Opinion
Civil Action No. 3:99-CV-2172-G
February 14, 2000
MEMORANDUM ORDER
Before the court are the motions of the defendants Phillip J. Stanford, Angela L. Stanford ("the Stanfords"), and The CareNetwork, Inc. (collectively, "the defendants") for abstention, for dismissal of the case pursuant to FED. R. CIV. P. 12(b)(1) or, in the alternative, for a more definite statement of the plaintiff's claim pursuant to FED. R. CIV. P. 12(e). For the following reasons, the defendants' motions for abstention and to dismiss are denied, and their motion for a more definite statement is granted.
I. BACKGROUND
Tom and Linda Clark ("the Clarks") allege that they created and developed an interrelated system of menus, charts, and software known as the Minute Menu System. Plaintiff T L Computer Systems, Inc.'s Response to Defendants' Motion for Abstention, Motion to Dismiss and, in the Alternative, Motion For More Definitive [sic] Statement, and Brief in Support ("Response") ¶ 1. The Minute Menu System (sometimes referred to as the "Menu Minute" System by the Stanfords) is used in certain child care programs administered by the United States government. See Plaintiffs' Original Petition ("Original Petition") at 3, ¶ 1, attached as Exhibit 1 to Defendants Phillip J. Stanford, Angela L. Stanford and The CareNetwork, Inc.'s Motion for Abstention, Motion to Dismiss and, in the Alternative, Motion for More Definate [sic] Statement Pursuant to FED. R. CIV. PRO. No. 12 and Brief in Support ("Motion"). In 1993, the Clarks transferred the Minute Menu System as a capital contribution to T L Computer Systems, Inc. ("T L"), the plaintiff in this case. Response ¶ 1. The Stanfords allege that this transfer was wrongful and made in violation of an oral partnership agreement that the Clarks and Stanfords formed sometime in 1992. Original Petition at 3, ¶¶ 1, 3. T L subsequently copyrighted several aspects of the Minute Menu System. Response ¶¶ 2-6.
Around 1992 or 1993, according to T L, The CareNetwork paid T L $15,000.00 in order to become a licensee of the Minute Menu System. Response ¶ 8. According to T L, The CareNetwork was only entitled as a licensee to utilize the Minute Menu System for its own use and benefit. Id. The Stanfords were at all relevant times the sole directors and officers of The CareNetwork. Id. At some point in 1999, The CareNetwork ceased its operations. Id. ¶ 9. T L filed this suit against the Stanfords on September 27, 1999 alleging, among other things, copyright and trademark infringement. See generally Complaint for Copyright Infringement, Unfair Competition, False Designation of Origin, Deception of the Public and Trademark Infringement ("Complaint"). T L alleges that the Stanfords have improperly appropriated the Minute Menu System for their own personal use and benefit, in violation of United States copyright and trademark law. Response Complaint ¶¶ 16-63. For example, T L alleges in the instant case that the Stanfords are using the Minute Menu System for the benefit of an organization known as the "Association for Children's Nutritional Growth, Inc.," without T L's approval. Response ¶ 9.
T L's lawsuit is not the first filed in the present dispute, however. On August 27, 1999, the Stanford/Clark Partnership (an entity T L alleges it does not recognize, see Response ¶ 15) and the Stanfords filed suit against T L and the Clarks in the 95th Judicial District Court of Dallas County, Texas, Case No. 99-06799 (the "State Court Lawsuit"). Motion ¶ 1. The State Court Lawsuit alleges, inter alia, the existence of a partnership between the Stanfords and the Clarks relating to the development and marketing of the Minute Menu System, the breach of that partnership agreement, and the breach of the Clarks' fiduciary duties. Id. In it, the Stanfords request damages and an accounting. Id.
On or about September 17, 1999, T L filed a plea to the jurisdiction (the "Plea") in the State Court Lawsuit, and obtained a hearing before a State Court Master on the Plea. Motion ¶ 2; also Defendants' Plea to the Jurisdiction, attached as Exhibit 2 to Motion. In their Plea, T L denied the existence of a partnership and alleged that the federal court had exclusive jurisdiction of Stanford's claims against it. Motion ¶ 2. After the hearing, which was held on September 27, 1999, the Master entered his findings that the Plea should be denied, and submitted these findings to the State Court Judge. Motion ¶ 3. Having been denied in the State Court Lawsuit a ruling that jurisdiction over the Stanfords' claims was exclusive to the federal courts, T L filed this suit against the Stanfords that same day. Motion ¶ 4.
T L argues that it has filed its claims with this court for the obvious reason that the federal courts have exclusive original jurisdiction over T L's claims of copyright infringement. See Response at 5-6 (citing 28 U.S.C. § 1338 (a)). The Stanfords respond that T L has engaged in "unabashed and impermissible forum shopping" by seeking to take its defenses to the State Court Lawsuit to this court by asserting them as new claims in a federal lawsuit. Motion ¶ 4. They point out that the parties are not diverse, and argue that there is no real federal question jurisdiction here, either. Id. ¶ 6. They argue that Texas partnership law is the law of decision in this dispute, and not the copyright infringement or unfair trade competition that is alleged by T L in its federal complaint. Id. ¶ 7. The Stanfords now urge this court to abstain from these proceedings pursuant to the Colorado River abstention doctrine. Id. at 5-8. See Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976).
II. ANALYSIS A. Abstention From Exercising Federal Jurisdiction Under the Colorado River Doctrine
"Because of the `virtual unflagging obligation of the federal courts to exercise the jurisdiction given them,' as between state and federal courts, the rule 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.'" Murphy v. Uncle Ben's, Inc., 168 F.3d 734, 737 (5th Cir. 1999) (quoting Colorado River, 424 U.S. at 817). But in special cases, "considerations of `[w]ise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation'" may permit a federal court to abstain in favor of a concurrent state proceeding. Colorado River, 424 U.S. at 817 (quoting Kerotest Manufacturing Company v. C-O-Two Fire Equipment Company, 342 U.S. 180, 183 (1952)); see also Microsource, Inc. v. Superior Signs, Inc., No. 3:97-CV-2733-G, 1998 WL 119537, at *3 (N.D. Tex. Mar. 9, 1998) (Fish, J.) (same).
The Supreme Court has set forth the following six factors that may be considered and weighed in determining whether exceptional circumstances exist that would permit a district court to decline exercising jurisdiction: (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. See Murphy, 168 F.3d at 738 (citing Wilton v. Seven Falls Company, 515 U.S. 277, 285-86 (1995)). The decision 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." Id. (citing Moses H. Cone Memorial Hospital v. Mercury Construction Corporation, 460 U.S. 1, 16 (1983)).
1. Assumption by Either Court of Jurisdiction Over a Res
This case does not involve any res or property over which any court, state or federal, has taken control. Motion at 6; Response at 8. "The absence of this factor is not, however, a `neutral item, of no weight in the scales.' Rather, the absence of this first factor weighs against abstention." Murphy, 168 F.3d at 738 (citation omitted) (quoting Evanston Insurance Company v. Jimco, Inc., 844 F.2d 1185, 1191 (5th Cir. 1988)).
2. The Relative Inconvenience of the Forums
The federal and state courts are within four city blocks of one another. The parties agree that this factor is inapplicable. Motion at 6; Response at 8-9. "Therefore, its absence weighs against abstention." Murphy, 168 F.3d at 738.
3. The Avoidance of Piecemeal Litigation
"These cases do not involve piecemeal litigation, i.e., there is `no more than one plaintiff, one defendant, and one issue.'" Murphy, 168 F.3d at 738 (quoting St. Paul Insurance Company v. Trejo, 39 F.3d 585, 590 (5th Cir. 1994)). These cases involve the same plaintiffs and defendants (although the parties are named slightly differently in the federal and state complaints) and the same issue — namely, the rights of each of the parties to the Minute Menu System. "This parallel litigation is duplicative, not piecemeal," and "`[t]he prevention of duplicative litigation is not a factor to be considered in an abstention determination.'" Murphy, 168 F.3d at 738 (quoting Evanston, 844 F.2d at 1192). This factor weighs against abstention.
4. The Order in Which Jurisdiction Was Obtained by the Concurrent Forum
The priority element of the Colorado River/Moses H. Cone balance "`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.'" Evanston, 844 F.2d at 1190 (quoting Moses H. Cone, 460 U.S. at 21). The State Court Lawsuit was filed thirty-one days before the federal action. Response at 9. Substantial discovery has been completed in the State Court Lawsuit. Motion ¶ 8. Depositions of all remaining parties to the State Court Lawsuit, and the board of directors of T L were scheduled to be completed by December 6, 1999. Id. In addition, substantial documents have been produced by T L and the Clarks, along with responses made to written discovery in the State Court Lawsuit. Id. Similar responses made by the Clarks and T L to the Stanfords for disclosure and documents in the State Court Lawsuit have been provided beginning November 12, 1999, and additional responses were due by December 6, 1999. According to the defendants, very little, if any, discovery will remain to be completed in the State Court Lawsuit after December 30, 1999. Motion ¶ 8. In contrast, no discovery has been undertaken in this case by any party. "The Supreme Court has emphasized that a factor favoring dismissal of a federal suit is `the apparent absence of any proceedings in the District Court, other than the filing of the complaint.'" Murphy, 168 F.3d at 738 (quoting Colorado River, 424 U.S. at 820). Therefore, this factor weighs in favor of abstention.
5. Whether and to What Extent Federal Law Provides the Rules of Decision on the Merits
In contrast to the first four factors, the fifth and sixth factors "were not added as considerations to weigh against retaining jurisdiction," but instead "provide additional reasons for retaining jurisdiction." St. Paul, 39 F.3d at 589 n. 4. In addition, "`[t]he presence of a federal law issue must always be a major consideration weighing against surrender [of jurisdiction], but the presence of state law issues weighs in favor of surrender only in rare circumstances." Murphy, 168 F.3d at 739 (quoting Evanston, 844 F.2d at 1193) (internal quotations omitted)).
T L makes claims in this case of copyright infringement, pursuant to 17 U.S.C. § 106 (1) and (3), and unfair competition, false designation of origin, and deception of the public, pursuant to 15 U.S.C. § 1125 (a). See, e.g., Complaint ¶¶ 16, 22, 36. These are all federal causes of action, authorized by federal statute, and they offer federal statutory damages. Not only does federal law provide the rules of decision, it is the exclusive source of law for these claims on the merits. Because T L's case involves mainly federal rules of decision, this factor weighs against abstention. See Murphy, 168 F.3d at 739.
6. The Adequacy of State Proceedings in Protecting the Rights of the Party Invoking Federal Jurisdiction
This final consideration can only be "a neutral factor or one that weighs against, not for, abstention." Evanston, 844 F.2d at 1193. According to the Supreme Court:
When a district court decides to dismiss or stay under Colorado River, it presumably concludes that the parallel state-court litigation will be an adequate vehicle for the complete and prompt resolution of the issues between the parties. If there is any substantial doubt as to this, it would be a serious abuse of discretion to grant the stay or dismissal at all. Thus, the 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, whether it stays or dismisses.Murphy, 168 F.3d at 739 (quoting Moses H. Cone, 460 U.S. at 28).
T L argues that it is impossible to imagine how the state courts could protect its rights when they are unable to assert jurisdiction over T L's federal copyright claims. Response at 10. The court agrees, as the federal Copyright Act, with limited exceptions, expressly preempts state law claims "equivalent to any of the exclusive rights within the general scope of copyright . . . ." See Microsource, 1998 WL 119537, at *2 (quoting 17 U.S.C. § 301 (a)). This factor weighs against abstention, as well.
" Colorado River abstention is to be used only sparingly, . . . and this case is a poor candidate." In re Abbott Laboratories, 51 F.3d 524, 529 (5th Cir. 1995). In this case, five of the six Colorado River factors either weigh against abstention or, in the case of the fifth and sixth factors, in favor of this court's retaining jurisdiction over T L's Complaint. Although the state court proceedings have advanced considerably further than the proceedings in federal court, this factor alone is not enough to allow this court to decline to exercise its jurisdiction. Because the balancing of these factors "is heavily weighted in favor of the exercise of jurisdiction," this court finds that it cannot abstain from exercising its jurisdiction under the circumstances here presented.
B. Dismissal of the Complaint Under FED. R. CIV. P. 12(b) (1) is Unwarranted
The Stanfords next argue that T L's complaint must be dismissed pursuant to Rule 12(b)(1) because T L's federal claims are only peripheral and minor in its complaint against the defendants herein. Motion at 8. The Stanfords characterize T L's federal claims as "a smokescreen for the forum shopping that [T L] has engaged in by filing this complaint." Id. at 9. T L responds that its claims sounds principally in copyright and trademark law, and that it is the Stanfords who have attempted to introduce issues of Texas partnership law into what are essentially federal breach of copyright and trademark proceedings. Response at 12.
"A motion under Rule 12(b)(1) should be granted only if it appears certain that the plaintiff cannot prove any set of facts in support of his claim that would entitle him to relief. `A case is properly dismissed for lack of subject matter jurisdiction when the court lacks the statutory or constitutional power to adjudicate the case.'" Home Builders Association of Mississippi, Inc. v. City of Madison, Mississippi, 143 F.3d 1006, 1010 (5th Cir. 1998) (quoting Nowak v. Ironworkers Local 6 Pension Fund, 81 F.3d 1182, 1187 (2d Cir. 1996)). T L alleges six separate counts of federal trademark and copyright law violations in its complaint, and it does not appear certain that T L would be unable to prove any set of facts warranting relief. T L has sufficiently established this court's jurisdiction over these claims, and Stanford's motion to dismiss T L's complaint pursuant to FED. R. CIV. P. 12(b)(1) must be denied.
C. T L's Complaint is Insufficient Under FED. R. CIV. P . 12(e)
The Stanfords finally argue that T L's Complaint is insufficient to place the Stanfords on notice as to what acts are complained of by T L. Motion at 10. When a party moves under Rule 12(e) for a more definite statement, the court is afforded discretion to determine whether the complaint is such that a party cannot reasonably be required to frame a responsive pleading. Mitchell v. E-Z Way Towers, Inc., 269 F.2d 126, 130 (5th Cir. 1959). The court agrees that T L's Complaint is insufficient to place the defendants on notice as to what acts are complained of by T L. For example, the Complaint makes such allegations as "Defendants have infringed Plaintiff's copyrights by activities proscribed under 17 U.S.C. § 106" and "the said wrongful acts of Defendants have caused and are causing great injury and damage to Plaintiff." Complaint 6 ¶¶ 17, 19. These pleadings are not clear enough to serve the purpose of notice pleading contemplated by the rules. Accordingly, T L shall serve on the Stanfords, within ten days of the date of this order, an amended complaint stating in greater detail its claims against the defendants. See FED. R. CIV. P. 12(e).
III. CONCLUSION
For the above reasons, the motions of the defendants are DENIED in part and GRANTED in part.
SO ORDERED.