Brand Energy Services, LLC v. Enerfab Power & Industrial, Inc.
Filing
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ORDER GRANTING DEFENDANT'S MOTION TO DISMISS OR STAY (Doc. 9 ). This civil action is STAYED until the case now pending in the Hamilton County Court of Common Pleas (Enerfab Power & Industrial, Inc. v. Brand Energy Services, Case No. A1505771) is fully resolved. Counsel shall notify the Court when the case has been resolved. Signed by Judge Timothy S. Black on 11/8/2016. (mr)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
BRAND ENERGY SERVICES, LLC,
Plaintiff,
vs.
ENERFAB POWER & INDUSTRIAL,
INC.,
Defendant.
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Case No. 1:16-cv-1043
Judge Timothy S. Black
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS OR STAY (Doc. 9)
This civil action is before the Court on Defendant’s motion to dismiss or stay
(Doc. 9) 1 and the parties’ responsive memoranda (Docs. 15, 19, 23, 31, 32, 34).
I.
FACTS AS ALLEGED BY THE PLAINTIFF
For purposes of this motion to dismiss, the Court must: (1) view the complaint in
the light most favorable to Plaintiff; and (2) take all well-pleaded factual allegations as
true. Tackett v. M&G Polymers, 561 F.3d 478, 488 (6th Cir. 2009).
Enerfab subcontracted to construct and install Novel Integrated Desulfurization
(“NID”) systems as part of the Dry Flue Gas Desulfurization systems at the Gallatin
Fossil Plant. (Doc. 1-1 at ¶¶ 7–10). On or about August 23, 2013, Enerfab entered into a
Blanket Subcontract Agreement with Brand Energy Services, LLC (“Brand”) to govern
subcontract work under purchase orders subsequently issued on the Gallatin Project (the
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This civil action was originally filed in the Middle District of Tennessee and the motion was
initially filed as a motion to dismiss or stay or alternatively to transfer venue. Judge Nixon in the
Middle District of Tennessee enforced the Forum Selection Clause and transferred the case to
this Court, but did not address the motion to dismiss or stay. (See Doc. 36).
“Subcontract”). (Id. at ¶ 12). On May 19, 2014, Brand executed a Purchase Order,
which detailed the scope of work on the project to include “the supply and installation of
the insulation and lagging for the NID proper and associated piping.” (Id. at ¶ 16).
Believing Brand failed to complete or commence its work in compliance with the
schedule and other Subcontract requirements, Enerfab alleges it attempted to resolve the
dispute with Brand. (Doc. 10 at 4–5). When Brand cancelled the proposed meeting to
discuss the dispute, Enerfab filed suit in the Hamilton County, Ohio Court of Common
Pleas on October 23, 2015, for breach of the Subcontract and Purchase Orders relating to
the Gallatin Project (the “Ohio action”). (Id. at 5; Doc. 10-1 at ¶¶ 40–52).
In its Complaint, Enerfab alleges that Brand failed to supply and install insulation
and lagging for four NID units within the scheduling milestones provided in the
Insulation Purchase Order (Doc. 10-1 at ¶¶ 40–44); failed to properly install lining for the
NID units as provided in the Coatings Purchase Order (id. at ¶¶ 45–48); and breached a
contractual/express warranty due to the alleged defective workmanship on the NID
coatings (id. at ¶¶ 49–53). In total, Enerfab seeks liquidated damages in excess of
$25,000; compensatory damages in excess of $25,000; pre- and post-judgment interest;
reasonable attorneys’ fees and costs; and other appropriate relief. (Id. at ¶ 145).
On November 30, 2015, Brand filed a motion to dismiss Enerfab’s Ohio action
(Doc. 10 at 5) and simultaneously brought its own suit for breach of the same Subcontract
and Purchase Orders against Enerfab in the Circuit Court for Sumner County, Tennessee.
(Doc. 1-1). In its Complaint, Brand alleges that Enerfab breached the Insulation Purchase
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Order by failing to provide Brand with sufficient resources to enable Brand to complete
its work on time (Doc. 1-1 at ¶¶ 69–73); breached the Coatings Purchase Order by failing
to adhere to the Project Schedule, causing delays, and improperly terminating Brand (id.
at ¶¶ 74–78); breached the covenant of good faith and fair dealing with regard to the
Insulation Purchase Order (id. at ¶¶ 79–88) and the Coatings Purchase Order (id. at
¶¶ 89–98). Brand also seeks a declaratory judgment that: (1) Enerfab is not entitled to
liquidated damages under the Insulation or Coatings Purchase Orders (id. at ¶¶ 99–105)
and (2) the Forum Selection Clause contained in the Subcontract (which requires all
litigation regarding the Subcontract be brought in Hamilton County, Ohio) is void and
unenforceable (id. at ¶¶ 106–12). In total, Brand seeks damages in excess of eight
million dollars, as well as attorneys’ fees and costs. (Id. at ¶¶ 24–25).
Enerfab filed a notice of removal to the Middle District of Tennessee on
December 30, 2015. (Doc. 1). On January 6, 2016, Enerfab filed this motion. (Doc. 9).
Enerfab argues that this Court has the authority to dismiss or stay this case pending the
resolution of the parallel state court proceeding. Colorado River Water Conservation
Dist. v. United States, 424 U.S. 800 (1976). Specifically, Enerfab argues that Brand’s
attempt to initiate parallel litigation makes little sense from an efficiency standpoint and
the factors relevant to the question of abstention support a dismissal or stay of this action.
Brand maintains that none of the Colorado River factors supports abstention.
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II.
STANDARD OF REVIEW
A. Motion to Dismiss
A motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) operates to test the
sufficiency of the complaint and permits dismissal of a complaint for “failure to state a
claim upon which relief can be granted.” To show grounds for relief, Fed. R. Civ. P. 8(a)
requires that the complaint contain a “short and plain statement of the claim showing that
the pleader is entitled to relief.”
While Fed. R. Civ. P. 8 “does not require ‘detailed factual allegations,’ . . . it
demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S.
544 (2007)). Pleadings offering mere “‘labels and conclusions’ or ‘a formulaic recitation
of the elements of a cause of action will not do.’” Id. (citing Twombly, 550 U.S. at 555).
In fact, in determining a motion to dismiss, “courts ‘are not bound to accept as true a
legal conclusion couched as a factual allegation[.]’” Twombly, 550 U.S. at 555 (citing
Papasan v. Allain, 478 U.S. 265 (1986)). Further, “[f]actual allegations must be enough
to raise a right to relief above the speculative level[.]” Id.
Accordingly, “[t]o survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’” Iqbal, 556 U.S. at 678. A claim is plausible where “plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. Plausibility “is not akin to a ‘probability requirement,’
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but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id.
“[W]here the well-pleaded facts do not permit the court to infer more than the mere
possibility of misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the
pleader is entitled to relief,’” and the case shall be dismissed. Id. (citing Fed. Rule Civ.
P. 8(a)(2)).
B. Motion to Stay
The decision whether to stay proceedings is entirely within a district court’s
discretion. Ohio Envtl. Council v. United States Dist. Court, S. Dist. of Ohio, E. Div.,
565 F.2d 393, 396 (6th Cir. 1977). “[T]he power to stay proceedings is incidental to the
power inherent in every court to control the disposition of the cause on its docket with the
economy of time and effort for itself, for counsel, and for litigants. How this can best be
done calls for the exercise of judgment, which must weigh competing interests and
maintain an even balance.” Michael v. Ghee, 325 F. Supp. 2d 829, 831 (N.D. Ohio 2004)
(quoting Landis v. N. Amer. Co., 299 U.S. 248, 254-55 (1936)). This Court has weighed
the following factors in conducting its balancing analysis: “[1] the potentiality of another
case having a dispositive effect on the case to be stayed, [2] the judicial economy to be
saved by waiting on a dispositive decision, [3] the public welfare, and [4] the
hardship/prejudice to the party opposing the stay, given its duration.” Id.
III.
ANALYSIS
Enerfab argues that the doctrine of abstention set forth in Colorado River Water
Conservation v. United States, 424 U.S. 800 (1976), compels that this action be dismissed
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or stayed pending resolution of the Ohio action. The Colorado River abstention doctrine
sets forth factors for federal courts to consider in deciding whether circumstances exist to
support dismissing or staying a federal action when there is a concurrent state action
pending. The Sixth Circuit has adopted the Colorado River abstention doctrine in
considering whether an action should be stayed to avoid piecemeal litigation between
state and federal courts. Romine v. Compuserve Corp., 160 F.3d 337 (6th Cir. 1998).
“Abstention is ‘an extraordinary and narrow exception to the duty of a District Court to
adjudicate a controversy properly before it.’” Caudill v. Wubanks Farms, Inc., 301 F.3d
658, 660 (6th Cir. 2002).
In Colorado River, the Supreme Court held that, in accordance with wise judicial
administration, federal courts may dismiss or stay a case solely because there is similar
litigation pending in a state court in order to conserve judicial resources. 424 U.S. at 818.
To determine the applicability of Colorado River to a particular case, courts first
determine whether there is a parallel proceeding in a state court. Bates v. Van Buren
Twp., 122 F. App’x 803, 806 (6th Cir. 2004). In parallel proceedings, the Sixth Circuit
has instructed courts to consider eight factors when deciding whether to apply Colorado
River abstention. These factors are:
(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; (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.
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Romine, 160 F.3d at 340-41. “These factors, however, do not comprise a mechanical
checklist. Rather, they require ‘a careful balancing of the important factors as they apply
in a given case’ depending on the particular facts at hand.” Id. at 341.
1.
Parallel Action
Before proceeding to the Colorado River test itself, a court must first determine
whether the federal and state proceedings are parallel. 424 U.S. at 806 (“the threshold
question in Colorado River abstention is whether there are parallel proceedings in state
court”). Suits are parallel when the actions are inextricably woven and involve
substantially the same parties litigating substantially the same issues. Romine, 160 F.3d
at 340.
Here, Brand’s federal action is clearly parallel to Enerfab’s Ohio action, because
Brand’s complaint involves the same parties and is litigating substantially the same
issues. The central issue in both lawsuits in whether Brand or Enerfab breached the
Subcontract and/or Purchase Orders when they performed work at the Gallatin Fossil
Plant.
2. Colorado River Factors
Six of the eight Colorado River factors militate in favor of the Court dismissing or
staying this action. Romine, 160 F.3d at 340-41. Here, the danger of piecemeal
litigation, the order in which the proceedings were filed, the advanced nature of the
proceedings in the state court, the absence of a federal issue, the adequacy of the Ohio
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forum to protect Plaintiff’s rights, and the presence of concurrent jurisdiction, militate
strongly in favor of abstention. See, e.g., Red Roof Inns, Inc. v. A.C. Furniture Co., No.,
2:10cv525, 2012 U.S. Dist. LEXIS 24321, at *14 (S.D. Ohio Feb. 27, 2012). A court’s
finding that a factor is neutral weighs against abstention. Kile Int’l Trucks, Inc. v. Int’l
Truck & Engine Co., No. 3:05cv0534, 2006 U.S. Dist. LEXIS 2024, at *13-14 (M.D.
Tenn. Jan. 9, 2006).
i.
Jurisdiction over any res or property
There is no property at issue, so this factor weighs against abstention. Romine,
160 F.3d at 341 (“The first factor to be weighed under the Colorado River test—whether
the state court has assumed jurisdiction over any res or property—is inapposite to the
instant matter because no property is at issue; this factor thus weighs against
abstention.”).
ii.
Convenience to the parties
Since this civil action is now in the Southern District of Ohio at Cincinnati, blocks
from the Hamilton County courthouse, the federal forum is just as convenient as the state
forum. Accordingly, this factor weighs against abstention.
iii.
Whether abstention would avoid piecemeal litigation
A desire to avoid piecemeal litigation was “the consideration that was paramount
in Colorado River itself.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460
U.S. 1, 19 (1983). Piecemeal litigation occurs when different courts adjudicate the same
issues, thereby supplicating judicial effort and possibly rendering an inconsistent result.
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Romine, 160 F.3d at 341. 2 For this Court and the state court to focus simultaneously on
the same issue would be a waste of limited judicial resources. Phillip Diniaco & Sonds,
Inc. v. Max J. Colvin & Sons Trucking, Inc., 865 F.2d 1269 (6th Cir. 1988). As Judge
Marbley remarked in Emerald Logistics, Inc. v. Crutcher, No. 2:07cv1112, 2008 U.S.
Dist. LEXIS 64898 (S.D. Ohio Aug. 25, 2008), in concluding that abstention was
appropriate under Colorado River: “It would be especially wasteful to simultaneously
litigate this dispute in two for[a] considering that the Tennessee court will almost
certainly render judgment first and thereby deprive this Court of jurisdiction to resolve
the matter because of res judicata.” Id. at 10. Accordingly, this factor weighs in favor of
abstention.
iv.
The order in which jurisdiction was obtained
The fourth Colorado River factor, the order in which jurisdiction was obtained,
gives preference to the case that was filed first. Here, Enerfab filed its state action in
October 2015, before this action was removed to federal court and before Brand initially
filed its case in Tennessee. Brand filed its lawsuit one month after Enerfab’s Ohio action
commenced. This case was not removed to federal court until more than two months
after the Ohio action was filed.
Brand argues that since the state court action was filed in violation of contractual
dispute resolution provisions, the order of obtaining jurisdiction weighs against
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See, e.g., Emerald Logistics, Inc. v. Crutcher, 2:07cv1112, 2008 U.S. Dist. LEXIS 648998
(S.D. Ohio Aug. 25, 2008) (concluding that Colorado River abstention was appropriate where
the race to get a favorable judgment could create “perverse incentives”).
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abstention. Moses, 460 U.S. at 21 (order in which state and federal courts obtained
jurisdiction weighed against abstention where, despite the defendant first filing the state
court action, the plaintiff in the federal action had no reason to file the federal court
action until after the defendant filed suit in state court, indicating defendant’s refusal to
abide by the arbitration agreement). However, Brand ignores the fact that it filed suit
before it mediated with Enerfab. Brand never sought to compel Enerfab to mediate. In
fact, Brand’s motion to dismiss in the Ohio action (which was denied), was based solely
on a venue argument, not that mediation was required. Accordingly, this factor weighs in
favor of abstention.
v.
Whether the source of governing law is state or federal
State law governs the causes of action asserted both in this case and in Enerfab’s
Ohio action. In cases where state law applies, rather than federal law, federal courts have
routinely agreed to abstain from asserting jurisdiction. See, e.g., Int’l Forest Prods.
Corp. v. Stonewall Packaging, LLC, No. 3:11cv0120, 2011 U.S. Dist. LEXIS 103777, at
*29 (M.D.Tenn. Aug. 8, 2011) (“Because there are no federal claims and state law
governs both actions, the fifth factor weighs in favor of abstention”). This Court has
jurisdiction pursuant to diversity of citizenship, not because any causes of action arise
under federal law. Accordingly, this factor favors abstention.
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vi.
The adequacy of the state court action to protect the federal
plaintiff’s rights
The sixth factor, the adequacy of the state court action to protect the federal
plaintiff’s rights, strongly favors abstention. The Ohio action has been placed on the
Hamilton County, Ohio Court of Common Pleas Commercial Docket. The Commercial
Docket is specially designed to handle “[d]isputes between or among two or more
business entities or individuals as to their business or investment activities relating to
contracts, transactions, or relationships between or among them.” (Amendments to the
Rules of Superintendence for the Court of Ohio, Rule 49.05(e)). Accordingly, the
Hamilton County Common Pleas Court Commercial Docket is especially well-equipped
to handle the parties’ breach of contract claims. Moreover, the state court is better
equipped to handle state law issues.
vii.
The relative progress of the state and federal proceedings
The seventh factor, the relative progress of the state and federal proceedings, also
weighs in favor of abstention. Enerfab filed the Ohio action over two months prior to this
action being removed to federal court. There has been no substantive progress made in
this case. On the other hand, the Ohio court heard oral argument on Brand’s motion to
dismiss (claiming the case should proceed in Tennessee) and on September 27, 2016, the
Court issued a decision denying the motion. Additionally, there is a Calendar Order in
the Ohio action that requires dispositive motions be filed no later than June 16, 2016 and
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trial is set for November 6, 2017. This federal action does not even have a calendar order
yet. Accordingly, the state proceeding is clearly more advanced than the federal action.
viii.
The presence or absence of concurrent jurisdiction
This federal court’s jurisdiction is based on diversity of citizenship and not on any
federal causes of action. “[T]he fact that there is concurrent jurisdiction in this case has
little bearing on abstention—except that it is within the federal court’s discretion to
favorably weigh abstention in such circumstances.” Epps v. Lauderdale Cnty., 139 F.
Supp.2d 859, 869 (W.D. Tenn. 2000). Accordingly, this factor favors abstention.
In balancing the Colorado River factors as they apply to this case, the Court finds
that the two factors that weigh in favor of the exercise of jurisdiction are significantly less
important than the six factors that strongly favor abstention. Although the balancing test
is generally weighted in favor of the exercise of jurisdiction, the Court finds that this
present case is one of those truly exceptional cases where the principles of wise judicial
administration, conservation of judicial resources, and comprehensive disposition of
litigation warrant abstention on account of parallel state litigation.
C.
Stay or Dismissal
Having found that abstention is appropriate, the Court will stay rather than dismiss
this case. A stay “lessens concerns over the statute of limitations, enables the parties to
return to the judge who is already familiar with the case, and generally protects all the
rights of the parties without imposing any additional burden on the district court.”
Emerald Logistics, 2008 U.S. Dist. LEXIS 64898 at 6. “Further, a stay ‘permits the
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federal court to retain jurisdiction in case the state court action does not meet its
anticipated end…[and brings] the case back before the same federal judge if a
determination is needed as to the preclusive effects of the state judgment or decisions.’”
Id.
IV.
CONCLUSION
For these reasons, Defendant’s motion to dismiss or stay (Doc. 9) is GRANTED.
This civil action is STAYED until the case now pending in the Hamilton County Court
of Common Pleas (Enerfab Power & Industrial, Inc. v. Brand Energy Services, Case No.
A1505771) is fully resolved. Counsel shall notify the Court when the case has been
resolved.
IT IS SO ORDERED.
Date: 11/8/16
s/ Timothy S. Black
Timothy S. Black
United States District Judge
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