Opinion
CIVIL ACTION: NO. 03-3241
January 15, 2004
MEMORANDUM AND ORDER
Plaintiff Michael A. Cerelli brings this diversity action against Defendants Jeffrey B. Cooper, Rocco N. Tatasciore, and Bravo Productions, Inc. ("Bravo"), seeking damages for alleged breach of fiduciary duty, breach of contract, and defamation. Defendants move the Court to dismiss Plaintiff's Complaint or to stay proceedings in this matter pending the resolution of two consolidated state cases. Defendants base their Motion on the doctrine of abstention established in Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976), which allows federal courts, in limited circumstances, to refrain from exercising jurisdiction when there is a parallel case pending in state court. Because the Court finds that the state and federal actions are not parallel within the meaning of Colorado River, the Motion will be denied.
I. Background
This case arises out of a dispute between Cerelli and his former business partners, Cooper and Tatasciore, regarding the operation of Bravo and its wholly-owned subsidiary, Explosion Lighting and Draping Company ("Explosion Lighting"). Cerelli, Cooper and Tatasciore are the sole shareholders of Bravo. (Compl. at ¶ 8). On or about January 1, 1999, Cerelli entered into a written Employment Agreement with Bravo that made Cerelli the company's President. (Compl. at ¶¶ 11-12). On or about November 20, 2001, Cerelli entered into a written Stock Purchase Agreement with Cooper, Tatasciore, and Bravo, in which Cooper and Tatasciore granted exclusive managerial control of Bravo to Cerelli. (Compl. at ¶¶ 13-14). Cerelli alleges that on February 4 and 5, 2002, without notice to Cerelli and without justification, Tatasciore withdrew forty thousand dollars ($40,000.00) from Bravo's bank accounts. (Compl. at ¶ 15). He further alleges that, on February 8, 2002, Cooper and Tatasciore improperly terminated his employment with Bravo. (Compl. at ¶ 16).
Explosion Lighting is a party to the state cases, but is not a party to the federal action.
On February 11, 2002, Cerelli filed a fifteen-count complaint against Cooper, Tatasciore, Bravo, and Explosion Lighting in the Philadelphia County Court of Common Pleas. (Saltz Declaration, at ¶ 3). Cerelli's state court action sought both legal and equitable relief. At the time of the filing of his Complaint, Cerelli also filed a Petition for Temporary Restraining Order and Preliminary Injunction, seeking to prohibit Cooper and Tatasciore from using corporate funds or from interfering with Cerelli's management as President of Bravo. (Saltz Declaration, at ¶ 4). Later the same day, Cooper and Tatasciore commenced a separate state court action against Cerelli, filing both a Complaint and a Petition for Preliminary Injunction. (Saltz Declaration, at ¶ 5). The two state cases were consolidated on June 27, 2002. Cerelli filed the instant action on May 22, 2003, fifteen months after the commencement of the state actions.
II. Legal Standard
The doctrine of abstention established by the Supreme Court in Colorado River provides that in narrow circumstances, a federal court may dismiss or stay its own proceedings in order to avoid duplicative litigation in the state court. However, abstention under Colorado River is the exception and not the rule. "There is a strong presumption against the application of the Colorado River doctrine." Certain Underwriters at Lloyd's. London v. Ross, 1998 WL 372304, at *2 (E.D. Pa. June 17, 1998). The Supreme Court has emphasized that federal courts have a "virtually unflagging obligation . . . to exercise the jurisdiction given them."Colorado River, 424 U.S. at 817. This principle holds even in cases where there is a parallel litigation in a state court. "The rule is well recognized 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." Id.
Only truly exceptional circumstances justify abstention under Colorado River. Id. at 813: Moses H. Cone Memorial Hospital v. Mercury Construction Co., 460 U.S. 1, 19, (1983). In Colorado River, the Supreme Court set forth several factors that support abstention, cautioning that no one factor is determinative. These factors include: (1) whether the state court assumed in rem jurisdiction over property: (2) the inconvenience of the federal forum: (3) the desirability of avoiding piecemeal litigation; and (4) the order in which jurisdiction was obtained by the concurrent forums. 424 U.S. at 818. In Moses H. Cone, the Supreme Court articulated two additional factors: (1) which forum's substantive law controls: and (2) the adequacy of the state forum to protect the rights of the parties. 460 U.S. at 23, 26.
As a threshold matter in any Colorado River abstention case, the District Court must determine whether the state and federal actions are "parallel." If they are not, the Court does not have authority to abstain. Ryan v. Johnson, 115 F.3d 193, 196 (3d Cir. 1997). The cases need not be identical in every respect, but they must involve substantially the same parties and claims. Trent v. Dial Medical of Fla., Inc., 33 F.3d 217, 224 (3d Cir. 1994) (overruled in part on other grounds by Ryan v. Johnson, 115 F.3d at 198); Fidelity Fed. Bank v. Larken Motel Co., 764 F. Supp. 1014, 1016-17 (E.D. Pa. 1991). Further, "[T]here must be a substantial likelihood that the state litigation will dispose of all the claims presented in the federal case." CFI of Wisconsin. Inc. v. Wilfran Agricultural Industries. Inc., 1999 WL 994021, at *2 (E.D. Pa. Nov. 2, 1999). When the federal case involves claims distinct from those in the state case, the proceedings are not parallel. Trent, 33 F.3d at 224. That the federal and state actions seek different remedies also indicates that the proceedings are not duplicative. Certain Underwriters at Lloyd's. London, 1998 WL 372304, at *2.
III. Analysis
There is substantial overlap between the federal and state claims. However, the federal claims are based in part on allegations not contained in the state complaint. Both the federal and state breach of fiduciary duty claims allege that Cooper and Tatasciore wrongfully terminated Cerelli's employment with Bravo and deprived him of management over the company. (Compl. at ¶ 19; State compl. at ¶ 32). The federal breach of fiduciary duty claim further alleges that Cooper and Tatasciore permitted a company-owned life insurance policy naming Cerelli's estate as the beneficiary to lapse, refused to allow the company to pay corporate debts of which Cerelli is the named guarantor, and failed to provide Cerelli with appropriate financial and tax information regarding Bravo and Explosion Lighting. (Compl. at ¶ 19). The state claim does not contain these allegations. Likewise, the state and federal defamation claims are based on entirely different sets of facts. The federal defamation claim states that Cooper and Tatasciore defamed Cerelli to customers, potential customers, and business associates, which harmed Cerelli's reputation. (Compl. at ¶ 30). The state defamation claim states that Cooper and Tatasciore made defamatory statements about Cerelli to Commonwealth Bank, causing the bank to decline to forbear on Bravo's outstanding loan. (State compl. at ¶ 78).
Plaintiff contends that, in fact, the allegedly defamatory statements at issue in the federal action did not occur until after the filing of the state action. (Pl. Opposition to Def. Motion to Dismiss or Stay, at p. 5).
Although the state and federal proceedings arise out of the same dispute and contain some common claims, the federal action presents distinct allegations. Further, several of these allegations relate to events occurring after the filing of the state action. As a result, it cannot be said that there is a "substantial likelihood that the state litigation will dispose of all the claims presented in the federal case."CFI of Wisconsia, 1999 WL 994021, at *2. The Court finds that the state and federal proceedings are not parallel. Accordingly, the Court lacks the power to abstain in this action.
IV. Conclusion
Defendants' Motion to Dismiss or Stay will be denied. An appropriate Order follows.
ORDER
AND NOW, this ___ day of January, 2004, upon consideration of Defendants' Motion to Dismiss or Stay (docket no. 4), and Plaintiff's response thereto (docket no. 6), it is ORDERED that the Motion is DENIED for the reasons stated in the accompanying Memorandum.