Welding Technologies, A Division of Riley Power, Inc. v. James Machine Works, LLC et al

Filing 29

MEMORANDUM AND ORDER denying 17 Motion to Stay or Transfer Case.(Signed by Judge Gregg Costa) Parties notified.(arrivera, )

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
GALVESTON DIVISION
§
WELDING TECHNOLOGIES, A
DIVISION OF RILEY POWER, INC., §
§
Plaintiff,
§
VS.
§ CIVIL ACTION NO. 3:12-CV-336
§
JAMES MACHINE WORKS, LLC, et §
al,
§
§
Defendants.

MEMORANDUM AND ORDER
In a perfect world, the legal controversies between two parties would
be resolved in a single lawsuit brought in a mutually acceptable forum. In
the real world, each of the two parties will often sue in its own preferred
court and then ask the court hearing its opponent’s suit to dismiss, transfer,
or abstain from hearing that case. Sometimes these procedural remedies are
appropriate, and one of the courts disposes of the suit in front of it in order to
let the dispute be resolved only in the other court. At other times they are
not, and both suits proceed in the classic “race to judgment.”
Such is the situation here, where Plaintiff Welding Technologies, a
Division of Riley Power, Inc., and Defendant James Machine Works, LLC,
are engaged in a contractual dispute over a construction project at the Dow
Chemical Company’s plant in Freeport, Texas. Both parties filed suit in the

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courts of their preferred state—Texas for Welding Technologies and
Louisiana for James Machine. Each party has now asked the court hearing
the case its opponent initiated to abstain from doing so.

Welding

Technologies filed exceptions asking the Louisiana court not to hear that
case; likewise, James Machine removed the Texas case to this Court and
now moves for a stay pursuant to the Colorado River abstention doctrine or,
in the alternative, a transfer of venue to the Western District of Louisiana.
The Court has considered the briefing and arguments of counsel and
the controlling law, and concludes that neither a stay nor a transfer is
appropriate under the facts of this case. The Court thus DENIES James
River’s motion.
I.

BACKGROUND 1

In the spring of 2011, James Machine, a company headquartered in
Monroe, Louisiana, won a contract from Samsung Engineering America,
Inc. to perform construction work at the Dow plant in Freeport. Part of that
project included a welding job that James Machine decided to subcontract.
Welding Technologies, headquartered in Massachusetts and Georgia, bid on
that job and, in January 2012, entered into a subcontract with James

1

The facts presented in this recitation are undisputed except where noted.

2

Machine to perform the welding job in exchange for payments totaling at
least $1,330,427, an amount that was later revised to over $1.5 million.
Both parties timely began performance under the subcontract.
However, on March 20, 2012, James Machine ordered Welding
Technologies to stop work and ceased making payments. James Machine
alleges it discovered that the work performed by Welding Technologies was
defective and failed to meet specifications; Welding Technologies disputes
this and alleges that it was able and willing to perform.
On March 22, 2012, James Machine sued Welding Technologies for
breach of contract in state court in Ouachita Parish, Louisiana, alleging that
Welding Technologies’s defective welding work had caused James Machine
extensive damages.

James Machine did not serve process on Welding

Technologies until July 3, 2012.
Meanwhile, in May 2012, Welding Technologies sent James Machine
a notice of its intent to place a mechanic’s lien against Dow’s Freeport plant
for the remainder of the amount owed under the subcontract. Welding
Technologies filed an affidavit claiming a lien against the Freeport plant in
the Brazoria County Clerk’s office in July 2012. Defendant Merchants
Bonding Company, acting on behalf of James Machine, filed a bond to

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indemnify against and discharge the lien, and, in August 2012, filed a notice
of that bond in the Brazoria County Clerk’s office.
In October 2012, Welding Technologies filed this suit in state court in
Brazoria County.

It brought a claim against both James Machine and

Merchants for an action on the bond, and brought claims solely against
James Machine for breach of contract and quantum meruit. James Machine
timely removed the case to this Court in November 2012.
Later in November, Welding Technologies moved to dismiss or stay
James Machine’s action in Louisiana state court. The state court denied that
motion in January 2013. That same month, James Machine filed the instant
motion for a stay in this case, or, alternatively, to transfer this case to the
Western District of Louisiana.
II.

COLORADO RIVER ABSTENTION

James Machine first argues that this Court should stay this case under
the doctrine of Colorado River abstention “because this action, . . . is a clear
exercise in forum shopping . . . .” Docket Entry No. 17 at 2. Colorado
River allows federal district courts to abstain from hearing cases in favor of
parallel state court cases “based on considerations of wise judicial
administration, giving regard to conservation of judicial resources and
comprehensive disposition of litigation.” Murphy v. Uncle Ben’s, Inc., 168

4

F.3d 734, 737–38 (5th Cir. 1999) (internal quotation marks, brackets, and
citation omitted) (quoting Colorado River Water Conservation Dist. v.
United States, 424 U.S. 800, 813, 816 (1976)). However, “federal courts
have a ‘virtually unflagging obligation . . . to exercise the jurisdiction given
them’” and the application of the doctrine is strictly limited to cases with
“exceptional circumstances” justifying abstention. Moses H. Cone Mem’l
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 15, 19 (1983) (quoting
Colorado River, 424 U.S. at 817); see also 17A CHARLES ALAN WRIGHT ET
AL.,

FEDERAL PRACTICE AND PROCEDURE § 4247 (3d ed. 2007) (“After Cone

there will be rare cases in which ‘exceptional circumstances’ will exist
justifying stay or dismissal because of a concurrent state proceeding, but in
most cases neither stay nor dismissal will be proper and the federal court
will be obliged to exercise its jurisdiction.” (italics added)); Josue Caballero,
Note, Colorado River Abstention Doctrine in the Fifth Circuit: The
Exceptional Circumstances of a Likely Reversal, 64 BAYLOR L. REV. 277,
299–300 (2012) (finding that the Fifth Circuit has reversed nearly nine out
of every ten appealed district court decisions to abstain under Colorado
River, but has never reversed a district court’s decision not to abstain).
Six factors guide this Court’s decision whether to stay this case under
Colorado River in favor of James Machine’s Louisiana action:

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“(1) assumption by either court of jurisdiction over a res; (2) the relative
inconvenience of the forums; (3) the avoidance of piecemeal litigation;
(4) the order in which jurisdiction was obtained by the concurrent forums;
(5) whether and to what extent federal law provides the rules of decision on
the merits; and (6) the adequacy of the state proceedings in protecting the
rights of the party invoking federal jurisdiction.” Murphy, 168 F.3d at 738
(citing Wilton v. Seven Falls Co., 515 U.S. 277, 285–86 (1995)). The
decision of whether to surrender jurisdiction because of parallel state court
litigation “‘does not rest on a mechanical checklist’ of these factors, but
rather ‘on a careful balancing of them, as they apply in a given case, with the
balance heavily weighted in favor of the exercise of jurisdiction.’” Kelly
Inv., Inc. v. Cont’l Common Corp., 315 F.3d 494, 497–98 (5th Cir. 2002)
(quoting Moses H. Cone, 460 U.S. at 16) (brackets omitted)).
As a preliminary matter, Welding Technologies argues that the Court
need not even reach the Colorado River factors. It contends that the two
cases are not parallel because they do not “involve the same parties and the
same issues,” Am. Guarantee & Liab. Ins. Co. v. Anco Insulations, Inc., 408
F.3d 248, 251 (5th Cir. 2005), and that a stay would be inappropriate
because Welding Technologies’s claim on the bond indemnifying its nowdischarged lien on Dow’s Freeport plant ultimately will require action by

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this Court. Docket Entry No. 20 at 16–18; see Moses H. Cone, 460 U.S. at
28 (“[T]he decision to invoke Colorado River necessarily contemplates that
the federal court will have nothing further to do in resolving any substantive
part of the case . . . .”). The Court need not resolve these threshold issues,
however, for James Machine’s argument for a stay fails under the wellestablished Colorado River factors.
A.

First Factor: Jurisdiction Over a Res

The first factor is whether either court has exercised jurisdiction over
a res of real property. The parties agree that there is no res under either
court’s

jurisdiction

since

Defendants

bonded

around

Welding

Technologies’s mechanic’s lien on Dow’s Freeport plant. The absence of a
res means that this first factor “is not, however, a merely neutral item”;
instead, it weighs against abstention. Evanston Ins. Co. v. Jimco, Inc., 844
F.2d 1185, 1191 (5th Cir. 1988).
B.

Second Factor: Relative Inconvenience of the Forums

The second factor is the relative inconvenience of the two forums, a
factor that “primarily involves the physical proximity of the federal forum to
the evidence and witnesses” and depends on “whether there is ‘any
contention that the federal forum [is] any less convenient to the parties than
the state forum.’” Id. at 1191–92 (quoting Moses H. Cone, 460 U.S. at 19).

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James Machine argues that this Court is a less convenient forum than the
Louisiana state court because there are no party witnesses remaining in
Texas and James Machine’s headquarters is in Ouachita Parish. However,
the parties’ initial disclosures reveal that all identified nonparty witnesses—
namely, the individuals who worked at Dow’s Freeport plant and would
have personal knowledge of whether Welding Technologies’s work was
defective—are located in either Houston or Freeport, Texas. See Docket
Entry No. 20-3 at 7–9, 14–16, 19–20. Whatever inconvenience may be
caused to James Machine’s employees by proceeding in this Court is
outweighed by the greater convenience this Court offers to the nonparty
witnesses. The second factor weighs heavily against abstention.
C.

Third Factor: Avoiding Piecemeal Litigation

The third factor is the avoidance of piecemeal litigation. To the extent
that these suits are the same, as James Machine argues, there is only a risk of
duplicative litigation, not of piecemeal litigation. See Murphy, 168 F.3d
738.

“The prevention of duplicative litigation is not a factor to be

considered in an abstention determination.” Evanston, 844 F.2d at 1192
(citing Colorado River, 424 U.S. at 817). And to the extent that Welding
Technologies’s action on the bond is separate and must be resolved in this
suit, as it argues, abstaining would increase the risk of piecemeal litigation.

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The third factor is thus neutral, at most, and weighs against abstention. See
Murphy, 168 F.3d at 738.
D.

Fourth Factor: Order in Which Jurisdiction Was
Obtained

The fourth factor is the order in which the two courts obtained
jurisdiction over the respective actions. However, this factor “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.” Id. (citations and
internal quotations omitted). Although James Machine filed the Louisiana
case in March 2012, no action was taken in that case until seven months
later, in October 2012, when settlement talks broke down and Welding
Technologies filed this suit. Moreover, it appears that this case is closer to
resolution than the Louisiana action. The parties have already exchanged
some written discovery and the Court has set an October 2013 trial date. At
most, the fourth factor weighs neither in favor of nor against abstention. Cf.
Id. at 738–39 (holding that the factor weighed against abstention where the
state and federal suits had been filed at the same time and were proceeding
at the same pace); Conseco Fin. Servicing Corp. v. Shinall, 51 F. App’x 483,
2002 WL 31319368, at *5 (5th Cir. 2002) (holding that the factor weighed
slightly in favor of abstention where some discovery had occurred in the
state court action, which was filed nine months before the federal action).
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E.

Fifth Factor: Whether and to What Extent Federal
Law Provides the Rules of Decision

The fifth factor is the presence of federal law issues in the case. This
factor generally can only be neutral, when there are no federal issues, or
weigh against abstention, when federal issues exist; the absence of federal
issues “does not counsel in favor of abstention.” Black Sea Inv., Ltd. v.
United Heritage Corp., 204 F.3d 647, 651 (5th Cir. 2000). The parties are in
agreement that there are no issues of federal law in this case. Thus, the fifth
factor weighs neither in favor of nor against abstention.
F.

Sixth Factor: Whether the State Court Proceedings
Are Adequate to Protect the Rights of the Party
Invoking Federal Jurisdiction

The final factor is whether the party invoking federal jurisdiction
would have its interests adequately protected in the Louisiana action. This
factor, with its focus on the “rights of the party invoking federal
jurisdiction,” highlights an odd feature of the Colorado River issue in this
case: the party that originally invoked federal jurisdiction by removing the
case from state court, James Machine, now seeks to avoid federal
jurisdiction. It is not at all clear to the Court that the party whose removal
vested jurisdiction in a federal court should be able to then invoke a doctrine
rooted in “principles of federalism and comity.” Growe v. Emison, 507 U.S.
25, 32 (1993) (citing Colorado River, 424 U.S. at 814–17); see also Black
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Sea Inv., 204 F.3d at 650 (“The Colorado River abstention doctrine is based
on principles of federalism, comity, and conservation of judicial
resources.”). Absent James Machine’s removal of this case to federal court,
there would be no issue of the federal court’s “potential interference with
ongoing state court proceedings.” Brown & Williamson Tobacco Corp. v.
Williams, 81 F.3d 155, 1996 WL 101363, at *2 (5th Cir. 1996) (unpublished
opinion). But while the Court has doubts about whether James Machine
should be able to ask a federal court to abstain when it is the reason the
federal court got involved in the first place, Welding Technologies does not
raise this concern and the Court finds that abstention is not warranted when
the Colorado River factors are applied.
Going back to the sixth factor, which prompted the Court to consider
the more general issue about the propriety of Colorado River given the
procedural posture of this case, it is sufficient to note that, like the fifth
factor, the sixth factor “can only be ‘a neutral factor or one that weighs
against, not for, abstention.’” Murphy, 168 F.3d at 739 (quoting Evanston,
844 F.2d at 1193).
Thus, of the six Colorado River factors, at least three weigh against
abstention while three, at most, weigh neither in favor of nor against

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abstention. 2 Notably, the second factor, the relative convenience of the two
forums, weighs heavily against abstention because this Court is a far more
convenient forum for the nonparty witnesses.

The balancing of the

Colorado River factors convinces the Court that there are no “exceptional
circumstances” that justify disrupting the “balance heavily weighted in favor
of the exercise of jurisdiction.” Moses H. Cone, 460 U.S. at 16, 19. A stay
is not warranted.
III.

MOTION TO TRANSFER VENUE

James Machine alternatively argues that this Court should transfer the
case pursuant to 28 U.S.C. § 1404(a) to Monroe, in the Western District of
Louisiana, the district encompassing both James Machine’s corporate offices
and the parish in which its state court action is pending. Under section
1404(a), “[f]or the convenience of parties and witnesses, in the interest of
justice, a district court may transfer any civil action to any other district or
division where it might have been brought or to any district or division to
2

James Machine argues that a seventh factor, whether this Court’s exercise of
jurisdiction would promote forum shopping, weighs in favor of a stay. Docket Entry No.
17 at 19. Welding Technologies points out that considerations of forum shopping,
although mentioned by the Supreme Court in a footnote in Moses H. Cone, are not
recognized as a formal Colorado River factor. See Docket Entry No. 20 at 15 n.7; see
also WRIGHT ET AL., supra, at § 4247 (noting that some courts have considered forum
shopping in the Colorado River analysis, but that courts may not decline to exercise
jurisdiction because of forum shopping alone). To the extent that considerations of forum
shopping may be relevant to the Colorado River analysis, the Court simply notes that, in
this case, these considerations would not affect the Court’s decision that a stay is
inappropriate.

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which all parties have consented.” 28 U.S.C. § 1404(a). The statute is
intended to save “time, energy, and money while at the same time protecting
litigants, witnesses, and the public against unnecessary inconvenience.”
Republic Capital Dev. Grp., L.L.C. v. A.G. Dev. Grp., Inc., No. H-05-1714,
2005 WL 3465728, at *8 (S.D. Tex. Dec. 19, 2005) (citing Van Dusen v.
Barrack, 376 U.S. 612 (1964)). The plaintiff’s initial choice of forum is
entitled to deference; thus, “when the transferee venue is not clearly more
convenient than the venue chosen by the plaintiff, the plaintiff’s choice
should be respected.” In re Volkswagen of Am., Inc. (Volkswagen II), 545
F.3d 304, 315 (5th Cir. 2008) (en banc).
Welding Technologies argues that a transfer is not warranted because
the action could not originally have been brought in the Western District of
Louisiana. See 28 U.S.C. § 1404(a). It points out that the Texas statute
addressing bonds filed to indemnify mechanic’s liens required it to file suit
in Brazoria County district court. See Tex. Prop. Code Ann. § 53.175.
Although transfer is limited to districts in which the plaintiff could have
brought suit, the courts have generally interpreted this requirement to mean
that suit could have been brought under federal law, that is, “that at least
venue and subject-matter jurisdiction must be proper in the transferee
district, and some courts have held that the defendant must also be amenable

13

to service of process.” See Ellis v. Great Sw. Corp., 646 F.2d 1099, 1104
n.5 (5th Cir. 1981) (citing 15 CHARLES ALAN WRIGHT

ET AL.,

FEDERAL

PRACTICE AND PROCEDURE §§ 3827, 3845 (1976 & 1981 Supp.)). The Court
is unaware of any cases holding that a state law limitation on where suit may
be brought is relevant to the determination of where suit “might have been
brought” for purposes of the federal venue transfer statute. 28 U.S.C. §
1404(a).
However, the Court need not resolve this threshold issue, for in any
event the balance of the private and public interest factors evaluated when
deciding a section 1404(a) motion weighs against a transfer.
The private concerns include: (1) the relative ease of access to
sources of proof; (2) the availability of compulsory process to
secure the attendance of witnesses; (3) the cost of attendance
for willing witnesses; and (4) all other practical problems that
make trial of a case easy, expeditious and inexpensive. The
public concerns include: (1) the administrative difficulties
flowing from court congestion; (2) the local interest in having
localized interests decided at home; (3) the familiarity of the
forum with the law that will govern the case; and (4) the
avoidance of unnecessary problems of conflict of laws of the
application of foreign law.
In re Volkswagen AG (Volkswagen I), 371 F.3d 201, 203 (5th Cir. 2004)
(citation omitted).
The first private interest factor is a wash. A transfer would ease access
to whatever documents and other sources of proof are held at James

14

Machine’s corporate offices in Monroe, but it would make it more difficult to
access any evidence that may be held by nonparties Dow and Samsung at
those companies’ facilities in this District.

However, the second private

interest factor weighs heavily against a transfer because only this Court would
have subpoena power over the identified nonparty witnesses.

Those

individuals all reside in either Houston or Freeport, within 100 miles of
Galveston but more than 100 miles from Louisiana, and thus would be able to
quash any subpoena issued by the Western District of Louisiana. See Fed. R.
Civ. P. 45(c)(3)(A)(ii).

The third private interest factor weighs slightly

against a transfer. A transfer would merely shift the cost of attendance from
James Machine’s party witnesses to any nonparty witnesses that reside in this
District. See State St. Capital Corp. v. Dente, 855 F. Supp. 192, 198 (S.D.
Tex. 1994) (“[I]t is the convenience of non-party witnesses, rather than that of
party witnesses, that is the more important factor and is accorded greater
weight in a transfer of venue analysis.” (citations omitted)); cf. Masco
Operators, Inc. v. Thompson Tractor Co., No. G-12-152, 2012 WL 3028075,
at *2 (S.D. Tex. July 23, 2012) (“Transferring venue from Galveston to
Mobile would do no more than to shift the burden from [defendant] to
[plaintiff] and would run counter to Section 1404(a)’s principle of affording
deference to a plaintiff’s choice of forum.”). The fourth factor is neutral.

15

James Machine argues that a transfer would avoid the prospect of having two
separate trials and thus would make trying the case more “easy, expeditious
and inexpensive.” Volkswagen I, 371 F.3d at 203 (citation omitted). But this
argument is flawed because a transfer would not result in consolidation of the
state and federal actions, which would still proceed independently towards
trial. The private interest factors weigh against a transfer.
The public interest factors also weigh against a transfer. For the first,
court congestion, although the Western District of Louisiana has
approximately 35% fewer cases filed per judge than the Southern District of
Texas, the Galveston division is unusual in its very low number of criminal
cases, which frees this Court for speedy trials in civil cases. See Federal
Court

Management

Statistics:

September

2012,

U.S.

Courts,

http://www.uscourts.gov/Statistics/FederalCourtManagementStatistics/distri
ct-courts-september-2012.aspx (last visited Mar. 18, 2013). The Court also
notes that this case is already well on its way to an October 2013 trial date,
and that, in 2012, civil cases in the Southern District of Texas reached
disposition nearly four months faster than those in the Western District of
Louisiana. See id. The first public interest factor weighs against a transfer.
The other public interest factors either weigh against a transfer or are
a wash. The second factor weighs against a transfer because the Southern

16

District of Texas has a significant localized interest in a case involving both
alleged defective welding services provided at an industrial facility in
Brazoria County and a lien and bond filed in the Brazoria County Clerk’s
office. As for the third public interest factor, although the parties disagree
on whether Texas or Louisiana law applies to their contractual claims, it
seems likely that Texas law applies to Welding Technologies’s action on the
bond and thus that this Court will be more familiar than the Western District
of Louisiana with at least that aspect of the case. Finally, the choice of law
issues cannot be avoided and must ultimately be decided by either this Court
or the Western District of Louisiana.
Thus, the balance of the private and public interest factors weighs
against a transfer, the proposed transferee venue is not “clearly more
convenient” than the Southern District of Texas, Volkswagen II, 545 F.3d at
315, and the motion to transfer will be denied.

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IV.

CONCLUSION

Under the facts of this case, neither the extraordinary remedy of a stay
under Colorado River nor a transfer to the Western District of Louisiana
pursuant to 28 U.S.C. § 1404(a) is appropriate. Defendant’s motion to stay
or to transfer (Docket Entry No. 17) is DENIED.
IT IS SO ORDERED.
SIGNED this 18th day of March, 2013.
______________________________
Gregg Costa

United States District Judge

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