Kamtel, Inc. v. Bore Tech Construction, LLC

Filing 21

ORDER denying 11 , 12 and 13 Motion to Dismiss under Fed. R. Civ. P. 12(b)(1)-(3) and (6); granting 11 motion to stay this case pending final judgment in Bore Tech Construction, LLC v. Kamtel, Inc., Case No. 2016-32024 (Harris Cty., Tex . Distr. Ct.); denying as unnecessary 14 Motion to Transfer to Southern District of Texas, Houston Division; and directing the clerk of court to administratively close this case. Either party may move to reopen the case within 60 days of the completion of the state court proceedings, including appeals. Signed by District Judge Barbara B. Crabb on 2/9/2017. (jls)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - KAMTEL, INC.,
OPINION AND ORDER
Plaintiff,
16-cv-633-bbc
v.
BORE TECH CONSTRUCTION, LLC,
Defendant.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Plaintiff Kamtel, Inc. is suing defendant Bore Tech Construction, LLC for breach of
contract and tortious interference with existing and prospective contracts relating to a
subcontract under which Bore Tech agreed to provide construction services to Kamtel on several
of its projects. Kamtel is relying on diversity of citizenship, 28 U.S.C. § 1332 as a basis for
subject matter jurisdiction, and a forum selection clause in the parties’ agreement as a basis for
personal jurisdiction. Dkt. #1.
Four months before Kamtel filed this case, Bore Tech filed its own breach of contract
action in a state court in Texas. After filing both an answer in the Texas action and its
complaint in this court, Kamtel sought to enforce the forum selection clause by asking the state
court to transfer its case to this court, or in the alternative, dismiss the Texas lawsuit. The state
court denied both motions.
Before the court are Bore Tech’s motions to dismiss this case under Fed. R. Civ. P.
12(b)(1)-(3) and (6) for improper venue, lack of personal and subject matter jurisdiction and

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failure to state a claim upon which relief can be granted on the ground that the forum selection
clause is invalid and the parties’ dispute is being litigated in state court. Dkt. ##11-13.
Alternatively, Bore Tech asks the court to “abate” or stay this case pending the outcome of the
Texas case, dkt. #11, or transfer the case to the United States District Court for the Southern
District of Texas pursuant to 28 U.S.C. § 1404 or § 1406(a). Dkt. #14.
For the reasons stated below, I conclude that Bore Tech has failed to show that dismissal
is warranted under any subsection of Fed. R. Civ. P. 12(b). However, in light of the ongoing
litigation in Texas involving the same contract, Kamtel’s delay in asserting the forum selection
clause in that case and general concerns with judicial administration, I will grant Bore Tech’s
motion to stay proceedings in this case pending a final judgment in the Texas lawsuit. Because
I am granting a stay, it is unnecessary to consider Bore Tech’s motion to transfer this case to the
Southern District of Texas, which it made only in the alternative to its request for a stay.
The following facts are drawn from Kamtel’s complaint and the parties’ subcontract. I
also refer to the parties’ filings in the Texas case and the order entered by the state court.

BACKGROUND
Plaintiff Kamtel, Inc. is a Wisconsin corporation with its principal place of business in
Wisconsin Rapids, Wisconsin. It is a general contractor for telecommunications providers and
its services include the placement and repair of buried and aerial cables across the Unites States.
Defendant Bore Tech Construction, LLC is a Texas limited liability company that provides
general construction contracting services. Bore Tech has its principal place of business in
Houston, Texas, and only one member, Stacia George, a citizen of Texas.

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For approximately thirty years, Kamtel has contracted with AT&T Inc. and its
predecessors and affiliates to perform outside plant engineering, construction management, right
of way acquisition and cable splicing, installation, and repair throughout the United States. Dkt.
#1 at ¶ 7. In early 2014, Bore Tech approached Kamtel and proposed that Kamtel hire Bore
Tech as its subcontractor on jobs for AT&T. Id. at ¶ 9. On June 14, 2014, Kamtel and Bore
Tech entered into a written agreement under which Bore Tech would serve as a subcontractor on
Kamtel’s AT&T projects, supplying labor, equipment and materials for cable placement. Id. at
¶ 11; dkt. #15, exh. #6. The agreement contained a Wisconsin choice of law provision and a
forum selection clause, which provides that any lawsuit arising from the parties’ contractual
relationship would be litigated exclusively in the State of Wisconsin. Dkt. #15, exh. #6 at ¶ 20.
Beginning in the fall of 2015, Kamtel became dissatisfied with Bore Tech’s performance.
The parties failed to repair their relationship, and Kamtel terminated the subcontract in March
2016. Dkt. #1 at ¶¶ 15-30. This action led to a small cascade of court filings.
On May 16, 2016, Bore Tech filed suit in the state district court for Harris County, Texas,
alleging claims of breach of contract, unjust enrichment and quantum merit against Kamtel. Dkt.
#15, exh. #1. AT&T filed an interpleader claim and deposited funds in the state court’s registry.
Dkt. #18, exh. #1. See also Heggy v. American Trading Employee Retirement Account Plan,
123 S.W.3d 770, 775 (Tex. App. 2003) (“A party faced with competing claims obtains a
discharge of liability to the competing claimants by interpleading the funds.”). In addition, two
other companies intervened in the lawsuit to collect funds owed to them by either Kamtel or Bore
Tech, depending on who was found liable for the invoices under the parties’ agreement. Dkt.
#18, exh. ##2-3. Kamtel filed an answer and general denial on July 1, 2016, but it did not assert

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any counterclaims or mention the forum selection clause in its pleading. Dkt. #15, exh. #2.
On September 16, 2016, Kamtel filed its lawsuit in this court, alleging claims against Bore
Tech for breach of contract and tortious interference with existing and prospective contracts.
Dkt. #1. Three days later, Kamtel filed a motion in the Texas state court to transfer Bore Tech’s
case to Wisconsin based on the forum selection clause in the parties’ agreement or, in the
alternative, dismiss the case. The Texas court denied Kamtel’s motion as “not meritorious” in
a one-sentence order. Dkt. #15, exh. #5. At a hearing on the motion, the state court explained
that there was no authority for a district court in Texas to transfer a case to a federal district court
in Wisconsin. Hrg. Tr. (Oct. 21, 2016), dkt. #18, exh. #4 at p. 6. The state court also made
the following finding:
I understand you have [a] forum selection clause. I don't think it is unreasonable
to litigate this case in Texas in this court because it would be unreasonable to
require [the intervening] parties to be dismissed and have to file separate lawsuits.
Id. at p. 17.

OPINION
I. MOTION TO DISMISS
Bore Tech has moved to dismiss this case for lack of subject matter jurisdiction under Fed.
R. Civ. P. 12(b)(1), lack of personal jurisdiction under Rule 12(b)(2), improper venue under Rule
12(b)(3) and failure to state a claim under Rule 12(b)(6). Because Bore Tech mentions 12(b)(6)
only in a footnote, dkt. #15 at 2 n. 1, and fails to advance any argument about why Kamtel’s
complaint fails to state a claim upon which relief may be granted, it has waived the argument.
Wehrs v. Wells, 688 F.3d 886, 891 n. 2 (7th Cir. 2012) (undeveloped and unsupported

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arguments are considered waived); Puffer v. Allstate Insurance Co., 675 F.3d 709, 718 (7th Cir.
2012) (undeveloped arguments and arguments unsupported by pertinent authority are waived).
Bore Tech makes a similarly conclusory statement that this case should be dismissed for lack of
subject matter jurisdiction, but does not challenge Kamtel’s assertion of subject matter
jurisdiction on the basis of diversity of citizenship under 28 U.S.C. § 1332, and no defect is
apparent. § 1332 (“[D]istrict courts shall have original jurisdiction of all civil actions where the
matter in controversy exceeds the sum or value of $75,000 . . . and is between . . . citizens of
different States.”); Johnson v. Wattenbarger, 361 F.3d 991, 992 (7th Cir. 2004) (district court
has independent duty to determine existence of subject matter jurisdiction). Accordingly, I will
deny Bore Tech’s motion to dismiss under Rule 12(b)(1) for lack of subject matter jurisdiction
and motion to dismiss under Rule 12(b)(6) for failure to state a claim.
With respect to Bore Tech’s Rule 12(b)(2) and (3) motions, the parties agree that the only
possible basis for personal jurisdiction over Bore Tech and for venue in this court is the forum
selection clause in their subcontract agreement. (Although the parties debated the difference
between the terms “venue” and “forum” in the Texas litigation, Bore Tech has not raised that
issue in this case. In any event, courts generally do not distinguish venue selection clauses from
forum selection clauses. IFC Credit Corp. v. Aliano Brothers General Contractors, 437 F.3d 606,
607 (7th Cir. 2006) (treating clause stating that all actions must be “venued” in certain place as
forum selection clause); Continental Insurance Co. v. M/V ORSULA, 354 F.3d 603, 607 (7th
Cir. 2003) (“[A] forum-selection clause [is] a contractual term used to select a specific venue.”).)
Although the brief that Bore Tech filed in support of its motions is convoluted and contains
scattershot arguments that are not fully developed in many instances, I understand Bore Tech to

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assert that the forum selection clause is either invalid or unenforceable for the following reasons:
1) The Texas state court’s decision not to enforce the forum selection clause has
a res judicata effect on this case.
2) The forum selection clause and the choice of law provision in the subcontract
are void under Texas Business & Commmerce Code § 272.001, which permits a
“party obligated by contract to perform construction or repair . . . of an
improvement to real property” to void any provision “making the contract or any
conflict arising under the contract subject to another state’s law.”
3) Enforcement of the forum selection clause would be unreasonable under either
state or federal law because (i) a similar action is already proceeding in Texas with
an interpleader and third-party interveners; and (ii) the Texas state court has
already issued a ruling on the applicability of the forum selection clause.
4) Kamtel waived its right to enforce the forum selection clause by not raising the
issue before or at the time it filed an answer in the Texas state case.
5) Kamtel is estopped from enforcing the forum selection clause in this court
because (i) it intentionally accepted the jurisdiction of the Texas court by not
removing the case to federal court; and (ii) it filed a general denial answer in the
Texas lawsuit.
Complicating the analysis of many of these issues is the question whether federal, Wisconsin or
Texas law applies, which the parties also dispute.
I can address Bore Tech’s argument regarding res judicata summarily. As Kamtel points
out, Bore Tech provides no legal authority or argument for its repeated assertion that res judicata
bars this lawsuit. Accordingly, it has waived the argument by failing to develop it. Wehrs, 688
F.3d at 891 n.2. However, even if there was no waiver, the res judicata argument is premature.
The United States Supreme Court has held that a federal court must give a state court judgment
“the same preclusive effect as would be given that judgment under the law of the state in which
the judgment was rendered.” Migra v. Warren City School District Board of Education, 465 U.S.
75, 81 (1984). Under Texas law, “[r]es judicata precludes relitigation of claims that have been

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finally adjudicated.” Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996). Because
the Texas litigation is still in its early stages and the state court has not entered a final judgment
on Bore Tech’s claims, the state court’s denial of Kamtel’s motion to dismiss does not have
preclusive effect in this case.
I will start with a discussion of the choice of law issue, which includes Bore Tech’s
argument that the forum selection clause is void under Texas law, and then address Bore Tech’s
remaining arguments regarding the validity and enforcement of the clause.

A. Choice of Law
“When assessing the validity of a forum selection clause, the first step is to determine
whether state law or federal common law ‘governs the issue of validity.’” Israeli v. Dott. Gallina
S.R.L., 632 F. Supp. 2d 866, 868 (W.D. Wis. 2009) (quoting IFC Credit, 437 F.3d at 608).
Under the well-settled doctrine announced in Erie Railroad Co. v. Tompkins, 304 U.S. 64
(1938), “federal courts sitting in diversity apply state substantive law and federal procedural law.”
Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 427 (1996). However, determining what
qualifies as a procedural matter versus a substantive matter is not always straightforward. Hahn
v. Walsh, 762 F.3d 617, 629 (7th Cir. 2014) (“[A]nalysis of particular applications of this broad
doctrine is more nuanced than simply labeling a state law ‘substantive’ or ‘procedural’.”). As Bore
Tech points out, there is some confusion about whether federal or state law applies to the validity
and enforcement of forum-selection clauses.

Matthew J. Sorensen, “Enforcement of

Forum-Selection Clauses in Federal Court After Atlantic Marine,” 82 Fordham L. Rev. 2521,
2524 (2014). Complicating matters is the fact that neither party in this case makes a coherent

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or convincing choice of law argument.
Bore Tech cites some authority in support of its view that state and not federal law should
determine whether a forum selection clause is valid and enforceable. Northwest National
Insurance Co. v. Donovan, 916 F.2d 372, 374 (7th Cir. 1990) (stating in dicta that “[v]alidity
and interpretation are separate issues, and it can be argued that as the rest of the contract in
which a forum selection clause is found will be interpreted under the principles of interpretation
followed by the state whose law governs the contract, so should that clause be.”). However, it
fails to explain or cite any authority for its conclusory assertion that Texas state law both applies
and voids the forum selection clause in this case.
In determining which state’s substantive law applies in a diversity case, a federal court
generally looks to the choice of law rules of the state in which it sits—in this case, Wisconsin.
Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496 (1941); McCoy v.
Iberdrola Renewables, Inc., 760 F.3d 674, 684 (7th Cir. 2014). The first rule of choice of law
in Wisconsin is “that the law of the forum should presumptively apply unless it becomes clear
that nonforum contacts are of the greater significance.”

State Farm Mutual Automobile

Insurance Co. v. Gillette, 2002 WI 31, ¶ 51, 251 Wis. 2d 561, 588, 641 N.W.2d 662, 676
(internal quotation omitted). In making this determination, Wisconsin courts consider five
choice-influencing factors: (1) predictability of results, which focuses on the parties’ expectations;
(2) maintenance of interstate and international order, which requires the jurisdiction with
minimal concerns to defer to the jurisdiction with substantial concerns; (3) “simplification of the
judicial task” of applying the state law; (4) advancement of the forum’s governmental interests;
and (5) application of the better rule of law. Id., 251 Wis. 2d at 588-94; Heath v. Zellmer, 35

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Wis. 2d 578, 596, 151 N.W.2d 664, 672 (1967). Bore Tech does not cite Wisconsin’s (or any
other state’s) choice of law rules or provide any information that would help the court analyze
the relevant factors.
At various points in its brief, Bore Tech emphasizes in its brief the fact that it and the
third-party interveners are Texas citizens, but it has not shown that Texas has any particular
interest in Kamtel’s claims or the parties’ contract apart from the fact that Bore Tech filed its
claims in Texas. (Bore Tech mentions that most of the work it performed on the AT&T projects
was in Texas, but it does not identify any evidence from which the court can draw this
conclusion, and the subcontract is silent on the issue.) Moreover, the parties expressed a clear
intent for Wisconsin law to apply to any disputes involving the contract.
Because Bore Tech failed to raise or develop a meaningful argument that Texas substantive
law voids the parties’ forum selection clause, it has waived the argument. McCoy, 760 F.3d at
684 (party may waive choice of law issue by failing to assert it and when no party raises choice
of law issue, federal court may apply forum state’s substantive law). Therefore, if the validity and
enforcement of the forum selection clause is a matter of state substantive law and not federal
procedure, Wisconsin law would apply.
For its part, Kamtel merely assumes that federal law applies to the forum selection clause
and focuses its discussion on the Supreme Court’s deference to forum selection clauses in Atlantic
Marine Construction Co., Inc. v. United States District Court for the Western District of Texas,
__ U.S. __, 134 S. Ct. 568, 575 (2013) (holding that district court should grant motion to change
federal venue based on valid forum selection clause “unless extraordinary circumstances unrelated
to the convenience of the parties clearly disfavor a transfer.”). However, this discussion does little

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to advance the choice of law analysis. As Bore Tech points out, Atlantic Marine involved the
transfer of cases between federal courts under 28 U.S.C. § 1404(a), which is not the issue in this
case, and “left open the question of whether state or federal law governs the validity of
forum-selection clauses in diversity cases.” Sorensen, 82 Fordham L. Rev. at 2545-46.
Federal courts are split on the issue whether state versus federal law applies to forum
selection clauses. Id. Given the confusion, many courts, including the Court of Appeals for the
Seventh Circuit, avoid deciding the issue. Id. at 2546-47; IFC Credit, 437 F.3d at 609 (“It seems
that either position is arbitrary. If federal law governs, an arbitrary difference between a federal
and a state litigation is created. If state law governs, an arbitrary difference between a dismissal
(followed by a refiling) and a transfer is created. Prudence in this situation counsels us to reserve
decision and instead consider how the appeal would be decided under either view and hope that
the result will be the same.”). As in IFC Credit, it is unnecessary to resolve the issue in this case
because as discussed below, the result in this case is the same under either standard.

B. Enforcement of Forum Selection Clause
As Bore Tech mentions briefly the United States Supreme Court has held that forum
selection clauses “are prima facie valid and should be enforced unless enforcement is shown by
the resisting party to be ‘unreasonable’ under the circumstances” or “would contravene a strong
public policy of the forum in which suit is brought, whether declared by statute or by judicial
decision.” M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 and 15 (1972). Although not
entirely on point in this case, the Court’s more recent decision in Atlantic Marine reiterated the
view that forum selection clauses should be “given controlling weight in all but the most

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exceptional cases.” M/S Bremen, 134 S. Ct. at 579 (addressing motions to transfer under 28
U.S.C. § 1404(a)). Wisconsin has a strong presumption favoring venue in the forum specified
in a contractual forum selection clause unless the clause is unconscionable or enforcement is
shown to be unreasonable under the circumstances. Israeli v. Dott. Gallina S.R.L., 632 F. Supp.
2d 866, 869 (W.D. Wis. 2009); Converting/Biophile Laboratories, Inc. v. Ludlow Composites
Corp., 2006 WI App 187, ¶ 22, 296 Wis. 2d 273, 722 N.W.2d 633; Pietroske, Inc. v.
Globalcom, Inc., 2004 WI App 142, ¶ 1, 275 Wis.2d 444, 685 N.W.2d 884.
Apart from alleging that the forum selection clause is void under Texas law, Bore Tech
does not challenge the conditions under which the contract or clause were formed or develop an
argument that the terms of the clause are unconscionable. E.g., Bremen, 407 U.S. at 15 (forum
selection clause may not be enforced if it was result of fraud or overreaching); Pietroske, 2004 WI
App 142, ¶ 6 (“In the context of a forum-selection clause, we are concerned about procedural and
substantive unconscionability.”). Instead, Bore Tech’s arguments against enforcing the forum
selection clause include waiver, estoppel and forum shopping and focus on Kamtel’s conduct in
the Texas litigation. Specifically, Bore Tech contends that Kamtel waived its forum selection
clause arguments and is estopped from bringing this suit on the basis of the clause because it
intentionally accepted the jurisdiction of the Texas state court and did not seek to enforce the
forum selection clause in a timely manner. However, as Kamtel points out, Bore Tech fails to cite
any relevant legal authority for its position that Kamtel’s claims should be dismissed on these
grounds.
Bore Tech discusses estoppel only in general terms and bases its waiver argument on a
Wisconsin state procedural statute regarding the time for filing a motion to stay proceedings

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pending trial in a foreign forum. Wis. Stat. § 801.63(2) (after a court finds that trial should take
place in a foreign forum, “[t]he motion to stay the procaedings shall be filed prior to or with the
answer unless the motion is to stay proceedings on a cause raised by counterclaim, in which
instance the motion shall be filed prior to or with the reply.”). Bore Tech does not explain why
it believes that it is relevant that Kamtel may have violated Wisconsin law by filing its motion to
transfer or dismiss the Texas case after filing an answer in the Texas court. As Kamtel points out,
Texas rules of procedure generally apply to cases pending in Texas state courts, even where
another state’s substantive law applies. Man Industries (India), Ltd. v. Midcontinent Express
Pipeline, LLC, 407 S.W.3d 342, 352 (Tex. App. 2013) (“Even if a contract contains a
choice-of-law provision in which the parties have agreed to apply the law of a different state, ‘we
as the forum will apply our own law to matters of remedy and procedure.’”) (quoting Autonation
Direct.Com, Inc. v. Thomas A. Moorehead, Inc., 278 S.W.3d 470, 472 (Tex. App. 2009)). Bore
Tech seems to concede that Kamtel’s motion to transfer or dismiss was not untimely under Texas
law.
In its reply brief, Bore Tech provides more explanation, arguing that waiver of a forum
selection clause is a matter of substantive contract law, which is governed by Wisconsin law in
this case. (I note that this argument is in apparent conflict with Bore Tech’s earlier argument that
Texas substantive law applies and voids the forum selection clause altogether.) The Court of
Appeals for the Fifth Circuit recently noted in an unpublished opinion that “[t]here is a lack of
authority determining whether federal or state law principles control the standard for determining
a party’s waiver of rights under a forum selection clause.” Wellogix, Inc. v. SAP American, Inc.,
648 Fed. Appx. 398, 401 (5th Cir. 2016). In Wellogix, the court of appeals avoided deciding the

12

choice of law issue because it agreed with the district court that defendant did not waive the
forum selection clause under either federal or state law. In any event, Bore Tech has not provided
sufficient argument or information from which I can make such a determination, and its new
choice of law arguments regarding waiver and estoppel come too late. Mendez v. Perla Dental,
646 F.3d 420, 423-24 (7th Cir. 2011).
Nonetheless, Bore Tech raises some good points about whether this lawsuit should
proceed in light of the ongoing litigation in Texas involving the same contract and Kamtel’s
failure to challenge that court’s jurisdiction until several months after filing an answer in the case.
However, these concerns are best considered in conjunction with Bore Tech’s motion to abate
(or stay) proceedings in this case pending the outcome of the Texas litigation, which I discuss
below. Because the parties consented to both personal jurisdiction and venue in Wisconsin, this
court does not “lack” personal jurisdiction and venue is not “wrong.” BouMatic, LLC v. Idento
Operations, BV, 759 F.3d 790, 793 (7th Cir. 2014) (citing Burger King Corp. v. Rudzewicz, 471
U.S. 462, 472 n. 14 (1985)) (personal jurisdiction and venue can rest on consent). Without
more facts or argument from Bore Tech, I am not persuaded that dismissal for lack of personal
jurisdiction or improper venue is warranted. Accordingly, Bore Tech’s motions to dismiss under
Rule 12(b)(2) and (3) will be denied.

II. MOTION TO STAY AND ALTERNATIVE MOTION TO TRANSFER
Kamtel criticizes Bore Tech for improperly relying on Wisconsin procedural law in arguing
that this case should be stayed pending resolution of the Texas state case and asserts that there
is “no procedural mechanism by which the court could do that.” Dkt. #17 at 18. However,

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Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976), “permits
federal courts to defer to a concurrent state proceeding as a matter of wise judicial administration
. . . when parallel state court and federal court lawsuits are pending between the same parties.”
Adkins v. VIM Recycling, Inc., 644 F.3d 483, 497-98 (7th Cir. 2011). Although the parties do
not discuss the Colorado River doctrine, several federal courts have raised the issue sua sponte.
Ayers v. Ayers, No. 11-CV-2208, 2013 WL 1290526, at *4 (C.D. Ill. Mar. 28, 2013)
(“[W]hether a court may abstain on its own accord under Colorado River appears to be a matter
of first impression in this Circuit,” but the Court of Appeals for the Seventh Circuit has allowed
it with similar abstention doctrines.). See also Jimenez v. Rodriguez-Pagan, 597 F.3d 18, 27 n.
4 (1st Cir. 2010); Michelson v. Citicorp National Services, Inc., 138 F.3d 508, 510 (3d Cir.
1998) (affirming district court sua sponte stay under Colorado River pending resolution of related
state court action); Nationstar Mortgage LLC v. Knox, 351 Fed. Appx. 844, 851 (5th Cir. 2009)
(unpublished).
As the district court explained in Ayers, “[t]he default rule between state and federal
courts is that ‘the pendency of an action in the state court is no bar to proceedings concerning
the same matter in the Federal court having jurisdiction,’ due to the ‘the virtually unflagging
obligation of the federal courts to exercise the jurisdiction given them.’” Ayers, 2013 WL
1290526, at *4 (quoting Colorado River, 424 U.S. at 817). “Abstention from the exercise of
federal jurisdiction is the exception, not the rule,” and “is an extraordinary and narrow exception
to the duty of a District Court to adjudicate a controversy properly before it.” Colorado River,
424 U.S. at 813. Abstention is justified “only in the exceptional circumstances where the order
to the parties to repair to the state court would clearly serve an important countervailing

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interest.” Id.
Determining whether Colorado River abstention should apply requires a two-part inquiry:
(1) whether the concurrent state and federal actions are actually parallel; and (2) if so, whether
“exceptional circumstances” justify abstention. Adkins, 644 F.3d at 498; Tyrer v. City of South
Beloit, 456 F.3d 744, 751 (7th Cir. 2006). With respect to the first question, “precisely formal
symmetry” is not required. Id. A court should examine “whether the suits involve the same
parties, arise out of the same facts and raise similar factual and legal issues.” Tyrer, 456 F.3d at
752. There is little doubt that the Texas case and this case are parallel. Although the Texas
lawsuit involves an interpleader and two third-party interveners not present in this lawsuit and
Kamtel has filed claims for tortious interference of contract and potential contract, the
fundamental question in both cases is who is liable for the breach of the parties’ agreement and
responsible for payment for services performed on the AT&T projects. Both cases involve the
same core parties, arise out of the same set of circumstances and raise the same factual and legal
issues. A decision in one case would directly affect the decision in the other.
In considering the second inquiry under Colorado River, the Court of Appeals for the
Seventh Circuit has instructed courts to balance the following factors: 1) whether the state has
assumed jurisdiction over the property at issue, and if so, which was first; 2) the inconvenience
of the federal forum; 3) the desirability of avoiding piecemeal litigation; 4) the order in which
jurisdiction was obtained by the concurrent forums; 5) the source of the governing law, state or
federal; 6) the adequacy of state-court action to protect the federal plaintiff’s rights; 7) the
relative progress of state and federal proceedings; 8) the presence or absence of concurrent
jurisdiction; 9) the availability of removal; and 10) the vexatious or contrived nature of the

15

federal claim. Tyrer, 456 F.3d at 754; Interstate Material Corp. v. City of Chicago, 847 F.2d
1285, 1288-89 (7th Cir. 1988).
The first seven factors weigh in favor of allowing the litigation in Texas to proceed. Before
Kamtel filed this federal lawsuit, the Texas state court considered the parties’ forum selection
arguments and exercised jurisdiction on the ground that it would be unreasonable to enforce the
forum selection clause. As discussed at length above, whether state or federal law governs the
forum selection clause is not clear, but there is a strong argument that state substantive law
applies. In addition, state law will control all other substantive legal decisions concerning the
parties’ claims because the underlying contract and tort claims do not involve federal legal
questions. Although Kamtel argues that its claims can be severed and proceed independently in
this court, the same underlying question of breach of contract is at issue in both cases and would
almost certainly entail duplication and a real risk of contradictory rulings on a variety of issues.
Although the judgment of the first court to finish likely would have preclusive effect on the other
court, that simply means that all of the resources devoted to litigating one of the cases would be
wasted. There is no reason to suspect that the state court could not adequately adjudicate
Kamtel’s claims. Particularly because the state court proceedings are well underway, it makes
sense to allow that court the first opportunity to resolve the parties’ disputes without the
potential interference and confusion that parallel proceedings could create.
Even though Kamtel is a citizen of the state of Wisconsin, this forum is not convenient
for other interested parties and witnesses. Bore Tech is a citizen of Texas and three other parties
already have joined the Texas lawsuit. It is unclear from the parties’ submissions where the
construction work was performed, but neither party has alleged that any of the work occurred in

16

Wisconsin.
Factor eight is neutral because concurrent jurisdiction seems to be appropriate. Factor
nine weighs slightly in favor of abstention because Kamtel had an opportunity to remove the
Texas case to this or another federal court but chose not to do so. Further, because I am not
dismissing this case, Kamtel will have the opportunity to be heard in this court on any matters
that are not resolved by the state court once that litigation has ended.
Finally, I conclude that on balance, factor ten also weighs in favor of abstention. By
failing to file a notice of removal or a motion to dismiss in lieu of an answer, Kamtel implicitly
consented to the Texas court’s jurisdiction for several months before seeking to enforce the forum
selection clause. Kamtel argues that Bore Tech should not be allowed to benefit from the
improper filing of its claims in Texas in violation of the forum selection clause and that its own
counterclaims should be allowed to proceed in the “correct, bargained-for forum.” Dkt. #18 at
10. However, regardless whether Bore-Tech had the “right” to initiate the lawsuit in Texas in
light of the forum selection clause, Kamtel was evidently content to litigate Bore Tech’s claims
there for several months before deciding to file suit in this court and only then move for a transfer
of venue in the state court proceeding. Merrill Lynch v. Commercial Financial, Corp. v. Trident
Labs, Inc., No. 10C5925, 2011 WL 2415159, at *5 (N.D. Ill. June 10, 2011) (finding that
plaintiff’s “unusual procedural posture” of waiting 18 months before filing transfer motion in
contract case involving forum selection clause was “special factor” weighing in favor of
abstention).
On balance, I conclude that a stay is warranted pending final judgment in the Texas case.
LaDuke v. Burlington Northern Railroad Co., 879 F.2d 1556, 1562 (7th Cir. 1989) (“A stay, in

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contrast to a dismissal, allows the federal court to retain jurisdiction over the federal action in
case the state litigation ‘washes out’ for some reason and fails to reach its anticipated end of a
final decision on the merits.”); Merrill Lynch, 2011 WL 2415159, at *5 (finding same). In any
event, “[i]t is within the discretion of the court to stay proceedings pending the resolution of
other suits. . . . The power to stay proceedings is incidental to the power inherent in every court
to control the disposition of the cases on its docket with economy of time and effort for itself,
for counsel, and for litigants.” Grice Engineering, Inc. v. JG Innovations, Inc., 691 F. Supp. 2d
915, 920 (W.D. Wis. 2010) (citing Landis v. North American Co., 299 U.S. 248, 254-55 (1936);
Cherokee Nation of Oklahoma v. United States, 124 F.3d 1413, 1416 (Fed. Cir. 1997)).
Because I am granting a stay in this case, it is unnecessary to consider Bore Tech’s motion
to transfer this case to the United States District Court for the Southern District of Texas, which
it filed only in the alternative to its request for a stay.

ORDER
IT IS ORDERED that:
1. Defendant Bore Tech Construction, LLC’s motion to dismiss under Fed. R. Civ. P.
12(b)(1)-(3) and (6), dkt. ##11-13, are DENIED.
2.

Defendant’s motion to stay this case pending final judgment in Bore Tech

Construction, LLC v. Kamtel, Inc., Cause No. 2016-32024 (Harris Cty., Tex. Distr. Ct.), dkt.
#11, is GRANTED.
3.

Defendant’s alternative motion to transfer this case, dkt. #14, is DENIED as

unnecessary.

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4. The clerk of court is instructed to close this case administratively and remove it from
the active docket. The case may be reopened by motion of either party within 60 days after the
proceedings in state court are completed, including any appeals.
Entered this 9th day of February, 2017.
BY THE COURT:
/s/
_______________________
BARBARA B. CRABB
District Judge

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