Kornhauser v. Notting Hill, LLC et al

Filing 15

ORDER adopting Report and Recommendation re 13 Report and Recommendation granting 4 Motion to Dismiss. Signed by Judge Michael R. Barrett on 9/27/18. (ba)(This document has been sent by regular mail to the party(ies) listed in the NEF that did not receive electronic notification.)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION

SAMUEL KORNHAUSER,
Plaintiff,
vs.

Case No. 1:17-cv-00719

NOTTING HILL, LLC,
Defendant.

Judge Michael R. Barrett

ORDER
This matter is before the Court on the magistrate judge’s May 14, 2018 Report
and Recommendation (“Report”) (Doc. 13) and Plaintiff’s objections (Doc. 14) thereto.
The Magistrate Judge accurately summarized the factual and procedural
background of this case, and the same will not be repeated here except as necessary to
address Plaintiff’s objections.
I.

STANDARD OF REVIEW
This Court shall consider objections to a magistrate judge's order on a

nondispositive matter and “shall modify or set aside any portion of the magistrate
judge's order found to be clearly erroneous or contrary to law.” Fed. R. Civ. P. 72(a).
When objections to a magistrate judge’s report and recommendation are received on a
dispositive matter, the assigned district judge “must determine de novo any part of the
magistrate judge’s disposition that has been properly objected to.” Fed. R. Civ. P.
72(b)(3). After review, the district judge “may accept, reject, or modify the
recommended decision; receive further evidence; or return the matter to the magistrate
judge with instructions.” Id.; see also 28 U.S.C. § 636(b)(1).

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II.

ANALYSIS
A. First Objection
First, and foremost, Plaintiff argues that the magistrate judge erroneously

dismissed this case on abstention grounds, because abstention was not raised by
Defendants. (Doc. 14, PageID 88-89). Although Plaintiff is correct that Defendants did
not expressly raise an abstention argument in their motion to dismiss, abstention need
not be raised by either party. “Indeed, the Supreme Court has indicated that ‘abstention
may be raised by the court sua sponte.’” Fed. Express Corp. v. Tenn. Pub. Serv. Com.,
925 F.2d 962, 966 (6th Cir. 1991) (citing Bellotti v. Baird, 428 U.S. 132, 143 n.10, 96 S.
Ct. 2857, 49 L. Ed. 2d 844 (1976)).
Second, Plaintiff offers the alternative argument that the magistrate judge
improperly balanced the eight Colorado River factors courts must consider when
deciding whether to abstain. (Doc. 14, PageID 89). “Abstention from the exercise of
federal jurisdiction is the exception, not the rule.” Colorado River Water Conservation
Dist. v. United States, 424 U.S. 800, 813 (1976). Under “exceptional” circumstances, “a
federal district court may abstain from exercising its subject matter jurisdiction due to
the existence of a concurrent state court proceeding, based on ‘considerations of wise
judicial administration, giving regard to conservation of judicial resources and
comprehensive disposition of litigation.’” PaineWebber, Inc. v. Cohen, 276 F.3d 197,
206 (6th Cir. 2001). “The Supreme Court has identified eight factors, four in [Colorado
River], and four in subsequent decisions, that a district court must consider when
deciding whether to abstain from exercising its jurisdiction due to the concurrent
jurisdiction of a state court.” Id. These factors are: “(1) whether the state court has

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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.” Id. (citing Romine v. Compuserve Corp., 160 F.3d
337, 340-41 (6th Cir. 1998)). “[T]he decision whether to dismiss a federal action
because of parallel state-court litigation does not rest on a mechanical checklist, but on
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.” Id. at 207 (citing Moses H.
Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 16 (1983)).
There is no dispute that the first two factors weigh in favor of this Court
exercising jurisdiction. Both of these factors counsel against abstention because the
state court has not assumed possession of any res and the federal forum is no less
convenient than the state forum.

Romine v. Compuserve Corp., 160 F.3d 337, 341

(6th Cir. 1998).
While the first two factors weigh against abstention, the remaining six factors
strongly tilt the balance in favor of abstention. The third factor favors abstention
because there is a strong potential for piecemeal litigation if this case proceeds in both
state and federal courts. Id. (“Piecemeal litigation occurs when different courts
adjudicate the identical issue, thereby duplicating judicial effort and potentially rendering
conflicting results.”). With the exception of a request for declaratory relief that could

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have been raised in state court, Plaintiff’s claims in the present action are identical to his
counterclaims pending in state court.
As to the fourth factor, “priority [in obtaining jurisdiction] should not be measured
exclusively by which complaint was filed first, but rather in terms of how much progress
has been made in the two actions.” PaineWebber, 276 F.3d at 206 (citing Moses H.
Cone Mem’l Hosp., 460 U.S. at 21). Here, though, the temporal delay between the
dates on which the state court and the federal court obtained jurisdiction over this
matter is significant. Defendant Notting Hill, LLC filed its initial complaint against
Plaintiff Kornhauser in state court in December 2016, and plaintiff filed this federal
action more than ten months later. Little progress has occurred in either lawsuit due
largely to Plaintiff Kornhauser’s unsuccessful attempt to remove the state action to
federal court in January 2017. Plaintiff argues that federal jurisdiction over this dispute
has thus existed since January 2017, when plaintiff removed the state action here. The
Court disagrees. When the removed state action was remanded to state court, the
Court expressly found that it lacked subject matter jurisdiction; thus, this Court did not
retain, nor did it ever have, jurisdiction over that matter. See Notting Hill, LLC v.
Kornhauser. S.D. Ohio Case No. 17-cv-00016, Decision and Entry . . . Remanding this
Case to State Court, Doc. 22 (Black, J.).1 Therefore, the order in which jurisdiction was
obtained weighs in favor of abstention.

In finding diversity jurisdiction lacking, Judge Black: (1) rejected Kornhauser’s argument that his
counterclaims placed the amount in controversy at over $900,000, because Kornhauser’s maximum
possible recovery under the contract at issue was $25,000; and (2) that, even if Kornhauser’s possible
recovery were higher, it would make no difference because the value of counterclaims may not be
included when calculating the amount in controversy for purposes of diversity jurisdiction. (Id. at 235). By
filing those counterclaims as standalone claims in this action, Plaintiff is attempting to circumvent Judge
Black’s decision.
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The fifth and sixth factors favor abstention because the claims at issue are
governed by state law, and the state court action is adequate to protect Kornhauser’s
interests. The seventh factor to be considered, which is the relative progress of the
state and federal cases, is of little consequence due to the delay caused by Plaintiff
Kornhauser’s attempted removal of the state action to federal court. Plaintiff argues that
the present action is further along than the state action, essentially reasoning that this
case picks up where the remanded case left off. (Doc. 14, PageID 91). This argument
again fails to recognize that this Court did not retain jurisdiction (which never existed)
when the previous action was remanded to state court.
Finally, the eighth factor—the presence of concurrent jurisdiction—favors
abstention here because state law governs the parties’ claims and there is no express
preference under the applicable law for federal litigation. PaineWebber, 276 F.3d at
208 (citing Moses H. Cone Mem’l Hosp., 460 U.S. at 25, n. 32; Romine, 160 F.3d at
342). This factor weighs in favor of abstention.
Accordingly, Plaintiff’s first objection is OVERRULED.
B. Second Objection
In lieu of dismissal, Plaintiff offers another alternative argument. Specifically,
Plaintiff argues that this Court should stay this case until the state action is resolved.
(Doc. 14, PageID 92). Plaintiff cites two cases to support this proposition. (Id.) (citing
Superior Beverage Co., Inc. v. Shieffelin & Co., 448 F.3d 910, 913 (6th Cir. 2006), and
Gray v. Bush, 628 F.3d 779, 785 (6th Cir. 2010)). However, the foregoing cases are
inapposite. They were decided based on the Burford abstention doctrine, rather than
the Colorado River abstention doctrine. A federal court may choose to abstain under

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Burford when exercise of jurisdiction by a federal court would disrupt a state
administrative process. Superior Beverage, 448 F.3d at 915. The Burford abstention
doctrine is thus inapplicable to this case. Plaintiff’s claims are governed by Ohio law
and state court can adequately adjudicate all issues. Thus, Plaintiff’s second objection
is OVERRULED.
IV. CONCLUSION
The Court finds the Report (Doc. 13) to be thorough, well reasoned, and correct.
The Report is ADOPTED in its entirety, and Plaintiff’s Objection (Doc. 14) is
OVERRULED. Defendant’s motion to dismiss (Doc. 4) is thus GRANTED under Fed.
R. Civ. P. 12(b)(1).
IT IS SO ORDERED.

s/Michael R. Barrett
________________________
United States District Judge

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