UNIVERSAL CONCRETE PRODUCTS, INC. v. THE PIKE COMPANY, INC.
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE GERALD J. PAPPERT ON 1/10/18. 1/10/18 ENTERED AND COPIES EMAILED TO COUNSEL.(jaa, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
UNIVERSAL CONCRETE PRODUCTS,
THE PIKE COMPANY, INC.,
January 10, 2018
Universal Concrete Products, Inc. seeks a declaration that the dispute resolution
provision in its contract with The Pike Company, Inc. is unconscionable and
unenforceable. Pike moves to dismiss Universal’s Amended Complaint, asking the
Court to decline to exercise its discretionary jurisdiction under the Declaratory
Judgment Act, 28 U.S.C. § 2201 et seq. The Court grants the motion for the reasons
In the spring of 2014, Universal entered into a verbal agreement with KirchoffConsigli Construction Management (“K-CC”), the General Contractor for a construction
project at Marist College in Poughkeepsie, New York. (Am. Compl. at 2, 5, ECF No. 8.)
Specifically, Universal agreed to provide precast concrete services for four buildings on
Marist’s campus. (Id. at 2.) In early 2015, Marist terminated K-CC and hired Pike as
the new General Contractor. (Id. at 2, 5–6.) Universal subsequently entered into a
subcontract with Pike, which contained a dispute resolution provision (“Article 11”).
(Id. at 2, 6–7.)
On December 22, 2016, Universal filed a writ of summons against Pike and
Marist in the Montgomery County Court of Common Pleas. (Id. at 12.) In response,
Pike, a Rochester, New York based company, (id. at 4), sought to mediate the dispute in
Rochester “pursuant to Article 11 and [their] interpretation of the dispute resolution
procedures contained in the Subcontract[,]” (id. at 12). Universal refused to do so,
contending that Article 11’s mediation provision is void and unenforceable. (Id.) Pike
then sued Universal in state court in Monroe County, New York, on May 4, 2017. (Id.)
Universal filed this action for declaratory and injunctive relief on June 8, 2017,
(Compl., ECF No. 1), and on June 9 removed Pike’s Monroe County lawsuit to the
United States District Court for the Western District of New York, (Am. Compl. at 13).
Also on June 9, Universal filed its complaint against Pike and Marist in the
Montgomery County case. (Id.) The Montgomery County complaint asserts breach of
contract, unjust enrichment, and other claims against Pike for damages allegedly
caused by delays and redesign during construction of the Marist project. (Id. at 11, 13;
Mot. to Dismiss at 4, ECF No. 11.) The complaint made no mention of Article 11, but
Pike’s Preliminary Objections asserted that the case should be dismissed for
Universal’s failure to comply with Article 11’s dispute resolution process. (Mot. at 4.)
Universal then amended its complaint, claiming that Article 11 is “unconscionable and
against public policy and, therefore, unenforceable.” (Resp. in Opp’n Ex. A, at 4, ECF
No. 12-1; Reply at 4, ECF No. 13.)
On August 22, 2017, Pike moved to dismiss the Amended Complaint in this case,
arguing that the Court should decline to exercise jurisdiction under the Declaratory
Judgment Act. Pike asserts that “[t]his action, seeking declaratory relief with respect
to the enforceability of the dispute resolution provisions of the parties’ [s]ubcontract, is
nothing more (or less) than an attempt by Plaintiff to circumvent pending court
proceedings in New York and Pennsylvania in a thinly-veiled effort to secure a ruling in
this Court to use as res judicata in the other cases.” (Mot. at 10.) In its response,
Universal also accuses Pike of “procedural gamesmanship,” (Resp. at 1), and argues
that the Court should retain jurisdiction because none of the other proceedings are
“parallel state proceedings” and that the factors articulated by the Third Circuit Court
of Appeals in Reifer v. Westport Insurance Corp., 751 F.3d 129 (3d Cir. 2014), weigh in
favor of exercising jurisdiction, (id. at 11 – 17).
The Declaratory Judgment Act provides in part that “[i]n a case of actual
controversy within its jurisdiction, . . . any court of the United States, upon the filing of
an appropriate pleading, may declare the rights and other legal relations of any
interested party seeking such declaration[.]” 28 U.S.C. § 2201(a). The Act “does not
itself create an independent basis for federal jurisdiction but instead provides a remedy
for controversies otherwise properly within the court’s subject matter jurisdiction.”
Auto–Owners Ins. Co. v. Stevens & Ricci Inc., 835 F.3d 388, 394 (3d Cir. 2016) (citing
Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671–72 (1950)).1
The Court has jurisdiction under 28 U.S.C. § 1332(a)(1). The parties are diverse and the
amount in controversy exceeds the sum of $75,000. “In actions seeking declaratory or injunctive
Actions seeking only declaratory relief are discretionary “[r]ather than being
subject to the ‘normal principle that federal courts should adjudicate claims within
their jurisdiction,” Reifer, 751 F.3d at 139 (quoting Wilton v. Seven Falls Co., 515 U.S.
277, 288 (1995)), and courts may “abstain from entertaining [them],” Allied World
Specialty Ins. Co. v. Indep. Blue Cross, No. 17-1463, 2017 WL 4922177, at *2 (E.D. Pa.
Oct. 31, 2017) (citing Kelly v. Maxum Specialty Ins. Grp., 868 F.3d 274, 281 (3d Cir.
2017)).2 “The central question is whether the controversy may ‘better be settled’ in the
state court[,]” United States v. Pa. Dep’t of Envtl. Res., 923 F.2d 1071, 1075 (3d Cir.
1991) (quoting Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 495 (1942)), and courts
are to be “governed by ‘considerations of practicality and wise judicial
administration[,]’” Reifer, 751 F.3d at 139 (quoting Wilton, 515 U.S. at 288).
Though the court’s discretion is “substantial,” it is nonetheless “bounded and
reviewable.” Kelly, 868 F.3d at 282 (quoting Reifer, 751 F.3d at 140). The Third Circuit
has established a non-exhaustive list of factors that are to be considered when deciding
whether to exercise jurisdiction over declaratory judgment actions. Courts must first
relief, it is well established that the amount in controversy is measured by the value of the object of
the litigation.” Correspondent Servs. Corp. v. First Equities Corp. of Fla., 442 F.3d 767, 769 (2d Cir.
2006) (quoting Hunt v. Wash. State Apple Advert. Com’n, 432 U.S. 333, 347 (1977)). In Manze v.
State Farm Insurance Co., the Third Circuit held that on a motion to compel arbitration, the court
“should look through to the possible award resulting from the desired arbitration” to determine the
amount in controversy. 817 F.2d 1062, 1068 (3d Cir. 1987) (quoting Davenport v. Proctor & Gamble
Mfg. Co., 241 F.2d 511, 514 (2d Cir. 1957)); see also Jumara v. State Farm Ins. Co., 55 F.3d 873, 877
(3d Cir. 1995) (same). This principle has been extended to suits seeking to enjoin arbitration. See
Webb v. Investacorp, Inc., 89 F.3d 252 (5th Cir. 1996). In the underlying dispute, Universal has
claimed damages in excess of $1.4 million. (See Resp. Ex. A, at 3.)
“[T]his discretion is ‘unique and substantial’ and is an exception to the otherwise ‘virtually
unflagging obligation’ of federal courts to ‘exercise the jurisdiction conferred on them by Congress.’”
Kelly, 868 F.3d at 281 n.5 (quoting Wilton, 515 U.S. at 284, 286). Courts, however, do not have the
same open-ended discretion to decline jurisdiction in declaratory judgment actions when the issues
include “federal statutory interpretation, the government’s choice of a federal forum, an issue of
sovereign immunity or the inadequacy of the state proceeding[.]” See Reifer, 751 F.3d at 140 n.12.
None of these exceptions apply to this case.
consider the factors discussed by the Supreme Court in Brillhart v. Excess Insurance
Co. of America, 316 U.S. 491 (1942), and determine whether there is a parallel state
proceeding. See Kelly, 868 F.3d at 282 (quoting Reifer, 751 F.3d at 144). This is a
significant, though not dispositive, factor: “‘the absence of pending parallel state
proceedings militates significantly in favor of exercising jurisdiction,’” while “the
existence of a parallel state proceeding ‘militates significantly in favor of declining
jurisdiction.’” Kelly, 868 F.3d at 282 (quoting Reifer, 751 F.3d at 144–45).
State court proceedings are parallel if, at the time the federal court is deciding
whether to abstain, there exists “substantial similarity in issues and parties between
contemporaneously pending proceedings.” Kelly, 868 F.3d at 284. Germane factors
include “the scope of the pending proceeding[,] the nature of the defenses open there”
and whether necessary parties have been joined. Brillhart, 316 U.S. at 495; Kelly, 868
F.3d at 284. However, “‘[p]roceedings are not parallel merely because they have the
potential to dispose of the same claims[,]’” Scottsdale Indem. Co. v. Collazos, No. 168239, 2017 WL 4711451, at *2 (D.N.J. Oct. 20, 2017) (quoting Kelly, 868 F.3d at 283); in
other words, the potential for the issues raised in the declaratory action to arise in the
state action is insufficient, Kelly, 868 F.3d at 285.
After determining whether there is a parallel state court proceeding, courts
should give “meaningful consideration” to the following factors to the extent they are
(1) the likelihood that a federal court declaration will resolve the
uncertainty of obligation which gave rise to the controversy;
(2) the convenience of the parties;
(3) the public interest in settlement of the uncertainty of obligation;
(4) the availability and relative convenience of other remedies;
(5) a general policy of restraint when the same issues are pending in a
(6) avoidance of duplicative litigation;
(7) prevention of the use of the declaratory action as a method of
procedural fencing or as a means to provide another forum in a race for
res judicata; and
(8) (in the insurance context), an inherent conflict of interest between an
insurer's duty to defend in a state court and its attempt to characterize
that suit in federal court as falling within the scope of a policy exclusion.
Kelly, 868 F.3d at 282–83 (quoting Reifer, 751 F.3d at 146). If the court concludes that
a parallel state proceeding does exist, it must ensure through “rigorous” analysis that
opposing factors outweigh the existence of the state court proceeding before exercising
jurisdiction. Kelly, 868 F.3d at 282 (quoting Reifer, 751 F.3d at 145).
The action pending in the Montgomery County Court of Common Pleas is a
parallel state proceeding. Universal and Pike, the only parties to this action, are both
parties to the Montgomery County case. (See Am. Compl. at 12.) The only issue here—
the enforceability of the arbitration provision—is currently before the state court where
Pike has contended that Universal failed to comply with Article 11 and Universal
contends that Article 11 is void and unenforceable. This is not a case in which the
enforceability of the arbitration clause “eventually could arise in [the] underlying state
 action[,]” Kelly, 868 F.3d at 283; the issue has already been raised and the common
pleas court will need to rule of the enforceability of Article 11 before proceeding to the
Universal’s arguments to the contrary are unavailing. It contends that its
complaint in Montgomery County “does not concern the same parties or present
identical questions of law” because it raises “substantive liability questions . . . against
both Pike and Marist.” (Resp. at 12–13, 14.) First, the mere fact that there is an
additional party (Marist) in the Montgomery County case is immaterial. The relevant
question is whether the parties in the declaratory judgment action are also parties to
the state court action and can thus represent their interests there. See Kelly, 868 F.3d
at 284 n.8 (“Strict identity between parties and claims is not necessary for pending
proceedings to be substantially similar, . . . ‘[s]ubstantial similarity’ only means that
the parties involved are closely related and that the resolution of an issue in one will
necessarily settle the matter in the other.”). Such is the case here.
Second, Universal focuses only on the causes of action asserted in its complaints
to argue that the issues presented are not similar. (Resp. in Opp. at 14.) This
disregards the Supreme Court’s explicit guidance to consider both claims and defenses
when assessing the similarity of the issues presented. See Brillhart, 316 U.S. at 495.
Pike argued that the Montgomery County case should be dismissed because Universal
failed to comply with Article 11. In response, Universal amended its complaint to
allege that “Article 11 . . . is unconscionable and against public policy, and therefore,
unenforceable.” (Reply Br. at 4, ECF No. 13; Mot. at 12.) The only issue before this
Court is also before the common pleas court.
None of the remaining Reifer factors weigh in favor of exercising jurisdiction, let
alone outweigh the strong presumption in favor of declining jurisdiction in light of the
parallel Montgomery County proceeding. Factor eight is irrelevant and Universal
acknowledges that factors two and three are, at best, neutral. (See Resp. at 17.)
Universal contends that factor one weighs in favor of exercising jurisdiction
because this Court is in a “unique [position] to resolve this ancillary dispute in an
efficient manner[.]” (Resp. at 15.) Not so—again, the only issue before this Court must
be decided in Montgomery County before the court there can even address Universal’s
claims against Pike. While a declaration by this Court would resolve uncertainty with
respect to enforceability of the arbitration clause, the Montgomery County court is not
only equally positioned to resolve that uncertainty, but is also in a positon to resolve the
entire dispute between the parties. This factor thus weighs in favor of declining
jurisdiction, as do factors four, five and six (remedies are available in state court, the
presence of the same issue counsels restraint, and efficiency dictates duplicative
litigation be avoided).
Factor seven is of particular relevance to this case. Both parties argue that the
other is engaged in gamesmanship. Pike claims that Universal’s initiation of this case
and removal of the Monroe County action (the following day) indicate “procedural
fencing.” (Mot. at 12.) Universal, on the other hand, accuses Pike of starting the race
for res judicata by filing the Monroe County action and argues that a declaratory
judgment by this Court is the only way to prevent Pike from “being rewarded” by its
conduct. (Resp. at 16.) In the Monroe County case, now in federal court, the judge
recently denied Universal’s motion to dismiss or abstain pending resolution of the
Montgomery County action, or to transfer the case to this Court (Mot. at 6 n.1), in part
due to Universal’s gamesmanship. (See The Pike Company, Inc. v. Universal Concrete
Products, Corp., No. 17–6365 (W.D.N.Y. Jan. 8, 2017), DKT No. 25.) While it appears
that each party is attempting to use the procedural rules to gain the upper hand over
the other, the Monroe County case is ultimately another battleground on which these
parties are waging their dispute. This case was the third (if not the fourth)3 action to
be filed between these parties related to the Marist project and is being used “as a
means to provide another forum in a race for res judicata.” Kelly, 868 F.3d at 283
(quoting Reifer, 751 F.3d at 146). For that reason, this factor weighs in favor of
An appropriate Order follows.
BY THE COURT:
/s/ Gerald J. Pappert
GERALD J. PAPPERT, J.
An additional lawsuit involving the Marist project, filed by another subcontractor, is
currently pending in state court in Dutchess County, New York. (Mot. at 6–7.) In that case,
Universal has asserted cross-claims against Pike for breach of contract. (Id.)
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