Turner v. Fushi Copperweld, Inc. et al

Filing 21

ORDERED that D's # 8 Motion to dismiss is GRANTED. The complaint (Doc. # 1 ) is DISMISSED in its entirety. Signed by Judge Larry R. Hicks on 5/6/2011. (Copies have been distributed pursuant to the NEF - DRM)

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1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 DISTRICT OF NEVADA 8 *** ) ) ) ) ) ) ) ) ) ) ) 9 THOMAS TURNER, 10 Plaintiff, 11 v. 12 FUSHI COPPERWELD, INC., et al. 13 Defendants. 3:10-cv-0711-LRH-VPC ORDER 14 15 Before the court is defendant Fushi Copperweld, Inc.’s (“Fushi”) motion to dismiss filed on 16 January 7, 2011. Doc. #8.1 Plaintiff Thomas Turner (“Turner”) filed an opposition (Doc. #16) to 17 which Fushi replied (Doc. #19). 18 I. 19 Facts and Procedural History Defendant Fushi is a publicly traded company incorporated in the state of Nevada. Fushi is 20 the leading global manufacturer of copper-clad bimetallic wire used in a variety of 21 telecommunication, utility, transportation and electrical applications. 22 On November 3, 2010, the Chairman of defendant Fushi, defendant Li Fu (“Fu”), presented 23 the Board of Directors with a proposal to purchase all outstanding Fushi stock at a set price and 24 take the company private. After that meeting, the Board of Directors made a public announcement 25 26 1 Refers to the court’s docket entry number. 1 about Fu’s offer and the formation of a special committee commissioned to make a 2 recommendation on Fu’s offer. Thereafter, on November 15, 2010, plaintiff Turner filed the present 3 putative shareholder class action complaint against Fushi. Doc. #1. 4 The present action is one of eleven putative shareholder class actions currently pending in 5 Nevada’s state or federal courts against defendant Fushi and its directors.2 All of the putative class 6 actions allege that defendants have breached their fiduciary duties to the company’s shareholders. 7 II. 8 9 Legal Standard In its motion to dismiss, defendant Fushi, relying on Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976), argues that the court should decline to exercise 10 jurisdiction over, and thereby dismiss, the putative shareholder class action in light of the similar 11 Nevada state court actions. See Doc. #8. 12 The Supreme Court has determined that under exceptional circumstances, a federal district 13 court may decline to exercise or postpone the exercise of its jurisdiction when there are concurrent 14 state and federal suits, and when doing so would promote wise and sound judicial administration, 15 including the conservation of judicial resources and the avoidance of piecemeal litigation. 16 Colorado River, 424 U.S. at 817. This type of abstention from the exercise of federal jurisdiction 17 for reasons of judicial economy should be “an extraordinary and narrow exception to the duty of a 18 District Court to adjudicate a controversy before it.” Id. at 813; see also, Nakash v. Marciano, 882 19 F.2d 1411, 1415 (9th Cir. 1989). 20 In order for the court to abstain from exercising jurisdiction under Colorado River, there 21 must be a parallel or substantially similar proceeding in state court. Security Farms v. Int’l Broth. of 22 Teamsters, Chauffers, Warehousemen & Helpers, 124 F.3d 999, 1009 (9th Cir. 1997) (“[I]nherent 23 24 25 26 2 At the time of this order, there are currently pending two federal actions in the United States District Court for the District of Nevada, four state actions in the Eight Judicial District Court for the State of Nevada, four state actions in the First Judicial District Court for the State of Nevada, and one state action in the Second Judicial District Court for the State of Nevada. 2 1 in the concept of abstention is the presence of a pendent state action in favor of which the federal 2 court must, or may, abstain.”). “Suits are parallel if substantially the same parties litigate 3 substantially the same issues in different forums.” New Beckley Min. Corp. v. Int’l Union, United 4 Mine Workers of America, 946 F.2d 1072 (4th Cir. 1991). 5 The Supreme Court and the Ninth Circuit have identified a nonexclusive list of relevant 6 factors for determining whether exceptional circumstances exist to justify invoking Colorado River 7 abstention. See Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 15-16; 8 Nakash, 882 F.2d at 1415-16. These factors include: (1) whether either court has assumed 9 jurisdiction over a res, or property at issue; (2) the relative convenience of the forums; (3) the 10 desirability of avoiding piecemeal litigation; (4) the order in which the forums obtained 11 jurisdiction; (5) whether state or federal law controls; and (6) whether the state proceeding is 12 adequate to protect the parties’ rights. See Colorado River, 424 U.S. at 818; Moses H. Cone, 460 13 U.S. at 25-26. “These factors are to be applied in a pragmatic and flexible way, as part of a 14 balancing process rather than as a mechanical checklist.” American Int’l Underwriters, Inc. v. 15 Continental Ins. Co., 843 F.2d 1253, 1257 (9th Cir. 1988). 16 III. 17 Discussion The court has carefully examined the Colorado River factors in relation to the 18 circumstances of this case and finds that the present action should be dismissed for the sake of wise 19 judicial administration. Initially, the court notes that the several state court actions are substantially 20 similar, if not identical, to the present federal action because they are all based on allegations that 21 Fushi’s directors breached their fiduciary duties. See New Beckley Min. Corp., 946 F.2d 1072. 22 23 Further, the court finds that the majority of relevant factors3 demonstrate that exceptional circumstances exist to abstain from exercising jurisdiction in this matter. First, all claims in this 24 25 26 3 The first two Colorado River factors are irrelevant to the court because there is no res, or real property in dispute and all the proposed forums are located in Nevada. 3 1 action are brought pursuant to Nevada law. Second, the Clark County Business Court, where a 2 majority of the state actions have been transferred and consolidated, is specifically designed to 3 handle shareholder actions and other business torts. See Eight Judicial District Court Rule 1.61. 4 Thus, the state court is in a better position to resolve the state law claims. Finally, declining to 5 exercise jurisdiction in this action would avoid piecemeal litigation because this court would no 6 longer be duplicating the efforts of the state court in addressing identical claims. See e.g., American 7 Int’l Underwriters, Inc. v. Continental Ins. Co., 843 F.2d 1253, 1258 (9th Cir. 1988) (“Piecemeal 8 litigation occurs when different tribunals consider that same issue, thereby duplicating efforts and 9 possibly reaching different results.”). Therefore, the court finds that it would be a misuse of judicial 10 resources to exercise jurisdiction over this duplicative proceeding when the state court is well- 11 prepared to proceed. Accordingly, the court shall grant Fushi’s motion to dismiss. 12 13 14 IT IS THEREFORE ORDERED that defendant’s motion to dismiss (Doc. #8) is GRANTED. The complaint (Doc. #1) is DISMISSED in its entirety. 15 IT IS SO ORDERED. 16 DATED this 6th day of May, 2011. 17 18 19 __________________________________ LARRY R. HICKS UNITED STATES DISTRICT JUDGE 20 21 22 23 24 25 26 4

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