contract with
a customer. Accordingly, when Cass tried to deliver the peppers planted pursuant to Contract 35
that summer, Hausbeck no longer needed the peppers and rejected the shipment as untimely.
Cass argues that the parties had agreed that delivery pursuant to Contract 35 would occur after
April 1, 2016, and that Hausbeck represented to Cass that it would accept delivery of peppers
under Contract 35 during the summer of 2016. Cass claims under the PACA that Hausbeck
rejected the delivery without reasonable cause. Cass further claims under the PACA that
Hausbeck failed to make full payment. Hausbeck argues that it paid for the peppers it had
contracted for via Contract 1019 and paid the price specified in that contract. Accordingly, all
claims in this federal action depend on the construction of Contracts 35 and 1019. Hausbeck
alleges in state court that Cass failed to timely deliver under Contract 35. Cass alleges in this
action that delivery was timely and that Hausbeck improperly rejected and underpaid Cass, in
violation of Contracts 35 and 1019.
In other words, both actions involve, at their core, a standard state law contract dispute.
If Hausbeck’s argument that Cass’s attempted delivery under Contract 35 was too late is correct,
then Cass’s PACA claims will necessarily fail. Conversely, if Cass’s argument that its attempted
delivery under Contract 35 was timely is accurate, then Cass will be likely entitled to relief under
the PACA, absent other explanations for the rejection and underpayment. The threshold issue is
identical in both the state and federal action. The mere fact that Cass asserts federal claims in the
federal suit which have not been raised in the state court action does not defeat the parallelism
between the suits. “[O]ne cannot merely advance a different legal theory to obtain a remedy and
counter abstention.” Kopacz v. Hopkinsville Surface & Storm Water Util., 714 F. Supp. 2d 682,
688 (W.D. Ky. 2010) (citing Crown Enterprises, Inc. v. Lambert, No. 06-CV-13206, 2006 WL
2844445, at *2 (E.D. Mich. Sept. 29, 2006)). See also Telesco v. Telesco Fuel & Masons’
Materials, Inc., 765 F.2d 356, 362 (2d Cir. 1985) (“Merely raising an alternative theory of
recovery, which may still be raised in state court, is not enough to differentiate the federal suit
from the state suit.”). Although the parallelism analysis must be made by comparing “the issues
in the federal action to the issues actually raised in the state court action, not those that might
have been raised,” the basic dispute in both actions here is identical. Baskin, 15 F.3d at 572.
Unlike in Baskin, where parallelism was absent because the suits involved the same facts but
different legal theories and different relief, the two cases here contest exactly the same facts and
contest the legal construction of the same Contracts. Id. After a decision in the state court action,
this Court would “have nothing further to do in resolving any substantive part of the case,” at
least with regard to construing the contracts. Moses H. Cone Mem’l Hosp, 460 U.S. at 28.
Cass has not yet brought a counterclaim in the state court action which alleges a breach
of contract and asserts its PACA claims. Thus, the state court will be unable to completely and
finally resolve the federal claims currently pending before this Court. In Walbridge Aldinger Co.
v. Aon Risk Servs., Inc. of Pennsylvania, the court found that the fact that the plaintiff in the
federal suit had not brought any claims against the defendant in the state suit meant that
parallelism was absent. No. 06 CV 11161 DT, 2006 WL 2376112, at *5 (E.D. Mich. Aug. 16,
2006). The Walbridge court’s approach is supported by significant Sixth Circuit precedent which
makes clear that parallelism is not present simply because the state court action could be made
parallel by joining additional claims. See Baskin, 15 F.3d at 572; Crawley, 744 F.2d at 31.
However, the analysis in CLT Logistics v. River West Brands is most instructive in
adressing the situation currently before the Court. 777 F. Supp. 2d 1052. The court in CLT
Logistics framed the issue presented as follows: “whether a federal and state case are parallel
where the federal case includes additional claims not asserted in the state case, but the two
actions share a common, threshold issue that could dispose of all claims in both cases.” Id. at
1058. In CLT Logistics, the threshold issue was a dispute over whether one of the parties had a
license to use certain trademarks or had an ownership interest in those trademarks. Id. at 1054. If
not, then Defendants would potentially be liable for trademark infringement. Id. Like in this case,
then, there was a “substantial possibility that resolving [a] common issue [would] dispose of all
claims.” Id. at 1059. The CLT Logistics court found that, when dealing with an overlap of a
common threshold issue, the “aims of judicial economy and comprehensive disposition” create
“sufficient parallelism for a court to reach the next step in the analysis.” See also Day v. Union
Mines Inc., 862 F.2d 652, 656 (7th Cir. 1988) (upholding the entry of a stay under Colorado
River because the state court decision would likely determine the outcome of the claims pending
in federal court); Grammar, Inc. v. Custom Foam Sys., Ltd., 482 F. Supp. 2d 853, 858 (E.D.
Mich. 2007) (staying the case because “the resolution of the contractual rights and duties in
either of the pending cases will likely resolve the issues in the other case”); One Up, Inc. v.
Webcraft Techs., Inc., No. 87 C 3041, 1989 WL 118725, at *3 (N.D. Ill. Sept. 22, 1989) (finding
that parallelism was present because the state case involved an issue which might have disposed
of the federal claims).
For the same reasons, parallelism exists here. Cass’s claims under the PACA are
dependent on construction of the contracts between the parties. If Cass breached Contract 35,
then Hausbeck’s refusal to accept late delivery cannot be characterized as “without reasonable
cause.” 7 U.S.C. § 499(b)(2). Likewise, Hausbeck’s refusal to pay the price negotiated for
peppers in Contract 35 would not be wrongful. That issue is squarely before the state court.
Thus, the principles which undergird the Colorado Water doctrine, including the interests in
judicial economy, avoidance of piecemeal adjudication, and wise judicial administration, support
a finding of parallelism. 424 U.S. at 819. Because the common threshold issue across the two
actions is substantially likely to resolve the federal claims, there is sufficient parallelism to reach
the second stage of the analysis. CLT Logistics, 777 F. Supp. 2d at 1059.
Second, the various factors outlined in Colorado River and Moses H. Cone must be
weighed. As already mentioned, federal courts have a “virtually unflagging obligation . . . to
exercise the jurisdiction given them,” and so abstention can only be justified by exceptional
circumstances. Colorado River, 424 U.S. at 817–18.
The parties agree that the state court has not assumed jurisdiction over any res or
property. Further, the parties do not argue that state court is a more convenient forum. Thus,
these factors do nothing to overcome the presumption that a federal court will exercise the
jurisdiction is possesses.
The likelihood of piecemeal litigation if both actions proceed simultaneously is high. The
danger of piecemeal litigation was the paramount consideration in Colorado River. Moses H.
Cone, 460 U.S. at 19. “Piecemeal litigation occurs when different courts adjudicate the identical
issue, thereby duplicating judicial effort and potentially rendering conflicting results.” Romine,
160 F.3d at 341. As already mentioned, the threshold issue is which party breached its
contractual obligations. Both courts will be required to construe the contracts. Accordingly, it is
possible that, should the two courts come to different conclusions, conflicting adjudications
regarding which party breached the contracts might arise. This not only threatens “‘efficient
adjudication’” but also places the legitimacy of the court system in jeopardy. Id. (quoting Lumen
Constr., Inc. v. Brant Constr. Co., 780 F.2d 691 (7th Cir.1985)).
Likewise, the state court action was filed several months before the federal action. The
state court’s jurisdiction thus attached first. Additionally, the state court action has advanced
further than the federal action. The parties have litigated the need for a temporary restraining
order and preliminary injunction, the state court has entered a scheduling order, and the parties
have exchanged witness lists. See Hausbeck Pickle, No. 16-cv-12881, ECF No. 1, at 50, 53–55,
The claims in the state court action all arise out of state law. The claims in the federal
action include both state law and federal claims. However, the federal claims are predicated on
whether there was a breach of contract, which is the subject of the state law claims. The parties
dispute whether, because of the existence of federal claims in the federal action, the state court
action can adequately protect Cass’s federal rights. “[T]he presence of federal-law issues must
always be a major consideration weighing against surrender.” Moses H. Cone, 460 U.S. at 26.
There is a strong interest in favor of providing a federal forum for federal issues. Thus, the fact
that Cass clearly wishes to litigate its federal issues in federal court strongly favors an exercise of
jurisdiction. However, the potentially determinative threshold issue in both cases is one of state
law. Thus, the importance of providing a federal forum for Cass’s action is mitigated. Further, if
this case is stayed pending the state court’s decision interpreting the contracts, this Court will
still be able to later protect Cass’s federal rights should the state court decision fail to resolve all
Further, “the source-of-law factor has less significance . . . [where] the federal courts’
jurisdiction to enforce [the law] is concurrent with that of the state courts.” Id. at 25. The parties
dispute whether the state court has concurrent jurisdiction over Cass’s PACA claims. 7 U.S.C. §
499e(b) & (c)(5) both clearly contemplate concurrent jurisdiction for PACA claims. Section
499e(b) provides that “liability may be enforced . . .
by suit in any court of competent
jurisdiction; but this section shall not in any way abridge the remedies now existing at common
law or by statute.” Likewise, § 499e(c)(5) explained that federal district courts are “specifically”
vested with jurisdiction over “actions by trust beneficiaries to enforce payment from the trust”
which the PACA creates, but that language does not create exclusive federal jurisdiction for
PACA claims. See Sterling v. First Intermark, Inc., No. 92-1448, 1992 WL 352614 (5th Cir.
1992). Accordingly, concurrent federal jurisdiction exists. However, the fact that Congress
explicitly provided for federal jurisdiction for the PACA claims indicates that Congress believed
it was important that PACA claimants have access to a federal forum. Thus, although the
presence of concurrent state court jurisdiction over Cass’s PACA claims supports abstention, that
support is mitigated by Congress’s apparent intent to protect the existence of a federal forum for
In short, factors one and two, which focus on the convenience of the forum, indicate that
both forums are equally appropriate. Thus, those factors do nothing to overcome the presumption
that this Court should exercise its jurisdiction and hear the case. Factor three, the threat of
piecemeal litigation, strongly supports abstention. Factor four, the order in which jurisdiction
was obtained, and factor seven, the relative progress of state and federal proceedings, both
provide modest support for abstention. Because Cass’s action involves federal claims, factor five
supports the exercise of jurisdiction. However, the weight to be given to factor five is lessened
because a threshold state law breach of contract issue must be resolved before the federal claims
are reached. Factor six, which analyzes the state court’s ability to protect the federal plaintiff’s
rights, offers some reason to exercise jurisdiction. There is every reason to believe the state court
would provide a fair and efficient adjudication of the parties’ claims. However, because the
federal claims are only brought in the federal suit, the state court will be unable to actually
address them. This supports the exercise of jurisdiction. See Gentry v. Wayne Cty., No. 10-CV11714, 2010 WL 4822749, at *6 (E.D. Mich. Nov. 22, 2010). But as discussed below, the Court
believes that a stay will adequately protect Cass’s federal rights. Finally, because there is
concurrent jurisdiction over PACA claims, factor eight supports abstention.
Viewed as a whole, the Colorado River analysis justifies abstention. Several factors,
especially the threat of piecemeal litigation, strongly support abstention. Conversely, the
strongest argument in favor of exercising jurisdiction is that Cass has brought federal claims in a
federal forum. Ordinarily, that would be enough to prevent abstention. However, in this situation,
the state law breach of contract claims provide a common threshold issue between the two cases.
If the Court were to exercise jurisdiction, the contracts between the parties would be interpreted
twice and potentially in contradictory ways. That result would not only waste of judicial
resources, but it would also harm the legitimacy of the court system. Romine, 160 F.3d at 341.
Because both actions involve a threshold issue of state law, and because both actions cannot
proceed without interpreting the parties’ contracts, the fact that Cass has also brought federal
claims does not strongly support the exercise of jurisdiction. In short, factors three, four, seven,
and eight all support abstention, with factor three providing clear justification for abstention. The
remaining factors, however, do not offer persuasive reasons to exercise jurisdiction. Although
the “[t]he Court’s task “is not to find some substantial reason for the exercise of federal
jurisdiction,” but to determine whether exceptional circumstance clearly justify abstention, those
circumstances exist here. Gentry v. Wayne Cty., No. 10-CV-11714, 2010 WL 4822749, at *6
(E.D. Mich. Nov. 22, 2010).
Because abstention is appropriate, the next question is whether the case should be stayed
or dismissed. Generally, when a federal court abstains in favor of a state court, the federal court
should stay the action instead of dismissing it. Wilton v. Seven Falls Co., 515 U.S. 277, 288 n.2
(1995). A stay is preferable in that situation because “it assures that the federal action can
proceed without risk of a time bar if the state case, for any reason, fails to resolve the matter in
controversy.” Id. In this case, imposing a stay will further the foundational principles of the
Colorado River abstention doctrine by both avoiding piecemeal litigation and ensuring that Cass
retains a federal forum to litigate its federal claim. The pending state court action has progressed
further than the federal action and consequently the state court is likely to render a decision
construing the parties’ contracts before this Court can. That decision will almost certainly
address the very issue implicated by Cass’s PACA claims: whether Hausbeck’s refusal to accept
delivery and make payment under Contract 35 was a breach of contract. Rather than risking two
contradictory constructions of the same contracts, this Court will stay the case pending the
resolution of the state court action. Once the state court construes the contracts, this Court will
resolve Cass’s federal claims pursuant to that decision if consistent with principles of res judicata
and collateral estoppel. Of course, Cass is free to simply assert its federal and state law claims
against Hausbeck as counterclaims in the state law suit. In either scenario, judicial economy is
furthered, piecemeal litigation is avoided, the legitimacy of the judicial system is protected, and
Cass’s decision to litigate federal claims in a federal forum is respected. Thus, this suit will be
stayed pending resolution of the state court action.
Accordingly, it is ORDERED that Defendants’ Motion to Dismiss is GRANTED in
It is further ORDERED that this action is STAYED pending the resolution of the state
court action, Hausbeck Pickle Co. v. Cass River Farms, LLC, No. 16-029606-CB, at which time
the stay may be lifted on motion of either the plaintiff or defendant.
It is further ORDERED that, to avoid administrative difficulties, the Clerk of Court close
this case for statistical purposes only. Nothing in this order or in the related docket entry shall be
considered a dismissal of this matter.
October 12, 2016
s/Thomas L. Ludington
THOMAS L. LUDINGTON
United States District Judge
PROOF OF SERVICE
The undersigned certifies that a copy of the foregoing order was served
upon each attorney or party of record herein by electronic means or first
class U.S. mail on October 12, 2016.
s/Kelly Winslow for
MICHAEL A. SIAN, Case Manager
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