Williamson et al v. Recovery Limited Partnership et al

Filing 935

ORDER granting in part and denying in part 886 Motion to Vacate; denying 886 Motion to Remand to State Court. Paragraphs 1 and 5 of this Courts Order (Doc. 738) are hereby VACATED. Signed by Judge Algenon L. Marbley on 9/23/2014. (cw)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
MICHAEL WILLIAMSON, et al.,
Plaintiffs,
v.
RECOVERY LIMITED
PARTNERSHIP, et al.,
Defendants.

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Case No. 2:06-cv-00292
JUDGE ALGENON L. MARBLEY

Magistrate Judge Kemp

OPINION & ORDER
I. INTRODUCTION
This matter is before the Court on Defendants Recovery Limited Partnership and
Columbus Exploration LLC’s Motion to Vacate Paragraphs 1 and 5 of the Court’s July 18, 2012
Order and to Remand the Williamson Plaintiffs’ Remaining Claim to Franklin County Common
Pleas Court for Resolution in the Pending Receivership. (Doc. 886). For the reasons set forth
herein, Defendants’ Motion is GRANTED in part and DENIED in part.

II. BACKGROUND
The Court need not reiterate the lengthy history of this case, as it has been set forth in
many previous Orders of this Court. (See, e.g., Doc. 870). Rather, the Court shall briefly discuss
the procedural history that is relevant to Defendants’ Motion.
This litigation commenced in 2005, when Dispatch Printing Company (“DPC”) filed two
cases in Franklin County Common Pleas Court against Columbus Exploration, LLC (“CX”),
Recovery Limited Partnership (“RLP”), and the individual Defendants, for breach of fiduciary
duty and an accounting. (Case Nos. 05-CV-4220, 05-CV-11795, Franklin Cnty. Ct. of Com.
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Pl.). In 2006, after these cases were consolidated with the Williamson Plaintiffs’ admiralty case
(Case No. 06-CV-4469), Defendants removed all three cases to this Court. (Doc. 2).
On July 18, 2012, this Court issued a Preliminary Injunction pursuant to Rule 65 of the
Federal Rules of Civil Procedure and Prejudgment Attachment pursuant to subsections (8) and
(9) of Section 2715.01 of the Ohio Revised Code (“P.I.”). (Doc. 738). Though the Order set
forth five separate findings, paragraphs 1 and 5 are the only sections at issue here. Those
paragraphs state:
1. The Court orders the attachment of seven (7) crates (or more)
of artifacts warehoused on Joyce Avenue, Columbus, Ohio,
and owned by Columbus Exploration, LLC or any other
Defendant Entity. These crates are not to be moved,
encumbered or sold without further order of this Court.
…
5. The Court issues a preliminary injunction against the
Defendant entities prohibiting them from making any transfer
of assets beyond those within the normal or ordinary course of
business for such recurring expenses as are anticipated. Any
other transfers require further approval of this Court after
notice and hearing.
(Id.).
On May 23, 2013, in a related action in the Franklin County Court of Common Pleas,
Judge Patrick Sheeran sustained the motion by the Dispatch Plaintiffs for the appointment of a
Receiver for the Injunction Defendants. On June 14, 2013, Judge Sheeran issued his entry
appointing Ira Kane as Receiver. On September 30, 2013, the Receiver filed his Application of
Receiver for Approval of Receiver’s Initial Receivership Plan and Report, which was approved
by Judge Sheeran on October 10, 2013. That Plan sets forth certain goals for the receivership,
including “put[ting] together a solid business structure” for the Injunction Defendants and
“preserv[ing] and operat[ing] the businesses . . . for the benefit of the investors and creditors.”
(Doc. 896-4 at 8, 20).
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Defendants CX and RLP filed the instant motion on November 13, 2013, in which they
requested that this Court vacate paragraphs 1 and 5 of this Court’s aforementioned Order (see
Doc. 738), and remand Plaintiffs’ breach of contract claim in the pending state receivership.

III. LAW AND ANALYSIS
a. Vacation of Paragraphs 1 and 5 of the Preliminary Injunction
Defendants argue that this Court should exercise its discretion to vacate paragraphs 1 and
5 of the P.I. They assert that the “improper conduct” that was the basis of this Court’s concern
and reasoning inherent in the P.I. is no longer an issue. (See Doc. 750 at 4). At the time of the
P.I. this Court had concerns about the bankruptcy petition submitted to the United States
Bankruptcy Court for the District of Delaware simultaneous to the Ohio state court’s
commencement of receivership proceedings. That bankruptcy petition, however, was dismissed,
and Mr. Kane was appointed as the Receiver by the Judge Sheeran not long thereafter.
Defendants further insist that maintaining paragraphs 1 and 5 of the P.I. creates a conflict with
the Receiver’s duties. Thus, Defendants contend that this Court vacate paragraphs 1 and 5 of the
P.I.
Plaintiffs counter that, though they have previously cooperated with Defendants in
disposing of some of the property in the Joyce Avenue storage facility, they are entitled to a
continued attachment of the remaining property based on its possible monetary value. According
to Plaintiffs, there has not been a change in relevant facts that would justify lifting the attachment
order. Plaintiffs allege that the problems caused by prior management remain, as do the
concerns that initially led to the Court’s P.I. Plaintiffs state that several million dollars were
allowed to be transferred fraudulently out of RLP and CX while prior management was in

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charge, and, as of December 9, 2013, that money had not been recovered by the Receiver.
Additionally, Plaintiffs claim that Defendants have shown an overall disregard for this Court’s
order, and spent large sums of money in relation to the litigation. Plaintiffs, therefore, insist that
the Court must maintain the P.I. to continue to protect Plaintiffs’ rights.
It is within this Court’s discretion to vacate its earlier P.I. In Pennsylvania General
Casualty Co. v. Commonwealth of Pennsylvania ex rel. Schnader, 294 U.S. 189 (1935) and
Jacobs v. DeShetler, 465 F.2d 840 (6th Cir. 1972), the Supreme Court and the Sixth Circuit,
respectively, discussed the ways in which federal courts should exercise their discretion. Under
Pennsylvania General, when a federal court is the first to acquire jurisdiction, if the parties’
interests will continue to be protected, ceding control to the state officer is appropriate. 294 U.S.
at 197. Moreover, the Jacobs Court found that the district court should exercise discretion “in
such a way as to [not] interfere with the orderly disposition of the litigation by the State Court.”
465 F.2d at 842.
In the case sub judice, this Court has jurisdiction over the assets as set forth in the P.I.
When the Court initially composed the Order, concerns about the actions of the various parties
were part of the basis for the P.I. Thus, the P.I. was granted, in part, to facilitate this Court’s
exertion of jurisdiction over the property at issue. The concerns that once existed, however, have
since dissipated. The Court no longer needs to maintain paragraphs 1 and 5 of the P.I. to
effectively protect the parties in light of Thompson’s tomfoolery. The Receiver will,
undoubtedly, continue to protect the parties’ interests. In keeping with the holdings in
Pennsylvania General and Jacobs, this Court shall exercise its discretion and vacate paragraphs
1 and 5 of the P.I., thereby allowing the Receiver to carry out its responsibilities without any
unintended interference from this Court. And it must be noted that vacating paragraphs 1 and 5

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does not divest the Receiver of the ability to maintain and handle the property in his charge;
indeed, it is this Court’s intent that the Receiver is able to exercise the full range of his authority
as set forth by his State Court appointment. As such, Defendants’ Motion is GRANTED in
part.
b. Remand of Breach of Contract Claim
The Court next turns to Defendants’ argument that its breach of contract claim should be
remanded to state court. “Abstention is an extraordinary and narrow exception to the duty of a
District Court to adjudicate a controversy properly before it.” Caudill v. Eubanks Farms, Inc.,
301 F.3d 658, 660 (6th Cir. 2002). As a general rule, a federal court need not dismiss or stay an
action on account of parallel state court proceedings. See Brillhart v. Excess Ins. Co., 316 U.S.
491, 495 (1942). The rationale is simple; requiring abstention “would give litigants a powerful
tool to keep cases out of federal court or remove cases to state court simply by filing a parallel
suit in state court.” Erwin Chemerinsky, Federal Jurisdiction, § 14.2 (6th ed. 2011). Moreover,
frequent abstention on account of parallel state litigation “favors state courts over federal
courts—a presumption inconsistent with Congress’s creation of federal jurisdiction and one that
is not supported by any statutory authority.” Id.
But in Colorado River Water Conservation District v. United States, the Supreme Court
created a “narrow exception” to the “virtually unflagging obligation of the federal courts to
exercise the jurisdiction given them.” 424 U.S. 800, 818 (1976). The Court held that in certain
circumstances, the principles of wise judicial administration, conservation of judicial resources,
and comprehensive disposition of litigation may warrant abstention on account of parallel state
litigation. Id. at 817. The Court recognized that duplicative litigation is wasteful, especially
considering that in many cases, the first court to render a judgment will divest the other court of

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jurisdiction because of res judicata. Moses H. Cone Mem’l Hosp. v. Mercury Constr. Co., 460
U.S. 1, 25 (1983). That said, “abstention is an ‘extraordinary and narrow exception to the duty
of a District Court to adjudicate a controversy properly before it,’ therefore, ‘[o]nly the clearest
of justifications’ warrant abstention.” Devlin v. Kalm, 493 F. App’x 678, 682 (6th Cir. 2012)
(quoting Rouse v. DaimlerChrysler Corp., 300 F.3d 711, 715 (6th Cir. 2002)).
The threshold question in a Colorado River case is whether there are parallel
proceedings in state court. Bates v. Van Buren Tp., 122 F. App’x. 803, 806 (6th Cir. 2004); see
also PaineWebber, Inc. v. Cohen, 276 F.3d 197, 207-08 (6th Cir. 2001). To be considered
parallel, the state court proceedings need only be “substantially similar,” not identical. Romine v.
Compuserve Corp., 160 F.3d 337, 340 (6th Cir. 1998). If the Court finds the two proceedings to
be parallel, it must then carefully balance the Colorado River factors, “with the balance heavily
weighted in favor of the exercise of jurisdiction.” Great Earth Co., Inc. v. Simons, 288 F.3d 878,
886 (6th Cir. 2002).
Defendants proffer that the receivership proceeding encompasses all claims stemming
from the shipwreck recovery efforts. Defendants further claim that the Williamson Plaintiffs’
core claim for breach of contract is pending in each proceeding. Additionally, claims against
other “potentially collectible defendants” (Def.’s Reply, Doc. 903 at 8) remain undecided in each
court. Thus, Defendants contend that default judgments against the outstanding defunct entities
could be obtained in state or federal court. Plaintiffs counter that remanding this case to state
court would require the state court to conduct a veil-piercing/alter ego trial concerning
defendants that are not currently before that court, thereby creating a disparity that shows that the
federal and state proceedings are not substantially similar.

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This Court finds that the case sub judice and the state court proceedings are substantially
similar, based on the parties and issues before each court. Having determined that the federal
and state court proceedings are indeed parallel, the Court must now balance the Colorado River
factors: (1) whether the state court has assumed jurisdiction over any res or property; (2) the
convenience of the federal forum; (3) the avoidance of piecemeal litigation; (4) the order in
which the state and federal proceedings were filed; (5) the relative progress of the state and
federal litigation; (6) whether the claims present a federal question; (7) the adequacy of the state
forum to protect the rights of the federal plaintiffs; and (8) the presence or absence of concurrent
jurisdiction. Romine, 160 F.3d at 340-341. The Supreme Court has cautioned that “[n]o one
factor is necessarily determinative; [rather,] a carefully considered judgment taking into account
both the obligation to exercise jurisdiction and the combination of factors counselling against
that exercise is required.” Colo. River, 424 U.S. at 819; see also Romine, 160 F.3d at 341
(quoting Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 15-16 (1983)
(“These factors, however, do not comprise a mechanical checklist. Rather, they require ‘a
careful balancing of the important factors as they apply in a give[n] case’ depending on the
particular facts at hand.”))
Here, the convenience of the federal forum, the source of governing law, and the relative
progress of state and federal litigation support a finding against abstention, and requires this
Court to deny Defendants’ remand request.
1. Convenience of the Federal Forum
This Court has personal jurisdiction over all parties to the case; the state court, however,
does not. The timeline of these proceedings has been extensive, and the case is well into its
eighth year. The issues have been briefed thoroughly, and this Court has a deep knowledge and

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understanding of this case that it has cultivated throughout the pendency of the litigation. If this
Court were to abstain, and remand to state court, the state court would then have the burden of
sifting through years of proceedings simply to gain a basic understanding of the expansive
history of this matter. Certainly, such an undertaking would require a great deal of time and
depletion of judicial resources, likely resulting in a delay in the state court’s proceedings.
2. Source of Governing Law
This case is governed by federal law and maritime law, pursuant to 28 U.S.C. § 1333.
The source of governing law is, therefore, federal. Accordingly, this factor weighs against
abstention.
3. Relative Progress of State and Federal Litigation
The Court’s consideration of this factor draws many parallels to its analysis of the
convenience of the federal forum. Though the state court proceedings were filed first, this matter
has been before the Court for eight years. As the case has progressed, so have the vast array of
issues in this case. Currently, there are nearly 1,000 items on this case’s docket report, a clear
indication of the progress of this case. Considering that progress in the light of this Court’s duty
to limit an exercise of abstention to extraordinary circumstances, it is clear that it would be
inappropriate to abstain from this case.
4. Remaining Colorado River Factors
The first, third, and eighth factors—whether the state court has assumed jurisdiction over
any property; avoidance of piecemeal litigation; and the presence or absence of concurrent
jurisdiction—do not weigh for or against abstention. The state court has assumed control over
property, and the appointment of the Receiver will continue to allow the state court to exercise
its jurisdiction as needed, particularly in light of this Court’s decision to vacate certain sections

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of its earlier P.I. The appointment of the Receiver, however, does not create an extraordinary
circumstance that will be cured by abstention. Next, the Court does not find that remanding this
case would result in the avoidance of piecemeal litigation. Both this Court and the state court
have proceedings currently before them, and, if this Court abstained on the breach of contract
claims, the claims of the Defendants uninvolved in the breach of contract claim would remain
with this Court. Finally, there is concurrent jurisdiction over the litigation, but, as with the
concern for piecemeal litigation, abstention would not ease any burden potentially shouldered by
any parties. Those factors, therefore, do not weigh in favor of abstention.
While the two remaining factors could support abstention, neither outweighs the Court’s
earlier findings that abstention is unnecessary. The second factor is the order in which
jurisdiction was obtained. In 2005, the state court was the first court to obtain jurisdiction over
this matter, before the case was removed to federal court in 2006. But this Court has now
handled this inarguably complex and lengthy litigation for eight years, essentially mooting any
clout held by the state court’s initial dealings with the Williamson litigation. The sixth factor
concerns the adequacy of the state court to protect the federal plaintiffs’ rights. This Court
currently has personal jurisdiction over all of the parties. A remand could cause a delay in
proceedings to allow the state court to sort through any such issues, in turn slowing the
resolution of this matter. Thus, neither factor weighs so heavily in favor of abstention as to lead
this Court to find that abstention would be proper here.
Upon consideration of each Colorado River factor, and given the peculiar nature of this
case, this Court cannot justify abstaining. Thus, Defendants’ request for remand of its breach of
contract claim is, therefore, DENIED.

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IV. CONCLUSION
Based on the foregoing reasons, Defendants Recovery Limited Partnership and Columbus
Exploration LLC’s Motion to Vacate and Remand (Doc. 886) is GRANTED in part and
DENIED in part. Paragraphs 1 and 5 of this Court’s Order (Doc. 738) are hereby VACATED.

IT IS SO ORDERED.
s/Algenon L. Marbley
ALGENON L. MARBLEY
UNITED STATES DISTRICT JUDGE
Dated: September 23, 2014

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