Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Foxfield Villa Associates, LLC v. Regnier

United States District Court, Tenth Circuit

January 17, 2013

FOXFIELD VILLA ASSOCIATES, LLC, et al., Plaintiffs,
v.
ROBERT D. REGNIER, et al., Defendants.

MEMORANDUM AND ORDER

CARLOS MURGUIA, UNITED STATES DISTRICT JUDGE

This matter is before the court on defendant Bank of Blue Valley (“BOBV”)’s motion to dismiss or, in the alternative, to stay the present proceedings against all parties under the Colorado River doctrine (Doc. 21).[1] Plaintiffs filed suit against BOBV, BOBV’s Board of Directors, BOBV’s holding company Blue Valley Ban Corp. (“Ban Corp.”), and members of Ban Corp.’s Board of Directors under the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and Kansas common law. For the reasons stated below, BOBV’s motion is granted in part and denied in part and a stay is entered as to all parties.

I. Background

On September 1, 2011, plaintiffs filed a petition against BOBV in the District Court of Johnson County, Kansas, (“state action” or “state-court action”) related to a loan transaction that took place on March 24, 2008. BOBV was the sole defendant in the state action. Plaintiffs filed a motion for leave to file an amended petition on May 17, 2012 and the court set a hearing date on the motion for Monday, August 13, 2012. Importantly, according to BOBV, plaintiffs’ proposed first amended petition originally added all of the parties and claims presently before this court, including the RICO claim. Plaintiffs did not follow through with their proposed amendment including these claims and parties, however. Instead, plaintiffs filed the instant action on Friday, August 10, 2012, and then revised their motion for leave to amend, removing the additional claims and defendants. Plaintiffs’ revised amended state-court petition alleged twenty-three counts against BOBV for breach of contract, promissory estoppel, equitable estoppel, declaratory judgment, unclean hands, fraudulent nondisclosure, fraud, breach of the duty of good faith and fair dealing, breach of fiduciary duty, tortious interference with contract and business expectancy, negligent and malicious breach of contract, unjust enrichment, rescission, equitable subordination, negligent and/or reckless failure to supervise, and civil conspiracy.

BOBV filed a counterclaim against plaintiffs in the state action to collect on the promissory note and personal guaranties executed by the plaintiffs, and to foreclose on the real property securing the transaction at issue. On August 10, 2012, nearly a year after filing the state-court suit, the same plaintiffs filed the instant action against BOBV, BOBV’s Board of Directors, Ban Corp., and Ban Corp.’s Board of Directors. Both the state and federal actions are based on the same alleged fraudulent statements or misrepresentations by defendants in connection with the March 2008 loan transaction. The instant action contains six counts that are similar to the claims brought in the state court case: fraudulent nondisclosure, fraud, breach of fiduciary duty, tortious interference, failure to supervise, and civil conspiracy. In addition, plaintiffs brought one federal claim under RICO.

Plaintiffs and BOBV hold differing views on the motives behind plaintiffs’ decision to withdraw and revise their motion for leave to amend and instead file the instant action in this court.

Plaintiffs state that they elected to assert the RICO claim in federal court because it arises under federal statute, and because this court is supposedly more experienced in handling such a claim. By contrast, BOBV argues that plaintiffs’ decision to bring the lawsuit to a second front was a strategic litigation tactic designed to make the defense of this litigation more cumbersome for BOBV. The court expresses no opinion on the motives behind plaintiffs’ decision; however, the court finds it important to consider this background in obtaining a complete picture of the case history.

Assuming plaintiff’s factual allegations as true, Ban Corp. is the holding company for BOBV, and BOBV is a wholly-owned subsidiary of Ban Corp. Defendant Robert Regnier (“Regnier”) is the President, Chief Executive Officer (“CEO”) and Chairman of the Board of Directors of Ban. Corp. Defendant Regnier is also the CEO and Chairman of the Board of Directors of BOBV. Defendant Donald H. Alexander (“Alexander”) was a director of BOBV and Ban Corp. Defendants Harvey S. Bodker (“Bodker”), Suzanne E. Dotson (“Dotson”), Charles S. Hunter (“Hunter”), and Richard L. Bond (“Bond”) were all directors of BOBV. Defendants Michael J. Brown (“Brown”), Robert D. Taylor (“Taylor”), Thomas A. McDonnell (“McDonnell”), and Anne D. St. Peter (“St. Peter”) were all directors of Ban Corp.

II. Legal Standard

As a preliminary matter, the court will briefly address plaintiffs’ argument that BOBV’s motion is not an approved pre-answer motion. Plaintiffs are correct that a motion requesting dismissal or a stay under the Colorado River doctrine does not fall under any enumerated provision of Federal Rule of Civil Procedure 12(b). However, the court exercises its discretion to consider additional pre-answer motions, including a motion to stay or dismiss under the Colorado River doctrine. See Intravascular Research Ltd. v. Endosonics Corp., 994 F.Supp. 564, 567 n.3 (D. Del. Feb. 13, 1998) (citing Int’l Ass’n of Entrepreneurs of Am. v. Angoff, 58 F.3d 1266, 1271 (8th Cir. 1995)); see also Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494–96 (1942) (noting that district courts have discretion to recognize additional pre-answer motions, including motions to stay a federal action when a parallel state action is pending).

Under the Colorado River doctrine, where a federal court would otherwise have concurrent jurisdiction with a state court, the federal court may “dismiss or stay a federal action in deference to pending parallel state court proceedings.” Fox v. Maulding, 16 F.3d 1079, 1080 (10th Cir. 1994) (“Fox I”) (citing Colorado River, 424 U.S. 800, 817 (1976)). The federal court has discretion in such a situation to stay or dismiss the federal suit for reasons of “wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.” Id. at 1081 (quoting Colorado River, 424 U.S. at 817–18) (quotation and quotation marks omitted). Federal courts have a “virtually unflagging obligation . . . to exercise the jurisdiction given them” and thus application of the doctrine is appropriate only in “exceptional” circumstances. Id. (quoting Colorado River, 424 U.S. at 817–18).

Certain factors under the Colorado River doctrine guide the federal court in determining whether to dismiss or stay a federal action that parallels a state action. First, the federal court must analyze whether the state court suit and the federal suit are in fact “parallel.” Reality Tech., Inc. v. Countertrade Prods., Inc., No. 10-cv-01791-PAB-KLM, 2011 WL 2134409, at *2 (D. Colo. May 27, 2011). If this test is met, the court may then apply the nonexhaustive factors delineated in Colorado River, 424 U.S. at 818, and Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 18 n.20, 23, 26–28 (1983). See id.

The Tenth Circuit has stated that—should the court determine that deferral to the state proceeding is appropriate—the court should enter a stay, rather than dismiss the case. Fox I, 16 F.3d at 1083 (“We think the better practice is to stay the federal action pending the outcome of the state proceedings.”) (citations omitted). “In the event the state proceedings do not resolve all the federal claims, a stay preserves an available federal forum in which to litigate the remaining claims, without plaintiff having to file a new federal action.” Id. If the state court proceeding resolves all of the federal claims, dismissal of the federal case may then be appropriate. Reality Tech., Inc., 2011 WL 2134409, at *2.

III. Discussion

A. Whether the Two Actions Are Parallel

The first step in determining whether deferral is appropriate is to determine whether the federal and state actions are indeed parallel. Fox I, 16 F.3d at 1081. “Suits are parallel if substantially the same parties litigate substantially the same issues in different forums.” Id. (quotation and quotation marks omitted). In making this determination, the court looks at the state case at it actually exists— and does not consider how the state proceedings could have been brought in theory. Id. Finally, plaintiffs may not avoid application of the Colorado River doctrine by including additional defendants or claims in the federal suit. Waddell & Reed Fin., Inc. v. Torchmark Corp., 180 F.Supp.2d 1235, 1240 (D. Kan. 2001).[2]

Here, both parties agree that the state and federal proceedings are parallel. The plaintiffs in both cases are the same. In the state case, BOBV is the only defendant. In the federal case, additional defendants include BOBV’s holding company, Ban Corp., and members of the Board of Directors for both Ban Corp. and BOBV. Although the parties in both cases are not identical, they are substantially the same and the claims lodged against the defendants in both cases are based on the same factual bases. In fact, the first amended state-court petition identifies each of the additional federal defendants in the “Parties, Jurisdiction and Venue” portion of the petition and the additional federal defendants are mentioned in the factual allegations in both the state and federal cases. Plaintiffs cannot avoid application of the Colorado River doctrine simply by adding additional parties in the federal suit— especially when the additional parties are so closely affiliated with the defendant present in both cases. See id.

In addition, both cases involve substantially the same issues. The same facts and allegations involved in the state case will be addressed in the instant case—both cases center on the issue of whether fraudulent statements or misrepresentations were made in connection with the March 2008 loan transaction with plaintiffs. The only notable difference is the addition of the RICO claim in the instant action; however, the RICO claim is based on many of the same facts at issue in the state action. See id. (finding that the addition of a RICO claim in the federal action did not prevent the determination that the two actions were parallel because the RICO claim was based on many of the same facts as the ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.