Opinion
Case No. 2:20-cv-00175-MLC
2020-11-30
TOLSA WYOMING BENTONITE CORP., Plaintiff, v. NORMERICA, INC., Defendant.
Aaron John Lyttle, Thomas N. Long, Long Reimer Winegar Beppler LLP, Cheyenne, WY, Evangelos Michailidis, Pro Hac Vice, Duane Morris LLP, New York, NY, for Plaintiff. Jon Mark Stewart, Davis & Cannon, Cheyenne, WY, for Defendant.
Aaron John Lyttle, Thomas N. Long, Long Reimer Winegar Beppler LLP, Cheyenne, WY, Evangelos Michailidis, Pro Hac Vice, Duane Morris LLP, New York, NY, for Plaintiff.
Jon Mark Stewart, Davis & Cannon, Cheyenne, WY, for Defendant.
ORDER DENYING MOTION TO STAY
Mark L. Carman, United States Magistrate Judge
THIS MATTER comes before the Court upon Normerica, Inc.’s (hereinafter, "Defendant") Motion to Stay Proceedings and Memorandum of Law [Doc. 12] filed on October 26, 2020. Tolsa Wyoming Bentonite Corp. (hereinafter, "Plaintiff") filed its Brief in Opposition [Doc. 14] to Defendant's motion on November 9, 2020. Having considered the filings, applicable law, and being otherwise fully advised, the Court finds Defendant's motion should be DENIED.
BACKGROUND
Plaintiff is a Wyoming corporation that manufactures, distributes, and sells various minerals from its mining facilities located in Wyoming. [Doc. 1 ¶ 1]. Defendant is a Canadian corporation that manufactures and distributes cat litter. [Doc. 12 pg 2]. On September 24, 2018, the Chief Operating Officer of Defendant emailed Plaintiff expressing interest in a large quantity of bentonite, a key ingredient of cat litter. [Doc. 1 ¶ 6]. After some negotiation, and Plaintiff sending Defendant an example of its bentonite, the parties reached an agreement. The basic terms of the agreement were set forth in an email on May 20, 2019, that explained Plaintiff was to provide between six to eight railcars of bentonite per week at $56.00 a ton to Defendant. Id. at ¶ 12. The only condition noted in the email was that the bentonite was to be free on board (FOB) to Plaintiff's Casper, Wyoming plant and loaded in railcars. Id. The parties agree that no formal document was executed with respect to the agreement.
Between July 2019 and February 2020 bentonite was shipped and received by the parties. Defendant claims that numerous loads were substandard and deficient. [Doc. 12-1 pg 9]. Specifically, Defendant alleges that the bentonite clay shipped by Plaintiff did not meet required specifications which were known and/or ought to have been known. Id. Plaintiff denies any of the shipments were deficient. In fact, Plaintiff claims that the shipments were of the same quality as samples sent to and accepted by Defendant on two different occasions. [Doc. 1 ¶ 25].
On July 10, 2020, Defendant filed a complaint in the Ontario Super Court of Justice asserting claims of breach of contract, breach of warranty, misrepresentation, unjust enrichment, and negligence. [Doc. 12-1 pg 6]. Plaintiff responded by filing a Statement of Defence (sic) on September 4, 2020, in the Canadian court. Id. at 24. Subsequently, Plaintiff commenced this action by filing its Complaint on September 15, 2020, here in the U.S. District Court of Wyoming, asserting claims of breach of contract, anticipatory repudiation, and unjust enrichment. [Doc. 1]. Defendant responded by filing its Answer on October 20, 2020. [Doc. 11].
Specifically, at issue today is Defendant's Motion to Stay Proceedings and Memorandum of Law [Doc. 12] filed on October 26, 2020. In its Motion , Defendant argues the Court should abstain from exercising its jurisdiction pursuant to a balancing test put forward by the District Court for the District of Colorado. Id. at 5. Plaintiff disagrees with Defendant's analysis of said balancing test. [Doc. 14]. Plaintiff further argues that Defendant's Motion should be denied due to Defendant's failure to satisfy the substantial standard required to deprive a federal court of its jurisdiction. Id. at 6.
APPLICABLE LAW
The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it. City of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 79 S. Ct. 1060, 3 L.Ed.2d 1163 (1959). Abdication of the obligation to decide cases can be justified under this doctrine only under exceptional circumstances. Id. In Colorado River , the Supreme Court furthered its precedent by explaining that a federal court faced with parallel state proceedings may in exceptional circumstances abstain "for reasons of wise administration." Colorado River Water Conservation Dist. v. United States , 424 U.S. 800, 96 S. Ct. 1236, 47 L.Ed.2d 483 (1976). As such, the Supreme Court has repeatedly emphasized "the virtually unflagging obligation of the federal courts to exercise the jurisdiction given them." Id. at 817, 96 S. Ct. 1236. Although neither the Supreme Court nor the Tenth Circuit has applied the Colorado River abstention doctrine in a case involving parallel proceedings in a foreign court, District Courts within the Tenth Circuit and other circuits have. See National Union Fire Ins. Co. v. Kozeny , 115 F. Supp. 2d 1243 (D. Colo. 2000), IBC Advanced Techs., Inc. v. Ucore Rare Metals, Inc. , 415 F. Supp. 3d 1028 (D. Utah 2019), and Royal & Sun All. Ins. Co. of Can. v. Century Int'l Arms, Inc. , 466 F.3d 88 (2d Cir. 2006) (collecting cases). In extending the Colorado River doctrine to the international context, courts have modified or reformulated some of the Colorado River factors. IBC Advanced Techs., Inc. , 415 F. Supp. 3d at 1032. The District of Colorado has articulated the modified Colorado River factors to be: 1) similarity of parties and issues involved in the foreign litigation; 2) the promotion of judicial efficiency; 3) adequacy of relief available in the alternative forum; 4) issues of fairness to and convenience of the parties, counsel, and witnesses; 5) the possibility of prejudice to any of the parties; and 6) the temporal sequence of the filing of the actions. Nat'l Union Fire Ins. Co. v. Kozeny , 115 F. Supp. 2d at 1247.
The Court's determination, however, "does not rest on a mechanical checklist, but a careful balancing of the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 103 S. Ct. 927, 74 L.Ed.2d 765 (1983). As the D.C. Circuit has explained, because only truly exceptional circumstances will allow a federal court to stay or dismiss a federal action in favor of a concurrent action, it is not enough that the factors favoring deferral outnumber those neutral or opposed. Edge Inv., LLC v. District of Columbia , 441 U.S. App. D.C. 463, 927 F.3d 549 (2019). Rather, the factors favoring deferral must themselves be exceptional. Id.
Further, the Supreme Court has made clear that courts engaging in a Colorado River analysis should not set out to "find some substantial reason for the exercise of federal jurisdiction" but should instead "ascertain whether there exist ‘exceptional’ circumstances, the ‘clearest of justifications,’ that can suffice under Colorado River to justify the surrender of that jurisdiction." Moses H. Cone , 460 U.S. at 25–26, 103 S.Ct. 927. Thus, as the Tenth Circuit has explained, "any doubt should be resolved in favor of exercising federal jurisdiction." Fox v. Maulding , 16 F.3d 1079, 1082 (10th Cir. 1994).
This "exceptional circumstances" approach has not been adopted universally. Other circuits have rejected it and instead employed an abuse of discretion standard. The Eleventh Circuit is one of those circuits. It has based its position on the ground that the "relationship between the federal courts and the states (grounded in federalism and the Constitution) is different from the relationship between federal courts and foreign nations (grounded in the historical notion of comity)." Clientron Corp. v. Devon IT, Inc. , No. 13-05634, 2014 WL 940406, at *8 (E.D. Pa. Mar. 10, 2014) (citing Posner v. Essex Ins. Co., Ltd., 178 F.3d 1209, 1223 (11th Cir. 1999) ). As explained by the Clientron court, the split between circuits stems from the disagreement over the principles underlying the abstention doctrine. Id. The exceptional circumstances approach, structured by Colorado River , stands for the notion that absent federalism concerns or circumstances that are deemed exceptional, federal courts have a non-discretionary duty to exercise jurisdiction for those cases properly before them as demanded by Congress. The Eleventh Circuit, however, has stated that Colorado River and all other abstention cases have evolved from relations between federal and state courts. Id. It thus refuses to extend Colorado River’ s exceptional circumstances principle beyond the federal-state context. Id.
Interestingly, the Clientron court evaluated the Supreme Court's conversation in Quackenbush v. Allstate Ins. Co. to reach its conclusion that the Supreme Court has made it "clear that abstention doctrine applies only to the relationship between state and federal courts". Id. at 9, 103 S. Ct. 927. Specifically, the court looked to when the Supreme Court said:
[W]e have recognized that federal courts have discretion to dismiss damages actions, in certain narrow circumstances, under the common-law doctrine of forum non conveniens .... The fact that we have applied the forum non conveniens doctrine in this manner does not change our analysis in this case.... To be sure, the abstention doctrines and the doctrine of forum non conveniens proceed from a similar premise: In rare circumstances, federal courts can relinquish their jurisdiction in favor of another forum. But our abstention doctrine is of a distinct historical pedigree, and the traditional considerations behind dismissal for forum non conveniens differ markedly from those informing the decision to abstain. Federal courts abstain out of deference to the paramount interests of the sovereign, and the concern is with principles of comity and federalism. Dismissal for forum non conveniens, by contrast, has historically reflected a far broader range of considerations, most notably the convenience to the parties and the practical difficulties that can attend the adjudication of a dispute in a certain locality.
Clientron Corp, 2014 WL 940406 at *8 (citing Quackenbush v. Allstate Ins. Co. , 517 U.S. 706, 722, 116 S. Ct. 1712, 1724, 135 L.Ed.2d 1 (1996) ).
The Clientron court deemed the Eleventh Circuit's position forceful when considering the above statements and the Supreme Court's forum non conveniens doctrine together. Id. Ultimately, it found no reason to extend the "exceptional circumstances" standard to foreign parallel litigation. Id. Instead, it was guided by broader considerations and selected to follow the Eleventh Circuit's abuse of discretion approach.
ANALYSIS
This Court agrees with the District of Colorado and the District of Utah in that it should use the "exceptional circumstances" approach when deciding questions of parallel foreign litigation. More precisely, the Court will use the modified Colorado River factors as put forward in Kozeny . For the sake of clarity, the Kozeny factors are: 1) similarity of parties and issues involved in the foreign litigation; 2) the promotion of judicial efficiency; 3) adequacy of relief available in the alternative forum; 4) issues of fairness to and convenience of the parties, counsel, and witnesses; 5) the possibility of prejudice to any of the parties; and 6) the temporal sequence of the filing of the actions. By evaluating each individual factor, with a keen eye of the factor's importance to this specific case, the Court can sufficiently execute its duty to adjudicate a controversy properly before it. The Court stresses that surrendering jurisdiction is the exception, not the rule. It takes more than a simple "winning" of the Kozeny factors to justify staying. The Court must truly find exceptional circumstances.
1. Similarity of Parties and Issues Involved in the Foreign Litigation
The parties and issues involved in the two actions are essentially identical. First, the named parties in the Canadian action do slightly differ than those named in this action. Northdown Industries Inc. is a co-plaintiff with Defendant in the Canadian action. [Doc. 12-1 pg 4]. Northdown is a corporation, duly incorporated pursuant to the laws of the State of Delaware. Id. at 7. Effectively, Northdown and Defendant are sister companies that carry on business as a manufacturer and distributor of cat litter in America and Canada alike. The absence of Northdown from this action is not surprising though, due to the fact Plaintiff denies having any involvement with Northdown. [ 12 -1 pg 19]. Regardless of the factual dispute, the absence of Northdown is not dispositive of this factor. As Defendant correctly cited in its briefing, the parties need not be identical to warrant a stay. Nat'l v. Kozeny , 115 F. Supp. 2d at 1247.
Next, the parties do not dispute that both actions arise from the same agreement. In fact, the specific facts and claims alleged by each party are substantially similar between the two actions. Defendant, in the Canadian action, brought claims of breach of contract, breach of warranty, misrepresentation, unjust enrichment, and negligence. [Doc. 12-1 pg 6]. In its Answer in this matter, as affirmative defenses Defendant has brought the claims of breach of contract, unjust enrichment, and breach of warranty. [Doc. 11 ¶ 2, 3, and 7]. Along the same lines as misrepresentation, as additional defenses Defendant also alleges Plaintiff failed to mitigate its damages, has unclean hands, and is equitably estopped from making certain claims. Id. at ¶ 6, 9, and 10. Lastly, Defendant is of the position in both actions that it has performed all duties and obligations owed under the agreement and that it is the aggrieved party.
Likewise, Plaintiff's factual allegations in the two actions are identical. See [Doc 12-1 pg 16-24] and [Doc 1]. Plaintiff did not counterclaim or bring affirmative defenses in the Canadian action. The Court can only speculate the omittance of counterclaims was done knowing this action was soon going to be filed. Notwithstanding, the Court finds that the parties and issues involved in the two actions are adequately similar. This factor weighs in favor of granting a stay.
2. The Promotion of Judicial Efficiency
Both parties asserted judicial efficiency favored their position. Plaintiff argues that judicial efficiency favors this Court retaining jurisdiction because the matters in question occurred in Wyoming and supposedly Wyoming law will govern. [Doc. 14 pg 7]. Defendant disagrees, and instead argues it is clear the agreement was formed in Canada, was to be performed in Canada, and ultimately Canadian law will apply. [Doc. 12 pg 6-7]. At this time, the Court will not decide whether Wyoming or Canadian law applies. Choice of law will remain to be decided, but the Court does not see that judicial efficiency will be impacted regardless of the controlling law.
Next, there can be no question that "[m]aintaining two concurrent and simultaneous proceedings would consume a great amount of judicial, administrative, and party resources." EFCO Corp. v. Aluma Sys., USA , 983 F. Supp. 816, 824 (S.D. Iowa 1997). Also, "simultaneous adjudications regarding identical facts and highly similar legal issues creates the risk of inconsistent judgments." Id. Thus, piecemeal litigation is a factor that can support a stay under the exceptional circumstance test. Travelers Indem. Co. v. Madonna , 914 F.2d 1364, 1369 (9th Cir. 1990).
However, the "correct evaluation of this factor involves considering whether exceptional circumstances exist which justify special concern about piecemeal litigation". Id. Much like the Travelers case, the matter at hand involves ordinary contract and tort issues. Defendant has not cited any exceptional circumstances that would hinder judicial efficiency by this Court retaining jurisdiction. Also, the Canadian court has made no rulings whatsoever regarding the parties’ issues, therefore creating no certainty that duplicative effort would result at all. The Court agrees with Plaintiff in that, "Defendant cannot overcome the strong presumption in favor of retaining jurisdiction with a generic judicial efficient argument ...". [Doc. 14 pg 8]. It would appear that this factor does not favor either party. A risk of inconsistent verdicts is always present when an issue is pending in multiple courts. This case does not present any exceptional risks beyond the generic possibility of an inconsistency.
3. Adequacy of Relief Available in the Alternative Forum
The Court wants to make clear that it fully agrees with the seemingly unanimous understanding that Canadian courts are an adequate alternative forum. See Lawson v. Klondex Mines , No. 3:18-cv-00284-LRH-CLB, 2020 WL 1434485, at *11, 2020 U.S. Dist. LEXIS 53036, at *36 (D. Nev. Mar. 24, 2020) (stating that "... there is no question that the Canadian court is a competent court that utilized proceedings consistent with civilized jurisprudence"); Clarkson Co. v. Shaheen , 544 F.2d 624, 630 (2d Cir. 1976) (stating, "... Canada [is] a sister common law jurisdiction with procedures akin to our own"); and Brinco Min. Ltd. v. Federal Ins. Co., 552 F.Supp. 1233, 1240 (D.D.C. 1982) (quoting Fleeger v. Clarkson Co., Ltd., 86 F.R.D. 388, 392–93 (N.D. Texas 1980) ) (stating that "[c]ertainly, if this court cannot extend comity to Canada, the comity principle has little vitality in our jurisprudence"). This Court has the greatest respect for its sister courts in Canada and the adequacy of the Canadian court system cannot be legitimately questioned. This factor is in Defendant's favor.
4. Issues of Fairness to and Convenience of the Parties, Counsel, and Witnesses
Defendant contends that this factor is neutral, in that the Canadian action and this action are each no more or less convenient and fair to either party. [Doc. 12 pg 9]. The Plaintiff disagrees, but it seemingly concedes that convenience to the parties, counsel, and witnesses are neutral. [Doc. 14 pg 8]. The Court agrees, with respect to the convenience to the parties, counsel, and witnesses, that there is neutrality. Defendant and its witnesses reside in Canada. Plaintiff and its witnesses reside in Wyoming. Both parties have retained Canadian and Wyoming attorneys. When singularly weighing convenience, the parties are in the same position. However, there is nothing exceptional about this neutrality of inconvenience.
Plaintiff's main focus when briefing this factor was on the issue of fairness. It points out every aspect of this transaction occurred in Wyoming. [Doc. 14 pg 8]. Plaintiff stresses it was solicited in Wyoming via email, it accepted the agreement in Wyoming via email, it performed all of its obligations in Wyoming, and at no point and time was responsible for any actions outside of Wyoming due to the FOB condition set by the parties. Id. at 8-9. Defendant contends that the place of contracting was in Canada. [Doc. 12 pg 7]. It claims that at one-point Plaintiff sent representatives to Canada to negotiate the agreement in person. Id. Defendant also believes, "without contradiction", the contract was to be performed in Canada. Id. Because of its contentions, Defendant believes this factor is neutral as it pertains to fairness. The court disagrees with Defendant.
There is no dispute Defendant initiated the parties’ relationship by soliciting Plaintiff via email. See [Doc. 1 ¶ 6] and [Doc. 11 ¶ 6]. There is also no dispute that the agreement was accepted by Plaintiff via email in Wyoming, and the terms of the agreement were that Plaintiff was to send Defendant six to eight railcars of bentonite weekly at a rate of $56.00 per ton, with a single condition of "FOB Tolsa Plant Casper. Load in Rail." See [Doc. 1 ¶ 12] and [Doc. 11 ¶ 12]. So, a Wyoming corporation was solicited via email in Wyoming. Plaintiff accepted the agreement via email in Wyoming. Pursuant to the agreement, Plaintiff was to use its facilities and resources in Wyoming to mine bentonite. The bentonite in question came from Wyoming soil and was stored only in Wyoming. Further, Plaintiff was obligated to transfer and load the bentonite to its Plant in Casper, Wyoming. Lastly, the single condition agreed to by the parties was a standard "FOB place of shipment" term, that place being Casper, Wyoming.
Plaintiff's Complaint [Doc. 1] mistakenly contains two separate paragraphs numbered as the twelfth. In regard to the basic terms of the agreement, the Court is citing to the first numbered paragraph twelve.
FOB shipped goods are "delivered free of charge on the means of conveyance, such as air, rail, or sea." Black's Law Dictionary (10th ed. 2014). As is commonly understood, the term allocates "the rights and duties of the buyer and seller of goods with respect to delivery, payment, and risk of loss, whereby the seller must clear the goods for export, and the buyer must arrange for transportation." Id. FOB obligations end when the goods are delivered into the transporter's possession. At that point, the seller takes over any risk of loss or associated costs.
As such, Plaintiff's performance was never expected to take place beyond Wyoming's borders. In fact, not one aspect of Plaintiff's role in the agreement extended beyond Wyoming, not even the risks associated with shipment. The fairness to the parties is far from neutral. Defendant essentially came to Wyoming, solicited a Wyoming corporation for a Wyoming resource, and took delivery of the product before it ever left Wyoming. Surely, it is fair to subject Defendant to Wyoming's courts. The same cannot be said about subjecting Plaintiff to Canadian courts. At a minimum, it is safe to say the Defendant has failed to meet its burden of proving there are exceptional circumstances with respect to fairness that warrant this court to decline jurisdiction. This factor is strongly in Plaintiff's favor.
5. The Possibility of Prejudice to any of the Parties
Defendant alleges Plaintiff will not be prejudiced by a stay. [Doc. 12 pg 9]. Its allegation is supported by arguing that Canada's judicial system shares the same roots as our jurisprudence and that Plaintiff will have ample opportunity to obtain documents and testimony from Canadian witnesses. Id. Interestingly, Plaintiff failed to brief this factor.
As was already discussed, this Court strongly agrees with Defendant's position that Canada is an adequate forum. For the second time, this Courts stresses that "[c]ertainly, if this court cannot extend comity to Canada, the comity principle has little vitality in our jurisprudence". Brinco, 552 F.Supp. at 1240 (D.D.C. 1982). Plaintiff would not be prejudiced by having its day in court before a Canadian tribunal, nor would it be prejudiced by any of the Canadian court's pretrial processes or types of claims it could potentially bring there. Furthermore, the Court has already determined the inconveniences faced by either party are similar, if not equal, depending on where this matter is ultimately heard. Because of this, Plaintiff would not be prejudiced based solely on the grounds of inconveniences or forum.
However, Defendant fails to explain how prejudice plays a role in any type of "exceptional circumstance" presented by this case. Defendant's burden is not to prove Plaintiff would not be prejudiced, but rather that this factor somehow weighs in favor of a stay due to this matter's exceptional circumstances. Just as Plaintiff would not be prejudiced by a Canadian tribunal, the Defendant would not be prejudiced by this one. Such a dilemma is common to every action with diversity. The Court's role is to ascertain whether there exist ‘exceptional’ circumstances, the ‘clearest of justifications,’ that can justify the surrender of jurisdiction. Moses H. Cone , 460 U.S. at 25–26, 103 S.Ct. 927. The adequacy of Canadian courts, their sufficient pretrial processes, and Plaintiff's ability to bring counterclaims does not help this Court ascertain whether there exist exceptional circumstances justifying surrender of jurisdiction. As argued by Defendant, this factor weighs in favor of denying a stay, or is at least neutral in the Court's determination.
6. The Temporal Sequence of the Filing of the Actions
There is no disagreement that the Canadian action was filed first. Defendant filed in Canada on July 10, 2020. [Doc. 12-1 pg 4]. Plaintiff filed this action on September 15, 2020. [Doc. 1]. The roughly two-month difference is the entirety of Defendant's argument on this point. [Doc. 12 pg 10]. Plaintiff argues that the temporal sequence is immaterial because first filer status does not give strict priority and that the presumption in favor of exercising jurisdiction cannot be overcome when the parallel proceedings are both in the early stages of litigation. [Doc. 14 pg 9-10]. The Court agrees with Plaintiff.
As cited by the Plaintiff, "[e]ven if the litigants had made somewhat more progress in [the foreign forum] than in the district court by the time the stay motion was heard, the mere fact that parallel proceedings may be further along does not make a case ‘exceptional’ for the purpose of invoking the Colorado River exception to the general rule that federal courts must exercise their jurisdiction concurrently with courts of other jurisdictions." Neuchatel Swiss Gen. Ins. Co. v. Lufthansa Airlines , 925 F.2d 1193, 1195 (9th Cir. 1991). Much like the other factors, Defendant has failed to show how being the first to the courthouse makes this matter exceptional. The two actions are both young and in precisely the same stages of litigation. There has not been a foreign judgment reached on the merits. There is no foreign injunction or protection order. There has simply been little to no headway made in either matter, an unexceptional progression to be sure. This factor weighs in favor of denying a stay, or is at least neutral in the Court's determination.
CONCLUSION
Defendant is unquestionably correct in alleging that the parallel proceedings have substantially similar issues and parties. It is correct in that interests of judicial economy do not favor duplicative adjudications. Likewise, Defendant is correct that it filed its Canadian action first and the factor of convenience to parties, counsel, and witnesses is neutral. Also, Canada is surely an adequate forum that presents no prejudice to Plaintiff. However, it would be unfair to Plaintiff, considering the circumstances, to stay this case.
More importantly, this matter involves an ordinary contractual dispute and a negligence claim. Defendant has failed to point to a single exceptional circumstance that would justify this court surrendering jurisdiction. The Court's determination does not rest on a mechanical checklist, but a careful balancing of the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction. Only truly exceptional circumstances will allow a federal court to stay an action in favor of a parallel foreign action. This case is void of such exceptional circumstances.
IT IS THEREFORE ORDERED that Defendant's Motion to Stay Proceedings and Memorandum of Law [Doc. 12] is hereby DENIED .